Reliance Communications Limited · NSE:RCOM
Reliance Communications — CLSA Investors' Forum 2007
51 slides from Reliance Communications's conference presentation, September 2007
Slide 1: Reliance Communications CLSA Investors' Forum Hong Kong
Reliance Communications CLSA Investors’ Forum Hong Kong September 2007
Slide 2: Forward looking statements – Important Note
Forward looking statements – Important Note This presentation and the discussion that follows may contain “forward looking statements” by Reliance Communications Ltd (“RCOM”) that are not historical in nature. These forward looking statements, which may include statements relating to future results
Slide 3: Contents
Contents Reliance ADA Group Reliance Communications - Indian Telecom Sector - Business Segments - Financials - Key Recent Developments 3 of 51 confidential
Slide 4: The vision of one man
Reliance ADA Group The vision of one man If you can dream it You can Do it Our legendary founder Sh. Dhirubhai Hirachand Ambani 28th December 1932 - Forever 4 of 51 confidential
Slide 5: Leadership Position in highest growth sectors
Reliance ADA Group Leadership Position in highest growth sectors Over 100 million individual customers - 1 in every 10 Indians 7 million shareowners 100,000 young, trained and motivated people Generation Generation Mobile Mobile Wireless Wireless Transmission Transmission Enterpr
Slide 6: Reliance ADA Group – Key financials
Reliance ADA Group Reliance ADA Group – Key financials Market capitalization Rs 175,000 Cr $43 bn #3 Assets Rs 50,000 Cr $12bn #3 Net worth Rs 41,000 Cr $10bn #3 Operating cash flow Rs 10,000 Cr $2.5bn #3 Profit after tax Rs 6,000 Cr $1.5bn #4 Net debt Nil Nil - Among India’s top 3 business groups 6
Slide 7: Unprecedented value creation
Reliance ADA Group Unprecedented value creation s e a cre in 1 x 1 US$ 43 billion US$ XX bn US$ 4 billion Market cap Market cap at June 2005 at present As on September 13, 2007 Value creation of US$40 bn in just two years 7 of 51 confidential
Slide 8: All group companies have outperformed the Sensex
Reliance ADA Group All group companies have outperformed the Sensex 280 Rebased to 100 260 240 220 200 180 160 140 120 Sensex 100 80 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug -07 Sep-07 Reliance Com m unications Reliace Energ y Reliance Natural Resources Relian
Slide 9: High liquidity across group companies
Reliance ADA Group High liquidity across group companies MSCI Sensex Nifty F&O Reliance Communications 5 5 5 5 Reliance Energy 5 5 5 Reliance Capital 5 5 Adlabs Films 5 Foreign portfolio investors own 20% in group stocks valued at US$ 8 bn Daily stock market turnover of Group companies >US$400 mn 9
Slide 10: Reliance Communications
Reliance Communications 10 of 51 confidential
Slide 11: The largest telecom growth opportunity in the world
Indian Telecom Sector The largest telecom growth opportunity in the world… Parameter Current status Global position Telecom subscribers 229 mn In the top 5 Wireless subscribers 189 mn 3rd largest Wireless Minutes of Usage ~ 471 minutes Second highest Broadband subscribers 2.5 mn Lowest in the world
Slide 12: Among the lowest penetration rates in the world
Indian Telecom Sector Among the lowest penetration rates in the world Low wireless penetration… …Leading to strong revenue growth 140% 60% 55.5% 117.0% 120% 50% 100% 40% 79.0% 79.2% 79.6% 80% 30% 60% 37.3% 20% 15.3% 40% 12.0% 9.2% 16.9% 10% 20% 0.4% 1.1% 0% 0% India China France US Japan UK France J
Slide 13: Mobile subscribers expected to cross 500 mn in 3 years
Indian Telecom Sector Mobile subscribers expected to cross 500 mn in 3 years… 600 50% 44% Mobile Subscribers (mn) 500 Penetration 38% 40% 5% GR3 530 400 C A 30% 444 30% 300 22% 348 20% 200 14% 253 9% 161 10% 100 96 0 0% 2006 2007 2008E 2009E 2010E 2011E Year end March 31 Source: Industry estimates …
Slide 14: Net annual subscriber adds have now surpassed China
Indian Telecom Sector Net annual subscriber adds have now surpassed China Net Net annual annual wireless wireless additions additions (million) (million) 90 India 84 80 77 68 70 62 66 China 59 60 65 50 40 31 30 22 18 20 10 0 2003 2004 2005 2006 2007E Source: Industry research Wireless subscribers –
Slide 15: Among highest EBITDA margins globally
Indian Telecom Sector Among highest EBITDA margins globally… EBITDA Margins 70% 60% 54.0% 51.3% 51.8% 50% 41.4% 41.7% 42.2% 38.5% 40.1% 40% 35.1% 33.2% 30.3% 28.3% 30% 20% 10% 0% he on &T ne N ti a e te l ile co m sc fo KP ar tr nc om ob e t riz AT a h ls li a ec n g l u Ve d B Te Re l Si M Te De Vo
Slide 16: RCOM: India's Largest Integrated Telecom Company
RCOM: India’s Largest Integrated Telecom Company Personal Business Global Business Enterprise Business Infrastructure Business 16 of 51 confidential
Slide 17: Leading position in the Asian telecom market
Leading position in the Asian telecom market Operator Market cap Subscribers China Mobile US$ 269 bn 338 mn China Telecom US$ 45 bn 244 mn Singtel US$ 39 bn 52 mn* Bharti Airtel US$ 39 bn 48 mn Reliance Communications US$ 28 bn 36 mn * Includes proportionate customers of affiliates Ranks among top 5
Slide 18: Among the 3 most valuable private sector companies in India
Among the 3 most valuable private sector companies in India Market Capitalisation De-merged entity – M-cap US$ 20 bn 0% 21 + US$ 28 bn US$ XX bn US$ 9 bn Market cap Market cap at March 2006 at present As on 13 September 2007 Created shareholder wealth of US$ 19 billion in 19 months 18 of 51 confiden
Slide 19: Who do we serve?
