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Transcript of Conferences Kotak
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September 2006
Indian Telecom
A SUCCESS STORY OF REFORMS
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Mobile Services Broadband & Telephone Services Enterprise Services
India a paradigm shift
India in 1992-93
Political instability
Zero forex reserves
High interest rates
Poor stock market activity High inflation
Negligible exports
India Today
Political stability
High forex reserves
Low interest rates
Buoyant stock mkt. activity Low inflation
Substantial export growth
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India strong fundamentals
A healthy GDP composition
A well diversified & globally competitive industrial base
A large & sophisticated financial system
robust capital markets
over 9,000 listed companies
An acknowledged leader in knowledge driven industries
Emerging leader in biotechnology, pharma research & entertainmentsoftware, among others
World class IT & telecom infrastructure
Reservoir of Intellectual Capital 250 universities, 1,500 research institutions, 10,000 higher education institutes Over a million graduates are produced every year
Pool of 23m professionals doctors, graduates, masters, engineers increasing
by nearly half a million every year
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India demographics advantage
1.1 billion population
54% of the Indian population is less than 25 yrsof age
One quarter of the worlds youth lives in India
By 2013, the net addition to the productivepopulation (aged 25-44 yrs) will be 91 million
Benefits of Demographics
Huge consumer base
Large and cheap labor force
Educated labor force
Quicker absorption of technology
239
147
123
159
211
231
121
199
157
122
86
102
109220
50 100 150 200 250
55+ yrs
45-54 yrs
35-44 yrs
25-34 yrs
15-24 yrs
5-14 yrs
0-4 yrs
2001 (Mn) 2013 (Mn)
Today's youth. will drive tomorrows boom
Demographic breakdown
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Indian economy drivers of future growth
1. Investments1. Investments
2. Consumption2. Consumption
3. Exports3. Exports
Infrastructure Investments, supported bygovernment policies and private-public initiatives
Corporate capex recovery is aided by high capacityutilization levels and free cash flows
Strong growth in urban areas due to services andoutsourcing industries
Well dispersed monsoon driving rural demand
Demand facilitated by growth in retail lending
Trickle-down impact is also coming into play
Cross section of globally competitive industriesdriving export growth
ITES/ Business Process Outsourcing
Knowledge based industries
Pharma, textiles & jewellery
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0 5,000 10,000 15,000 20,000 25,000
Russia
India
Mexico
Brazil
ChinaCanada
Italy
France
UK
Germany
Japan
US
GDP (US$bn)
Year 2000 vs. Year 2020 predictions
India .poisedto become3rd largest economySource: KPMG, Goldman Sachs
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The Confidence called India
One of the fastest growing economies, second only to China
Fourth-largest economy on purchasing power parity basis
3rd in investor confidence for FDI investments
India offers the best return on investment amongemerging markets
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Indian Telecom
..poster boy of reforms
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Indian telecom a snapshot
Source: Based on data in Global Wireless Matrix 1Q06- Merrill Lynch .COAI & AUSPI data
1992 2006
- Total Telecom Base ~ 7 Mln ~ 165 Mln 5th largest in the world
- Mobile Sub Base - ~ 114 Mln 4th largest in the world
- Mobile Penetration - ~ 10 % Lowest in the world
- ARPU - < USD 10 One of lowest
- Mou/Sub/Month - > 400 minutes 2nd highest after US
- Realised RPM - ~ 2 US cents/ min Lowest in the world(A ll Inc lus ive)
time to connect6 months to 6 minutes
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114
1
0
20
40
60
80
100
120
Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Aug-06
MobileSubscribers(Mn)
23
165
5
45
85
125
165
Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Aug-06
Telecoms
ubsc
ribers(Mn)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Tele
-density
Telecom subscribers (LHS) Tele-density (RHS)
Indian telecom growth trajectory
CAGR86%
CA
GR30%
mobile exceeds fixed-line subscriber base one of the fastest growing mobile market in the world
Indian telecom mobile led growth
Source: AUSPI and COAI data
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0.0
1.5
3.0
4.5
6.0
Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 Aug-06
Subs
criberaddition(inM
n)
India China
Indian mobile comparison with China net additions
Source: TRAIs report on Service Performance Indicators dated January 31, 2006 and industry data
OutpacingChina
5.8 mn
4.7 mn
2.0 mn
2.7 mn
0.3 mn
5.5 mn
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Indian wireless performance versus global peers
Top 5 Subscriber Base (As at Mar 3106)
Source: Based on data in Global Wireless Matrix
amongst thetop wireless markets
Top 5 QE Mar06 Net Additions
Country Mobile Subs (Mn) Rank
China 409.7 1
US 214.3 2Russia 132.1 3
India 96.7 4
Japan 96.5 5
Countries Net Adds (Mn) % of Total Net Adds
China 16.3 18.3%
India 14.7 16.5%
US 6.4 7.2%
Russia 6.3 7.1%Brazil 3.3 3.7%
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competitive landscape
Source: AUSPI and COAI data
services offeredmobile
technology
no. of
operational
circles (of 23)
mobile market
share (Aug - 06)
no. of mobile
subscribers
(mn)
a. Private GSM
1. Bharti Integrated GSM 23 22.5% 25.6
2. Hutch Mobile GSM 16 18.0% 20.4
3. Idea Mobile GSM 11 8.6% 9.7
4. Others Mobile GSM - 5.1% 5.8
b. Private CDMA
5. Reliance Integrated CDMA, GSM 23 19.2% 21.9
6. Tata Integrated CDMA 20 6.9% 7.8
c. Government Owned
7. BSNL + MTNL Integrated GSM, CDMA 23 19.7% 22.4
Total 100.0% 113.7Note: 1) Hutch subscriber base included BPL operations in Mumbai.Note: 2) All India Mobile Subscribers includes GSM and Digital Mobile (CDMA) subscribers as reported by COAI and AUSPI. 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 theseoperator's from the overall subscriber base.
highly competitive top 4 garnering 80% share
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Indian mobile growth potential
increasing affordability + increasing coverage.market expansion even at 300 million subscribers, penetration lower than many other
comparable economies
Source: Based on data in Global Wireless Matrix 1Q06- Merrill Lynch.
