Kumar Mangalam Birla, Chairman of the $41-billion multinational Aditya Birla Group, is the man behind Idea Cellular’s spectacular growth and noticeable promotion campaigns. The company’s compounded annual revenue growth rate stood at 16.73 per cent whereas its compounded annual growth in profit (after tax) stood at about 46 per cent, more than double of its revenue growth highlighting the spiralling profit margins and apt cost optimisation strategy.
In 1995, 28-year-old Birla became the head of Aditya Birla Group. Soon, the young Birla proved that age is no bar for excellence. He broke all records in terms of market value, revenue and profit in the next two decades. Birla has raised the group’s turnover from $2 billion in 1995 to $41 billion today. He has made 36 acquisitions in 19 years in India and globally, the highest by an Indian multinational in India.
Since his takeover of the group, Birla’s business strategy was mainly ruled by thoughtful mergers and acquisitions across businesses. He has recently created the country’s largest mobile operator by customer and revenue market share, by merging his company, Idea Cellular with British telecom major Vodafone. The companies will focus to build a better 4G and 5G coverage in the years to come, which will be the services of the future. “Sustained investment by the combined entity will accelerate the pan-India expansion of wireless broadband services using 4G/4G+/5G technologies, support the introduction of digital content and ‘Internet of Things’ (IoT) services as well as expand financial inclusion through mobile money services for the benefit of Indian consumers, businesses and society as a whole,” said the statement issued by Idea Cellular.
Birla, close to his semi-centennial birthday now, will head the merged entity as its chairman. Vodafone will own 45.1 per cent in the new company after transferring 4.9 per cent to the Aditya Birla group for Rs 3,874 crore in cash concurrent with completion of the merger. Idea will hold 26 per cent of the combined entity, while the rest will be owned by public shareholders.
The future of the deal looks promising. According to Hong Kong-based brokerage firm CLSA, the merger would make the joint entity the largest telecom operator of the country, with 43 per cent revenue market share in 2018-19. Airtel will have 33 per cent, and Reliance Jio will occupy 13 per cent share. Otherwise, Idea Cellular was one of India’s top three wireless telephony companies with a market value above Rs 58,000 crore.
During the World Economic Forum at Davos, Sunil Mittal, chairman of Bharti Enterprise, which owns Airtel, appreciated the merger talks and told a news firm, “It’s a perfect match. If you look at it, the match is not bad. But you know I can’t sit on the minds of Vittorio (Colao) or Kumar (Mangalam Birla). The strength and weaknesses match very well. Rural-urban, structured portfolio...makes for a good business case and I would support it.”
Generally labelled as media shy, Birla got into the wireless telephony business in association with American multinational telecommunications conglomerate, AT&T and another Indian business house, the Tatas. However, AT&T exited the company by selling its stake to Tata and Birla. In 2006, the Tatas sold their stake to Birla at a substantial premium.
Also, the acquisition of Novelis, a global metals major, in 2007, the second largest acquisition ever by an Indian company, led to a new found respect for Indian companies and stoked a higher level of interest in the country as well.
The Aditya Birla Group has been ranked fourth in the world and first in Asia Pacific in the ‘Top Companies for Leaders’ study 2011, conducted by Aon Hewitt, Fortune Magazine and RBL. The group has topped Nielsen’s Corporate Image Monitor 2014-15 as well.
