Reliance Communications Limited · NSE:RCOM
Reliance Communications — Q2 FY2014 Earnings Presentation
54 slides from Reliance Communications's earnings presentation, Nov 12, 2013
Slide 1: Analyst Meet - 2nd Quarter ended September 30, 2013
Analyst Meet - 2nd Quarter ended September 30, 2013 Business and Results Update November 12, 2013
Slide 2: Contents
Contents Business Update o India Operations o Global Operations Financial Update Deleveraging and Asset Monetisation Summary
Slide 3: Contents
Contents Business Update o o India Operations o Global Operations Financial Update Deleveraging and Asset Monetisation Summary
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 Regional players are getting operators 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 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 14% select circles 86% 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 Confident
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 (Rs. crore) Xx% Contribution to total wireless revenues 11% Incremental revenue from data of 22,500 ~Rs.18,000 crore is expected to 3% be added over 2012-15 4,100 • Mobile data (2G + 3G) 2012 2
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 MHz band, which is about 60% of the last reserve price Sp
Slide 10: Regulatory Update
Regulatory Update License Renewals Impact over 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 • Kolkata • Rajasthan ~12% ~17% ~17% ~46% • Delhi • Ker
Slide 11: RCOM's strategic focus areas
RCOM’s strategic focus areas…. iRMS RCOM focus areas Cost & Smart Capex People Optimisation Confidential Slide 11
Slide 12: Unmatched Spectrum Assets & Robust 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 13: Spectrum based Go to Market Strategy
Gain iRMS Spectrum based “Go to Market” Strategy 3G spectrum in key circles Circle Objectives Strategy clusters Get fair share of iRMS - Match competition coverage on 3G 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: Revenue Mix | GSM & CDMA
Gain iRMS Revenue Mix | GSM & CDMA Revenue Mix 35% 32% 31% 38% 37% 65% 68% 69% 62% 63% Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 GSM + Data CDMA Voice Confidential Slide 15
Slide 16: Strategic Partnerships & Alliances
Gain iRMS Strategic Partnerships & Alliances Smart App Alliances Device Partnerships Video Music Social Messaging Partnership across Genre & device range Confidential Slide 16
Slide 17: Bringing Freshness to Telecom Services
Gain iRMS Bringing “Freshness” to Telecom Services Refreshing Internet Plan New way to buy smart-phone Confidential Slide 17
Slide 18: RCOM's strategic focus areas
RCOM’s strategic focus areas…. iRMS RCOM focus areas Cost & Smart Capex People Optimisation Confidential Slide 18
Slide 19: 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’s networks and services to deliver a world-class seamless voice and da
Slide 20: 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, International calling and back office business Improve overall efficiency to serve customers, allowing greater focus on revenue enhancement Help in cross-sell and
Slide 21: 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 22: 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 be shared on a bilateral basis Agreements to create additional addressable market of 150mm population coverage Additional market opportunity of Rs. 10,000 crore RCOM Seeker RCOM Donor Improve Netw
Slide 23: RCOM's growth model
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 24: Benefits of Reciprocity arrangement with Reliance Jio
Smart Capex Benefits of “Reciprocity” arrangement with Reliance Jio Reliance Jio to take RCOM’s 45,000 towers Reliance Jio has ambition to be a Pan- India operator RCOM to take sites from Reliance Jio as per requirement for: Expansion of footprint To convert “Bridge ICR” to our own network
Slide 25: RCOM's strategic focus areas
RCOM’s strategic focus areas…. iRMS RCOM focus areas Cost & Smart Capex People Optimisation Confidential Slide 25
Slide 26: 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 Region as P&L unit Circles (20) Empowered Ownership at field level Regions (5) Circle as a “Country” Cluster as a “Thumping Heart” HQ Co
Slide 27: Enhancing Productivity and efficiency
Smart People Enhancing Productivity and efficiency Wireless Businesses Mobile Broadband Business including Pure Mobility Mobility, Consumer Broadband, DTH and Infratel Network, IT, other Support Consolidated into Common Services and Shared Services Network organization to Managed Service
Slide 28: Contents
Contents Business Update o India Operations o o Global Operations Financial Update Deleveraging and Asset Monetisation Summary
Slide 29: Leadership in Carrier, Enterprise and Voice
Global Leadership in each of our businesses: Carrier, Enterprise and Voice Global Voice Carrier 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 30: Demand set to quadruple by 2015
Global Demand set to quadruple by 2015 Increasing – Nearly 15 billion network connections via number of devices (up from 7 billion in 2010) devices More internet – 3 billion internet users users Faster – Average fixed broadband speed to increase broadband from 7 Mbps in 2010 to 28 Mbps in 2015. spee
Slide 31: Opportunities
Global Opportunities Focused to meet growing demand in Carrier, Enterprise and Voice segments 1 Carrier: Maintain leadership position 2 Enterprise: 1. Expand business in Finance, Legal and Healthcare Verticals in the U.S. 2. Capture higher wallet share of existing MNC customers in Managed Services
Slide 32: 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 32
Slide 33: Well positioned to capture 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 78.0 4.0 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 34: Enterprises are outsourcing entire 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 35: Own metro network in the U.S.
