Idea Cellular Limited Investor Presentation
Disclaimer The information contained in this presentation is only current as of its date. All actions and statements made herein or otherwise shall be subject to the applicable laws and regulations as amended from time to time. There is no representation that all information relating to the context has been taken care of in the presentation and neither we undertake any obligation as to the regular updating of the information as a result of new information, future events or otherwise. We will accept no liability whatsoever for any loss arising directly or indirectly from the use of, reliance of any information contained in this presentation or for any omission of the information. The information shall not be distributed or used by any person or entity in any jurisdiction or countries were such distribution or use would be contrary to the applicable laws or Regulations. It is advised that prior to acting upon this presentation independent consultation / advise may be obtained and necessary due diligence, investigation etc may be done at your end. You may also contact us directly for any questions or clarifications at our end. This presentation contain certain statements of future expectations and other forward-looking statements, including those relating to our general business plans and strategy, our future financial condition and growth prospects, and future developments in our industry and our competitive and regulatory environment. In addition to statements which are forward looking by reason of context, the words may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential or continue and similar expressions identify forward looking statements. Actual results, performances or events may differ materially from these forward-looking statements including the plans, objectives, expectations, estimates and intentions expressed in forward looking statements due to a number of factors, including without limitation future changes or developments in our business, our competitive environment, telecommunications technology and application, and political, economic, legal and social conditions in India. It is cautioned that the foregoing list is not exhaustive. This presentation is not being used in connection with any invitation of an offer or an offer of securities and should not be used as a basis for any investment decision. The information contained herein 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. No money, securities or other consideration is being solicited, and, if sent in response to the information contained herein, will not be accepted. 2
Indian Wireless Fastest Growing Estimates Yr 1 Subscribers (mn) * UBS Citi CSFB Macq ML 475 477 48 5 51 Drivers Cost of Entry Cost of Handset Network Coverage Disposable Income Subscribers (mn) 5 45 4 35 3 25 2 15 1 5 4 42 44 46 48 5 1 2 4 7 13 34 Mar-99 Mar- Mar-1 Mar-2 Mar-3 Mar-4 Mar-5 Mar-6 Mar-7 Mar-8 Mar-9 Mar-1 * estimates by research houses (as of 17th March 9) 52 96 162 261 39 Estimates 487 3
