Idea Cellular prepares for battle with Vodafone with US$2 billion

Idea Cellular is a brand-new company which has been traded for only a few days. Its ambitious aims as India's sixth-largest network are confirmed by its announcement that it will invest US$2 billion to hold out against other newly-arrived competitors such as Vodafone.

Optimism and confidence are two nouns which can be used to describe the ambitious business strategy of Idea Cellular, India's newest mobile player and the sixth largest in this fastest-growing of all markets.

Naivety is not the noun in question - Idea may only have been in existence for about a week but it is all too aware of the competition posed by players such as Vodafone. To help the new company tackle the threat, Idea has a war-chest of US$2 billion to invest by 2009.

Idea, although based in Pune, is looking to Mumbai and Bihar to establish more networks, meaning that Idea will be operative in 13 of the country's 23 zones designated as telecoms zones. Managing Director Sanjeev Aga is clear in his intentions for Idea, stressing that the investment will not for the time being be covering new circles. Nevertheless, his firm will eventually be applying for licences in the remaining ten zones.

Idea was encouraged when trading on the Mumbai Stock Exchange got underway; bids totalled 50 times the number of shares available, and shares themselves rose in value 20%.

India is a highly vigorous and expanding market for mobile - around 80% of those with access to a telephone choose mobile, nearly 7 million more mobile subscribers signed up in January and a mobile call will set the owner back US$0.02.

* Idea Cellular, 58% owned by Aditya Birla Group, is under the control of billionaire Kumar Mangalam Birla. Minoroty share-holders are Citigroup and Providence Equity Partners. Chief competitors are Bharti Airtel, Reliance, Hutchison Essar and BSNL.

** Vodafone has established itself in India by paying US$11 billion for Hutchison Essar Ltd.

This report acknowledges Shailendra Bhatnagar's Bloomberg report as a source of information.

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