Vodafone Idea Ltd · NSE:IDEA
Vodafone Idea — Investor Day (November 2018)
54 slides from Vodafone Idea's investor day presentation, Nov 21, 2018
Slide 1: Vodafone Idea Investor & Analyst event
Vodafone Idea Investor & Analyst event Mumbai, 21 November 2018
Slide 2: Disclaimer
Disclaimer The information contained in this presentation is provided by Vodafone Idea Limited (the “Company” or “VIL”) to you solely for your information. This presentation does not purport to be a complete description of the markets’ conditions or developments referred to in the material. This pre
Slide 3: Welcome
Welcome Xerox Ricoh Head of CEO of CEO of COO Balesh Sharma Vodafone Vodafone Vodafone Vodafone Chief Executive Officer India Malta Czech India Gujarat Republic Circle 3
Slide 4: Presenters and agenda
Presenters and agenda Balesh Sharma Vishant Vora Ambrish Jain Akshaya Moondra Chief Executive Officer Chief Technology Officer Chief Operations Officer Chief Financial Officer Introduction to Spectrum position Driving ARPU Financial results Vodafone Idea Prioritising capex Operations Synergies Growt
Slide 5: Introduction to Vodafone Idea
Introduction to Vodafone Idea Balesh Sharma Chief Executive Officer
Slide 6: Vodafone Idea Limited: a leading telecom operator
Vodafone Idea Limited: a leading telecom operator 1,850 MHz >200,000 >365,000 >335,000 Kms Spectrum holding Unique GSM Cell sites Broadband sites Fibre 1.5 million >200,000 ~500,000 Retail touchpoints Enterprise customers Enhanced coverage 422 million Across towns & villages 13,200 Branded stores Su
Slide 7: Well positioned to compete: two complementary brands
Well positioned to compete: two complementary brands Trendy Stylish, Warm, friendly fashionable Helpful/reliable Individualistic Small/mid town Urban Honest, hard working Mass market International Fun loving Humble, & simple Value for money Youthful Achiever, Traditional Powerful 7
Slide 8: Well positioned to compete: leading spectrum
Well positioned to compete: leading spectrum Liberalised spectrum holdings1 Leading spectrum position (MHz) Total spectrum • Leader on total and liberalised spectrum 1,850 1,715 • Longest remaining duration • Levers to boost capacity: 1,727 1,485 • Spectrum consolidation 1,537 1,485 • TDD Spectrum •
Slide 9: Well positioned to compete: well invested network
Well positioned to compete: well invested network Aggregate capex on par with peers historically1 Broadband sites on par with peers2 Leading network Net Promoter Score4 Rs bn Vodafone Idea Bharti mobility India (000’s) Coverage (Points) Vodafone Idea Bharti Jio 669 Overall network 648 90%3 performan
Slide 10: Growth opportunities
Growth opportunities Balesh Sharma Chief Executive Officer
Slide 11: Growth opportunity: large population, fastest growing economy
Growth opportunity: large population, fastest growing economy Growing population and high demographic Fastest growing major economy dividend Easing inflationary environment Real GDP growth (%)1 India’s population (mn)1 Consumer Price Index growth (%)1 Avg 2014-17 Avg 2018-20 1,388 7.3 7.5 1,370 6.9
Slide 12: Growth opportunity: significant ARPU recovery potential
Growth opportunity: significant ARPU recovery potential Significant revenue decline Exponential data growth Significant ARPU compression Industry gross revenue (Rs. bn)1 Data usage per data subscriber Blended mobile ARPU (US$) – June 20183 per month (GB) – June 20182 8.3 505 33.6 493 466 469 435 440
Slide 13: Growth opportunity: India now has three main players
Growth opportunity: India now has three main players Input Active customer market share (%)1 Jun 2016 (%) Aug 2018 (%) 41% 42% 41% 40% 39% 39% 39% 40% 40% 38% Aircel Sistema, HFCL Reliance Comms 7 1 7 37% 36% 35% 35% 8 34% 34% 33% 33% 34% 34% BSNL 20 7 41 40 Tata 23% 24% 5 20% 20% 20% 12% Telenor 4
Slide 14: Growth opportunity: to upsell 2G and 3G subscriber base
