Slide 1: Reliance Communications Investor Presentation March 2014
Reliance Communications Investor Presentation March, 2014
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Reliance Communications Limited (the “Company”) solely for information purposes without any regard to any specific objectives, financial situations or informational needs of any particular person. This presentation may not be copied, distributed or d
Slide 3: Contents
Contents Indian Telecom Scenario RCOM Operational Strategy for Growth o India Operations o Global Operations o Financial Update Deleveraging and Asset Monetisation Key Takeaways
Slide 4: Indian Telecom Landscape
Indian Telecom Landscape 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 next
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 11 5 Operators Operators Over capacity led to low tariffs, making business unviable Top
Slide 6: 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 Confident
Slide 7: 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$ mn) Xx% Contribution to total wireless revenues 11% 3,688 Incremental revenue from data of 3% ~US$ 3 bn is expected to be 670 added over 2012-15 2012 2015 • Mobile data (2G + 3G) grew at 9
Slide 8: Regulatory Update
Regulatory Update Regulatory Clarity has Fully Emerged; Regulatory Environment Likely to be Stable All spectrum required for the Access Services is being allotted now through transparent auction process TRAI recommended the reserve price of spectrum in 800 MHz band in Feb-14 Spectrum TRAI has
Slide 9: Regulatory Update: License Renewals
Regulatory Update License Renewals Impact over 2014-2016 for Select Operators 2014 2015 2016 Circle revenue as % of GR for FY13 Revenue of circles coming up for • AP • NE renewal in 2014-16, as % of GR for • Delhi • Karnataka FY13 • HP • Punjab • Kolkata • Rajasthan ~12% ~17% ~17% ~46% • Delhi • Ker
Slide 10: Regulatory Update: Spectrum Winners and Payments
Regulatory Update Recent Spectrum Winners and Payment Schedule (February, 2014) R JIO # of Circles 15 11 11 14 5 5 1 US$ mn PV of 3,038 3,220 1,757 1,812 138 34 27 Spectrum Part Payment Upfront * 889 915 531 598 46 11 9 TOTAL PAYOUT * 5,120 5,455 2,944 2,989 228 57 44 * Payouts if opted for 10 year
Slide 11: Regulatory Impact
Regulatory Impact Post Auction, Industry / Incumbents View: Tariff Likely to Harden GSM incumbents RCOM All incremental revenue to be utilized for regulatory payouts & No significant regulatory additional debt required payout Minimal value accretive Incremental revenue to generate further FCF For RC
Slide 12: Contents
Contents Indian Telecom Scenario RCOM Operational Strategy for Growth o India Operations o Global Operations o Financial Update Deleveraging and Asset Monetisation Key Takeaways
Slide 13: Key Message 1: Future Ready Spectrum Portfolio
Key Message 1: Future Ready Spectrum Portfolio Spectrum Band LTE Ecosystem * RCOM R-Jio (MHz) LTE capable spectrum LTE capable spectrum 2300 Y X Y 2100 Y Y - 1800 Y Y Y 900 Y Y - 850 Y Y - * 2300 MHz band is for TDD, rest for FDD All urban centers / major cities sites mostly fiberised Over 2/3rd
Slide 14: Well developed LTE device ecosystem
Well developed LTE device ecosystem in 850 MHz…. 850+700 850+1800 46 Smart 54 Smart Mutli-technology Mutli-band chipset supports 2G, 3G, 4G Phones Phones technologies in the same handset. Presently Lte Multi-band Chipset supports: 850+900 850+2100 FDD: 700 / 800 / 850 / 900 / 1800 /1900 / 2100 T
Slide 15: Key Message 2: Future Expansion at Least Cost
Key Message 2: Future Expansion at Least Cost RCOM‟s growth model “Test the waters” Increased shareholder returns De-risk No capex Increased cash flows growth Higher operational Reliance Jio Comparable efficiency agreement costs/ min Increased network coverage and better quality 1) Intra-cir
Slide 16: Key Message 3: Minimal Regulatory Cash Outflow
Key Message 3: RCOM has Minimal Regulatory Cash Outflow Spectrum Renewal Payment in FY2016 # of Circles 7 Only 7 circles of RTL coming up for US$ mn renewal in FY2016, where the spectrum is in 900MHz band PV of Spectrum 255 For renewal of spectrum upto 5MHz in 900MHz band spectrum - Total Payout
