Delivering growth through innovation and affordability

Transcription

1 Quarterly report on the results for the first quarter ended June 30, 2006 Bharti Airtel Limited (Incorporated as a public limited company on July 7, 1995 under the Companies Act, 1956) Qutab Ambience, H-5/12, Mehrauli Road, New Delhi , India Phone: (91-11) Fax: (91-11) Delivering growth through innovation and affordability July 26, 2006 Sunil B Mittal Chief Executive Officer Chairman & Group Managing Director Akhil Gupta Chief Financial Officer Joint Managing Director The financial statements included in this quarterly report fairly presents in all material respects the financial condition, results of operations, cash flows of the company as of, and for the periods presented in this report. Mobile Services I Enterprise Services Broadband & Telephone Services Page 1 of 40

2 Supplemental Disclosures Safe Harbor: - Some information in this report may contain forward-looking statements. We have based these forwardlooking statements on our current beliefs, expectations and intentions as to facts, actions and events that will or may occur in the future. Such statements generally are identified by forward-looking words such as believe, plan, anticipate, continue, estimate, expect, may, will or other similar words. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We have chosen these assumptions or bases in good faith, and we believe that they are reasonable in all material respects. However, we caution you that forwardlooking statements and assumed facts or bases almost always vary from actual results, and the differences between the results implied by the forward-looking statements and assumed facts or bases and actual results can be material, depending on the circumstances. You should also keep in mind that any forward-looking statement made by us in this report or elsewhere speaks only as of the date on which we made it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this report after the date hereof. In light of these risks and uncertainties, any forward-looking statement made in this report or elsewhere may or may not occur and has to be understood and read along with this supplemental disclosure. General Risk: - Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Company unless they can afford to take the risk of losing their investment. For taking an investment decision, investors must rely on their own examination of Bharti Airtel including the risks involved. Convenience translation: - We publish our financial statements in Indian Rupees. All references herein to Indian Rupees and Rs. are to Indian Rupees and all references herein to US dollars and US$ are to United States dollars. All translations from Indian Rupees to United States dollars were made (unless otherwise indicated) using the rate of Rs = US $1.00, the noon buying rate as announced by the Federal Reserve Bank of New York on June 30, All amounts translated into United States dollars as described above are provided solely for the convenience of the reader, and no representation is made that the Indian Rupees or United States dollar amounts referred to herein could have been or could be converted into United States dollars or Indian Rupees respectively, as the case may be, at any particular rate, the above rates or at all. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding off. Information contained on our website, and is not part of this Quarterly Report. Use of Certain Non-GAAP measures: - This result announcement contains certain information on the Company s results of operations and cash flows that have been derived from amounts calculated in accordance with United States Generally Accepted Accounting Principles (US GAAP), but are not in themselves US GAAP measures. They should not be viewed in isolation as alternatives to the equivalent US GAAP measures and should be read in conjunction with the equivalent US GAAP measures. Further, disclosures are also provided under Use of Non - GAAP financial information on page 19. Others: - In this report, the terms we, us, our, Bharti, or the Company, unless otherwise specified or the context otherwise implies, refer to Bharti Airtel Limited ( Bharti Airtel ) and its subsidiaries, Bharti Hexacom Limited ( Bharti Hexacom ), Bharti Comtel Limited ( Bharti Comtel ), Bharti Aquanet Limited ( Bharti Aquanet ), Satcom Broadband Equipment Limited (Satcom) and Bharti Broadband Limited (BBL). Disclaimer: - This communication does not constitute an offer of securities for sale in the United States. Securities may not be sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. Any public offering of securities to be made in the United States will be made by means of a prospectus and will contain detailed information about the Company and its management, as well as financial statements Page 2 of 40

3 TABLE OF CONTENTS Section 1 - Bharti Airtel Performance at a glance 4 Section 2 - An Overview 5 Section 3 - Financial Highlights as per US GAAP 3.1 Consolidated - Summarised Consolidated Financial Statements Segment-wise Information Segment-wise Investments and Contribution 9 Section 4 - Operational Highlights 10 Section 5 - Management Discussion & Analysis 5.1 Key Industry & Company Developments Results of Operations 14 Section 6 - Stock Market Highlights 16 Section 7 - Use of Non-GAAP Financial Information 18 Annexures - Detailed Financial & Related Information A.1 Consolidated Financial Statements as per US GAAP 24 A.2 Trends & Ratio Analysis 27 A.3 Key Accounting Policies as per US GAAP 30 A.4 Summarised Consolidated Profit & Loss Statement as per Indian GAAP 34 A.5 Summary of differences in net profit / (loss) between US GAAP and Indian GAAP 34 B.1 Summary of differences between US GAAP un-audited and audited summarized statement of 35 operations for the year ended March 31, 2006 Glossary 36 Page 3 of 40

4 Section 1 BHARTI AIRTEL PERFORMANCE AT A GLANCE Particulars UNITS Quarter Full Year Ended March 31, Ended June 30, Total Custom er Base 000 s. 3,443 7,141 11,842 20,926 24,577 Mobile Services 000 s. 3,071 6,504 10,984 19,579 23,073 Broadband & Telephone Services 000 s ,347 1,505 Consolidated financials as per US GAAP Revenue INR Mn. 24,170 48,320 80, ,215 38,564 EBITDA INR Mn. 5,056 15,968 30,128 43,572 15,021 Cash profit from operations INR Mn. 3,041 13,588 28,132 41,060 13,330 Earnings before tax INR Mn. (1,873) 5,976 16,604 25,563 8,599 Profit after tax INR Mn. (2,018) 5,076 14,978 22,567 7,551 Consolidated financials as per US GAAP Revenue US$ Mn ,113 1,835 2, EBITDA US$ Mn Cash profit from operations US$ Mn Earnings before tax US$ Mn. (39) Profit after tax US$ Mn. (42) Key Ratios EBITDA Margin % 20.9% 33.0% 37.6% 37.5% 39.0% Net Profit Margin % % 18.7% 19.4% 19.6% Net Debt to funded equity ratio Times Return on Stockholders Equity % % 28.5% 29.4% 29.6% Return on Capital employed % - 9.5% 18.3% 22.1% 24.0% 1. Annual financial highlights for the year ended March 31, 2003, 2004, 2005 and 2006 are based on consolidated audited results as per United States Generally Accepted Accounting Principles (US GAAP). 2. Financial highlights for the quarter ended June 30, 2006 are un-audited and are based on the consolidated results as per United States Generally Accepted Accounting Principles (US GAAP). 3. Exchange rate for Rupee conversion to US$ is (a) Rs for financial year ended March 31, 2003 (b) Rs for the financial year ended 2004 (c) Rs for the financial year ended March 31, 2005 (d) Rs for the quarter ended June 30, 2005 (e) Rs for the quarter ended September 30, 2005 (f) Rs for the quarter ended December 31, 2005, (g) Rs for the quarter ended March 31, 2006 and (h) and Rs for the quarter ended June 30, 2006 being the noon buying rate as announced by The Federal Reserve Bank of New York at the end of the respective periods. Page 4 of 40

