Reliance Communications Limited · NSE:RCOM
Reliance Communications — Investor Presentation (October 2013)
35 slides from Reliance Communications's investor presentation, October 2013
Slide 1: Reliance Communications Limited
Reliance Communications Limited October 2013 October,
Slide 2: Forward looking statements – Important Note
Forward looking g statements – Important p Note Thi presentation This t ti and d the th discussion di i th t follows that f ll may contain t i “forward “f d looking l ki statements” t t t ” by b Reliance Communications Ltd (“RCOM”) that are not historical in nature. These forward looking statements,
Slide 3: Key Themes
Key Themes Industry getting consolidated among top 5 operators Data expected p to be the next g growth driver in India RCOM’s integrated infrastructure best positions it to play the data growth story in India as well as globally Cost efficiency measures in place to improve margins S Smart
Slide 4: Indian Telecom Landscape
Indian Telecom Landscape p Pre - 2012 Post 2012 Hyper competition and highly Industry getting consolidated among fragmented market with 15 pan-India top 5 players operators Regional players are getting Significant price wars marginalized Regulatory uncertainty Data expected to be the nex
Slide 5: Consolidation in the Industry
Consolidation in the Industry Recent Post Auction Consolidation has already Reduced Competition Pre-auction competitive landscape Post-auction competitive landscape Pan-India players Pan-India private players 5 Operators 11 Operators Over capacity led to low tariffs, making business unviable Indus
Slide 6: Consolidation in the Industry
Consolidation in the Industry Top Operators Benefiting from a Sustainable Business Environment Operator market share of revenues Top 5 operators Others Top 5 operators account for over 84% of the revenue market share Regional operators have rolled back operations in 16% 84% select circles Total
Slide 7: Data is the Next Big Opportunity
Data is the Next Big Opportunity Indian Telecom Industry: Moving from Voice to Data Mobile Broadband Convergence : M2M Social Networking M-commerce SMS Radio Mobile Apps Mobile Advertising CRBT Voice Calling Mobile Gaming The Past Present Future Mobile Broadband – Enabler for Future Growth 7 of 35
Slide 8: Data is the Next Big Opportunity
Data is the Next Big Opportunity Data to Drive Industry Revenue in Future Wireless Data revenue in India (US$mm) Xx% Contribution to total wireless revenues 11% Incremental revenue from data of 3,688 ~US$3bn is expected to be 3% added dd d over 2013 2013-15 15 670 • Mobile data (2G + 3G) 2012 2015
Slide 9: Regulatory Update
Regulatory Update Regulatory Clarity is Emerging All spectrum required for the Access Services is being allotted now through transparent auction process TRAI has already recommended the reserve price of spectrum for next auction of 1800 MH band, MHz b d which hi h is i about b t 60% off th the l
Slide 10: Regulatory Update
Regulatory Update License Renewals Impact over 2014-2016 2014 2016 for Select Operators Circle revenue as % of GR for FY13 2014 2015 2016 Revenue of circles coming up for renewal in 2014-16, as % of GR for • AP • NE FY13 • Delhi • Karnataka • HP • Punjab P j b • Kolkata • Rajasthan ~12% ~17% ~17% ~4
Slide 11: RCOM is well positioned to play the India data story
• RCOM is well positioned to play the India data story • RCOM has an integrated infrastructure to capitalize on global data opportunity • Cost efficiency measures in place to improve margins • Smart capex p strategy gy to improve p returns • Deleveraging and asset monetization
Slide 12: Unmatched Spectrum Assets & Robust Backhaul Network
Gain iRMS Unmatched Spectrum p Assets & Robust Backhaul Network Pan India presence and network Largest network of backhaul optical deployment across technology platforms fiber amongst all private operators Service Areas Spectrum Holding (MHz*) Optical Fiber Layout for Operators (Kms) CDMA 2G-GSM 3G
