Tata Communications Limited · NSE:TATACOMM
Tata Communications — Q3 FY2019 Earnings Presentation
35 slides from Tata Communications's earnings presentation, February 2019
Slide 1: Investor Presentation 3rd Quarter - FY2019
INVESTOR PRESENTATION 3RD QUARTER - FY2019
Slide 2: Safe Harbour
SAFE HARBOUR SOME OF THE STATEMENTS HEREIN CONSTITUTE “FORWARD-LOOKING STATEMENTS” THAT DO NOT DIRECTLY OR EXCLUSIVELY RELATE TO HISTORICAL FACTS. THESE FORWARD-LOOKING STATEMENTS REFLECT OUR INTENTIONS, PLANS, EXPECTATIONS, ASSUMPTIONS AND BELIEFS ABOUT FUTURE EVENTS AND ARE SUBJECT TO RISKS, UNCER
Slide 3: Agenda
AGENDA • BUSINESS OVERVIEW • FINANCIAL OVERVIEW 3
Slide 4: Business Overview
lp TATA COMMUNICATIONS TATA “a : —— BUSINESS OVERVIE
Slide 5: Delivering a New World of Communications
DELIVERING A NEW WORLD OF COMMUNICATIONS TM POWERING THE PLATFORM ECONOMY, THE INTERNET AND GLOBALISATION Over 25% of the world’s We have the only wholly-owned internet traffic uses our subsea cable network that circles network (Over 12,000 the globe petabits) We’re a leading player in managed hosti
Slide 6: Growth Story
GROWTH STORY TRANSFORMING FROM AN INDIAN PSU TO A DIGITAL ENABLEMENT PLAYER Transformation Growth Innovation World’s 1st LTE roaming peering with Telecom Italia Sparkle 100G connectivity to carriers & Partnered with Salesforce to VSNL, VSNL International, CIPRIS, Tata enterprises across the US & Eur
Slide 7: Global Reach – Providing Connectivity Across the World
GLOBAL REACH – PROVIDING CONNECTIVITY ACROSS THE WORLD Over 40 Entities across the globe Global Backbone “Ring Around the World” Leadership 25% of in Global World’s SIP internet Trunking routes 7
Slide 8: Our Customers
OUR CUSTOMERS ~ 7,000 CUSTOMERS GLOBALLY: ~2,000 SERVICE PROVIDER CUSTOMERS & ~5,000 ENTERPRISE CUSTOMERS 60% of S&P 500 66% of the Fortune 500 69% of PWC 100 41% of FTSE 350 Banking/ Media/ Healthcare/ Service Manufacturing E-Commerce IT/ITES Services Technology Financial Entertainment Pharmaceutic
Slide 9: Market Overview
MARKET OVERVIEW TECHNOLOGY IS A GAME CHANGER 70% of large and mid-sized enterprises are likely to rework their networking setups over the next three years Network Function Virtualisation 37% of IT budgets are spent on cloud and cloud-related services (NFV) Big Data and Explosion of 4.4 million IT jo
Slide 10: Business Themes Supporting Digital Transformation
BUSINESS THEMES SUPPORTING DIGITAL TRANSFORMATON DIGITAL TYPICALLY DELIVERS VALUE ACROSS 4 IMPACT AREAS FOR BUSINESSES Driving their digital transformation on a global scale, organisations need best-in-class global Borderless infrastructure and tools. They will power organisations’ expansion into ne
Slide 11: Business Themes Enabling Digital Transformation
BUSINESS THEMES ENABLING DIGITAL TRANSFORMATION CLOUD AND BUSINESS MANAGED VOICE MEDIA NETWORK MOBILITY DATA CENTRE COLLABORATION SECURITY
Slide 12: Products and Services
PRODUCTS AND SERVICES PROVIDER OF ENTERPRISE & WHOLESALE DATA SERVICES & WHOLESALE LONG DISTANCE VOICE SOLUTIONS Data Services Virtual Intl Private Internet Private Mobility Inmarsat Line Leased Line Traditional Network Services Ethernet National Private Line Internet Protocol - Transit Managed Mana
Slide 13: We Address ~$49 Bn Out of a $898 Bn Telecom Market
WE ADDRESS ~$49 BN OUT OF A $898 MN TELECOM MARKET SERVICEABLE ADDRESSABLE MARKET REPRESENTS PORTION OF THE TELECOM MARKET WHICH WE CAN CAPTURE Telecom: SAM: $898Bn $49Bn $42 Bn $128 Bn $79 Bn $9 Bn $9 Bn $159 Bn $49 Bn $4 Bn $0.4 Bn $8 Bn $86 Bn $2 Bn $211 Bn $2 Bn $3 Bn $0.1 Bn $8 Bn $146 Bn $2 Bn