Growth opportunity: to upsell 2G and 3G subscriber base Input Under-penetrated market Two main players 2G market Three main players mobile broadband market India subscribers (bn)1 2G subs (mn)1 Broadband subs (mn)2 Market share Market share 48% 55% 0.15 1.2 346 37% 252 Rural 1.0 0.6 0.5bn 273 58% pe
Slide 15: Growth opportunity: huge 4G potential
Growth opportunity: huge 4G potential Input 4G subscriber market share Expanding 4G population coverage (%) Vodafone Idea Bharti Jio Today ~ 50% combined 68.2% 65.6% 65.1% 65.6% >80% 40% 49% Vodafone Vodafone Idea Idea By FY 20 16.4% 17.6% 17.3% 17.3% Incremental population coverage (mn) 16.8% 17.6%
Slide 16: Strategy
Strategy Balesh Sharma Chief Executive Officer
Slide 17: Vision
Vision Create world class digital experiences to connect and inspire every Indian to build a better tomorrow 17
Slide 18: The strategy for Vodafone Idea
The strategy for Vodafone Idea Drive ARPU via Radically accelerate Prioritising investments Fast growing revenue Strengthen simplification, integration to reduce in profitable areas streams, partnerships balance sheet rationalisation and cost of production upselling to drive value • Bring forward sy
Slide 19: Integration: progressing ahead of plan, accelerating synergies
Integration: progressing ahead of plan, accelerating synergies Original synergy target brought forward by two years – Rs140bn1 of run-rate costs & capex synergies (Rs84bn opex and Rs56bn capex) on an annual basis by the second full year post completion Target synergy completion date FY 2021 Previous
Slide 20: Moving focus from circles to key districts
Moving focus from circles to key districts Revenue per District per month for 650+ Districts1 (Q2 FY 19) 75 Quad C Quad A Build selectively Fortify and win 54 Districts 303 Districts 3% Revenue 86% Revenue (12%) EBITDA 50 138% EBITDA MPV2 Index per District District Potential Quad D 25 Quad B Optimi
Slide 21: Partnerships for growth
Partnerships for growth Our assets 422mn customers 13k stores Carrier billing Digital assets Distribution reach, 1.5mn Customer intelligence Co-creating value for our customers and partners 21
Slide 22: Business: leadership positions in an attractive market
Business: leadership positions in an attractive market Input Leader in mobility market share Number 1 in Internet of Things Non-Mobility: the growth engine Enterprise mobility market share (%) IoT RMS (%) Revenue growth (Apr to Sep 2018 YoY) 41.6 45 36.9 Cloud 33% 33 IoT 23% 10.8 11 11 6.5 7 4.1 Fix
Slide 23: Network
Network Vishant Vora Chief Technology Officer
Slide 24: Network: largest spectrum portfolio
Network: largest spectrum portfolio Spectrum holdings - unpaired basis (MHz)1 1,166 914 600 570 428 458 400 283 243 Sub-GHz 1800/2100 TDD Sub-GHz 1800/2100 TDD Sub-GHz 1800/2100 TDD Vodafone Idea Bharti3 Jio + RCom Total holdings 1,850 MHz 1,727 MHz 1,485 MHz Total liberalized holdings 1,715 MHz 1,5
Slide 25: Network: illustration of DSR, UBR, Beamforming
Network: illustration of DSR, UBR, Beamforming Dynamic Spectrum Refarming Ultrabroadband Beamforming Conventional deployment: Traditional UBR 64T64R: 16 Layers G G G G GG G G LTE 2 Port Antenna 2 Port Antenna 2 Port Antenna GSM After DSR feature activation: LTE 1800 2100 (1800M + G G G GG GG GGG M M
Slide 26: Network: capex at par with peers historically
Network: capex at par with peers historically Capital expenditure (Rs. bn)1 Data volume growth1,2 Vodafone Idea Bharti mobility India Data traffic (PB/day) Vodafone Idea Bharti Jio 669 Project “Parivartan” “More for Less” 648 80 195 69 160 162 55 134 142 46 126 120 128 40 93 29 24 17 58 9 12 2 2 5 5
Slide 27: Project Parivartan: network innovation initiatives
Project Parivartan: 9/30 network innovation initiatives completed Edge Core on Cloud 2.5 Hyper-scale inspired Transmission Fluid Access, Spectral capacity Capex / IP Capex 1 MB for Core Smart Edge Core Cloud 2.5 4 Flow, Service aware IP 7 Mbps / MHz Ultra in Spectral Capacity • Multiple Apps on One
Slide 28: Network: enhanced 4G coverage and capacity
