Slide 1: Reliance Communications Investor Presentation – March 2006
Reliance Communications Investor Presentation – March 2006 1
Slide 2: Forward looking statements – Important note
Forward looking statements – Important note This presentation and the following discussion may contain “forward looking statements” by Reliance Communications Ventures Limited (“RCVL”) that are not historical in nature. These forward looking statements, which may include statements relating to futur
Slide 3: Agenda
Agenda Overview Global Broadband Wireless Performance Summary Reliance 3 of 76 Communications
Slide 4: Reliance – Anil Dhirubhai Ambani Group
Reliance – Anil Dhirubhai Ambani Group Over 25 million customers – by far the largest in India 8 million shareholders – among the largest in the world Group net worth of over US$ 6 billion Group market capitalization of over US$ 22 billion Group assets of over US$ 7 billion Reliance Anil Dhirubhai A
Slide 5: Group rankings – Net worth
Group rankings – Net worth Group Net Worth (US$ Bn) Rank RIL Group 11.0 1 Tata Group 7.1 2 Reliance ADA Group 5.6 3 ICICI Group 4.7 4 AV Birla Group 3.0 5 Source: BSE Website, Company reports Among Top 3 business groups in net worth Reliance 5 of 76 Communications
Slide 6: Group rankings – Market capitalisation
Group rankings – Market capitalisation Group Market Cap Rank (US$ Bn) Tata Group 42.5 1 RIL Group 24.0 2 Reliance ADA Group 22.0 3 Infosys 17.8 4 Wipro / Bharti 16.9 5 Source: BSE Website, Company reports Among Top 3 business groups in market cap Reliance 6 of 76 Communications
Slide 7: Group rankings – Operating profit
Group rankings – Operating profit Group Operating Profit Rank (3QA US$ Bn) RIL Group 3.7 1 Tata Group 3.2 2 Reliance ADA Group 1.1 3 Bharti 0.9 4 Infosys 0.7 5 Source: BSE Website, Company reports Among Top 3 business groups in operating profit Reliance 7 of 76 Communications
Slide 8: Existing Holding Structure – RCVL Group
Existing Holding Structure – RCVL Group Reliance ADA 2 Mn Public Group Shareholders 38.27% 61.73% Reliance Communications Ventures (RCVL) 45.00% 45.34% 35.60% Reliance Reliance Infocomm (RIC) 45.71% Reliance Telecom (RTL) Communications Wireless – CDMA, Infrastructure Wireless – GSM Wireline, ILD, N
Slide 9: Re-organisation of RCVL
Re-organisation of RCVL RIC to be merged with RCVL, and to become an operating division RCVL to become major operating company with over 19 million individual and enterprise customers RTL, RCIL and Flag (and their affiliates) to become 100% subsidiaries of RCVL RCVL to acquire 134-acre Dhirubhai Amb
Slide 10: New Holding Structure – RCVL Group
New Holding Structure – RCVL Group Reliance ADA 2 Mn Public Group Shareholders 63% Reliance 37% Communications Ventures 100% 100% 100% Reliance Reliance Infocomm Reliance Telecom Communications Infrastructure RIC will be amalgamated with RCVL, and will become an operating division Flag Complete alig
Slide 11: Benefits of Proposed Re-organisation
Benefits of Proposed Re-organisation Aligns interests of all shareholders in a single listed entity Simple and transparent ownership structure for all RCVL businesses Eliminates areas of potential conflict of interest and related party transactions Creates synergies by consolidating ownership Avoids
Slide 12: Post-reorganisation Shareholding Pattern
Post-reorganisation Shareholding Pattern Existing (%) Proposed (%) Indian Retail Investors (2 million) 23 14 Foreign Ownership FIIs 24 14 GDRs, NRIs, OCBs 6 4 Indian Institutions / Mutual Funds 9 5 Reliance ADA Group (Promoters) 38 63 Total 100 100 Post-reorganisation market cap at Rs 65,000 cr (US$
Slide 13: Is Reliance Communications just another mobile phone company?
