Unitech Limited · NSE:UNITECH
Unitech — Merger or Acquisition (February 2009)
35 slides from Unitech's merger presentation, Feb 13, 2009
Slide 1: Investor Communication
Investor Communication February 13, 2009
Slide 2: Contents
Contents Update on transaction with Telenor Business case Financing plan 1
Slide 3: Update on transaction with Telenor
Update on transaction with Telenor • On 28 October 2008, Unitech Ltd. entered into an agreement with Telenor whereby Telenor would acquire a 60% stake in Unitech Wireless via fresh equity infusion • One of the closing conditions is the signing of definitive tower sharing and transmission agreements
Slide 4: Strategic Partner – Telenor – Largest global mobile operator in Asia
Strategic Partner – Telenor – Largest global mobile operator in Asia • Seventh largest mobile operator in the world • Subscriber base in excess of 160 million • Headquartered in Norway; Owned 54% by the Government, Norway • Listed at the Oslo Stock Exchange • Revenues in 2008 of approximately USD 16
Slide 5: Telenor to inject Rs.61.2 billion of new equity in Unitech Wireless in 2009
Telenor to inject Rs.61.2 billion of new equity in Unitech Wireless in 2009 Qtr. ended Qtr. ended Qtr. ended March 31, 2009 June 30, 2009 September 30, 2009* Telenor cash 1 Rs.12.5 billion 2 Rs.15.0 billion 3 Rs.15.0 billion injections upon closing 4 Rs.11.2 billion Cumulative Rs.12.5 billion Rs.27.
Slide 6: Impact on Unitech Limited Consolidated Balance Sheet
Impact on Unitech Limited Consolidated Balance Sheet • Debt and Guarantees totalling INR 21 billion will be transferred to Unitech Wireless • Approximately INR 4 billion will be paid to Unitech Limited by Unitech Wireless towards repayment of Shareholder loan. • Unitech Limited will have an economic
Slide 7: Unitech Wireless has received spectrum in 21 of 22 circles
Unitech Wireless has received spectrum in 21 of 22 circles India telecom circles Metro circle Circle A Circle B J&K Circle C • Unified Access Service license valid for 20 years for all 22 Punjab HP circles in India Delhi Haryana North East • Spectrum granted in 21 of 22 UP(W) Rajasthan circles, with
Slide 8: Tower sharing agreement in place
Tower sharing agreement in place • As announced on 11 February 2009, Unitech Wireless has signed an agreement for tower access and transmission with Wireless-TT Info Service Limited (WTTIL), the Tata Teleservices tower company and Quippo Telecom Infrastructure Limited (QTIL) • In addition, an agreem
Slide 9: Contents
Contents Update on transaction with Telenor Business plan • Indian mobile market • Market strategy • Operational strategy Financing plan 8
Slide 10: India – A large and growing economy
India – A large and growing economy GDP per capita (USD) and real GDP growth GDP per capita (USD) Real GDP per capita (USD), PPP adjusted* Real GDP growth • Population of 1.15 billion 1,770 expected to grow by 1.4% per 1,540 1,330 year 1,170 • GDP forecast to continue to 1,000 1,020 1,040 grow, alth
Slide 11: India is the world's largest untapped mobile market
India is the world’s largest untapped mobile market Population with and without mobile connections in 2008 (million) Not connected Connected 1,330 Mobile penetration (SIM) 1,150 710 800 300 620 30 240 200 170 150 350 100 50 270 80 100 140 150 90 50 China India USA Indonesia Brazil Pakistan Banglades
Slide 12: Mobile spend expected to grow to around 2% of GDP
Mobile spend expected to grow to around 2% of GDP Nominal GDP (INR bn) / Mobile spend of GDP (%) 85,000 75,000 66,000 60,000 54,000 2.4 2.4 2.3 2.1 1.8 2008 2009 2010 2011 2012 Source: Unitech Wireless estimate 11
Slide 13: Rapid subscriber growth expected to continue
Rapid subscriber growth expected to continue Pan-Indian mobile penetration forecast Per cent 100 Thailand 90 80 • 10 million monthly net adds in 2008 70 Philippines • Low fixed line 60 penetration Indonesia • 8 mobile operators 50 Pakistan • Growing middle class 40 China • Increasing affluence 30 Ba
Slide 14: ARPU expected to stabilize
ARPU expected to stabilize Expected market ARPU Rs/month • GDP per capita to grow by 80% over next 5 years 500 • Continued sharp price reductions and MoU 400 growth will be limited by spectrum 300 • ARPU decline expected 200 to slow down as share of low-ARPU net adds 100 relative to total subscriber
Slide 15: 22 growth opportunities with different market characteristics
22 growth opportunities with different market characteristics Penetration Circle Population GDP/cap (US$) (Per cent) Mumbai 23 4,936 72 Delhi 22 5,180 90 Kolkata 17 3,282 54 Chennai 12 3,402 70 Metro Circles 74 73 Maharashtra 88 4,936 30 Andhra Pradesh 82 3,487 32 • Significant scope for RoTN 62 38
Slide 16: No uniform competitive position taken across India
No uniform competitive position taken across India Operator Market share 2008 Market position in circles Total circles #1 #2 #3 #4 <#4 25 8 7 4 0 3 22 19 2 6 3 7 4 22 17 7 3 3 2 6 21 12 0 3 7 5 5 20 10 2 2 3 0 8 15 9 0 1 0 6 15 22 6 3 0 1 2 4 10 * Other operators, constituting a total market share o
Slide 17: Indian customers are unhappy with the quality of existing offers
Indian customers are unhappy with the quality of existing offers Poor market performance . . . . . . and low customer satisfaction High call setup failure rates . . . “When people choose their SIM cards, they check if the network will be strong 1.46% in their house ” – Mobile store manager 0.54% “Ne