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 1000 MNC customers Confidential Slide 35
Slide 36: Reliance meets all requirements of Global CIO
Enterprise Reliance meets all requirements of Global CIO Global Reach MPLS focus with IP sec, especially customers with hard to get to sites. Look for management only requirements Focus where our strengths are, mid tier MNC’s Flexibility 700 certified suppliers, 800 approved products provide the wid
Slide 37: Presence in key markets and strong regional connectivity
Voice Presence in key markets and strong regional connectivity Net herland Net herland NY, Switch Spain Aust ria France Russia UK London Aust ria Japan Canada Germany Germany Sw it zerland Belgium Sw it zerland Belgium d LA, Switch It aly Saudi Arabia France USA Spain Bahrain China Japan UAE Qat ar
Slide 38: Platform for Wholesale growth
Voice Platform for Wholesale growth LCBQR software enables maximisation of capacity utilisation as well as Wholesale traffic capacity to generate incremental profits without any increase in opex or capex Focus on Gulf, Latin America, Asia & Africa regions : 40% of global market Intellectual Pr
Slide 39: 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 40: Reliance is well positioned to capture demand
Global In summary, Reliance is well positioned to capture demand for enterprise and voice services 1 Scalable global network 4 2 Positioned for Full suite of Increase in Profitable products and Demand Growth services 3 Marquee customer base Confidential Slide 40
Slide 41: Contents
Contents Business Update o India Operations o Global Operations Financial Update Deleveraging and Asset Monetisation Summary
Slide 42: Re-organisation of Segmental Reporting
Re-organisation of Segmental Reporting RCOM’s business re-organized into two strategic customer-facing geographical business units: India and Global Operations Old Structure New Structure Reliance Reliance Communications Communications Wireless GEBU India Operations Global Operations Telecom Other
Slide 43: Benefits of New Segmental Reporting
Benefits of New Segmental Reporting To improve visibility, disclosures of financial performance of business operation and better KPIs To get a better understanding of the performance of the telecom operations of the company in India and International markets To significantly reduce the elimina
Slide 44: Reduction in Eliminations
Reduction in Eliminations … Illustration: 1QFY14 reported vs Restated under New reporting structure Old Structure New Structure (Amt in Rs. Crs) Consolidated P&L 1Q FY14 Consolidated P&L 1Q FY14 Gross Revenue 7,314 Gross Revenue 5,790 Wireless 4,816 India Operations 4,659 GEBU 2,300 Global Operation
Slide 45: RCOM Financials
RCOM Financials Financial highlights 2Q FY 2014 vs. 1Q FY2014 2QFY14 * 2QFY14 normalised basis ** Revenues at Rs. 5,835* Cr. vs Rs. 5,412 Revenues at Rs. 5,394 Cr. vs Rs. 5,412 Cr. up 7.8% Q-o-Q Cr. down 0.3% Q-o-Q EBITDA of Rs. 2,328 Cr. vs Rs. 1,701 EBITDA of Rs. 1,887 Cr. vs Rs. 1,701 Cr.
Slide 46: Financial Snapshot - Segmental Reporting
Financial Snapshot - Segmental Reporting India Operations Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q-o-Q % Revenue 4,387 4,493 4,534 4,659 4,624 -0.8% Voice 3,140 3,208 3,280 3,398 3,384 -0.4% Non-voice 1,020 1,089 1,002 1,071 1,018 -4.9% Others 227 196 252 190 220 16.8% EBITDA 1,425 1,397 1,181 1,45
Slide 47: Voice KPIs
Voice KPIs Old Format New Format Q2 Q1 Q2 Q-o-Q Q2 Q1 Q2 Q-o-Q Voice KPIs Voice KPIs FY13 FY14 FY14 % FY13 FY14 FY14 % ARPU 102 129 - - ARPU 95 119 120 0.8% RPM 0.432 0.457 - - RPM 0.403 0.421 0.434 3.1% Total MoU (bn Total MoU 103.3 106.3 101.5 -4.5% 102.5 105.5 - - min) Voice Usage/ Voice Usage/ 2
Slide 48: Non-Voice KPIs
Non-Voice KPIs Old Format New Format Q2 Q1 Q2 Q-o-Q Q2 Q1 Q2 Q-o-Q Non-Voice KPIs Non-Voice KPIs FY13 FY14 FY14 % FY13 FY14 FY14 % Total data Total data 26.0 31.1 34.0 9.3% 26.0 31.1 34.0 9.3% customer customer 3G customer (Mn) 4.8 7.7 9.1 18.2% 3G customer (Mn) 4.8 7.7 9.1 18.2% Total data traffic
Slide 49: Contents
Contents Business Update o India Operations o Global Operations Financial Update Deleveraging and Asset Monetisation Summary
Slide 50: Comprehensive Business Co-operation Framework Between RCOM & Reliance Jio
De-leveraging and Asset Monetisation Comprehensive Business Co-operation Framework Between RCOM & Reliance Jio Tower sharing agreement Nation-wide tower infrastructure sharing agreement with Reliance Jio Infocomm 45,000 tower (Ground based + Rooftop) to be shared Aggregate value of Rs. 12,000
Slide 51: 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 52: Contents
Contents Business Update o India Operations o Global Operations Financial Update Deleveraging and Asset Monetisation Summary
Slide 53: Summary
Summary Industry getting consolidated among top 5 operators Data driving the next growth phase in India RCOM infrastructure positions it well to tap the data opportunity Extensive capacity to cater to global data traffic Cost optimization and Smart capex strategy to improve return Focuse
Slide 54: Thank You
RELIANCE Thank You
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