5 Section 2 AN OVERVIEW 2.1 Introduction We are one of India s leading private sector providers of telecommunication services with an aggregate of 24,577,419 customers as of June 30, 2006, consisting of 23,072,579 GSM mobile and 1,504,840 broadband & telephone customers. We are the largest mobile service provider in the country, based on the number of customers with operations in all the 23-telecom circles of India. We also provide broadband & telephone services and enterprise services. The enterprise services group has two sub-units - carriers (long distance services) and corporates. All these services are provided under the Airtel brand. 2.2 Business Divisions Mobile Services - We offer mobile and fixed wireless services (FWP) using GSM technology, and are the largest mobile service provider in the country, based on the number of customers. Our 23,072,579 GSM mobile customers accounted for a market share of 22.5% of the all India mobile market, as on June 30, We have presence in 4,026 census towns and over 1,00,000 non-census towns & villages in India, thus covering approximately 46% of the country s population. Broadband & Telephone Services - We provide broadband (DSL) & telephone services (fixed line) in 92 cities. We had 1,504,840 customers as on June 30, 2006 of which 25.4% (383,000) were subscribing to broadband (DSL) services. Enterprise Services - Our Enterprise Services division comprises of the Carriers and Corporates business units: Carriers This business unit is India's first private long distance communications service provider offering a portfolio of wholesale services in data and voice domain. This business segment includes the pan India network infrastructure including the optical transport network, national and international voiceswitching network, Multi Protocol Label Switches (MPLS), Asynchronous Transfer Modes (ATM) and Frame Relays (FR) among others. It offers extensive coverage through 35,016 km long optical transport network connected with two international submarine cable landing stations in Chennai for Network i2i and SMW 4. These cable stations provide international connectivity across transatlantic and transpacific routes with resilience and restorability. This business unit has strategic partnership with international carriers that include BT, AT&T, MCI/VZB and SingTel to provide services to their customers in India. Corporates Our enterprise services group provides end-to-end telecom solutions to corporate customers. This business unit adopts a unique partnership model to engage closely with customers and partners. 2.3 Vendors We believe in deploying the finest technology and operating state-of-the-art networks. Equipment suppliers for our mobile networks include Ericsson and Nokia. In the case of the telephone services and long distance networks, equipment suppliers include Siemens, Nortel, Corning, among others. We have an information technology alliance with IBM for our group - wide information technology requirements. We also have a technology alliance with Nortel for call center technology requirements. 2.4 Partners We have strong strategic alliance with SingTel, which has enabled us to further enhance and expand our telecommunications networks in India to provide quality service to our customers. The investment made by SingTel in our company is one of their largest investments made in the world outside Singapore. We also have a strategic alliance with Vodafone, the world s leading mobile telecommunications company having ownership interests in 27 countries across 5 continents. In addition, the group has partner networks in a further 33 countries. The investment made by Vodafone in Bharti is one of the largest single foreign investments made in the Indian telecom sector. Page 5 of 40

6 Section 3 FINANCIAL HIGHLIGHTS Un-audited financial results for the first quarter ended June 30, 2006 as per United States Generally Accepted Accounting Principles (US GAAP). Detailed financial statements, analysis and other related information is attached to this report as Annexures (page 24). Also, kindly refer to Section 7 (use of Non - GAAP financial information on page 18) and Glossary (page 36) for detailed definitions. 3 Consolidated - Summary of Consolidated Financial Statements Consolidated Summarised Statement of Operations (net of inter segment eliminations) Particulars Amount in Rs. Million, except ratios Y-on-Y June 2006 June 2005 Grow th Total revenues 38,564 25,173 53% EBITDA 15,021 9,407 60% Cash profit from operations 13,330 9,258 44% Income / (Loss) before Income taxes 8,599 5,980 44% Current tax expense 1, Income / (Loss) after current tax expense 7,505 5,469 37% Deferred tax expense / (income) (142) 304 Net income / (loss) 7,551 5,099 48% EBITDA / Total revenues 39.0% 37.4% Consolidated Summarised Balance Sheet Particulars Amount in Rs. Million As at June 30, 2006 ASSETS Total current assets 40,098 Total non current assets 202,166 Total assets 242,264 LIABILITIES AND STOCKHOLDERS' EQUITY Total current liabilities 88,931 Total non current liabilities 52,118 Total liabilities 141,049 Minority Interests 1,053 Total stockholders' equity 100,161 Total liabilities and stockholders' equity 242,264 Page 6 of 40

