Idea Cellular Limited An Aditya Birla Group Company

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Idea Cellular Limited An Aditya Birla Group Company Quarterly Report Fourth Quarter ended March 31, 2010 Registered Office: Suman Tower, Plot No.

1 Idea Cellular Limited An Aditya Birla Group Company Quarterly Report Fourth Quarter ended March 31, 2010 Registered Office: Suman Tower, Plot No. 18, Sector 11, Gandhinagar , India Corporate Office: 5 th Floor, Windsor, Off C.S.T. Road, Near Vidya Nagari, Kalina Santacruz (East), Mumbai , India!dea Quarterly Report March 10 Page 1 of 14

2 Supplemental Disclosures Unless stated otherwise, the financial data in this report is derived from our unaudited / audited consolidated financial statements prepared in accordance with Indian GAAP. Our financial year ends on March 31 of each year, so all references to a particular financial year are to the twelve months ending March 31 of that year. In this report, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding-off. There are significant differences between Indian GAAP, IFRS, and U.S. GAAP; accordingly, the degree to which the Indian GAAP financial statements will provide meaningful information is dependent on the reader s familiarity with Indian accounting practices. Any reliance by persons not familiar with Indian accounting practices on the financial information presented in this report should accordingly be limited. We have not attempted to explain such differences or quantify their impact on the financial data included herein. Unless stated otherwise, industry data used throughout this report has been obtained from industry publications. Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe that industry data used in this report is reliable, it has not been independently verified. Actual results may differ materially from those suggested by the forward-looking statements due to risks or uncertainties associated with our expectations with respect to, but not limited to, our ability to successfully implement our strategy, our growth and expansion, technological changes, our exposure to market risks, general economic and political conditions in India which have an impact on our business activities or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry Report Structure Page No. 1. Performance at a glance 3 2. Company Overview 3 3. Reporting Guidelines 5 4. Financial Highlights 6 5. Key Performance Indicators 8 6. Management Discussion & Analysis Stock Market Highlights Shareholding Pattern Glossary 13!dea Quarterly Report March 10 Page 2 of 14

3 1. Performance at a glance Idea Standalone 1 2. Company Overview Idea Cellular Limited ( Idea ) is a leading pan India mobile service operator. The revenue market share (RMS) for the company, including the Punjab and Karnataka service areas, for Q3FY10 stands at 12.7%, while for the Established service areas the RMS is at 18.8%. A. Promoter Group Idea is part of the Aditya Birla Group, India's first truly multinational group. The Group has businesses in sectors ranging from metals, garments, cement, fertilisers, life insurance and financial services among others. Over half of the Group s revenues are derived from overseas operations. The group operates in 25 countries, and is anchored by an extraordinary force of over 130,000 employees belonging to 30 nationalities. The current Group holding of 46.99% in Idea is made up of; Aditya Birla Nuvo Ltd % Birla TMT Holdings Pvt. Ltd. 8.59% Hindalco Industries Ltd. 6.92% Grasim Industries Ltd. 5.18% Others 0.91% Total 46.99%!dea Quarterly Report March 10 Page 3 of 14

4 B. Key Shareholders AXIATA Group Berhad (previously TM International Berhad), through its affiliates, has 19.10% shareholding in Idea Cellular. AXIATA has controlling stakes in its affiliates in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia, and significant stakes in India and Singapore. India and Indonesia are among the fastest growing markets in the world. As of December 2009, the Group has over 120 million mobile subscribers in Asia, and provides employment to over 25,000 people in 10 countries. Providence Equity Partners, through its affiliates has a 10.0% shareholding in Idea, and has also invested INR mn in ABTL through Compulsorily Convertible Preference Shares. C. Corporate Structure Idea Cellular Limited (Idea) 100% -- Idea Cellular Infrastructure Services Limited (ICISL) 100% -- Idea Cellular Services Limited (ICSL) 100% -- Swinder Singh Satara & Co Limited (SSSL) 100% -- Carlos Tower Limited (Carlos) 100% -- Aditya Birla Telecom Limited (ABTL) 100% -- Idea Cellular Tower Infrastructure Limited (ICTIL) 16% -- Indus Towers Limited (Indus) ICISL A tower company owning towers in Bihar and Orissa service areas. ICSL SSSL Provides manpower services to Idea. Engaged in the business of sale and purchase of Data Cards, Mobile Hand Sets and Fixed Wireless Phones. Carlos Acquired through amalgamation of Spice Communications Ltd into Idea and presently not having any operations. ABTL Holds 16% shareholding in Indus. ICTIL Holds towers de-merged from Idea, which will subsequently merge into Indus. Indus A joint venture between Bharti Infratel, Vodafone Essar and Idea (through ABTL), to provide passive infrastructure services in 15 service areas.!dea Quarterly Report March 10 Page 4 of 14