Who do we serve? Over 36 million customers in India Over 1 million individual global customers Over 200 major global carriers Over 250 MNCs Over 800 out of Top 1,000 Indian large enterprises Over 10,000 Indian SMEs Unparalleled customer franchise in India and globally 19 of 51 confidenti
Slide 20: Dominant position across multiple segments
Dominant position across multiple segments # Largest mobile network in the country: 85% population coverage Largest carrier of wireless data: >60% market share Largest in enterprise data services: >50% market share Largest private PCO operator: >50% market share Largest carrier of international voic
Slide 21: Partnerships with global leaders
Partnerships with global leaders Network IT Best in class technologies 21 of 51 confidential
Slide 22: Business Segments: Wireless
Business Segments: Wireless 22 of 51 confidential
Slide 23: One of the fastest growing wireless companies globally
Wireless Business One of the fastest growing wireless companies globally Among India’s top 2 operators with over 34 mn wireless subscribers - Prepaid subscriber additions drive growth - 85% of total subscribers Key Performance Indicators - EBITDA margins among the highest in the industry ~40%...
Slide 24: Unrivalled wireless multimedia platform
Wireless Business Unrivalled wireless multimedia platform Reliance Mobile Unparalleled user experience in India World “Click, Browse and Select” Multi-media content delivery available on the entire range of handsets Platform, phones and network superiority Over 20 million multimedia enabled ph
Slide 25: Largest distribution network of 2,000 exclusive retail stores
Wireless Business Largest distribution network of 2,000 exclusive retail stores & >500,000 third party retailers Largest chain of company Channel Dimensions owned and franchised stores Channel strength of 2000 distributor & Provides high level of branding >500,000 retailers Presence in >23,0
Slide 26: World's largest network roll-out
Wireless Business World’s largest network roll-out Covering almost a billion Indians Wireless coverage - Towers portfolio up from 14,000 to 40,000 - Coverage from 10,000 to >23,000 towns - Population coverage expansion from 55% to 85% - Almost 100% coverage of railway routes - Almost 100% coverage
Slide 27: Pioneered wireless affordability in India
Wireless Business Pioneered wireless affordability in India Driven call rates down from >10 cents to <1 cent per minute Established unbeatable handset propositions - Nokia & Reliance are the top 2 handset brands in the country - Monochrome handset at US$19 and Colour at US$30 have been hot selle
Slide 28: Recent innovations
Wireless Business Recent innovations Bundled Offerings: handsets & talk time Lifetime validity schemes Affordable roaming tariffs & connectivity Pioneer in unlimited on-net calls First “World Edition” Dual Standard CDMA / GSM Blackberry in India - Bloomberg access across the world - First
Slide 29: New growth opportunities
Wireless Business New growth opportunities… RCOM can launch GSM services in all 15 additional circles & create national GSM footprint at a nominal entry fee of <US$ 400 mn - RCOM has >30% market share in dual technology circles vs 20% in rest of the country - RCOM can replicate this success nation
Slide 30: Business Segments: Global (Voice + Data)
Business Segments: Global (Voice + Data) 30 of 51 confidential
Slide 31: At the forefront of US$ 90 bn enterprise data opportunity
Global Business At the forefront of US$ 90 bn enterprise data opportunity Flag NGN - world’s largest IP network over Global submarine cable system Infrastructure Capacity to carry 2.5 bn voice calls, 300 mn web chats and 52 mn video chats Over 200 international telco customers of FLAG Customer
Slide 32: World's largest IP enabled optic fiber cable
Global Business World’s largest IP enabled optic fiber cable Significant asset base drives leadership in voice and data segments 230,000 Rkms of submarine and terrestrial optic fiber cable 32 of 51 confidential
Slide 33: Achievements
Global Business Achievements Leadership position in voice - #1 International wholesale carrier - #1 ILD and NLD operator in India - #1 US to India calling service for retail customers Largest carrier of international voice: >40% market share Only Indian company with > 1 million retail customer
Slide 34: Rolling out Next Generation Network (NGN)