7 3.2 Segment - wise Summarised Statement of Operations Mobile Services - comprises of consolidated statement of operations of mobile operations. Partibulars Amount in Rs. Million, except ratios June 2006 June 2005 Y-on-Y Grow th Total revenues 28,411 17,464 63% EBITDA 10,341 6,085 70% EBIT 6,961 3,890 79% EBITDA / Total Revenues 36.4% 34.8% Non-mobile Services comprises of the Broadband & Telephone Services corporates). Particulars Amount in Rs. Million, except ratios Y-on-Y June 2006 June 2005 Grow th Total revenues 14,215 10,223 39% EBITDA 4,879 3,515 39% EBIT 3,507 2,535 38% EBITDA / Total Revenues 34.3% 34.4% and Enterprise Services (carriers and Broadband & Telephone Services Broadband & Telephone Services Consolidated - comprises of consolidated statement of operations of broadband & telephone operations. Particulars Amount in Rs. Million, except ratios Y-on-Y June 2006 June 2005 Grow th Total revenues 5,182 3,404 52% EBITDA 1, % EBIT % EBITDA / Total Revenues 23.0% 28.9% Existing Broadband & Telephone Operations (Refer glossary for definition) Particulars Amount in Rs. Million, except ratios Y-on-Y June 2006 June 2005 Grow th Total revenues 4,780 3,340 43% EBITDA 1,586 1,070 48% EBIT % EBITDA / Total Revenues 33.2% 32.0% Page 7 of 40

8 New Broadband & Telephone Operations - (Refer glossary for definition) Particulars Enterprise Services comprises of the Enterprise Services Carriers (Long distance services) and Enterprise Services - Corporates Particulars Enterprise Services Carriers - comprises of the domestic, international long distance operations and landing station (at Chennai). Amount in Rs. Million, except ratios Particulars Y-on-Y June 2006 June 2005 Grow th Total revenues 7,064 5,209 36% EBITDA 2,750 1,869 47% EBIT 2,278 1,468 55% EBITDA / Total Revenues 38.9% 35.9% Enterprise Services Corporates Particulars Amount in Rs. Million, except ratios Y-on-Y June 2006 June 2005 Grow th Total revenues EBITDA (393) (86) - EBIT (534) (110) - EBITDA / Total Revenues - - Amount in Rs. Million, except ratios Y-on-Y June 2006 June 2005 Grow th Total revenues 9,033 6,819 32% EBITDA 3,686 2,532 46% EBIT 3,123 2,057 52% EBITD A / Total Revenues 40.8% 37.1% Amount in Rs. Million, except ratios Y-on-Y June 2006 June 2005 Grow th Total revenues 1,969 1,610 22% EBITDA % EBIT % EBITDA / Total Revenues 47.5% 41.1% Others comprises of the expense s of the Bharti corporate office Amount in Rs. Million, except ratios Particulars Y-on-Y June 2006 June 2005 Grow th Total revenues 0 0 EBITDA (119) (193) Depreciation & Others EBIT (170) (295) Page 8 of 40

9 3.3 Segment-wise Investments and Contribution Investments in projects Amount in Rs. Million, except ratios Segment As at June 30, 2006 Rs. Million % of Total Mobile Services 177,633 71% Broadband & Telephone Services 40,036 16% Enterprise Services - Carriers 29,033 12% Enterprise Services - Corporates 4,044 2% Others 451 0% Total 251, % Less:- Accumulated Depreciation & Amortisation 52,954 Net Fixed Assets & Other Project Investment 198,242 Note: The investment in projects comprises gross fixed assets, intangible assets, capital work in progress, gross goodwill and one-time entry fee paid Segment-wise Contribution to Revenue, EBITDA and Capex incurred during the period Segment June 2006 Revenue EBITDA Capex Rs. Million % of total Rs. Million % of total Rs. Million % of total Mobile Services 28,411 74% 10,341 69% 18,054 84% Broadband & Telephone Services 5,182 13% 1,193 8% 3,962 18% Existing Circles 4,780 12% 1,586 11% 3,042 14% New Circles 402 1% (393) -3% 920 4% Enterprise Services - Carriers 7,064 18% 2,750 18% 1,306 6% Enterprise Services - Corporates 1,969 5% 936 6% 55 0% Others 0 0% (119) -1% 85 0% Sub Total 42, % 15, % 23, % Eliminations (4,062) -11% (80) -1% (1,967) -9% Total 38, % 15, % 21, % Note: During the quarter, there was an IRU transaction between carrier and corporate segment. Those assets are eliminated as an inter segment transaction. Page 9 of 40

10 SECTION 4 OPERATING HIGHLIGHTS The financial figures used for computing ARPU, Non Voice revenue, SMS revenue, gross revenue per employee per month are based on United States Generally Accepted Accounting Principles (US GAAP). 4.1 Consolidated Parameters Unit June 30, 2006 March 31, 2006 Q-on-Q Grow th June 30, 2005 Y-on-Y Grow th Customers on our Network Mobile Services 000's. 23,073 19,579 18% 12,256 88% Broadband & Telephone Services 000's. 1,505 1,347 12% % Total 000's. 24,577 20,926 17% 13,191 86% Non Voice Revenue as a % of Total Revenues % 15.8% 16.7% 16.3% Total Minu tes on Netw ork % 35,609 29,628 20% 18,142 96% Total On-Roll Employees No. 14,374 10,970 31% 8,739 64% 4.2 Mobile Services Parameters Unit June 30, 2006 March 31, 2006 Q-on-Q Grow th June 30, 2005 Y-on-Y Grow th Subscriber Base All India Mobile Subscribers 000's. 102,606 89,647 14% 56,906 80% Mobile Customers on Bharti's Netw ork 000's. 23,073 19,579 18% 12,256 88% Net Additions All India Mobile Subscribers 000's. 12,959 14,231-9% 5, % Mobile Customers on Bharti's Netw ork 000's. 3,493 3,252 7% 1, % Market Share Bharti's Mobile Market Share % 22.5% 21.8% 21.5% Bharti's Market Share of Net Additions % 27.0% 22.9% 24.5% Pre-Paid Customers Total Customer Base % 84.4% 82.7% 75.7% Total Net Additions % 93.7% 97.9% 76.4% Other Operating Information Average Revenue Per User (ARPU) Rs % Average Revenue Per User (ARPU) US$ % Average Minutes of Use Per User Minutes % % Monthly Churn Post-paid Voluntary Churn % 1.3% 1.4% 1.1% Post-paid Company Initiated Churn % 2.1% 2.7% 2.8% Prepaid % 4.7% 5.2% 6.7% Non Voice Revenue SMS Revenue as a % of Mobile Revenues % 6.4% 6.8% 6.8% Non Voice Revenue as a % of Mobile Revenues % 10.8% 10.7% 10.2% Note: All India Mobile Subscribers for periods until March 31, 2006 includes GSM and Digital Mobile (CDMA) subscribers as reported by COAI and AUSPI. For the quarter ended June 30, 2006, due to non - availability of subscriber data of few of the CDMA operators into Digital mobile and WLL(F) services, we have excluded the last available WLL(F) subscriber numbers of these operator's from the overall subscriber base. Page 10 of 40