Question Is Reliance Communications just another mobile phone company? Reliance 13 of 76 Communications
Slide 14: Dominant position across multiple segments
Dominant position across multiple segments # Wireless traffic – 290 million mins/day Wireless data carrier – 32 million mins/day Non-incumbent Public Call Office (PCO) lines – 48% market share International Long Distance (ILD) voice carrier – 46% market hare US-India retail voice carrier – 40% marke
Slide 15: Who do we serve?
Who do we serve? Over 19 million consumers in India Over 500,000 individual global consumers Over 200 major global carriers Over 250 MNCs Over 600 Indian large enterprises Over 10,000 Indian SMEs Unparalleled customer franchise Reliance 15 of 76 Communications
Slide 16: Revenue by segments
Revenue by segments Total Service Revenue (%) – 3Q FY06 Broadband 4% Wireless 50% Global 46% Note: Revenue pre-eliminations and excluding equipment sales Non-wireless revenue as large as Wireless revenue Reliance 16 of 76 Communications
Slide 17: India telecom market growth forecasts
India telecom market growth forecasts Revenue Forecasts (US$ Bn) Mobile Customer Additions (Mn) 22.9 84 19.9 70 16.9 13.7 53 48 28 FY05 FY06E FY07E FY08E 94-04 2005 2006E 2007E 2008E Wireline Wireless NLD ILD Enterprise Data BB Access Note: Gartner research estimates Note: Morgan Stanley , Gartner r
Slide 18: Converged Services Platform
Fully integrated IP-enabled infrastructure platform Business / Mobile Convergence CONVERGED SERVICES PLATFORM Infotainment Data Centre Application Productivity Applications BPM Convergence Voice Data Internet Video Service • Bundled Services - Flexible in Design , Targeted for Specific Markets • Con
Slide 19: Agenda
Agenda Overview Global Broadband Wireless Performance Summary Reliance 19 of 76 Communications
Slide 20: Global business product portfolio
Global business product portfolio Voice Data International Bandwidth Wholesale – Bilateral IRU – Carrier of Carriers Carriers Leased Circuits – Retail – Reliance Corporate IndiaCall Internet National Managed Data Services Wholesale – Carrier of Carriers Among Top 5 global carriers of voice and data
Slide 21: Portfolio delivered through global network
Portfolio delivered through global network National 60,000+ RKms intercity backbone Ring and Mesh architecture Largest MPLS enabled core network International FLAG 54,000 RKms undersea OFC network PoPs in 28 countries across 4 continents Leadership in MEA and Asia Anchored by largest ful
Slide 22: Global network further strengthened by FALCON
Global network further strengthened by FALCON US$ 400 mn project 11,500 cable route kms 18 landing points in 12 countries India-Suez express route 4 fiber pairs 2.56 Tbps capacity Links Gulf to Egypt and India Gulf loop Self healing 1.28 Tbps capacity Reliance becoming dominant in the Middle East Re
Slide 23: #1 ILD voice carrier in India
# 1 ILD voice carrier in India ILD Voice Market / Reliance Market Share 2,562 2,418 Total Market (Mn Mins) 2,237 Reliance Market Share (%) 2,020 1,762 1,664 1,537 1,485 1,402 1,278 1,178 45% 45% 46% 44% 41% 35% 23% 17% 13% 9% 3% Q1 FY04 Q2 FY04 Q3 FY04 Q4 FY04 Q1 FY05 Q2 FY05 Q3 FY05 Q4 FY05 Q1 FY06
Slide 24: Leadership achieved through global partnerships and network reach
Leadership achieved through global partnerships and network reach India Inbound Traffic – Over 50 major international carrier partners India Outbound Traffic – partnership with domestic carriers Voice services for International Call Centers – focus on BPOs 25 International cable landing stations inc
Slide 25: #1 ILD retail voice carrier US - India
# 1 ILD retail voice carrier US - India Retail inbound Virtual Calling Service from US, Canada and UK Entirely web based Launched in May 2004 Brand leader within 2 years Over 500,000 individual customers Churn <6% over 18 months ARPUs – US$ 30 per month 40% share in a highly competitive market Relia
Slide 26: Most reliable and cost competitive NLD voice service