5 3. Reporting Guidelines: To facilitate an analytical perspective, the results have been formatted and grouped as under: a) Standalone Idea, and its 100% subsidiaries. Effectively, this encompasses all operations, excluding the JVs, Spice (till February 28, 2010) and Indus. Spice Communications has been amalgamated into Idea Cellular w.e.f. March 01, 2010 and accordingly from that date Idea Standalone includes erstwhile Spice. b) Consolidated Idea, its 100% subsidiaries, and its JVs, grouped together. In addition to Idea Standalone, this covers the proportionate consolidation of erstwhile Spice (41.09% till February 28, 2010) and Indus (16%). JV financials have been consolidated as jointly controlled entities as per AS 27 - Financial reporting of Interests in Joint Ventures. It may be noted that the consolidation of financials of two or more entities requires elimination of inter entity transactions. Illustratively, rentals paid by Idea to Indus, become expenses for Idea and revenues for Indus, on a standalone basis. However, upon consolidation, the proportionate revenue of Indus gets reduced to the extent contributed by Idea. The rental expenses of Idea also stand correspondingly reduced in the consolidated financials.!dea Quarterly Report March 10 Page 5 of 14

6 4. Financial Highlights A. Standalone Profit & Loss Account INR mn B. Consolidated Profit & Loss Account INR mn * Up to February 28, 2010, Spice Communications Ltd was a joint venture for Idea and was a separate legal entity. Hence Idea standalone results did not include Spice, while consolidated results included 41.09% share of Spice results. However, w.e.f. March 01, 2010 Spice has been amalgamated into Idea and accordingly 100% share of erstwhile Spice results, is now part of Idea Standalone for the month of March 10. The consolidated results include 41.09% share of Spice results till February 28, 2010 and 100% share of erstwhile Spice results for the month of March 10.!dea Quarterly Report March 10 Page 6 of 14

C. Revenue & Profitability Break-up INR mn INR mn @ Includes 100% share of erstwhile Spice results for the Month of March 10 # Represents 41.

7 C. Revenue & Profitability Break-up INR mn INR Includes 100% share of erstwhile Spice results for the Month of March 10 # Represents 41.09% share of Spice results from January 01, 2010 to February 28, During the last quarter this was for a full 3 months period. Note: Impact of the joint venture is presented to provide a perspective to Idea's consolidated financials. Due to differences in accounting treatment, these may not be representative of the financial statements of joint ventures.!dea Quarterly Report March 10 Page 7 of 14

8 D. Summarized Balance Sheet INR mn 5. Key Performance Indicators A. Financial Indicators Idea Standalone!dea Quarterly Report March 10 Page 8 of 14

B. Operational Indicators Idea Standalone* * Operational Indicators are including 100% Spice for the month of March 10.

9 B. Operational Indicators Idea Standalone* * Operational Indicators are including 100% Spice for the month of March Total Minutes of use, excluding Spice service areas for the month of March 10, are 65,672 mn, a growth of 13.5% over last quarter. 2 Increase in Cell Sites Rented Others (EoP) is mainly on account of inclusion of Cell Sites of Spice service areas (EoP 5037)!dea Quarterly Report March 10 Page 9 of 14

