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Early April, Aircel came calling on the financial capital of the country, en route to acquiring a pan-Indian presence. Its arrival was hard to miss. The company's trademark red and blue was splashed all over the city, as the company went about unembarrassedly promoting itself. Expense, of course, was no consideration, judging by the king-size ads that appeared everywhere, making sure the company's entry was heard and seen in ample measure.

The aggression was necessary. In a city that has over 80 per cent mobile penetration and seven other operators already in the fray, you certainly need to shout to be heard. In such a market, gaining customers is tricky at the very least. Mumbai has over 19 million telecom users, who are being served by all the top telecom companies –­ Bharti Airtel, Vodafone Essar, Reliance Communications (RCOM), Mahanagar Telephone Nigam Limited (MTNL), Idea Cellular, Tata Teleservices (Maharashtra) Limited (TTML), and Loop Mobile (formerly BPL Mobile).

Mumbai, the highest revenue generating circle in the country, completes Aircel's metro rollout. A month earlier, the operator entered the Delhi market, which boasts of the highest teledensity levels (of over 100 per cent) in the country. Here, Aircel is pitted against six other telecom majors.

The one-time regional operator realises that the odds are high. Despite this, it is confident it can make room for itself. It has set a very ambitious target of scaling up its user base from the current 17 million to 30 million by the end of the year, which, Dr Mahesh Uppal, director, ComFirst, believes "is feasible". He explains: "If the country is adding 15 million subscribers a month, even if Aircel gets a twelfth of the additions, the target is realistic (if it really goes for it, that is)."

Gurdeep Singh, chief operating officer, Aircel, feels the same way. At the time of the Delhi launch, he stated: "The fact that the market is 100 per cent saturated means you cannot do more of the same. We will have to be innovative. Also, the 100 per cent saturation figures are according to the number of SIM cards sold. If you look at the unique users, it will be in the range of 65 to 70 per cent. So, there is room for growth. We will fish in the incremental user market, the new subscribers. Further, if we take into account the churn rate, which is about 3 per cent a month, and number portability (when it comes in), we will be able to make a mark."

Aircel's strategy for now is to pull out all the stops and target potential users in all segments –­ business, corporate, youth/students as well as migrant populations from the Northeast, West Bengal, Bihar and Uttar Pradesh. It intends to come up with innovative tariffs and services. Given that India is a price-sensitive market, the idea is to offer a hard-to-refuse tariff package.

In Delhi, for instance, the company is rewarding usage by offering lifetime validity on its prepaid mobile services. Further, it offers local calls at Re 1 for the first minute, Re 0.60 for the second minute and Re 0.40 from the third minute onwards. To address the needs of small and medium enterprises and professionals, it is offering friendly recharge schemes that enable users to make free calls and send messages across Aircel networks. The Aircel-toAircel STD tariff has been pegged at a very competitive Re 0.50 per minute.

But users are also looking beyond tariffs to make their choices. Singh agrees. "Affordability is not the only issue. Pricing will be competitive, but ours will be a total value offering. The youth, for example, ask for offerings like community calling, downloading and data transferring. And they do not mind changing their number because they just go to Facebook and quickly upload their new number." Value addition is, therefore, key in the race for subscriber numbers.

Growing presence
Mumbai is Aircel's seventeenth circle of operation and most recent addition, following a spate of launches in Delhi, Uttar Pradesh East and West, Uttarakhand, Kerala, Andhra Pradesh and Hyderabad in the past three months. Very soon the company will extend its reach to the rest of Maharashtra.

This will take Aircel's footprint to 18 out of the 23 circles. According to Sandip Das, CEO of Maxis Communications, its joint venture (JV) partner, "The entire 23circle rollout should be possible in two years. However, if we don't roll out all the networks ourselves, it could be sooner."

