Uninor's 'barebones' strategy helps it thrive While most newbie telcos are struggling to survive, Unitech Wireless (under its brand Uninor) has figured out a way to flourish at the bottom of the market The spat between Telenor of Norway and homegrown real estate developer Unitechboth partners in mobile telephony provider Unitech Wirelessis out in the open. Telenor, a 67.25 per cent shareholder, wants a right issue to fund the expansion, while Unitech thinks debt is the way ahead. It has also contested the Rs 600-crore valuation of Unitech Wireless by Telenor and BNP Paribas. This is way below the Rs 9,000-crore valuation of the company when Telenor entered in 2009. Telenor has said that telecom valuations have corrected sharply in the last couple of years. Unitech has countered that the company is worth Rs 11,000 to Rs 12,000 crore. Both partners have initiated arbitration proceedings.

The two are bickering perhaps because theres good business here, the arrest of Unitechs Sa njay Chandra (he was released recently) in the 2G scam notwithstanding. (However, the Central Bureau of Investigation has said that it came across no money trail or quid pro quo from Unitech and Chandra to A Raja, the then- telecom minister.) Unitech Wireless has 36 million customersmore than all the other newcomers put together. The company had got licenses for all the 21 telecom circles in the country, but hasnt got spectrum in the most lucrative of all, Delhi. Though it has launched in all 20, in order to meet its rollout obligations, Unitech Wireless has focused on 13 circles. In these circles, its share of subscribers is 5 per cent and share of revenues is 2.7 per cent. But, the company claims, its share of incremental customers was about 15 per cent and incremental revenue was 15 per cent in 2011. And, Unitech Wireless Managing Director Sigwe Brekke says, EBITDA (earnings before interest, tax, depreciation and amortisation) breakeven will happen by 2013, as was planned originally.

Unitech Wirelesss average revenue per user of Rs 100 per month is way below the Rs 200 to Rs 250, it had projected in 2009. But the assumptions on usage (300 to 350 minutes per person per month) and net customer accretion (7 to 8 million per month) have been more or less on target. Brekke doesnt disclose the profit or loss in operations, but gives an idea where Unitech Wireless stands: For us, the cost ought to come down to the industry average which is 35 to 40 paisa. The revenue is still lower; we need to get it up 20 to 25 per cent. The recent move by all telecom companies to raise tariffs must have helped, and Brekke would hope that there would be more such increases in the days to come. Unitech Wireless has curtailed its capital expenditure plan. In the original plan, much of the Rs 15,000-crore investment was front-loadedit was to be made in the first two years. Now, it is being spaced out over more years. Rivals also question Unitech Wirelesss strategy to target its service at the bottom of the market. It only offers voice and SMS, forget value-added and 3G services, or even post-paid connections. And its prices are rock bottom. With basic tariffs at rock bottom, in this crowded market the only way to make money is value-added services, says a Delhi-headquartered rival. The market has evolved.