Slide 18: Customers on the move creates opportunities for new entrants
Customers on the move creates opportunities for new entrants Gross subscriber potential in India per year (in millions) Total subscribers Churn Net adds 400 350 300 250 80% 200 50% 150 100 50 50% 20% 0 2008 09 10 11 12 2013 350 480 600 700 770 830 Source: Unitech Wireless estimate. Average market ch
Slide 19: Contents
Contents Update on transaction with Telenor Business plan • Indian mobile market • Market strategy • Operational strategy Financing plan 18
Slide 20: Telenor to bring best practices from other Asian markets
Telenor to bring best practices from other Asian markets Targeted offerings and Excellence in distribution distinct branding • Design specific offers for • 1 million pan-Indian each segment distribution points in 36 months • Automated lifecycle program for usage stimulation and • Strong value propos
Slide 21: Telenor to bring best practices from other Asian markets
Telenor to bring best practices from other Asian markets Customer lifecycle management • Automated lifecycle program for usage stimulation and retention • Adding value to the SIM • Being the preferred SIM • Knowing the customer • One-to-one communication • Tariff packages designed to stimulate ARPU
Slide 22: Targeting 8% pan-Indian market share and average market ARPU
Targeting 8% pan-Indian market share and average market ARPU UW pan-Indian market share development Per cent Share of gross adds Market share • Service launch Q3 2009 10 • Large share of net adds first years due to low 8 churn from own subscriber base 6 • Significant differences in market share betw
Slide 23: Contents
Contents Update on transaction with Telenor Business plan • Indian mobile market • Market strategy • Operational strategy Financing plan 22
Slide 24: Low cost operational model
Low cost operational model • Gradual network build-up • Infrastructure sharing • GSM equipment at competitive cost • Full-scale IT outsourcing • Long term cost and capex efficiency 23
Slide 25: Gradual network build-up to pan-Indian coverage
Gradual network build-up to pan-Indian coverage Number of sites / Pan-Indian population coverage Per cent • Minimum roll-out requirement is 5-6,000 sites to meet license ~40,000 coverage obligations • Launch plan based on ~30,000 attractiveness of the markets • 40% circle population coverage ~20,000
Slide 26: Infrastructure agreement with Tata/Quippo
Infrastructure agreement with Tata/Quippo • Tower sharing agreement with Tata/Quippo provides required coverage at launch and flexibility for further expansion –40,000 towers by end 2010, of which 22,000 available by April 2009 • Lower opex in 2009-2010 than previously anticipated • Tower sharing pr
Slide 27: Tower sharing improves Capex efficiency significantly
Tower sharing improves Capex efficiency significantly . . . Total Capex per site Rs ‘000 ~4,000 • Tower sharing enables swift and flexible rollout of network • 75% capex saving per site -75% compared to own build-out ~1,000 Own built Rental 26
Slide 28: ...with limited impact on Opex
. . . with limited impact on Opex Tower rental Site-related Opex Other site-related cost (land rent, O&M, security and insurance) • Non-rental costs down by 60% • Efficiency gains in constructing and operation of towers • Potential savings from power and diesel consumption based 60% upon shared infr
Slide 29: GSM equipment at competitive cost
GSM equipment at competitive cost • No technology legacy • High spectrum capacity utilisation • Low equipment cost due to –Large volumes –Multiple vendors –Overall industry development 28
Slide 30: IT outsourcing will secure speed and quality at competitive prices
IT outsourcing will secure speed and quality at competitive prices IT cost as Percentage of revenue Per cent • Indian IT outsourcing market 6 highly competitive 4.7 • Reduced up-front investment IT 4 cost • Re-use of existing modules and solutions level • IT to be booked mainly as 2 capex in early p
Slide 31: Cost drivers and cost levels
Cost drivers and cost levels Cost component Unit Cost level Cost driver • Customer acquisition Cost/gross add Rs. 250-300 Gross adds cost • Marketing Long term 3% • Admin Percentage of ~10% Revenues • Call centre revenues • Interconnect cost Long term 30%* • Licensing fee • Tower rental • Electricit
Slide 32: Long term capex efficiency
Long term capex efficiency Capex/sales Per cent 100 80 10% long term target 60 40 20 0 2009 10 11 12 13 14 15 16 17 2018 Construction phase Expansion phase Steady state • Building coverage • Securing capacity • Develop services for existing • Main Capex driver is • Main Capex driver is Subscribers n
Slide 33: Contents
Contents Update on transaction with Telenor Business case Financing plan 32
Slide 34: Unitech Wireless financing plan
Unitech Wireless financing plan • Unitech Wireless is expected to have accumulated Capex of approximately Rs.75 billion during the first three years of operation • EBITDA breakeven in approximately three years from launch • Long term ambition of 30% EBITDA margin and 20% operating cash flow margin •
Slide 35: Summary
Summary • Telenor has strong track record and experience in successfully launching operations in emerging markets • A partnership with Telenor will benefit Unitech Ltd by creating long term shareholder value • Tower sharing agreement reduces build-out capex by approximately 75%, with limited operati