10 6. Management Discussion & Analysis A Year of Over-capacity and Hyper-competition in the Indian Telecom Sector The number of operators jumped during the last 15 months, as licenses obtained during the telecom bubble days of 2007, converted into live operations. The consequent sector over-capacity and hyper- competition caused a year on year decline of 23% in the Average Realised Rate for Idea, while general market rates plunged even deeper. To grab share, new launches offered subscriptions at throw-away prices loaded with free talk time. On the one hand, this led to the use-andthrow phenomenon of new SIM cards. On the other hand, the paid revenue of yesteryear converted to unpaid revenue. Consequently, the national mobility sector revenue growth for the calendar year 2009 contracted to ~12% (after normalization for IUC), compared to the ~22% growth in the earlier year. Conventional matrices like subscribers, ARPU etc became meaningless. Strong Financial Performance Idea Cellular posted a strong Q4 to finish yet another year of splendid performance, in the context of exacting sector conditions. Idea s results for FY10 are a portent. In a year characterised by the entry of hungry new operators, it would be expected that the incumbent would cede market share. Counter-intuitively, though not unexpectedly, during the calendar year 2009, Idea infact increased its revenue market share from 11.4% to 12.7% (even in its 11 established service areas, the share increased from 17.5% to 18.8%). EBITDA margin for the established service areas improved by 0.8% to 30.7% from 29.9% compared to the previous year, notwithstanding the punishing 23% drop in ARR. Idea has infact grown EBITDA and PAT compared to the previous year, both on a standalone and consolidated basis, even after further absorbing incremental EBITDA losses of Rs. 2,403 mn from the new service areas during FY10. On a quarter upon previous quarter basis, Revenue grew by 7.8%, even as the ARR declined by ~ 9%. On a pro-forma* standalone basis, the QoQ revenue growth was 4.6% (established service areas revenue growth 3.6%). Pro-forma standalone EBITDA margin for the quarter was up mainly due to the absence of ESOP re-pricing effects taken in the last quarter, and additional reversals during this quarter amounting to ~ Rs. 600 mn. Higher EBITDA, and a one time write back of Rs 346 mn, on account of conversion of finance lease into operating lease in the service areas of erstwhile Spice Communications, contributed to a higher PAT on a pro-forma standalone basis, compared to the last quarter. On a consolidated basis, revenue for the quarter stood at Rs. 33,477 mn. EBITDA margin at 27.6% was up by 1.7% due to higher EBITDA margin of Idea standalone. The one time income of Rs. 520 mn is the impact of conversion of finance lease into operating lease in the service areas of erstwhile Spice. Consolidated PAT of Rs. 2,666 mn was down by Rs. 97 mn, compared to the standalone PAT, due to the losses from Spice and Indus. * Standalone pro-forma figures exclude Spice circle results for Mar 10. Consolidated pro-forma figures are derived assuming full quarter consolidation of Spice circles at 41.09%. This is presented for the purpose of comparison with the previous quarter results.!dea Quarterly Report March 10 Page 10 of 14

11 The equity share capital of the company has increased by Rs. 1,997 mn, mainly due to fresh issue of equity to the shareholders of erstwhile Spice, while the Reserve & Surplus have reduced by Rs. 21,415 mn mainly because of adjustment of investment in erstwhile Spice and the impairment in the values of overlapping licenses in line with the scheme of amalgamation. The Profit and Loss account is reduced by Rs. 7,684 mn, chiefly on account of the debit balance of Profit and Loss account of erstwhile Spice upon amalgamation. The Balance Sheet of the company as of Mar 10, with a net debt of only Rs. 51,259 mn against a net-worth of Rs. 114,101 mn, together with an average cash generation of over Rs. 7,000 mn per quarter, provides a solid foundation to support future investment, and to face any level of competitive pressure going forward. Capex Cell sites (EoP) 66,187 49,860 24,793 10,114 4,763 FY06 FY 07 FY08 FY09* FY10* * includes Spice s Cell sites Idea (incl. Spice) rolled out 3,237 cell sites during the quarter, taking EoP cell sites to 66,187. Total addition to the Gross Block (including CWIP) during the year, for Idea (incl. 100%) was around Rs. 33 bn. Total capex (network and non-network) guidance for FY11 is ~ Rs. 30 bn, for Idea standalone. This dose not include any payouts on account of 3G auction and 3G capex. Amalgamation of Spice Communications The Scheme of Amalgamation of Spice Communication Ltd into Idea has been approved by the Hon'ble High Courts of Gujarat and Delhi, and pursuant to the filing of the High Court Orders with the respective Registrars of Companies, Spice is merged into Idea w.e.f. March 01, De-merger of Bihar operations from ABTL to Idea The Scheme for the De-merger of the UAS License of Bihar service area, including related telecom assets and liabilities of ABTL to Idea, with the appointed date of April 01, 2009, was approved by the Hon ble High Courts of Gujarat and Bombay, and accordingly the UAS License of Bihar service area, including related telecom assets and liabilities, were de-merged from ABTL into Idea.!dea Quarterly Report March 10 Page 11 of 14

12 7. Stock Market Highlights Idea Cellular Daily Stock Price (NSE) & Volume (Combined of BSE & NSE) Movement Volume (no. of Shares) Closing Price (INR) 25,000,000 BSE & NSE Combined Volume NSE Cl Price 75 20,000, ,000, ,000, ,000, Jan Jan Jan Jan Jan Jan Jan Feb Feb Feb Feb Feb Feb Mar Mar Mar Mar Mar Mar Mar Shareholding Pattern as on March 31, 2010:!dea Quarterly Report March 10 Page 12 of 14