Brekke argues that value-added services account for only 10 per cent of the market. And he has no qualms at Uninor being a barebones brandits customers include migrant workers and teenagers. If you are a postpaid, 3G or data customer, forget us, he says. This helps. While most telecom companies spend 6 to 7 per cent of their revenue on advertising, Unitech Wireless spends only around 3 per cent. Since its mass market, it does not advertise on the electronic media (it is expensive) or national publications (it is not consumed by its potential customers). Instead, it buys space on local media and advertises heavily at the point of sale. Brekke believes that 50 per cent customers walk into the store with an open mind and ask the retailer for a good connection. To get the retailer on his side, Brekke offers him three commissions: one when the SIM card is sold, two when he achieves a certain volume, and three when the customer hits a pre-defined ARPU. The third, he claims, is not offered by anybody else, and is therefore extra incentive that the retailer gets from Unitech Wireless. This is an innovation Brekke imported from Telenors operations in Bangladesh. All told, Unitech Wireless has 370,000 retailers. Seven thousand salesmen, contracted from manpower aggregators but dressed in the Unitech Wireless uniform, visit all large dealers every day. It has a reasonable presence at the bottom of the pyramid, says Ernst & Young Senior Partner Amit Sachdeva. It has been innovat ive in sales and distribution. Unitech Wireless was amongst the last buyers of 2G equipment. It got all the five equipment makers vendorsZTE, Huawei, Ericsson, Nokia-Siemens and Alcatel-Lucentto compete for the order. Their 2G investments at the end of their livesalmost all the fixed costs had been taken out, and they had to worry only about the variable costs. This got our prices down by close to 20 per cent, says Brekke. Our IT contract with Wipro also came out 10 per cent cheaper than expected. With newer equipment, Brekke claims Unitech Wireless can push through 50 per cent more traffic than others. Instead of spreading itself thin, Unitech Wireless has decided to focus on large towns and cities in each circle. Thats because these towns are highly penetrated, but 10 per cent customers change their service provider every month. This means they are not happy with their service provider, which is a great opportunity for a newcomer like us, says Brekke. This enable us to expand one step at a time; we dont have to be everywhere on day one. Even otherwise, Brekke

feels the market is under-penetrated, which leaves a huge upside for Unitech Wireless. We estimate that only about 45 per cent of the population has a mobile phone. The rest is mostly duplication. Of the 850 million SIM cards in the country, you have to deduct more than 40 per cent because a lot of people have two SIM cards. Our estimate is that 40 to 50 per cent of the new handsets sold are dual-SIM handsets. The issue that needs to be sorted out is money for expansion. Telenor wants Unitech Wireless wants to do a rights issue of Rs 8,000 crore. Unitech insists on debt. Brekke says there is no long-term debt available. Unitech Wireless has raised short term loans of Rs 5,000 to Rs 6,000 crore, guaranteed fully by Telenor, from the international market. But that cannot go on forever. The only option left, Brekke says, is a right issue. Under current rules, Telenor can raise its stake in Unitech Wireless up to 74 per cent and no further. The only way out is if Unitech sells its part of the rights issue to a third partner. In spite of the 2G controversy, Brekke says, none of the top 100 people of the company left. I tell my people to focus on operations and let me take care of all the questions that are raised, he says. Meanwhile, Brekke claims, 10 to 15 people from India have been sent to work for Telenor in Thailand and Malaysia. Is that because they have cracked the toughest mobile telephony market in the world? Brekke seems to think so.

Uninor sees rivals adopting dynamic pricing strategyUninor, the Indian unit of Norways Telenor ASA, the worlds fifth largest telecom firm, believes dynamic pricing of calls like the one it has started in India could find acceptance by rival telecom firms.

In the dynamic pricing scheme, a subscriber gets varying discounts on calls made. Besides, the caller also gets to see the discount on a call at a given point in time. Uninors discount on calls

ranges between 5% and 60% based on the traffic handled by a base transceiver station (BTS), which routes the call.

On a 60% discount call, the caller pays 20 paise for a one-minute call. Dynamic pricing has helped us stand out in the market. This is going to be adopted like some of the earlier plans such as one-paisa-per-second and others. The one-paisa-per-second approach may not be the right scheme for a customer always. Moreover with dynamic pricing we get to utilise our BTS most optimally, Stein-Erik Vellan, MD, Uninor told DNA Money before the launch ofits GSM mobile services in five circles Mumbai, Maharashtra and Goa, Gujarat, Kolkata and West Bengal. So when a BTS is handling more subscribers the discount will be less and when a BTS has less subscribers the discount will be more. This approach allows us to handle 50% more traffic per BTS, helping us delay the congestion of network, he said.