Idea An Overview Operates in 15 service areas (incl. Spice Comm.) Operating service areas cover ~ 78% of national subscriber base With planned launch of Orissa and Tamil Nadu in next 4 months, and remaining before Dec 9, Idea will soon have pan- India operations 12% 1% Share of non-idea service areas in national subs base 9.6% 8% 6% Current Operations 4% 2%.8%.9% 1.5% 2.2% 3.% 3.9% % North East J & K Assam Orissa Kolkata West Bengal TN 4
Competitiveness Lever 1 = Spectrum 9 MHz spectrum band provides major capex/opex advantage, compared to 18 MHz Idea holds 9 MHz spectrum in 9 service areas ~ 58% of national subs base (excl. 4 metros) ~ 5% of national subs base (total) Idea s spectrum profile is very attractive across all private operators Service areas share of national subs base (excl. metros) 1% 9.5% 9.5% 8% 6% 4.6% 5.2% 5.9% 6.3% 7.3% 7.5% 9 MHz Spectrum (incl. Spice Comm.) 18 MHz Spectrum 4% 2% % 2.9% Har. P un. Ker. U P W M.P. Kar. Guj. Maha. A.P. 5
Competitiveness Lever 2 = Scale Within a Service Area Service Area (9 MHz) Idea - Subs Mkt share* Rank Kerala 26.2% 1 Maharashtra 24.7% 1 M.P. 23.9% 1 UP (W) 21.4% 2 Haryana 17.% 2 A.P 16.7% 3 Gujarat 16.6% 3 9 MHz Spectrum (incl. Spice Comm.) Punjab # 17.5% 3 Karnataka # 6.9% 5 18 MHz Spectrum *Source: TRAI (as on 31 Dec 8 ) # Spice Comm. service areas new in Idea fold In 9 service areas, comprising ~ 5% of national market, Idea s competitiveness is intrinsically strong based on quality of spectrum and scale of operations 6
18 MHz New Launches Focus On Optimisation, Not Maximisation Mumbai launched Aug 8, Bihar Oct 8, Orissa and Tamil Nadu launch by Jun 9, West Bengal, Kolkata, Assam, Northeast and J&K by Dec 9 To leverage synergies i.e. roaming, termination, NLD, ad spend etc. Focus on financial returns, not on market position Service Area Idea s Subs Mkt share* Share in Net Adds for Q3 FY9 Mumbai 1.9% 17.6% Bihar 1.5% 11.5% *Source: TRAI (as on 31 Dec 8 ) 7
The Indus Advantage Provides passive infrastructure services in 15 service areas Largest independent tower company in the world - ~ 1, towers Indus Share Holding Indus benefits from assured tenancy from promoters, and from other operators Idea benefits by reduced capex, speed to market, and embedded value of shareholding Idea currently operates Vodafone Essar Ltd 42% Idea Cellular Ltd 16% Bharti Infratel Ltd 42% To be launched Indus Share Holding *through ABTL 8
Strong Balance Sheet to Drive Strategic Intent 1 Net Debt ~ INR 2 bn as on Dec 8 2 Net Worth ~ INR 136 bn as on Dec 8 3 Cash Generation ~ INR 16bn cash profits during Apr - Dec 28 4 Gearing Net Debt to Equity ratio of.14 with cash of ~ INR 8 bn, as of Dec 8 9
Idea A Power Brand No. 4 Buzziest Brand in India Across All Categories* The Top 25* * Buzziest Brands of the Year Poll 29 1
Idea Has Built Large Capacities last 2 Fiscals Added ~147 sites in FY 27-8, more than doubling the sites built since inception Again added ~ 195 sites in FY 28-9, almost doubling capacity during the year 5 45 4 35 Cum. Sites 442* 3 24793 25 2 15 1114 1 5 1843 349 4763 * estimate # figures only for Idea, excluding Spice comm. FY4 FY5 FY6 FY 7 FY8 FY9 11