Slide 17: RCOM's strategic focus areas
RCOM‟s strategic focus areas…. iRMS RCOM focus areas Cost & Smart Capex People Optimisation Confidential Slide 17
Slide 18: Journey so far
Journey so far RCOM: A multi technology integrated telecom operator 1997 2009 2011 9 GSM 14 GSM 3G in 13 circles circles circles launched launched launched Now 2003 2009 – 2013 Pan India 30% 70% CDMA launch 70% GSM + Data growth 30% Earlier Now Revenue stable CDMA GSM Worldwide ecosystem for CDMA
Slide 19: Gain iRMS: Spectrum Assets and Backhaul Network
Gain iRMS Unmatched Spectrum 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 LT
Slide 20: Gain iRMS: Balanced GSM/3G and CDMA Spectrum Portfolio
Gain iRMS Balanced Portfolio of GSM/3G & CDMA Spectrum helping RCOM maintain Data Leadership 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 Graduall
Slide 21: Spectrum based Go to Market Strategy
Gain iRMS Spectrum based “Go to Market” Strategy 3G spectrum in key circles Circle clusters Objectives Strategy 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 22: RCOM's strategic focus areas
Gain iRMS RCOM‟s strategic focus areas…. GSM Strategy iRMS CDMA Strategy RCOM focus areas Cost & Smart Capex People Optimisation Confidential Slide 22
Slide 23: GSM Voice Strategy: Market Portfolio Approach
GSM Voice Strategy: Market Portfolio Approach National Circles Hot Micro Markets 3 Clusters of Circles and Current Revenue Size Participate & Grow High competition 11 Circles rev concentration US$ „All Markets are not 8 bn annual Equal‟ US$ US$ Protect & 11 bn Disrupt & 5 bn Grow annual annual Grow
Slide 24: GSM Data Strategy: Disruptive Value Story
GSM Data Strategy : Disruptive Value Story for Customers Play across both Small Screen and Large Screen In 3G Circles In non-3G Circles Aggressive iphone Smartphone stance on 3G = 2G Bundles Nokia EDGE / HSD (ZeroPlan) proposition …more Maximize customer acquisitions through MNP Drive Upgrade
Slide 25: GSM Metros Strategy: Segmented Share Gain
GSM Metros Strategy : Segmented Share Gain Urban mobile penetration is > 140% Target Revenue of non-3G Net Port-Ins in Delhi, Mumbai : +ve Swing Players in Delhi, Mumbai US$ 1.5 bn annual (market revenue size) Target Retail Customer Segments 3 1 2 B2B: Aggressive Switchers Netizens Play Differenti
Slide 26: RCOM's strategic focus areas
Gain iRMS RCOM‟s strategic focus areas…. GSM Strategy iRMS CDMA Strategy RCOM focus areas Cost & Smart Capex People Optimisation Confidential Slide 26
Slide 27: CDMA Data Strategy: Focus on Core Data Markets
CDMA Data Strategy: Focus on Core Data Markets • 100% network at14.4 Mbps +++ Metro Markets • 3 Markets with HSPA+ network Delhi, Mumbai, Bangalore, Kolkata, Hyderabad, Pune, • 4 Markets with EVDO Rev B Chennai • Only operator with all metros having 3G Category A • Ubiquitous Mobile Broadband • 10 M
Slide 28: CDMA Device Strategy: Multimode Devices
CDMA Device Strategy: Improving of Multimode Devices With Chipset Evolution Multi Mode: LTE / HSPA / EVDO • Supports 7 Bands – 850, 900, 1800, 2100, 2300, 2600 + 1 • All ID‟s already operational in Verizon, Sprint, AT&T (US), Vodafone, Telstra (Australia), Singtel, Star Hub (Singapore) US$ 400 DTAC
Slide 29: CDMA: Value For Money Customer Offers
CDMA: Value For Money Customer Offers with Retailer Advocacy Category Product Retailer Margin Talk: Unlimited XL Unlimited 1599 Text: Unlimited onwards per month Data: Unlimited I n Corporate / SME c Free Smartphone r e Talk: 299 a Young L Professional 299 Text: 299 s per month Data: 2 Gb I n g Talk
Slide 30: RCOM's strategic focus areas
RCOM‟s strategic focus areas…. iRMS RCOM focus areas Cost & Smart Capex People Optimisation Confidential Slide 30
Slide 31: Cost Optimization: Outsourcing
Cost Optimization Outsourcing of Network Management Services & Call Center Operations Outsourced Network Management Services to RCOM to shift 5,500 call centre staff to third- Ericsson and Alcatel-Lucent party BPOs Comprehensive and value-enhancing management Improve overall efficiency to se