11 4. 3 Broadband & Telephone Services Parameters Broadband & Telephony Customers 000's. 1,505 1,347 12% % Net additions 000's % % Average Revenue Per User ( ARPU) Rs 1,202 1,063 13% 1,256-4% Average Revenue Per User (ARPU) US$ % % Note: ARPU for the quarter ended June 30, 2006 includes DSL revenues. 4.4 Traffic Details - Gross of inter-segment eliminations Parameters 4.5 Network and Coverage Parameters Unit Unit Unit June 30, March 31, Q-on-Q June 30, Y-on-Y Grow th 2005 Grow th June 30, March 31, Q-on-Q June 30, Y-on-Y Grow th 2005 Grow th Mobile Services Mn Min 28,194 23,187 22% 13, % Broadband & Telephone Services Mn Min 3,780 3,549 7% 2,997 26% National Long Distance Services Mn Min 2,882 2,208 30% 1, % International Long Distance Services Mn Min % % Total Minutes on Network Mn Min 35,609 29,628 20% 18,142 96% June 30, 2006 March 31, 2006 Q-on-Q Movement June 30, 2005 Y-on-Y Movement Mobile Services Census Tow ns No. 4,026 3, n/a - Non-Census Tow ns & Villages No. 101,614 80,687 20,927 n/a - Population Coverage % 46% 42% 4% n/a - Broadband & Telephone Services No. of cities covered No Carriers (National Long Distance) Optic Fibre Netw ork Rkms 35,016 32,900 29, Human Resource Analysis Parameters Unit June 30, 2006 March 31, 2006 Q-on-Q Grow th June 30, 2005 Y-on-Y Grow th Consolidated Total On-Roll Employees No. 14,374 10,970 31% 8,739 64% Number of Customers per employee No. 1,710 1,908 1,509 Mobile Services Number of Customers per employee No. 3,483 3,243 7% 2,412 44% Gross Revenue per employee per month Rs. 1,429,677 1,332,321 7% 1,145,727 25% Broadband & Telephone Services Number of Customers per employee No % % Existing Circles No % % New Circles No % 35 Gross Revenue per employee per month Rs. 299, ,709-31% 501,790-40% Existing Circles Rs. 394, ,838-30% 667,355-41% New Circles Rs. 77, ,271-35% 35,553 Enterprise Services - Carriers Gross Revenue per employee per month Rs. 2,921,560 3,911,140-25% 3,282,098-11% Enterprise Services - Corporates Gross Revenue per employee per month Rs. 688, ,743-7% 813,330-15% Page 11 of 40

12 5.1 Key Industry and Company Developments SECTION 5 MANAGEMENT DISCUSSION & ANALYSIS INDUSTRY Consultation Paper on Allocation and Pricing of Spectrum for 3G Services and Broadband Wireless Access On June 12, 2006 Telecom Regulatory Authority of India (TRAI) released a consultation paper on the methodology of allotment and pricing of spectrum for 3G services. The primary issues for discussion are: principles and criteria for identification of preferred frequency bands for 3G services; possible methods of allocation of spectrum for 3G; quantum of spectrum allocation to each operator; criteria to determine the 3G spectrum pricing; need for imposing one-time charge for 3G spectrum; amount of annual spectrum charge for 3G spectrum; use of existing criteria of annual spectrum charge for 2G spectrum based on Adjusted Gross Revenue (AGR) for 3G spectrum as well; imposition of roll-out obligations for 3G services; and availability of spectrum for wireless broadband technologies like WiFi, WiMAX identification of ideal frequency bands and optimum allocation per operator. Deadline for submission of written responses was June 30, Subsequently TRAI hosted open house discussions with all stakeholders. TRAI s recommendations on the subject are awaited. Consultation Paper on Interconnect Usage Charge (IUC) for Short Message Service (SMS) Currently, the transmission of SMS across networks of different operators is based on mutual agreement and most of the operators have adopted a bill & keep approach for charging. In view of increasing popularity of SMS as a means of communication and advertisement, and with the availability of numerous tariff plans offering free/discounted tariffs for SMS, the SMS traffic imbalance across operators is increasing. In view of the above, on June 13, 2006 TRAI released a consultation paper to discuss whether the current situation justifies regulatory intervention in the form of fixation of an IUC for SMS akin to IUC voice calls or whether SMS revenue sharing should be left to market forces. The key issues raised include: Need for regulating termination charges for SMS and its methodology. Need for regulating carriage charges for SMS and its methodology. Effect on the retail tariff for SMS if IUC are prescribed. Stakeholders were required to submit their responses by June 30, Pursuant thereto, TRAI conducted open house discussions. TRAI s recommendations are awaited. Consultation Paper on Fixing Benchmarks pertaining to Quality of Service (QoS) for Broadband Currently there are no prescribed benchmarks for QoS for broadband services in India. In developed countries, the QoS aspects of broadband service are generally addressed through competition. However in India, the service has just taken off and in view of the rapid growth of the service coupled with insufficient competition in this segment, TRAI has decided to prescribe benchmarks pertaining to QoS for broadband services. On May 23, 2006 TRAI released a consultation paper for fixation of benchmarks for QoS for broadband services. Deadline for submission of responses was June 16, TRAI held open house discussion on June 28, 2006 wherein TRAI clarified that fixation of QoS benchmarks is essential. It also constituted a committee to discuss and arrive at technical implementation guidelines. Consultation Paper on Admissibility of Revenue Share between Visiting Network and Terminating Network for Roaming Calls On June 16, 2006 TRAI released a consultation paper to discuss whether in case of roaming subscribers, the terminating network service provider should get only the prescribed termination charges or should there be any revenue share between the visiting network service provider and the terminating network service provider, in view of higher tariffs for calls originated by roaming subscribers. Deadline for submission of written responses was June 30, TRAI held open house discussions with stakeholders and is expected to come out with its recommendations soon. Verification of Prepaid Subscriber Base Verification of subscribers, both prepaid and postpaid, is a condition of the License of all cellular/unified access service operators. In order to co-ordinate and oversee proper subscriber verification, as per the license conditions and the process stipulated by DoT, Cellular Operator Association of India (COAI) & Association of Unified Telecom Service Providers of India (AUSPI) jointly set up the Apex Advisory Council for Telecom in India (ACT) in April The ACT has laid down a common standard procedure for verification of mobile connections. During May 2006, in a joint meeting of the representatives of the industry with DoT, DoT directed all telecom service providers to re-verify their complete pre-paid subscriber base within 5 months. The operators have initiated the activity as per directions of DoT. Page 12 of 40