Slide 14: Our Target Addressable Market Is Expanding from $49Bn to $78Bn
OUR TARGET ADDRESSABLE MARKET IS EXPANDING FROM $49BN IN FY19 TO $78 BN IN FY22 US $78 Bn CAGR in FY22 17% 13 15 91% US $49 Bn 5 MOVE in FY19 4 3 2 0 12 20% 0 1 0 1 (2) 1 2 MOVE 2 Growth driven by new 8 25% Mobility 7 40% services like IZO, 4 27% Netfoundry 4 1 IZO 2 Netfoundry, Mobility and 5 18% I
Slide 15: Helping Consumers Remain Agile, Adaptable, and Responsive
HELPING CONSUMERS REMAIN AGILE, ADAPTABLE, AND RESPONSIVE POWERING THE DIGITAL ECONOMY AND HELPING OUR CUSTOMERS AND PARTNERS ACCELERATE THEIR GROWTH BY DEVELOPING INNOVATIVE BUSINESS SOLUTIONS Innovating Together New business Crowdsourcing ideas from 8,500 strong workforce & units e.g. IoT Internal
Slide 16: Investing for the Future
INVESTING FOR THE FUTURE MOVE is 3 Products built on the Tata Global Network SIM CONNECT Global Mobile Connectivity for Humans – Providing Global Visibility, Security and Control to MNCs IOT CONNECT Global Connectivity for Machines and Things – Fully Programmable Global IoT connectivity and services
Slide 17: Leveraging Our Positioning
LEVERAGING OUR POSITIONING Cloud and Data Centre Solutions − Connecting businesses to 8 main cloud platforms in 20 locations across 3 continents − Our data centres meet and exceed TIA 942 standards and offer 99.982% uptime − 10,000+ installed racks, and more than 5,000 virtual instances Managed Mana
Slide 18: Third Party Endorsements, Awards and Recognition
THIRD PARTY ENDORSEMENTS, AWARDS AND RECOGNITION CONTINUOUS IMPROVEMENT India's largest corporations: Tata Communications at Frost & Sullivan India ICT Awards: #68 • Enterprise Data Service Provider of the Year (10th Year in a row) Transparency International, a global civil society organization, • E
Slide 19: Positioned in the Leaders' Quadrant
POSITIONED IN THE LEADERS’ QUADRANT “LEADER” IN GARTNER MAGIC QUADRANT FOR NETWORK SERVICES, GLOBAL FOR 5TH CONSECUTIVE YEAR • Our products have been getting analyst recognition and are consistently featured in Gartner Magic Quadrant • This year we debuted as a niche player in MQ for managed hybrid
Slide 20: Shareholder Value Creation
SHAREHOLDER VALUE CREATION FOCUS ON MAXIMIZING LONG TERM INTRINSIC VALUE FOR SHAREHOLDERS − Recalibrate Investments 2.5% Drive 5.5% − Co-create with partners Capital Efficiency − Strong discipline and governance around capital allocation and expenditure 17.0% Improve − Improve operating efficiency a
Slide 21: Corporate Social Responsibility
CORPORATE SOCIAL RESPONSIBILITY TECHNOLOGY DRIVING SOCIAL CHANGE “ “ By financially including women around the globe, we take an important step towards poverty alleviation, equality and economic prosperity. Walt Macnee, Vice Chairman, Mastercard • Tata Communications and MasterCard joined forces to
Slide 22: Financial Performance
TATA COMMUNICATIONS FINANCIAL PERFORMANCE ee ap TATA
Slide 23: Performance Highlights | Core – Gross Revenue
PERFORMANCE HIGHLIGHTS | CORE – GROSS REVENUE 2906 2850 640 2627 2601 580 592 1231 190 142 130 1436 1008 824 USD Mn USD Mn 1778 450 438 462 1471 1619 1619 FY15 FY16 FY17 FY18 Q3 FY18 Q2 FY19 Q3 FY19 Y-o-Y Q-o-Q Growth % FY16 FY17 FY18 Growth % YoY QoQ Data 10.1% 0.0% 9.8% Data 2.6% 5.5% Vo
Slide 24: Performance Highlights | Core – EBITDA
PERFORMANCE HIGHLIGHTS | CORE – EBITDA 118 397 420 99 352 374 90 10 77 12 104 62 54 13 USD Mn USD Mn 107 293 343 290 320 88 77 FY15 FY16 FY17 FY18 Q3 FY18 Q2 FY19 Q3 FY19 Y-o-Y Q-o-Q Margin % FY15 FY16 FY17 FY18 Margin % Q3FY18 Q2FY19 Q3FY19 Data 19.9% 21.2% 17.9% 18% Data 19.5% 17.5% 23.2% V
Slide 25: Performance Highlights | Core – Operating FCF