Idea Has Absorbed Major Investments To Drive Future Benefit 1% 8% 32.8% 33.3% 33.9% 33.2% 26.4% 26.% EBITDA Margin 6% 15.2% 17.% 16.4% 17.2% 19.5% 21.8% Network Cost 4% 16.3% 17.1% 17.4% 18.2% 18.6% 18.8% Roaming & Access Charges 2% % 16.1% 12.8% 13.2% 11.3% 14.2% 12.9% 9.9% 1.2% 9.9% 11.2% 11.2% 1.9% 5.6% 5.6% 4.6% 4.6% 5.6% 5.3% 4.1% 4.% 4.6% 4.2% 4.4% 4.3% Q2 FY8 Q3 FY8 Q4 FY8 Q1 FY9 Q2 FY9 Q3 FY9 Decline in EBITDA margin is ~ increase in network cost Subs Acq & Busi Prom License & WPC charges Personnel Cost Other Expenses Idea has absorbed ARR decline and also EBITDA losses in Mumbai+Bihar ( 3.4% of revenue in Q3 FY9) Capacity built up in last 2 fiscals will drive future benefit Note: Idea standalone including subsidiaries on a standalone basis. 12
Idea Fastest Growing Revenue # 3. 25. 2. 15. INR bn 13.2 14.8 15.6 17.1 19.9 21.8 23. 26.2 CQGR* 1.3% YoY (Apr Dec 8) 49.5% 1. Highest revenue growth rate in last 4 5. quarters across all major players. Q4 FY7 Q1 FY8 Q2 FY8 Q3 FY8 Q4 FY8 Q1 FY9 Q2 FY9 Q3 FY9 Subscribers # 34.2 35 3 25 2 15 mn 14.1 16.1 18.7 21.1 24. 27.2 3.4 CQGR* 13.6% YoY (EoP Dec 8) 62.5% Highest subscriber growth rate in last 2 1 years across all major players 5 Q4 FY7 Q1 FY8 Q2 FY8 Q3 FY8 Q4 FY8 Q1 FY9 Q2 FY9 Q3 FY9 # figures only for Idea, excluding joint ventures * CQGR base Q4FY7 13
Shareholding As on 31 st Dec 8 Indian Others 1.8% TOP 5 shareholders (excluding Promoters) Foreign Holding 4.1% AV Birla Group 49.1% TMI MAURITITUS 15.% P5 ASIA INVESMENT 1.6% MONET LIMITED 2.9% HSBC GLOBAL INVESTMENT 2.7% WAGNER LIMITED 2.% Post Spice merger* Foreign Holding 43.5% Indian Others 1.3% AV Birla Group 46.2% TOP 5 shareholders (excluding Promoters) TMI MAURITITUS 2.% P5 ASIA INVESMENT 1.% MONET LIMITED 2.7% HSBC GLOBAL INVESTMENT 2.6% WAGNER LIMITED 1.9% * assuming no change in other shareholding 14
Idea - Awards & Recognitions 15
Appendix 16
Key Trends (Idea) Minutes of use per user per month Realized rate per minute Minutes 44 42 411 428 417 41 Q3 FY9 Q2 FY9.64.62 4 38 36 34 32 36 377 Q2 FY8 Q3 FY8 Q4 FY8 Q1 FY9 Q2 FY9 Q3 FY9 Q1 FY9.65 Q4 FY8.7 Q3 FY8.74 Q2 FY8.8 INR..2.4.6.8 1. Average revenue per user per month Pre paid subscribers as % of total sub INR 29 285 28 275 27 265 288 279 287 278 261 266 % 95% 94% 94% 93% 93% 92% 91.8% 92.6% 93.% 93.7% 94.% 94.3% 26 92% 255 91% 25 Q2 FY8 Q3 FY8 Q4 FY8 Q1 FY9 Q2 FY9 Q3 FY9 91% Q2 FY8 Q3 FY8 Q4 FY8 Q1 FY9 Q2 FY9 Q3 FY9 17
Financial Matrix (Idea) *FY9 figures are for 9 months only Robust Growth in Top Line Robust Growth in EBITDA 8 INR bn 67.4 71. 25 INR bn 22.7 2.1 7 6 5 43.9 2 15 1.9 14.9 4 3 2 1 13.1 22.7 29.9 1 5 3.9 8.4 FY4 FY5 FY6 FY7 FY8 YTD FY9* FY4 FY5 FY6 FY7 FY8 YTD FY9* Robust Growth in Net Profits Robust Growth in Cash Profits INR bn 12 1.4 1 8 6.7 6 5. 4 2.8 2.1-2 -4 (2.4) FY4 FY5 FY6 FY7 FY8 YTD FY9* 22 2 18 16 14 12 1 8 6 4 2 INR bn 19.8 16.4 11.7 7.6 5.2 1. FY4 FY5 FY6 FY7 FY8 YTD FY9* 18
Financial Matrix (Consolidated) *FY9 figures are for 9 months only, Including proportionate share of Spice Comm. & Indus Robust Growth in Top Line Robust Growth in EBITDA INR bn 8 67.4 72.1 25 INR bn 22.7 2.2 7 6 5 43.9 2 15 1.9 14.9 4 3 2 13.1 22.7 29.9 1 5 3.9 8.4 1 FY4 FY5 FY6 FY7 FY8 YTD FY9* FY4 FY5 FY6 FY7 FY8 YTD FY9* Robust Growth in Net Profits Robust Growth in Cash Profits 12 1 8 6 4 2-2 -4 INR bn 1.4 6.3 5. 2.1.8 (2.4) FY4 FY5 FY6 FY7 FY8 YTD FY9* 22 2 18 16 14 12 1 8 6 4 2 INR bn 19.8 16.3 11.7 7.6 5.2 1. FY4 FY5 FY6 FY7 FY8 YTD FY9* 19
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