Network: enhanced 4G coverage and capacity 4G coverage Network build capacity Key actions /targets by FY 20 >1bn population coverage >95% PB/day • TDD spectrum >70% of sites 3x >80% • Re-farming 900 & 2100 band for 4G 2.5x >70% • De-commissioning of 3G spectrum starts ~50% within the next 6-9 months
Slide 29: Network: committed to the best network experience
Network: committed to the best network experience Targeted improvements 10% 50% 15% by FY 20 Improvement in latency Improvement in downlink speed Reduction in dropped call rate Network Customer experience excellence approach CXX Tools / Analytics Touch Point NPS analysis NPS surveys administered for
Slide 30: Network: overview of network integration activities
Network: overview of network integration activities Integration activities – next 18-24 months Key levers in our execution • Already completed similar activities 146k sites rolled out in the last Physical activities 24% in BAU activities 18 months 62k sites shared (ICR, MORAN) • Physical sites conso
Slide 31: Network: network opex and capex synergies
Network: network opex and capex synergies FY21 run rate (Rs.bn) • Day 0, tenancy exits of ~66k co-located sites resulted in an immediate Rs.1.5bn Site exits rental savings in Sept ‘18 (Rs. 18bn annualised) savings and • Additional 22k future site exits from overlapping networks resulting in rental s
Slide 32: Future proofing our network
Future proofing our network 5G Radio Transport Voice Core Data Core • 90% of TDD radios will • Dynamic Spectrum • Interoperability across • All new 2G, 3G Voice • Early mover advantage be 5G ready Refarming vendors, OTT inspired Core will be on future on Cloud 2.5: 46% design innovations ready CLOUD
Slide 33: Network: summary
Network: summary • Value centric investments • Wide use of spectrally efficient We will build the most advanced, solutions secure network with enormous • All investments future proof capacity and a significant reduction in Capex per MB • Rapid and tailor made integration leading to quicker synergy r
Slide 34: Operations
Operations Ambrish Jain Chief Operations Officer
Slide 35: Consumer prepaid plans: Sep18 status
Consumer prepaid plans: Sep18 status 20 100s of different 37 10 Recharges and 30 100 29 • Separate Vouchers for Talk-time, Data, Acquisition plans 120 50 330 10p 25p Tariff, Validities, Sachets 30p 1 days 220 300 • Confusing to customers 100 mins On- mins 3 7 net 500 • Customer complaints days days
Slide 36: Radical simplification of prepaid plans: current status
Radical simplification of prepaid plans: current status New: simplified portfolio: Integrated products with bundled Talk time, Data, Tariff non-unlimited recharges 2GB, Rs 245 talk time, • Common price points across all 22 circles Only 5 plans - nationwide 30p/mins Rs 245 • Easier to understand Rs 1
Slide 37: Operations: improve ARPU & revenue
Operations: improve ARPU & revenue Extending customer access to the stronger network Simplified Simplified Outcomes postpaid postpaid Segmented portfolio portfoliowith with • Minimum ARPU Rs. 35 to stay discounts bundled bundled on the network discontinued content content MRP 35: Rs1.5/min Data bund
Slide 38: Operations: integration ahead of plan; structure & organisation completed
Operations: integration ahead of plan; structure & organisationcompleted Circle Operations Sales & Distribution Urban Branded Retail Stores Customer Service 290 59 # of Call centres Aug’18 158 c.6,000 26 Circle and zonal 23 office infrastructure 43K 12 27K Mar’19 consolidated <4,000 Zones Distributo
Slide 39: Operations: opex synergies
Operations: opex synergies FY21 run rate (Rs. bn) • Change in acquisition mix with focus on HVC • Volume reduction Acquisition • Distribution consolidation ~6 bn • Closure of high cost - low quality channels • Harmonisation of retail stores & service centre consolidation • Increase in acquisitions t
Slide 40: Operations: Digital Transformation
Operations: Digital Transformation Digital Customer Management Digital Operations Engage with consumers in new way Enable intelligent sensing operations • Digitisation & Automation of critical operations Drive Buy Engage Assist and processes • Digital First Employee Journeys • Use of technologies, e