Most reliable and cost competitive NLD voice service Most extensive private sector pan-India network Deeper reach enhances quality of service and revenue retention Reliance VSNL / Tata Bharti Inter city route kms 61,500 + ~ 29,000 ~ 31,000 NLD interconnects with BSNL 620 + ~ 150 ~ 150 & other servic
Slide 27: International data services gaining momentum
International data services gaining momentum 14% of Global business revenue and growing fast 600+ global carrier and enterprise customers Partnership model for entry into new markets Integrated PoPs being introduced to enhance capability Managed IPLC Internet transit MPLS / IP-VPN Global Ethernet St
Slide 28: Voice and data opportunities
Voice and data opportunities Voice One India / ADC reduction Î exponential traffic growth Carrier Access Code (CAC) opening up consumer market Demand from new entrants for long distance infrastructure Data Increasing globalization of Indian IT, ITES, BPO industries Growth in managed data services –
Slide 29: Agenda
Agenda Overview Global Broadband Wireless Performance Summary Reliance 29 of 76 Communications
Slide 30: India's broadband opportunity
India’s broadband opportunity No. of Ability to Pay Annual Revenue Segment / Business Customers (US$ per Month) (FY 2010) Consumer / SOHO 50 mn US$ 15 US$ 9.0 bn Large Enterprises 9,000 US$ 20,000 US$ 2.0 bn SMEs 2 mn US$ 50 US$ 1.2 bn Total - - US$ 12.2 bn Source: Industry research Potential to gro
Slide 31: Achievements in 1st year of operations
Achievements in 1st year of operations Initial focus on enterprise segment Launched in Premier Business districts in Top 29 Metros Existing 20,000 Rkms of Metro fiber Î Unique SDH + Ethernet Over 50,000 buildings on-net Over 40% market share in buildings connected Focus on products / services vital
Slide 32: Most complete product portfolio of any operator
Most complete product portfolio of any operator Voice Data Large Centrex (Smart Office) MPLS VPN Enterprises E1 DID Leased Lines, IPLC RSN (migrating to 1-800) Gigabit Ethernet Audio Conferencing Office Internet Video Conferencing IDC - Managed Hosting, Storage & DR Professional Support Services Sma
Slide 33: Significant penetration of marquee accounts
Significant penetration of marquee accounts IT / ITES Segment BFSI Segment Media Segment FMCG Segment Services Segment Reliance 33 of 76 Communications
Slide 34: Reliance deploying superior infrastructure
Reliance deploying superior infrastructure Reliance Bharti BSNL Advantage Multiple Level 3 IDCs 200k sq ft 5k sq ft X DR solutions Network + IDC combination X X One stop shop MPLS enabled cities 170+ ~ 50 ~ 10 SLAs, BW on demand Optical rings in last mile X X Resilience, uptime BB Wireless (LMDS) 15
Slide 35: Strategies for growth
Strategies for growth Leverage >20,000 RKms metro fiber for “last meter” Activate additional metros Wireless BB access for comprehensive coverage Expand IDC capacity and presence New consumer broadband services – IPTV launch Synergy with media interests of Reliance ADA Group Strongly positioned to c
Slide 36: Agenda
Agenda Overview Global Broadband Wireless Performance Summary Reliance 36 of 76 Communications
Slide 37: Our achievements
Our achievements Customer base Over 19 mn India’s largest Coverage Over 4,500 towns India’s largest Wireless coverage 520 mn pops India’s largest Wireless traffic / day 320 mn mins India’s largest Customer capacity 30 mn customers India’s largest Wireless internet customers 350,000 India’s largest W
Slide 38: One network, multi-products
One network, multi-products The broadest range of wireless products in the market Consumer Enterprise Mobile D D Fixed wireless phone D D Wireless internet access D D Wireless multimedia D D Wireless data-VPN D D PCO / payphone D D Only possible on Reliance’s integrated network with flexible capabil
Slide 39: Largest wireless customer base