Uninor has stayed away from bidding for 3G spectrum as it feels 3G does not make sense as the firm can offer similar services in the 2.5G GSM network since it has deployed enhanced EDGE network. As you know 90% of the traffic is for voice and this is going to continue for years. And we can offer all that is being said for 3G in our network as it is an advanced one, said Vellan. With the expansion, Uninor is now present in 13 of Indias 22 telecom zones. The firm did not disclose investment on the launch of its services in those five circles. It is a substantial number given that we have set up over 21,000 BTSes already, said Vellan. The firm expects to increase the number of BTS to 40,000.

Stating that the firm will not get into a price war that may bleed the business, Vellan said, We will adopt only those measures that make business sense and help us attain our objective of being

Ebidta-positive in 3 years, operating cash positive in 5 years in India. Besides we aim a market share of 8% by 2018.

Strategy using by Telecom Service Providers In IndiaToday, telecom service provider industry is going to change in India after entered 2G and 3G service. Competition is already become tough and all telecom service providers are trying to take position by much strategically. Within 2-3 years many other new service providers are entered into Indian market and made healthy competition with good market coverage. Lets see company/brand wise strategically analysis:Total GSM Market Players: - Airtel, Vodafone, Uninor, Idea, Reliance, Tata Docomo, BSNL/MTNL, Aircel, Videocon. (1) Uninor: - Uninor brand is a joint venture between Telenor Norway & Unitech which has entered before a year ago in India and today Uninor has already taken good brand position in Indian market. Today, Uninor is playing with 5.99% market share among all GSM players. Within short span of period, it has covered good market share, covered good subscriber base and competing strong against rivals Airtel, Vodafone, Idea, Aircel etc. Strategy: - Uninor brand has adopted Pricing Strategy since launching period. However, pricing strategy already been used by other service provider but no one brand come yet like Uninor pricing strategy . As well, it is coming with various kinds of unique ideas & concept on pricing part. And we can definitely say that Price is core competency for Uninor brand. Overall media planning too strategically where it is covering majority print media (Esp. Daily news paper), OOH, Digital media as well as TVC campaign is using much less. (2) Airtel (Bharti Enterprise):- After changing a corporate identity, Airtel is trying to get reposition in market by targeting on youth market. The new campaign is focusing on Har Eak

Friend Zaroori Hai in order to take strong position in youth market. Today, Airtel is moving towards totally on youth market than others. Recently before a month ago, Airtel has released so many various kind of campaign like Curious Friend, chipku friend, proxy friend, LOL friend, Facebook friend, Sharing friend, etc. The ultimately, it is conveying message about its punch line Har Ek Friend Zaroori Hai. Advertisement Link: http://www.youtube.com/watch?v=Xbgk8-9vzAE&feature=endscreen&NR=1 Overall, Airtel has lost its position from market in terms of brand equity, market share after changing logo. (3) Vodafone: - Vodafone is getting good success and built up strong brand image in market. The Zoo zoo campaign was getting huge positive feedback and on that base Vodafone got good image. Still, the Zoo Zoo concept is running and already released various VAS services campaign as well as 3G service campaigns. Vodafone is much strong rival of Airtel and Vodafone has also covered good market share with growth. (4) Idea (Aditya Birla Group):- Idea brand is now much focusing on 3G network service, brand is endorsing by bollywood Star Mr. Abhishek Bachchan. The campaign is always good with creative concept but yet Idea brand could not bit either Airtel or Vodafone. All above brands are trying to get position on their specific market and want to build up stronger brand equity. Subscriber base:- Airtel having 176.95 mn with 27.3% market share, Vodafone having 148.60 mn with 22.93% market share, Idea having 108.12 mn with 16.68 market share, BSNL having 93.42 mn with 14.42% market share, Aircel having 62.46 mn with 9.64% market share while Uninor having 38.79 mn with 5.99% market share. Subscriber Growth: - Airtel 0.55%, Vodafone 0.58%, BSNL 0.93%, Aircel 1.33%, Idea 1.64% and Uninor have achieved 6.86% growth in subscriber base.

Conclusion:We can make easily analysis that Uninor has achieved good market within short span of period as well as also built up good brand image in Indian market.