Slide 32: Cost Optimization Measures
Cost Optimization Cost Optimization Measures Cost lever Target Reduction Planned Activities Reduce consumable cost – Network cost To be reduced by 10% - 12% batteries / solar power Managed services IP colocation sites Downward revision of channel Gross Acquisition To be reduced by 10% - 15% comm
Slide 33: Smart Capex
Smart Capex Benefits of Comprehensive Arrangement with Reliance Jio Benefits RCOM current donor to R Jio RCOM passive infra shared Inter city fiber: 1,20,000 km with R Jio Revenue / EBITDA accretive Tower sharing: ~45,000 Possible Intra city fiber: 70,000 km RCOM‟s reciprocal access from R Jio
Slide 34: RCOM's strategic focus areas
RCOM‟s strategic focus areas…. iRMS RCOM focus areas Cost & Smart Capex People Optimisation Confidential Slide 34
Slide 35: Smart Organization: Circle as a Country Approach
Smart People Smart Organization: Circle as a “Country” Approach “Go To Market” basis Micro segmentation Clusters Clusters (107) Circle demographics Circle as P&L unit Circles (20) Empowered Ownership at field level Regions (4) Dedicated GSM & CDMA teams HQ Confidential Slide 35
Slide 36: Building Leadership bandwidth at RCOM
Building Leadership bandwidth at RCOM CEO CEO CEO COO Reliance Communications Consumer Business Reliance GlobalCom Reliance GlobalCom Mr. Vinod Sawhny Mr. Gurdeep Singh Mr. William (Bill) Barney Mr. Wilfred Kwan • Experience – 30 Yrs • Experience – 30 Yrs • Experience – 15 Yrs (in Asia) • Experience
Slide 37: Contents
Contents Indian Telecom Scenario RCOM Operational Strategy for Growth o India Operations o Global Operations o Financial Update Deleveraging and Asset Monetisation Key Takeaways
Slide 38: Global: Leadership in Carrier, Enterprise and Voice
Global Leadership in each of our businesses: Carrier, Enterprise and Voice Global Carrier Voice Enterprise World‟s largest private Top 5 Managed Top 15 largest submarine cable Network Service international long system owner 70,000+ provider globally distance carriers km of sub-sea fiber Top
Slide 39: Carrier: Subsea cables on the right routes
Carrier Subsea cables on the right routes The routes covered collectively account for 63% of the global data demand as measured by lit capacity Confidential Slide 39
Slide 40: Carrier: Increasing demand for international connectivity
Carrier Well positioned to capture increasing demand for international connectivity Trans-Atlantic (Tbps) Intra-Asia (Tbps) Middle East-West (Tbps) 52.4 4.0 78.0 5.5x 6.7x 6.0x 13.0 9.5 0.6 3.4 1.2 0.1 2005 2011 2016 2005 2011 2016 2005 2011 2016 Middle East-East (Tbps) India-West (Tbps) India-East
Slide 41: Enterprise: Outsourcing of telecom network services
Enterprise Enterprises are outsourcing entire telecom-network services to proven service providers We understand and meet the CIO‟s business needs Service support Scalability & Customer interface Support for Higher Differentiated Bandwidths Helpdesk Internet, Email, Latency Performance Service DNS
Slide 42: Enterprise: US metro network and managed services
Enterprise Own metro network in the U.S. and proven Managed Services and Ethernet service provider More than 22,000 route kilometer of metro Ethernet fiber in the U.S. Reach in more than 163 countries More than 30,000 managed sites being serviced Over 1,000 MNC customers Confidential Slide 4
Slide 43: Voice: Presence in key markets
Voice Presence in key markets and strong regional connectivity Netherland Netherland NY, Switch Spain Austria France Russia UK London Austria Japan Canada GermanyGermany Switzerland Belgium Switzerland Belgium d LA, Switch Italy Saudi Arabia France USA Spain Bahrain China Japan UAE Qatar Pakistan So
Slide 44: Voice: Reliance Global Call
Voice Reliance Global Call Enterprise Presence Product USA, UK, Canada, Australia, India, Reliance Global Call is a web New Zealand, based international calling Hong Kong, Singapore, service offering calls to over 230 France, Spain and Austria countries USA, UK, Reliance Global Call has over Canada,
Slide 45: Global: Well positioned for enterprise and voice demand