Slide 13: Spectrum based Go to Market Strategy
Gain iRMS Spectrum based “Go to Market” Strategy 3G spectrum in key circles Circle Objectives Strategy clusters Match competition coverage on 3G Get fair share of iRMS - Prioritize – Metros (DEL, MUM, KOL) handheld, dongle and Voice Tariff : L2 3G Metro Disruptive postpaid play Data domi
Slide 14: CDMA advantage
Gain iRMS CDMA advantage 3G – 13 Circles HSD – Pan India Dual data spectrum HSD Dominate large Dominate small/ screen/ CDMA large screen branded smart- phones Data market Data market share > 35% share > 20% 3G HSPA CDMA HSD Gradually Convert CDMA to Data network to Support Smart-phones/ large Screen
Slide 15: Key Trends Driving the Growth in IP Traffic
International Enterprise Business Key Trends Driving the Growth in IP Traffic Increasing By 2015, there will be nearly 15 billion network connections via devices number of (up from 7 billion in 2010), including machine to machine connections d i devices More internet By 2015, there will be nearly 3
Slide 16: RCOM is well positioned to play the India data story
• RCOM is well positioned to play the India data story • RCOM has an integrated infrastructure to capitalize on global data opportunity • Cost efficiency measures in place to improve margins • Smart capex p strategy gy to improve p returns • Deleveraging and asset monetization
Slide 17: Global Connectivity and Assets to Leverage on Global Data Explosion
International Enterprise Business Global Connectivity and Assets to Leverage on Global Data Explosion Global Connectivity Global Network Over 277,000 Kms of optic fiber cable with landing points in 30 countries Manage over 60,000 customer sites in 163 countries through 700 carrier partners Sea
Slide 18: Leading Enterprise Service Provider in India
Indian Enterprise Business Leading Enterprise Service Provider in India Long Distance Network in India 190,000 kilometer of fiber optic in India connecting 600,000 villages & 24,000 towns to key business markets in India, USA, Europe, Middle East, and APAC regions Over 45,000 Enterprise customer
Slide 19: Biggest Data Center Player in India
Indian Enterprise Business Biggest Data Center Player in India 18 (9 India, 9 outside India) Data centers across the globe with more than 550,000 sq ft of facilities space Geographic redundancy Wide & complex applications hosted Building a new data center with q ft, ready 400,000 sq y for re
Slide 20: RCOM is well positioned to play the India data story
• RCOM is well positioned to play the India data story • RCOM has an integrated infrastructure to capitalize on global data opportunity • Cost efficiency measures in place to improve margins • Smart capex p strategy gy to improve p returns • Deleveraging and asset monetization
Slide 21: Outsourcing of Network Management Services
Cost Optimization Outsourcing of Network Management Services Outsourced Network Management Services to Ericsson (North & West India) and Alcatel-Lucent (East & South India) Comprehensive and value-enhancing management to RCOM’ networks RCOM’s t k and d services i tto d deliver li a world-class l
Slide 22: Outsourcing of Call Center Operations
Cost Optimization Outsourcing of Call Center Operations RCOM to shift 5,500 call centre staff to third- party BPOs for Enterprise, Enterprise International calling and back office business Improve overall efficiency to serve customers customers, allowing greater focus on revenue enhancement He
Slide 23: Smart Organization: Circle as a Country Approach
Cost Optimization Smart Organization: Circle as a “Country” Approach “Go To Market” basis Micro segmentation Clusters Circle demographics Region as P&L unit Clusters (107) Empowered Ownership at field level Circles (20) Circle as a “Country” Cluster as a “Thumping Heart” Regions g ((
Slide 24: Cost Optimization Measures