 Funds infusion
Aircel, a JV between Maxis Communications Berhad, Malaysia (holding 74 per cent stake) and Apollo Hospitals Enterprise, has committed over $5 billion for countrywide capex rollouts through 2009. A total of $10 billion has been kept aside for investments till 2011. "We have raised $1.8 billion through debt and we may look at a public offer once the economy looks up," says Das.

The infusion of funds is necessary for the company's pan-Indian network rollout. Aircel has earmarked an investment of nearly Rs 11 billion for its foray into the Mumbai circle. "In the first phase, we have invested Rs 6 billion in networks, IT, customer care and start-up distribution that will include our own stores. The next phase will see an investment of around Rs 5 billion by December, for enhancing network capability, expanding coverage and providing in-building solutions," notes Singh.

In Uttar Pradesh and Uttarakhand, Aircel is looking to invest Rs 20 billion by end-2009. The company has already spent close to Rs 7.5 billion in setting up the necessary infrastructure, including 1,500 cell sites in the region, which would be ramped up to about 2,500 in the months to come.

Journey this far
Aircel commenced operations in 1999 and became the leading mobile operator in Tamil Nadu within 18 months. In December 2003, it launched commercially in Chennai and rapidly established itself as a market leader –­ a position it has held ever since. Against its 27.3 per cent market share in the circle, Bharti Airtel has 23.7 per cent.

Determined to cast away its regional label, the company embarked on outward expansion in 2005. The idea was to grow its operations so as to achieve economies of scale and deal with increasing competition from rivals such as Bharti Airtel, Vodafone Essar and RCOM.

The company's ambitious plans were backed by the expertise and financial muscle of Maxis, which bought 74 per cent stake in Aircel in 2006 (Aircel was originally promoted by C. Sivasankaran). The balance 26 per cent is held by the Reddy family of the Chennai-based Apollo Hospitals.

With Maxis at the helm, Aircel's key priorities were charting the future course of the company and restructuring the top management to achieve a national-level organisational structure. Having obtained all the operational licences, Aircel's first foray was into the eastern circles, where it planned to replicate the success it achieved in Chennai and Tamil Nadu. It succeeded in garnering a fair number of subscribers in the Assam, the Northeast, Orissa, Bihar, Jammu & Kashmir, Himachal Pradesh, West Bengal and Kolkata circles. In fact, in the Assam and Northeast circles, it quickly emerged as the number one operator in subscriber terms. Today, it has 2.6 million subscribers in the two circles.

In 2008, it was allocated spectrum for 13 new circles, giving a further impetus to its rollout plans. The circles were Delhi, Mumbai, Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra and Goa, Rajasthan, Punjab, Uttar Pradesh (West) and Uttar Pradesh (East).

Meanwhile, the carefully drafted revamp plans were beginning to show results with a change in Aircel's positioning and strategies. As a result, Aircel's market share increased from 2.88 per cent in March 2006 to 4.65 per cent in February 2009.

Analyst views
Though there are not many clear advantages that Aircel has over the competition, its biggest asset is its strong financial backing. "In the face of the current economic downturn, funding is a big problem. So, one of the key positives for Aircel is that it recently got an investment commitment of $10 billion from Maxis Communications," says Sourabh Kaushal, principal consultant, BDA India. It also stands to benefit from other operators' experience.

At the same time, the company does not have any major weaknesses or drawbacks either. Of course, the fight for market share will be tougher for Aircel. As Uppal notes, "The creamy layer has already been taken away. The company will now need to market its products very aggressively as it is very difficult to churn customers, especially in India."

The company's foray into cities like Delhi and Mumbai will, in particular, be a challenge. In Mumbai, the existing operators have a combined subscriber base of over 19 million while Delhi has over 20 million. To win over subscribers in such a market will require a very strong strategy. "These are difficult markets, but still, every single operator would want a presence here. This is where the big bucks are, but there is now very little low-hanging fruit," says Uppal.