13 Status Update on Previous Reported Quarter Increase in Foreign Direct Investment (FDI) cap from 49% to 74% On November 03, 2005, the Government of India had announced enhancement of FDI ceiling from 49% to 74% in telecom sector subject to certain preconditions. Telecom licensees were required to submit a compliance report to DoT by March 02, The DoT has extended this deadline till October 03, 2006, upon requests of telecom operators. Bharti (Mobile Services) Punjab Circle Litigation The arbitration proceedings for a claim for the refund of license fee and interest paid to the DoT were decided against Bharti Mobile, the licensee of the Punjab mobile circle. The company has already paid the license fees and interest thereon before the commencement of arbitration proceedings. The company challenged the award before the Hon ble Delhi High Court and the matter is now listed for hearing before the Hon ble Delhi High Court on September 18, Mobile Number Portability In March 2006 TRAI had submitted its recommendations to the Department of Telecommunications (DoT) on mobile number portability (MNP) wherein it had recommended that MNP should be implemented in India by April The DoT is empowered to frame policy based on TRAI s recommendations. However, presently, the DoT has not officially announced a policy for introduction of MNP in India. Draft Regulation on Intelligent Network (IN) Services The matter is still being discussed with operators by TRAI. Implementation of Carrier Selection DoT has not yet announced any policy on the subject. Treatment of Fixed Wireless Services Both Tata & Reliance had gone in appeal before the Supreme Court against the TDSAT Orders declaring their fixed wireless services to be of the nature of limited mobility service. These matters are listed for hearing. COMPANY Key developments Airtel redefined mobile affordability by launching Easy Lifetime Pre-paid. With this product customers can go mobile for life for Rs. 99 per month in 12 easy installments. Airtel launched Airtel Mega Fixed Wireless Phone (FWP) services in India. This service fulfills the customer needs for an innovative home phone service with advantages of instant availability, feature rich instruments and mobility within premises. Airtel crossed the landmark of 75 million cumulative music downloads in May This include all forms of music downloads - Hello Tunes (Ring back tone) as well as ring tones of all forms including MP3, truetones, polytones and mono tones. Airtel launched India s first Music Video Download service. Airtel offers Full Music and Video downloads at an affordable price of Rs.20 for a full music download and Rs.30 for a music video download. The company has been ranked among the top 10 best performing companies in the world in the globally renowned BusinessWeek IT 100 list. Bharti Airtel has been described by BusinessWeek in the report as a highly innovative company. Page 13 of 40

14 5.2 Results of Operations The company has reported its un-audited financial statements and operational results for the first quarter ended June 30, The financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles US GAAP). Key Highlights - For the quarter ended June 30, 2006 Total Revenues of Rs billion (up 53% Y-o-Y). EBITDA of Rs billion (up 60% Y-o-Y). Cash profit from operations of Rs billion (up 44% Y-o-Y). Highest ever-net addition of ~3.65 million of total customers on its network. Market leader with a market share of all India mobile subscribers at 22.5%. Bharti Airtel Consolidated " One Airtel Management Structure" - Under its "One Airtel" strategy the company announced a new Management Structure in March As a consequence and for achieving higher levels of efficiency, the company has also realigned some business activities under relevant business units. Customer Base As on June 30, 2006, the company had an aggregate of 24,577,419 customers, consisting of 23,072,579 GSM mobile and 1,504,840 broadband & telephone customers. Its total customer base as on June 30, 2006 increased by 86% compared to the customer base as on June 30, Revenues/Turnover During the quarter ended June 30, 2006, the company had revenues of Rs. 38,564 million; a growth of 53% compared to the quarter ended June 30, Revenues from mobile services represented 74% of the total revenues for the quarter ended June 30, Non-voice revenue contributed to approximately 15.8% of the total revenues for the quarter. Operating Expenses (ex-revenue share license and spectrum fee) During the quarter ended June 30, 2006, the company incurred an opex of Rs. 13,535 million representing 35.1% of the total revenues. The operating expense comprises: Rs. 4,754 million towards network operations costs (~12.3% of turnover) Rs. 2,365 million towards employee costs, (~6.1% of turnover) Rs. 335 million towards equipments costs, and Rs. 6,081 million towards selling general and administrative costs (~15.8% of turnover) The operating expenses grew by 60% compared to the quarter ended June 30, The increase in the operating expenses is associated to the costs pertaining to the expansion of operations. EBITDA, Finance Cost and Cash Profit from Operations During the quarter ended June 30, 2006, the company had an EBITDA of Rs. 15,021 million; a growth of 60% compared to the quarter ended June 30, The EBITDA margin for the quarter was 39.0%. The net finance cost for the quarter ended June 30, 2006 was Rs. 1,691 million. The interest on borrowings during the quarter was Rs. 713 million and the finance income (primarily related to income on marketable securities) was Rs. 93 million. The balance amount was other finance costs, effect of exchange fluctuation and the effect of derivative accounting. The cash profit from operations for the quarter was Rs. 13,330 million, an increase of 44%, as compared to the quarter ended June 30, During the quarter ended June 30, 2006, the company had depreciation & amortisation expenses of Rs. 4,972 million. Income Before Income Taxes (PBT) The income before income tax for the quarter was Rs. 8,599 million, an increase of 44%, as compared to the quarter ended June 30, The current tax for the quarter ended June 30, 2006 was Rs. 1,094 million and deferred tax income of Rs. 142 million. Net profit The net profit for the quarter ended June 30, 2006, was Rs 7,551 million. Balance Sheet As on June 30, 2006, the company had total assets of Rs. 242 billion and total liabilities of Rs. 141 billion respectively. The difference of Rs. 101 billion was on account of stockholder equity and minority interest. The company had a net debt of Rs. 42,201 million (US$ 920 million) as on June 30, 2006, resulting in a net debt to EBITDA (LTM) of 0.86 times. Capital Expenditure During the quarter ended June 30, 2006, the company incurred capital expenditure of Rs. 21,495 million (US$ 469 million). Human Resources As on June 30, 2006, the company had a total of 14,374 employees consisting of 6,624 in mobile services, 7,518 in non-mobile services and 232 in corporate office (as common pool). With a focus to provide superior customer experience, the company have brought approximately 2,600 customer facing employees on its rolls and have been included in the broadband & telephone segment for purpose of computation of human resource productivity indicators. These individuals were up till now outsourced from third party service providers. Mobile Services Customer Base, Churn, ARPU and MoU As at the end of the quarter the company had 23,072,579 GSM mobile customers on its network, which accounted for a market share 22.5% of the All India mobile market. Of its 23,072,579 GSM mobile customers as of June 30, 2006, postpaid customer contributed 15.6% to the overall customer base while pre-paid customers contributed the Page 14 of 40