Global In summary, Reliance is well positioned to capture demand for enterprise and voice services 1 Scalable global network 4 Positioned 2 Increase in for Full suite of Profitable products and Demand services Growth 3 Marquee customer base Confidential Slide 45
Slide 46: Contents
Contents Indian Telecom Scenario RCOM Operational Strategy for Growth o India Operations o Global Operations o Financial Update Deleveraging and Asset Monetisation Key Takeaways
Slide 47: Financial Snapshot
Financial Snapshot RCOM Financial Performance Revenue (US$mm) and EBITDA margin Capex (US$mm) Revenue (US$mm) EBITDA margin % 3,788 39% 3,570 1,633 3,341 33% 959 32% 643 FY11 FY12 FY13 FY11 FY12 FY13 Fx: 1US$=INR61 Margin Improvement Coupled with Lower Capex Intensity Confidential Slide 47
Slide 48: Financial Snapshot: Operating Metrics
Financial Snapshot Operating Metrics have Seen a Sharp Turnaround RPM (INR) Minutes of usage/ sub Improved industry 288 270 251 0.45 224 dynamics with pricing 0.44 0.44 power coming back to 0.41 operators Focus on high quality Dec '10 Dec '11 Dec '12 Dec '13 Dec '10 Dec '11 Dec '12 Dec '13 custo
Slide 49: Financial Snapshot – Segment Reporting
Financial Snapshot – Segment Reporting India Operations US$ mn Q3 FY13 Q2 FY14 Q3 FY14 Q-o-Q % Y-o-Y% Revenue 737 758 760 0.3% 3.2% Voice 526 555 560 1.0% 6.5% Non-voice 179 167 167 0.05% -6.5% Others 32 36 33 -8.9% 3.2% EBITDA 229 269 263 -2.0% 15.0% Margin % 31.1% 35.5% 34.6% -90 bps +350 bps Glob
Slide 50: KPIs
KPIs Voice Voice KPIs Q3 FY13 Q2 FY14 Q3 FY14 Q-o-Q % Y-o-Y % ARPU (INR) 112 120 125 4.2% 11.6% RPM (INR) 0.414 0.434 0.435 0.4% 5.1% Total MoU (Bn. Min.) 103.8 101.5 101.9 0.4% -1.8% Voice Usage/ Cust/ Month (Min.) 270 277 288 4.0% 6.7% Total Customer Base (Mn.) 119.8 117.5 118.5 0.8% -1.1% Churn (
Slide 51: Data Leadership
Data Leadership RCOM is the Leader in the Wireless Data Market Non-voice as % of Total Revenue No. of 3G Active Subscriber (mm) 11.1 25.3% 23.0% 9.5 8.7 17.3% 17.2% 16.1% 6.1 14.6% 5.2 4.1 3QFY13 Rcom Airtel Idea 3QFY14 3QFY13 Rcom Airtel Idea 3QFY14 Total Data Traffic on Network (mm MBs) Data usage
Slide 52: Contents
Contents Indian Telecom Scenario RCOM Operational Strategy for Growth o India Operations o Global Operations o Financial Update Deleveraging and Asset Monetisation Key Takeaways
Slide 53: De-leveraging and Asset Monetisation: Reliance Jio Framework
De-leveraging and Asset Monetisation Comprehensive Business Co-operation Framework Between RCOM & Reliance Jio Tower sharing agreement Inter-city fiber sharing agreement Nation-wide tower infrastructure sharing RCOM‟s 120,000 Kms. of Inter-city fiber agreement with R Jio optic network to be util
Slide 54: Unlocking Value through De-merger of Real Estate
De-leveraging and Asset Monetisation 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 55: De-leveraging and Shareholder Return
De-leveraging and Shareholder Return Target leverage ~5x * ~1x ~2x 1 ~2x # 2 Current Net Debt/ EBITDA Internal accruals Asset monetisation Target Net Debt/ EBITDA 1 Organic growth and free cash flow generation 2 Securitization of R Jio receivables and divestment of non-core assets # Excluding th
Slide 56: Contents
Contents Indian Telecom Scenario RCOM Operational Strategy for Growth o India Operations o Global Operations o Financial Update Deleveraging and Asset Monetisation Key Takeaways
Slide 57: RCOM: Potential future risks and upsides
RCOM: Potential future risks & upsides Potential future risks RCOM Impact Potential future upside Regulatory spectrum Data leadership payouts Low capability Ready Intercity fiber deal Done Capex Intensity Low with R Jio Tower tenancy deal with R Jio Done Business operation Low downside Monetisation
Slide 58: Key Takeaways
Key Takeaways Industry getting consolidated among top 5 operators Data driving the next growth phase in India, RCOM well positioned to maintain data leadership RCOM Future ready spectrum portfolio Future expansion at least cost Minimal regulatory cash outflow Arrangement / cooperation
Slide 59: Thank You
RELIANCE Thank You