PERFORMANCE HIGHLIGHTS | CORE – OPERATING FCF 10 11 72 52 USD Mn USD Mn 59 13 42 46 120 137 92 22 FY16 FY17 FY18 Q3 FY18 Q2 FY19 Q3 FY19 Y-o-Y Q-o-Q EBITDA to FCF FY16 FY17 FY18 EBITDA to FCF Q3FY18 Q2FY19 Q3FY19 Data 34.9% 31.9% 42.7% Data 48.1% 29.1% 43.3% Voice 93.9% 95.9% 97.5% Voice 9
Slide 26: Performance Highlights | Portfolio Mix
PERFORMANCE HIGHLIGHTS | PORTFOLIO MIX Gross Revenue Mix EBITDA Mix Operating Free Cash Flow Mix - 5.4% - - 0.7% 6.5% 7.9% 8.2% (10.7%) 5.3% (3.7%) (11.6%) 7.1% 9.7% (7.1%) (9.1%) 12.4% - - - Data- 50.6% 0.6% - (4.0%) 1.9% 4.9% 4.9% 39.9% 6.7% Data- 91.1% Data- 78.0% 62.3% 60.9% 43.2% 72.3% 44.0% Da
Slide 27: Performance Highlights | Data – Gross Revenue
PERFORMANCE HIGHLIGHTS | DATA – GROSS REVENUE 1751 450 438 462 1619 1619 1471 - 212 19 5 4 5 - 186 208 - 0.4 54 49 54 2.4 157 - - 202 0.1 0.6 154 255 320 90 97 101 USD Mn USD Mn 1160 1231 1156 1201 302 287 299 FY15 FY16 FY17 FY18 Q3 FY18 Q2 FY19 Q3 FY19 Y-o-Y Growth % YoY QoQ Q-o-Q Growth % FY16 FY1
Slide 28: Performance Highlights | Data – EBITDA
PERFORMANCE HIGHLIGHTS | DATA – EBITDA 107 343 320 88 2 293 290 7 77 -- - 2 7 - 2 21 25 2 17 7 5 119 USD Mn USD Mn 305 352 328 362 97 83 (15) (30) (41) (40) (0) (9) (5) (14) (9) (13) (16) (34) Q3 FY18 Q2 FY19 Q3 FY19 FY15 FY16 FY17 FY18 Y-o-Y Margin % FY15 FY16 FY17 FY18 Margin % Q3FY18 Q2FY19 Q3FY1
Slide 29: Performance Highlights | Capital Expenditure
PERFORMANCE HIGHLIGHTS | CAPITAL EXPENDITURE 69.3 65.1 8.4 57.2 10.6 0.1 USD Mn USD Mn 263 0.2 237 235 11.1 18.1 35 13.6 5 0.6 37 50 3 87 1 48 24.1 66 Y-o-Y 42.8 Q-o-Q 40.7 137 149 21.4 118 Q3 FY18 Q2 FY19 Q3 FY19 FY16 FY17 FY18 Data Sustenance Data Growth Voice Others Data Sustenance Data Growth Vo
Slide 30: Performance Highlights | Net Debt
PERFORMANCE HIGHLIGHTS | NET DEBT 1380 1327 1438 1204 1209 1254 1268 1251 1287 1150 1151 USD Mn Mar'14 Mar'15 Mar'16 Mar'17 Jun'17 Sep'17 Dec'17 Mar'18 Jun'18 Sep'18 Dec'18 Net Debt to EBITDA (x) Cost of Debt % 3.6 3.6 3.6 3.7 3.5 3.3 3.4 3.4 3.4 4.28% 3.80% 3.2 3.41% 3.12% 3.24% 3.30% 3.60% 3.87% 3
Slide 31: Performance Highlights | TCTSL - Standalone
PERFORMANCE HIGHLIGHTS | TCTSL - STANDALONE Gross Revenue 3375 EBITDA 404 2944 2865 351 287 Margin % INR Mn INR Mn 13.7% 10.0% 10.4% Q3 FY18 Q2 FY19 Q3 FY19 Q3 FY18 Q2 FY19 Q3 FY19 Headcount (Exit) 4363 4060 4056 Growth % YoY QoQ Count Gross Revenue 14.7% 17.8% EBITDA (13.1%) 22.4% Q3 FY18 Q2
Slide 32: Performance Highlights | TCPSL - Standalone
PERFORMANCE HIGHLIGHTS | TCPSL - STANDALONE 911 Gross Revenue EBITDA 895 Q3 FY18 Q2 FY19 Q3 FY19 Margin % INR Mn INR Mn 7.2% 8.0% 864 64 6.0% (18) 4 4.0% 0.4% 2.0% Q3 FY18 Q2 FY19 Q3 FY19 - ATM Count (2.0%) (2.0%) (4.0%) 16340 14585 13062 8317 Growth % YoY QoQ 8168 8059 Count 8023 6417 5003 Gross Re
Slide 33: Investment Thesis
INVESTMENT THESIS Data led Growth Valuation Arbitrage Lean Balance as compared to Sheet Global Peers Value Creation Global through huge Land Management Team Assets Regulatory Regular Dividend Environment Pay-out Favourable Internal Transformation 33
Slide 34: Key Take Away
KEY TAKE AWAY ❑ Riding on global data growth ❑ Digital Transformation and Cloud adoption to drive the business growth ❑ Transformation driving demand for SD WAN and network virtualisation services ❑ Positioned for the first time by Gartner in its 2017 Magic Quadrant for Managed Hybrid Cloud Hosting,
Slide 35: Thank You
THANK YOU tatacommunications.com © 2016 Tata Communications. All Rights Reserved. TATA COMMUNICATIONS and TATA are trademarks of Tata Sons Limited in certain countries. 35 35
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