15 balance 84.4%. During the quarter, its share of 3,493,371 net additions was 27% of All India wireless subscriber net additions. The monthly churn for the quarter ended June 30, 2006 was 3.4% (1.3% voluntary churn and 2.1% company initiated churn) for its post-paid segment, and 4.7% for the pre-paid segment. During the quarter, blended ARPU was Rs. 441 (US$ 9.6) per month as compared to Rs 442 per month in the quarter ended March 31, The blended monthly usage per customer, during the quarter, was at 441 minutes, an increase of 2% over the quarter ended March 31, The non-voice revenue, which includes Short Messaging Service (SMS), voice mail service, call management and other value added services like Hello Tunes and Airtel Live contributed to approximately 10.8% of the total revenues of the segment. The Short Messaging Services (SMS) revenue, which is primarily text messaging accounted for 6.4% of the total revenue of the segment, for the quarter ended June 30, Revenues, EBITDA and EBIT The revenues for the quarter ended June 30, 2006 for mobile services stood at Rs 28,411 million, an increase of 63% over the corresponding quarter last year. The revenue from this segment contributed to 74% of its total consolidated revenues. The EBITDA during the quarter ended June 30, 2006 was Rs 10,341 million representing growth of 70% over the quarter ended June 30, The EBITDA margin for the quarter ended June 30, 2006 was 36.4%. The EBIT for the quarter ended June 30, 2006 was Rs 6,961million as compared to Rs 3,890 million for the quarter ended June 30, 2005, an improvement of 79%. Capital Expenditure During the quarter ended June 30, 2006, the company incurred a capital expenditure of Rs 18,054 million (US$ 394 million) on its mobile services. Broadband & Telephone Services (B&T) Customer Base and ARPU At the end of the quarter ended June 30, 2006, the company had its broadband & telephone operations in 92 cities. During the quarter, the company added 158,100 customers on its broadband & telephone networks with 1,504,840 customers as on June 30, The company had approximately 383, 000 customers (~25.4% of the total customer base) subscribing to broadband (DSL) services. The ARPU for the quarter was Rs. 1,202 (US$ 26.2) per month. Revenues, EBITDA and EBIT For the quarter ended June 30, 2006, the revenues from its broadband & telephone operations of Rs 5,182 million, represented a growth of 52% over the corresponding quarter last year. The EBITDA for the quarter was Rs. 1,193 million compared to Rs. 984 million in the corresponding prior year quarter, an increase of 21% respectively. The EBITDA margin for this segment was 23% for the quarter ended June 30, The EBIT for the quarter ended June 30, 2006 was Rs 384 million. The revenue and EBITDA for the quarter ended June 30, 2006 from its existing operations was Rs. 4,780 million and Rs. 1,586 million respectively. The company s existing broadband & telephone operations had an EBITDA margin of 33.2% for the quarter ended June 30, The revenue for the quarter ended June 30, 2006 from its new operations was Rs. 402 million. The company s new broadband & telephone operations had a negative EBITDA of Rs 393 million for the quarter ended June 30, Capital Expenditure During the quarter ended June 30, 2006, the company incurred a capital expenditure of Rs. 3,962 million (US$ 86 million) on its B&T services. Enterprise Services Carriers Revenues, EBITDA and EBIT For the quarter ended June 30, 2006, the revenues from its long distance services was Rs. 7,064 million representing a growth of 36% over the corresponding quarter last year. The EBITDA from this segment during the quarter was Rs 2,750 million, a growth of 47% over the corresponding quarter last year. The EBITDA margin for the quarter, was 38.9%. The EBIT of this segment was Rs. 2,278 million representing a growth of 55% over the corresponding quarter last year. Enterprise Services - Corporates Revenues, EBITDA and EBIT For the quarter ended June 30, 2006, the revenue from this segment was Rs. 1,969 million, a growth of 22% over the corresponding quarter last year. The EBITDA for this segment for the quarter ended June 30, 2006 was Rs. 936 million. The EBITDA margin for this segment in the quarter ended June 30, 2006 was 47.5%. The EBIT of this segment was Rs. 845 million representing a growth of 43% over the corresponding quarter last year. Page 15 of 41