According to Kaushal, "Aircel is basically looking to attract churned subscribers, and that is what is reflected in its ad campaign as well. Currently, the churn levels in India are about 3.3 per cent on a monthly basis, which translates into about 11 million subscribers per month. The upcoming mobile number portability and 3G services will provide the company with a chance to further benefit from customer churn."

The key, say analysts, is for operators to differentiate themselves from other players on parameters other than call charges. "Aircel could begin to actually segment the market in a way that has not been attempted till date. The market has consistently been driven just by volumes and call charges. If the company is smart, it will introduce products that are not only different but also profitable. The catch really is in building or developing the market. The effort required is phenomenal, but the rewards are comparable as well," notes Uppal.

Aircel is aware of this. It is accordingly advertising value-added services like phone banking and location-based offerings. Das has promised that the company would come up with a number of other innovative schemes and a network "devoid of congestion". In fact, TRAI's latest report on quality of service states that Aircel has the least congested network.

However, Kaushal notes that "currently, Aircel's focus is more on acquisition. A key challenge for the company will be in terms of maintaining the revenue per minute and EBITDA levels. For this, it needs to move away from acquisition to retention, and concentrate on getting high-end subscribers."

Recent developments
To ensure quick rollout of services as well as quality of service in the new circles, Aircel has opted for the outsourcing route and has tied up with specialists. It has a three-year managed services hosting agreement with Ericsson, which has end-to-end responsibility to provide Aircel with a consumer push email service, including systems integration, management, operations and maintenance. The company has also awarded a nine-year next-generation network (NGN) outsourcing contract to Wipro. Recently, Aircel implemented multiple components of the Oracle Communications Service Fulfillment Suite including Oracle Communications Service Activation, an automated platform for activation of complex services in a streamlined manner across multiple technology domains for both wireline and wireless service providers. This, Aircel expects, will help to drive its aggressive growth plans.

In order to roll out networks fast, the company plans to double its current tower portfolio. It is also open to renting or sharing of towers to save on capex. For instance, in Mumbai, for its passive infrastructure requirements, Aircel has opted for a mix of owning and renting towers. Of the over 1,000 towers the company currently has in Mumbai, 650 are shared with other operators.

Compared to other operators, Aircel has shown considerable speed in tapping the opportunities arising from emerging technologies such as Wi-Max and 3G. Following the launch of Wi-Max services in Chennai in October 2006, Aircel expanded its network to cover 44 cities, serving thousands of corporate users. The company believes that this initiative will increase its revenue and check churn among existing customers owing to better quality services.

On the 3G front, the company has successfully tested the complete range of 3G services in Chennai and is ready to offer the services across the country once the spectrum auctions are dealt with. In fact, the company believes that it can get a huge leg up if it were to enter mature markets like Delhi or Mumbai with 3G rather than 2G. Clearly keen on 3G, "Aircel has kept aside a kitty to bid for spectrum at the base price of Rs 20.2 billion, despite the economic slowdown," notes Das.

The company has already launched national long distance (NLD) services and is in the process of making its foray into the international long distance segment by mid-year. Aircel has also deployed NGN technology for its NLD network.

Meanwhile, the company is reportedly in acquisition talks with Loop Mobile, which is currently managed by the Ruias of the Essar Group. Industry analysts value Loop Mobile at Rs 15-Rs 20 billion and though the company is present in just one circle (Mumbai), it is a senior player and is profitable. Loop, therefore, commands a premium, despite the legal dispute over its ownership.

According to analysts, since consolidation is the way forward in the much-fragmented Mumbai market, it makes sense for Aircel to look at Loop as an acquisition possibility, since it already has an established subscriber base in the circle. Loop would offer ready access to a high ARPU subscriber base (it reportedly has an ARPU of Rs 300 per month). The company has also recently revamped its infrastructure and is offering high-end value-added services.

With India being a significant market for the Maxis Group, accounting for more than half its total subscriber base, Aircel will continue to play a major part in the group's future plans. Given the growth path the company has been following of late, it is likely to be a strong pan-Indian operator going forward.