13 9. Glossary Definitions/Abbreviation Established service areas Annualized EBITDA ARPU (Average Revenue Per User) AS ARR (Average Realised rate) Book Value/Share BSE Churn Cash Profit Cash Earning / Share EBIT EBITDA (Earnings before interest, tax, depreciation and amortisation) Enterprise Value EPS EoP Description/Full Form Represent Maharashtra & Goa, Gujarat, Andhra Pradesh, Madhya Pradesh & Chhattisgarh, Delhi, Kerala, Haryana, Uttar Pradesh West & Uttaranchal, Uttar Pradesh East, Rajasthan and Himachal Pradesh service area, and also include the service areas of Punjab and Karnataka from March 01, 2010 Annualised figure of quarterly EBITDA Is calculated by dividing services revenue (exclusive of infrastructure revenues) for the relevant period by the average number of subscribers during the period. Average number of subscribers during the period is calculated as average of average subscribers for each month. The result obtained is divided by the number of months in that period to arrive at the ARPU per month figure Accounting Standards as issued by the Institute of Chartered Accountants of India ARR is calculated as ARPU divided by MoUs/Subscriber Is calculated as Total assets reduced by loan funds and deferred tax liability, divided by number of outstanding equity shares Bombay Stock Exchange Churn relates to subscribers who are removed from the EoP base for discontinuing to use the service of the company Is calculated as summation of PAT, Depreciation, Charge on account of ESOPs and Deferred tax, for the relevant period. Is calculated by dividing the cash profit for the period by weighted average number of outstanding equity shares. Earnings Before Interest and Tax This is the amount after deducting operating expenditure from total income. Total income is comprised of service revenue, sales of trading goods and other income. Operating expenditure is comprised of cost of trading goods, personnel expenditure, network operating expenditure, license and WPC charges, roaming and access charges, subscriber acquisition and servicing expenditure, advertisement and business promotion expenditure and administration & other expenses Is calculated as summation of Market Capitalisation and Net Debt Earning per share, is calculated by dividing the profit after tax for the period by weighted average number of outstanding equity shares End of period FY Financial year ending March 31 GSM Gross Revenue Indian GAAP IRU MoUs/Sub (Average Minutes of Usages per Subs) Net Adds Global System for Mobile communications, the most popular standard for mobile phones in the world Is calculated as summation of service revenue, Revenue from sale of trading goods and other non-service revenue. Indian Generally Accepted Accounting Principles Indefeasible right of use Is calculated as, total Minutes of Use by Mobile Subscriber in our network during the period divided by average of subscribers during the period Refers to net customer additions which is calculated as the difference between the closing and the opening customers for the period!dea Quarterly Report March 10 Page 13 of 14

14 Definitions/Abbreviation Net Debt Net Worth New Service Areas NSE PBT PAT Price to Book Value Price to Cash Earning Price to Earning ROCE Subscribers SIM Service Area Description/Full Form Total loan funds reduced by cash and cash equivalents Calculated as summation of Share Capital and Reserves & Surplus reduced by debit balance of profit & loss account Represent Mumbai, Bihar, Orissa, Tamil Nadu, J&K, Kolkata, West Bengal, Assam and the North East service areas. National Stock Exchange Profit before tax Profit after tax Is calculated by dividing the closing market price at the end of the quarter (NSE) by Book Value/ Share Is calculated by dividing the closing market price at the end of the quarter (NSE) by annualised Cash Earning/Share Is calculated by diving the closing market price (NSE) by annualised EPS ROCE is calculated as a) for the year: PAT plus gross int. & fin. cost divided by average capital employed for the year, b) for the quarter : PAT plus gross int. & fin. cost for the quarter is annualised and divided by capital employed for the quarter. Capital employed is taken as average of opening and closing of Shareholders funds and Loan Funds reduced by debit balance of P&L account, for the respective period Mobile telephone service customers Subscriber Identity Module Unless otherwise specifically mentioned, means telecom service areas in India (including metropolitan service areas) as defined by the DoT.!dea Quarterly Report March 10 Page 14 of 14

Idea Cellular Limited An Aditya Birla Group Company

Idea Cellular Limited An Aditya Birla Group Company Quarterly Report First Quarter ended June 30, 2009 A D I T Y A B I R L A G R O U P Registered Office: Suman Tower, Plot No. 18, Sector 11, Gandhinagar