16 6.1 General Information SECTION 6 Stock Market Highlights Shareholding & Financial Data Unit Stock Data No. of Shares Outstanding as on June 30, 2006) Million Nos. 1,895 Code/Exchange /BSE Closing Market Price - BSE July 25, 2006) Rs./Share Bloomberg/Reuters BHARTI IN/BRTI.BO Market Capitalisation Rs. Million 699,913 Shareholding Pattern As on Jun. 30, 2006 Book Value Per Share Rs Promoters Holding 45.38% Market Price/Book Value Times 6.99 Singtel (Pastel Ltd) 15.60% Net Debt to EBITDA (LTM) Times 0.86 Vodafone 5.62% Enterprise Value Rs. Million Enterprise Value/ Annualised Q1 Revenue Times Enterprise Value/ Annualised Q1 EBITDA Times 742, 114 Employee Welfare Trusts/ESOPs 0.21% Free Float Total 33.20% % Combined Volume April 01, July 25, 0.97 million per day 2006) 6.2 Summarised Shareholding pattern as of June 30, 2006 Category Indian Holding Promoters Banks/ Mutual Funds/ Indian Financial Institutions Indian Residents/ Bodies Corporate/ Others Total - Indian Foreign Holding Foreign Companies Foreign Institutional Investors Non-Resident Indians and Overseas Corporate Bodies Total - Foreign % 45.38% 3.99% 2.66% 52.02% 21.55% 25.61% 0.82% 47.98% Total % 6.3 Bharti Airtel Daily Stock price` (BSE) & Volume (Com bined of BSE & NSE) Movement 440 4,000.) Apr 6-Apr 11-Apr 16-Apr 21-Apr 26-Apr 1-May 6-May 11-May 16-May 21-May price per s 26-May hare (Rs 3,000 2,000 1,000 volume (in 000's ) 0 31-May 5-Jun 10-Jun 15-Jun 20-Jun 25-Jun 30-Jun 5-Jul 10-Jul 15-Jul 20-Jul 25-Jul Source: Bloomberg Volume (in 000's) Share Price (Rs.) Page 16 of 40

17 6.4 Comparison of Domestic Telecom stock movement with Sensex and Nifty Apr 6-Apr 11-Apr 16-Apr 21-Apr 26-Apr 1-May 6-May 11-May 16-May 21-May 26-May 31-May 5-Jun 10-Jun 15-Jun 20-Jun 25-Jun 30-Jun 5-Jul 10-Jul 15-Jul 20-Jul 25-Jul Bharti Sensex NSE RCOM MTNL VSNL Source: Bloomberg Page 17 of 40

18 SECTION 7 Use of Non-GAAP Financial Information In presenting and discussing the Company s reported financial position, operating results and cash flows, certain information is derived from amounts calculated in accordance with US GAAP, but this information is not in itself an expressly permitted GAAP measure. Such non - GAAP measures should not be viewed in isolation as alternatives to the equivalent GAAP measures. A summary of certain of the non - GAAP measures included in this report, together with details where additional information and reconciliation to the nearest equivalent GAAP measure can be found, is shown below. Non - GAAP measure Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) Earnings before Interest and Taxation Equivalent GAAP measure for USGAAP Operating Income Operating Income Location in this results announcement of reconciliation and further information Consolidated Page 19, Mobile Services: - Page 20, Non Mobile Services: - Page 21, Broadband & Telephone Services: - Page 21, Enterprise Services (Carriers): - Page 21, Enterprise Services (Corporates): - Page 22, Others: - Page 22. Consolidated Page 19, Mobile Services: - Page 20, Non Mobile Services: - Page 21, Broadband & Telephone Services: - Page 21, Enterprise Services (Carriers): - Page 21, Enterprise Services (Corporates): - Page 22, Others: - Page 22. Cash Profit from Operations Operating Income Page 19 Income/(loss) before Page 19 Income/(loss) after current tax expenses taxation Net Debt N.A Page 19 Net Revenues Total revenues Page 19 Earnings before Interest & Taxes [for Non-mobile Services] N.A. Page 21 Total Revenues [for Non-mobile Services] N.A. Page 21 Total Non Current Assets N.A Page 20 Total Non Current Liabilities N.A Page 20 Schedule of cost of services N.A Page 23 Schedule of depreciation and amortization N.A Page 23 Schedule of finance cost N.A Page 23 Schedule of Income tax N.A Page 23 Page 18 of 40

19 7.1 Reconciliation of Non-GAAP financial information based on USGAAP Consolidated Particulars June 2006 Operating Income To EBITDA Operating Incom e 10,041 Depreciation & Amortisation 4,972 Pre-operating cost 9 EBITDA 15,021 Operating Income to Cash Profit from Operations Operating Incom e 10,041 Depreciation & Amortisation 4,972 Pre-operative costs 9 Interest income 757 Interest Expense (2,449) Cash Profit from Operations 13,330 Operating Incom e to EBIT Operating Incom e 10,041 Less: Non operating expenses 1 Add: Other Income 250 EBIT 10,291 Net Debt Long term debt, net of current portion 40,891 Short-term borrow ings and current portion of long-term debt 11,285 Less: Cash and cash equivalents 3,062 Restricted cash 176 Restricted cash, non-current 56 Short term investments 6,181 Investments 500 Net Debt 42,201 Total Revenue to Net Revenue Total Revenue 38,564 Less:- Access charges 6,612 Net Revenue 31,952 Operating expenses Netw ork operations costs 4,754 Equipment costs 335 Employee costs 2,365 Selling general and administrative costs 6,081 Operating Expenses 13,535 Incom e / (Loss) before Incom e taxes to Incom e / (Loss) after current tax expense Income / (Loss) before Income taxes 8,599 Less:- Current tax expense 1,094 Incom e / (Loss) after current tax expense 7,505 Page 19 of 40

20 7.1.1 Consolidated (contd.) Amount in Rs million Partic ulars June 2006 Property and equipment, net 159,774 Acquired intangible assets, net 14,597 Goodw ill 23,686 Investment in associates and joint ventures 185 Investments 500 Restricted cash, non-current 56 Other assets 3, 368 Total Non Current Assets 202,166 Amount in Rs million Partic ulars June 2006 Long-term debt, net of current portion 40,891 Deferred taxes on income 3,386 Unearned income- Indefeasible right to use sales 4,052 Other liabilities 3,789 Total Non Current Liabilities 52, Mobile Services Amount in Rs million Partic ulars June 2006 Operating Income To EBITDA Operating Incom e 6,818 Depreciation & Amortisation 3,523 EBITDA 10,341 Operating Incom e to EBIT Operating Incom e 6818 Less: Share of profits in associates/ joint ventures 1 Add: Other Income 144 EBIT 6961 Page 20 of 40