Global Business Rolling out Next Generation Network (NGN) US$ 450 mn Falcon cable in the Middle East commissioned last year has expanded FLAG’s presence from 28 to 40 countries - Financed through long term bandwidth sales US$ 1.5 bn FLAG NGN project to build 50,000 Kms cable - Connecting 4 under
Slide 35: RCOM's acquisition of Yipes to accelerate growth
Yipes Acquisition RCOM’s acquisition of Yipes to accelerate growth Yipes is a leading Ethernet services company in the US Yipes is highly profitable, with gross operating margins at 55% Plan to further expand Yipes network in US and in 40 new markets globally Seattle Chicago San Francisco Bost
Slide 36: Yipes industry vertical coverage
Yipes Acquisition Yipes industry vertical coverage Financial Legal Government Healthcare Solutions for 4 verticals, accounting for 50% of ethernet market Nearly 1,000 blue-chip customers in US 36 of 51 confidential
Slide 37: Business Segments: Enterprise
Business Segments: Enterprise 37 of 51 confidential
Slide 38: Market to grow by US$ 8 bn in the next 3 years alone
Enterprise Business Market to grow by US$ 8 bn in the next 3 years alone Broadband market segment revenue (US$ Bn) US$ 13 bn bn 8 $ US + US$ 5.5 bn FY06 FY09F Household SMB + SME Enterprise Source : Industry Report Underserved market: Provides strong growth opportunity 38 of 51 confidential
Slide 39: Strong in-roads into marquee accounts
Enterprise Business Strong in-roads into marquee accounts… IT/ ITES Segment BFSI Segment Media Segment …representing leading players in the largest usage verticals 39 of 51 confidential
Slide 40: 850 of Top 1,000 Indian enterprises are our customers
Enterprise Business 850 of Top 1,000 Indian enterprises are our customers FMCG Segment Services Segment Telecom Operators Winning >50% of new business generated in the segment 40 of 51 confidential
Slide 41: Achievements
Enterprise Business Achievements >50% market share in highest growth data Atlantic products Fiber Internet data centers Ring Meshed Core - - Centrex solutions: virtual, multi-location PBX Virtual private networks Pacific - >600,000 buildings connected to our fiber network, to cross 1 mn by year
Slide 42: Financials
Financials 42 of 51 confidential
Slide 43: Highlights
RCOM Financials Highlights Revenue, EBITDA & Net Profit (US$ Mn) Revenue EBITDA Net Profit 3,530 1,395 772 % 4% 26 0% +3 +1 0 +6 2,625 620 108 FY06 FY07 FY06 FY07 FY06 FY07 Consistent & Substantial increase in profitability 43 of 51 confidential
Slide 44: Consistent Performance
RCOM Financials Consistent Performance 2.5X PAT growth in 5 quarters... …3rd highest in India 301 (US$ Mn) Q1 FY08 PAT Growth 250 Reliance Industries 796 28% 226 Bharti Airtel 372 100% 171 Reliance 301 138% Communications 125 98 TCS 293 36% Infosys 263 35% Technologies Q4FY06 Q1FY07 Q2FY07 Q3FY07 Q4
Slide 45: Strong Financial Platform
RCOM Financials Strong Financial Platform Raised US$ 2.5 bn, including US$ 1.5 bn through FCCBs… Total Assets US$ 13,659 mn Net worth US$ 5,610 mn Operating US$ 1,463 mn* Cash Flow *15 months period ROE 36%# 1Q annualized and adjusted # …Net debt to equity at 0.1– potential to borrow US$ 12 bn for g
Slide 46: Key Recent Developments
Key Recent Developments 46 of 51 confidential
Slide 47: 5% of Towerco placed with major global investors
Value Unlocking Initiatives 5% of Towerco placed with major global investors Valuation Achieved - Equity value of US$ 6.75bn - Translates to Rs 135 per RCOM share - Capital gains of US$ 300 mn From 14,000 to 40,000 towers in six months Towers built for passive infrastructure sharing - Ability
Slide 48: Value Unlocking Initiatives
Value Unlocking Initiatives FLAG World’s largest IP network over submarine cable system RCOM plans private placement to unlock value Special Economic Zone BPO 40 acres SEZ in Mumbai Strong capability to service BFSI, telecom & Strong interest from leading IT/ITES utilities sector companies
Slide 49: Planned launch of DTH & IPTV
Planned launch of DTH & IPTV DTH Network – to launch before end of 2007 India has 110 million TV households of which 50% are not connected through cable or DTH Our DTH services will tap this opportunity This modern network will provide DVD quality picture and better viewing experience IPTV ser
Slide 50: RCOM: Looking Ahead
RCOM: Looking Ahead India among the most attractive growth markets in the world RCOM is India’s only integrated telecom company RCOM to have world’s largest network covering a billion people in more than 23,000 towns and 600,000 villages RCOM is the most profitable telecom company in India w
Slide 51: Thank you
RELIANCE Anil Dhirubhai Ambani Group Thank you September 2007