Various market estimates
CountrySubs in
Mn.Pen / Pop
India in 2010 (if) 300 27%
china 410 31%
philippines 36 41%
thailand 32 51%
canada 17 53%
malaysia 21 78%
usa 214 72%
korea 39 80%singapore 4 101%
uk 68 113%
world average 41%
Current Status (Mar'06)
230
257
258
300
300
320
349
392
207
100 150 200 250 300 350 400
COAI (Yr '07)
TRAI (Yr '09)
JPM (Yr '10)
SSKI (Yr '10)
LB (Yr '10)
Gartner (Yr '09)
ABN (Yr '10)
Macquarie (Yr '10)
CS (Yr '10)
Mobile Subscribers (Mn)
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The Road Map
BhartiAirtel Limited
..a case in point
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Bharti past to present
Revenues: US$ 14.2 mn
EBITDA: US$ 1.5 mn Net profit: US$ 1.2 mn
Net worth: US$ 12.9 mn
Inception
Revenues, EBITDA, Net profit for full year ended march 31, 2006 are as per USGAAP.
Market cap is as on date.
1995
Today
2006
Revenues: US$ 2,613 mn
EBITDA: US$ 980 mn Net profit: US$ 507 mn
Market cap: US$ 18 bn
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Integrated play - service offerings
deriving synergies.financial & operational
Mobile servicesBroadband &
Telephone servicesEnterprise services
Bharti Airtel Limited
CorporatesCarriers
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mobile services
customer base (Aug'06) 25.65 mn
mobile market share (Aug'06) 22.5%
net additions (Aug'06) 1.31 mn
operational (as at end of Jun'06)
mobile minutes carried (Q1FY07) 28.19 Bn Mincensus towns 4,026
non census towns & villages 101,614
population covered 46%
strategy mass market
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broadband & telephone services
customer base (Aug'06) 1.59 mn
DSL customers (% of total cust.) ~27.6 %
net additions (Aug'06) 43 k
coverage (as at end of Jun'06) 92 citiesstrategy selective
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enterprise services carriers NLD
LegendExisting OFC Route
Under Execution
Kolkata
Mumbai
Chennai
Hyderabad
Bangalore
Jaipur
Ahmedabad
Bhopal
Chandigarh
Delhi
Nagpur
Lucknow
Jalandhar
Ernakulam
Coimbatore
Kolkata
Mumbai
Chennai
Hyderabad
Bangalore
Jaipur
Ahmedabad
Bhopal
Chandigarh
Delhi
Nagpur
Lucknow
Jalandhar
Ernakulam
Coimbatore
Voice Network
captive traffic (group traffic) 2/3 rd
NLD minutes carried (Q1FY07) 2.88 Bn Min
optic fibre laid ~ 35,000 Km
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enterprise services carriers ILD
Major international carriers connected to the ILD gateways through i2i, SMW4,SMW3 and Flag Submarine cable systems
Legendi-2-i
SEA-ME-WE-4Other Intl Connectivity
Intl Gateways Connectivity
SEA-ME-WE-4 Connectivity to West
i-2-i Connectivity to East
ILD minutes carried (Q1FY07) 753 Mn Min
ILD gateways 4
landing stations 2
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enterprise services - corporates
Voice services
Satellite services Managed data &Internet services
Managed e -business services
Managed customizedintegrated solutions
Mobile services
competition limited
segment one stop telecom solution
1000 top large corporates
2,000 - 3,000 medium multi
location companies
leveraging integrated play
target
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overall financial performance
Source: Results for the quarter ended June 30, 2006 are un-audited and as per US GAAP.
Amount in USD Million
June 30,
2006
June 30,
2005
Y-o-Y
Growth
Subscribers (000's) 24,577 13,191 86%
Revenues 841 549 53%
EBITDA 327 205 60%
EBITDA Margin 39.0% 37.4%
Cash Profit from Operations 291 202 44%
Earning before tax 187 130 44%
Net Profit 165 111 48%
ParametersQuarter Ended
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our partners -alliances with best in class
Asias telecom power
house
Worlds leading mobile
telecommunicationscompany
IBM Daksh
Mphasis
Hinduja TMT
Tele Tech
Nortel
Strategic Equity Partners Business Partners
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focus on core competence
transformational business innovations outsourcing & capex
Features/ AdvantagesVendorsOutsourcing
Deals
Enhanced & consistent customer experience
Common platform across the group
Scalable business model to meet business needs
IBM Daksh
Mphasis Hinduja TMT
Tele Tech
Nortel
Call Center
Outsourcing
Pricing & payment as a % of revenues
S1 Outsourcing to provide end to end IT includinghardware, software and services
SDP to deliver Service Delivery Platform enablingdelivery of content to end user devices like mobiles,PCs etc
SLAs for quality and deployment.
Scalability, sustainability and accountability
InformationTechnology
Pricing linked to capacity - US$ per erlang
Payments linked to usage and network quality
service level agreements (SLAs)
Ease in network planning
Scalability, sustainability and accountability
Network
outsourcing &Maintenance
Assured networkquality
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Our vision
By 2010 Airtel will be the most admired brand in India:
loved by more customers
targeted by top talent
benchmarked by more businesses
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India outlook
The question is no longer whether India can fly but how high
(Prime Minister Dr. Manmohan Singh)