21 7.1.3 Non-mobile Services Amount in Rs million Partic ulars June 2006 Revenues For Non-mobile Services Revenues from Broadband & Telephone Services 5,182 Revenues from Enterprise Services 9,033 Revenues For Non-mobile Services 14,215 EBITDA For Non-mobile Services EBITDA from Broadband & Telephone Services 1,193 EBITDA from Enterprise Services 3,686 EBITDA For Non-mobile Services 4,879 EBIT For Non-mobile Services EBIT from Broadband & Telephone Services 384 EBIT from Enterprise Services 3,123 EBIT For Non-mobile Services 3, Broadband & Telephone Services Amount in Rs million June 2006 Operating Incom e 388 Depreciation & Amortisation 797 Pre-operating cost 9 EBITDA 1,193 Operating Incom e 388 Add: Partic ulars Operating Income To EBITDA Operating Incom e to EBIT Other Income (4) EBIT Enterprise Services Carriers (Long Distance Services) Amount in Rs million June 2006 Operating Incom e 2,237 Depreciation & Amortisation 513 EBITDA 2,750 Operating Incom e 2237 Less: Share of profits in associates/ joint ventures (2) Add: Partic ulars Operating Income To EBITDA Operating Incom e to EBIT Other Income 38 EBIT 2278 Page 21 of 40

22 7.1.6 Enterprise Services - Corporates Amount in Rs million June 2006 Operating Incom e 773 Depreciation & Amortisation 162 EBITDA 936 Operating Incom e 773 Add: Partic ulars Operating Income To EBITDA Operating Incom e to EBIT Other Income 72 EBIT Others Amount in Rs million June 2006 Operating Incom e (169) Depreciation & Amortisation 50 EBITDA (119) Operating Incom e (169) Less: Partic ulars Operating Income To EBITDA Operating Income To EBIT Share of profits in associates/ joint ventures 1 Non operating expenses 1 EBIT (170) Page 22 of 40

23 7.2 Schedule to Financial Statements Schedule of Cost of Services Partic ulars Amount in Rs million June 2006 Access charges 6,612 Licence fees, revenue share & spectrum charges 3,395 Netw ork operations costs 4,754 Employee costs 2,365 Depreciation & amortisation 4,847 Cost of Services 21, Schedule of Depreciation and Amortisation Partic ulars Amount in Rs million June 2006 Fixed Assets 4,567 Licence Fees 157 ESOP Intangibles 165 Depreciation and Amortisation 4, Schedule of Finance Cost (net) Amount in Rs million Partic ulars June 2006 Interest on borrow ings 713 Finance charges 104 Finance income (93) Derivatives & Exchange Fluctuation 967 Finance cost (net) 1, Schedule of Income tax Amount in Rs million Partic ulars June 2006 Current tax expense 1,094 Deferred tax expense / (income) (142) Incom e tax expense / (Incom e) 952 Page 23 of 40

24 ANNEXURES DETAILED FINANCIAL AND RELATED INFORMATION A.1 FINANCIAL STATEMENTS AS PER UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) A.1.1 Consolidated Statement of Operations (as per USGAAP) Particulars Amount in Rs. Million, except ratios Y-on-Y June 2006 June 2005 Grow th Revenues Services 38,303 24,767 55% Indefeasible right ot use sales % Equipment Total Revenues 38,564 25,173 53% Operating Expenses Cost of Services (21,974) (14,708) 49% (Inclusive of depreciation and amortisation ) Costs of equipment sales (335) (319) 5% Selling, general & administrative expenses (Inclusive of depreciation and amortisation ) (6,206) (4,142) 50% Pre-operating cost (9) (6) 38% Total Operating Expense (28,523) (19,175) 49% Operating Income / (Loss) 10,041 5,998 67% Interest expense (2,449) (466) Interest income Share of profits in associates / joint ventures 0 (3) Other income Non operating expenses (1) (1) Incom e / (Loss) before incom e Taxes 8,599 5,980 44% Income tax (expense) / benefit (952) (815) (Profit) / loss to minority shareholders (96) (66) Net incom e / (loss) 7,551 5,099 48% Earnings / (loss) per share for profit attributable to common shareholders Basic Diluted Weighted average number of shares used in computing earnings / (loss) per share Weighted average number of common shares (in millions) 1,891 1,860 Weighted average number of diluted shares (in millions) 1,895 1,889 Page 24 of 40

25 A.1.2 Consolidated Balance Sheet (as per USGAAP) Particulars Amount in Rs. Million As at June 30, 2006 ASSETS Cash and cash equivalents 3,062 Accounts receivable, net of allow ances for doubtful debts 12,212 Unbilled receivables 3,658 Inventories 1,023 Short term investments 6,181 Deferred taxes on income 1,583 Derivative financial instruments 1,093 Restricted cash 176 Prepaid expenses and other current assets Due from related parties 10, Total Current Assets 40,098 Prope rty and equipment, net 159,774 Acquired intangible assets, net 14,597 Goodw ill 23,686 Investment in associates and joint ventures 185 Investments 500 Restricted cash, non-current 56 Other assets 3,368 Total Assets 242,264 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrow ings and current portion of long-term debt 11,285 Trade payables 18,157 Equipment supply payables 29,390 Accrued expenses 9,857 Unearned income 13,829 Unearned income- Indefeasible right to use sales 336 Derivative financial instruments 1,463 Due to related parties 8 Other current liabilites 4,608 Total current liabilities 88,931 Long-term debt, net of current portion 40,891 Deferred taxes on income 3,386 Unearned income- Indefeasible right to use sales 4,052 Other liabilities 3,789 Total liabilities 141,049 Minority interest 1,053 Stockholders' equity Common stock, par value Rs.10 per share 18,952 Additional paid in capital 56,655 Deferred stock based compensation (314) Treasury stock (201) Retained earnings / (deficit) 25,069 Total stockholders' equity 100,161 Total liabilities and stockholders' equity 242,264 Page 25 of 40