Miscalculated the impact of unlimited plans – Idea CEO

Outgoing Idea Cellular CEO Himanshu Kapania admitted today that his company understimated the impact that unlimited plans would have on the company’s finances.

Reacting to concerns about Idea Cellular’s failure to keep up with the revenue growth of Bharti Airtel and Reliance Jio in the last six months, Kapania identified two factors for the slowdown in growth.

The first, he said, was that the company was not fully prepared for the sharp drop in revenue generation due to the introduction of unlimited plans.

Most of the industry has had to stop charging for voice by the minute and go for the so-called unlimited packs that come with (nearly) unlimited voice calling and limited data.

This resulted in a halving of voice prices for players like Idea and a fall of around 80% in data tariffs.

“We had expected that volumes would compensate (for the fall in prices),” Kapania said. “Volumes did not compensate.. It has been a harsh learning for us,” he said.

Both Idea and Airtel had started out by pricing their unlimited packs at around Rs 350 per month, but were forced to cut the price of the 1GB/day unlimited pack to Rs 150 per month in the last quarter due to competition from Reliance Jio.

“There has been a 75 rupee drop in the last 12 months in terms of ARPU from unlimited customers due to recent price cuts,” Kapania said.

The second ‘mistake’ the company made during the last six months has been to sharply cut down on the commissions it pays to dealers and retailers. This was done partly because of the financial stress at the company and partly because there was less competition in the market due to the exit of players like Tata DoCoMo and Aircel.

This, said Kapania, hurt Idea’s subscriber growth numbers, which in turn, hurt its revenue growth.┬áKapania said the new management will “review the strategy”.


Kapania also fielded questions on whether the new company will continue to focus on content and whether the new company will start investing in You Broadband, which was acquired by Vodafone two years ago, to withstand Jio GigaFiber.

Airtel had last week said it would be ‘careful’ about investing in content, given the ‘challenges’ in monetizing the same. The comments were welcomed by investors, who drove the stock higher by 7%.

“Content remains part of our strategy,” Kapania said, adding that investments will continue to be made to broaden the portfolio of offerings to adjacent areas like content, online and IoT (Internet of Things).

On fiber broadband, Kapania said the two companies have not been able to pay much attention to that side of the business due to the merger.

“I feel it is too premature to talk of fixed line. We are too focused on getting our merger together,” he said.