Cost Optimization Cost Optimization Measures Cost lever Target Reduction Planned Activities ¾Reduce consumable cost – Network cost To be reduced by 10% - 12% batteries / solar power ¾Managed services ¾IP colocation sites ¾Downward revision of channel Gross Acquisition To be reduced by 10% - 15% comm
Slide 25: RCOM is well positioned to play the India data story
• RCOM is well positioned to play the India data story • RCOM has an integrated infrastructure to capitalize on global data opportunity • Cost efficiency measures in place to improve margins • Smart capex p strategy gy to improve p returns • Deleveraging and asset monetization
Slide 26: ICR Arrangement to Expand Coverage at Minimum Capex
Smart Capex ICR Arrangement to Expand Coverage at Minimum Capex Ecosystem of over 10,000 sites to b shared be h d on a bil bilateral t lb basis i Agreements to create additional addressable market of 150mm population coverage Additional market opportunity of ~US$1.6bn RCOM Seeker RCOM Donor Im
Slide 27: Faster Time to Market with Minimum Capital Investment
Smart Capex Traditional business model Significant Regulatory Incur substantial Manage capex to build approvals fixed costs network network RCOM’s growth model Intra-circle roaming arrangements Increased shareholder “Test the waters” returns Increased cash flows De-risk growth No capex Higher
Slide 28: RCOM is well positioned to play the India data story
• RCOM is well positioned to play the India data story • RCOM has an integrated infrastructure to capitalize on global data opportunity • Cost efficiency measures in place to improve margins • Smart capex p strategy gy to improve p returns • Deleveraging and asset monetization
Slide 29: RCOM Financial Performance
De-leveraging and Shareholder Return RCOM Financial Performance Revenue (US$mm) and EBITDA margin Capex (US$mm) Revenue (US$mm) EBITDA margin % 3 788 3,788 39% 3,570 1,633 3,341 33% 959 32% 643 FY11 FY12 FY13 FY11 FY12 FY13 Fx: 1US$=INR61 Margin improvement coupled with lower capex intensity 29 of 3
Slide 30: Operating Metrics have Seen a Sharp Turnaround
De-leveraging and Shareholder Return Operating g Metrics have Seen a Sharp Turnaround Wireless RPM (INR)1 Minutes of usage/ sub Improved industry 295 283 0.46 233 228 dynamics with pricing 0.44 0.44 power coming back to 0.43 operators Focus on high quality Jun '10 Jun '11 Jun '12 Jun '13 Jun '10
Slide 31: RCOM is the Leader in the Wireless Data Market
De-leveraging and Shareholder Return RCOM is the Leader in the Wireless Data Market Non-voice as % of Total Revenue No. of 3G Active Subscriber (mm) Rcom Airtel Idea Rcom Airtel Idea 7.7 21.3% 68 6.8 20 2% 20.2% 16.3% 17.3% 5.5 16.0% 14.5% 4.0 3.7 3.1 1QFY13 1QFY14 1QFY13 1QFY14 Total Data Traffic o
Slide 32: Business Co-operation Framework Between RCOM & Reliance Jio
De-leveraging and Shareholder Return Comprehensive Business Co-operation Framework Between RCOM & Reliance Jio Tower sharing agreement Nation-wide tower infrastructure sharing agreement with Reliance e a ce JJioo Infocomm oco 45,000 tower (Ground based + Rooftop) to be shared Aggregate value o
Slide 33: Unlocking Value through De-merger of Real Estate
De-leveraging and Shareholder Return Unlocking Value through De-merger of Real Estate In-principal approval on a demerger of the Real Estate held by RCOM into a separate unit Reliance Properties Ltd. will be a separate listed Company All shareholders of RCOM will receive fully tradable pro-rat
Slide 34: Summary
Summary • Industry getting consolidated among top 5 operators • Data driving the next growth phase in India • RCOM infrastructure p positions it well to tap p the data opportunity pp y • Extensive capacity to cater to global data traffic • Cost optimization and Smart capex strategy to improve return
Slide 35: Thank you
RELIANCE Thank you
Reliance Communications — Investor Presentation (October 2013) on 6ix