Slide 41: Operations: summary
Operations: summary • Radical simplification of product portfolio • Initiatives for ARPU and revenue enhancement • Integration ahead of plan • Digital Transformation to improve customer experience, build operational efficiency and reduce costs Improved Customer Reduction in costs Increased revenues
Slide 42: Finance
Finance Akshaya Moondra Chief Financial Officer
Slide 43: Finance: results and merger accounting
Finance: results and merger accounting Rs. bn Q1FY19 Q2FY19 H1FY19 LTM • Accounting for the merger has been done under the (Pro-forma) Sep18 ‘pooling of interest’ method and all assets, liabilities and reserves of Vodafone have been recorded at their Revenue 129.4 120.2 249.7 526.1 respective book v
Slide 44: Finance: opex synergies
Finance: opex synergies Full opex synergy run-rate delivered in FY21 (Rs. bn)1 384 Network & IT 55 362 18 66 G&A and other 17 278 Rs. 84 bn total opex run-rate Customer acquisition, servicing & synergies advertising 12 Total opex synergies 84 FY17 opex Q2FY19 normalised Synergy Synergy Opex base cos
Slide 45: Finance: EBITDA margin enhancement
Finance: EBITDA margin enhancement Opportunity for ARPU recovery towards … along with synergy acceleration Margins are low today, 3 player historical levels with much higher offerings… could drive significant EBITDA margin upside markets are typically attractive Synergy impact ARPU improvement Avera
Slide 46: Finance: capex efficiency
Finance: capex efficiency Capex per site (Rs. mn) Deployment in last 18 months Vodafone Idea Bharti Capex Incr. BB sites Incr. OFC (Rs. bn) (No.s ‘000) (Km ‘000) Bharti 323 157 34 Vodafone Idea 200 146 21 2.58 2.06 Vodafone Idea 1.82 62% 93% as % of Airtel 1.55 1.31 1.37 FY18 H1 FY19 Apr FY18 Apr-18
Slide 47: Finance: capex guidance
Finance: capex guidance Capex (Rs. bn) 332 Reuse of • Sources of capex synergy 62 co-located equipment - existing co-located equipment to be redeployed (gross savings - Rs. 66 bn, net savings Rs. 62 bn) - spectrum consolidation creates significant capacity Fresh capex - capex avoidance and efficienc
Slide 48: Finance: Fibre monetisation opportunity
Finance: Fibre monetisation opportunity Extensive reach Km Intra – city 37 k Inter – city 119 k Total 156 k • Fibre assets used for backhaul capacity • c.180 k km of fibre under IRUs and which will continue to remain in the mobile business Vodafone footprint Idea footprint 48
Slide 49: Finance: Fibre monetisation strategic rationale
Finance: Fibre monetisation strategic rationale Increasing value through sharing Release of capital Future capex avoidance • Dedicated focus increases value: • Creates incremental financial • New fibre roll-out will be in a – Driving sharing flexibility FibreCo, resulting in fibre capex avoidance fo
Slide 50: Finance: clear deleveraging plan
Finance: clear deleveraging plan Pro-forma leverage Net debt breakdown (Sep18) 14.0x Spectrum debt Net non-spectrum debt Current Position • 79% of current net debt to DoT for 21% spectrum • Debt : equity ratio @1.62: post 79% proposed equity issue <1.0 6.8x 5.3x 5.0x Initiatives • Up to Rs. 250 bn (
Slide 51: Finance: key messages
Finance: key messages Operations Funding • Acceleration of opex synergies of Rs. 84 bn by two • Clear deleveraging plan supported by potential years to drive EBITDA improvement capital raise, Indus stake proceeds and potential to • EBITDA is highly sensitive to ARPU recovery – monetise fibre assets
Slide 52: Summary
Summary Balesh Sharma Chief Executive Officer
Slide 53: Summary: we are creating the best telco
Summary: we are creating the best telco 1 The Indian market is a large under-penetrated growth opportunity Vodafone Idea has leading assets – the best spectrum, network quality, 2 distribution reach, customer service and two strong brands We are accelerating the delivery of merger synergy benefits 3
Slide 54: Q&A
Q&A 54