Largest wireless customer base Cumulative Customer Base (Mn) – Top 2 Operators Reliance Bharti 18.1 17.4 11.7 11.0 7.7 6.5 3.4 1.5 Mar 03 Mar 04 Mar 05 Jan 06 Source : TRAI reports Leadership within 7 months of launching CDMA service 1 million monthly customers additions in last three months Subscri
Slide 40: Leader in mass consumer mobile
Leader in mass consumer mobile Pre-paid Mobile Base (Mn) - Dec 05 Reliance’s Share of Pre-paid Mobile (%) 12.5 13.0 33% 10.7 21% 22% 22% 19% Reliance Bharti Hutch+BPL Metro Cat A Cat B Cat C India Sources : TRAI report Sept 05, most recent competitor disclosures Cat A = Mah, Guj, AP, Kar, TN; Cat B
Slide 41: Driving wireline substitution
Driving wireline substitution Incumbent Wireline Loss (Mn) Fixed Wireless Net Additions (Mn) CY 05 Reliance Other Non-incumbent Operators 2 - 0.5 - 0.5 1.2 CY 05 Incumbent narrowband wireline base eroding despite low penetration Change in ADC to revenue share from 1st March, 2006 significantly benef
Slide 42: Pioneer and leader in pre-paid wireless PCOs
Pioneer and leader in pre-paid wireless PCOs Non-incumbent PCO lines ('000) 713 458 328 38 26 Reliance Bharti Tata HFCL STL Note: Reliance as at Dec 05. Other operators data as per latest TRAI quarterly report, Sep 05 Business conceived and built on zero-risk pre-paid model Reliance 42 of 76 Communi
Slide 43: Wireless internet coverage everywhere
Wireless internet coverage everywhere Reliance Others Availability Over 4,500 towns < 25 towns Speed 144 kbps 9.6 / 56 kbps 350,000 wireless internet access customers on Reliance network No serious competition in near future from GSM / GPRS / EDGE / Wi-Fi The entire nation is our Hotspot Reliance 43
Slide 44: Unmatched levels of wireless multimedia user experience
Unmatched levels of wireless multimedia user experience Reliance World Unparalleled user experience in India “Click, Browse and Select” Audio-video content delivery across all tiers of phones Platform, phones and network superiority Nearly 10 million multimedia enabled phones Platform supporting mul
Slide 45: Unique deployment of wireless data solutions
Unique deployment of wireless data solutions Over 500 ATMs, 3000 PoS terminals, 75% market share of lottery terminals SBI, ICICI, HDFC, Euronet, HLL’s Sangam PoS terminals Wireless ATMs Expanding range of applications for consumers and business Reliance 45 of 76 Communications
Slide 46: Wireless leadership position attained through…
Wireless leadership position attained through … Network coverage and capacity Cost leadership Distribution and service delivery Handset options Reliance 46 of 76 Communications
Slide 47: Only operator to dimension network ahead of exponential growth
Only operator to dimension network ahead of exponential growth Coverage at a Glance – Mar 06 % of Urban population covered 97% % of Rural population covered 42% % of National highway covered 50% % of Railways covered 58% Towns covered 4,500+ Villages covered 235,000+ Population covered 54% Customer
Slide 48: High capacity + high quality @ low cost
High capacity + high quality @ low cost Unit Cost of Capacity Example CDMA GSM Cost of BTS US$ 45,000 US$ 12,500 Capacity @ 70% loading 210 Erlangs 43 Erlangs US$ / Erlang US$ 684 US$ 1,860 Capacity cost advantage provides competitive pricing power Reliance 48 of 76 Communications
Slide 49: Distribution channels reaching deep into market
Distribution channels reaching deep into market Reliance Communications Electronic Web World Sales Agents Recharge Point of Sale Retail Outlets Stores Outlets 45,000 – Handsets 105,000 1,500 7,000 3,000 210,000 – Recharge 3,000 ATMs Unique asset leveragable in multiple ways Reliance 49 of 76 Communi
Slide 50: Power of distribution - Handsets
Power of distribution - Handsets Reliance Nokia Integrated Handset design, Business communications service manufacturing, sales provider Selling capability 20 Mn p.a. 20 Mn p.a Handset outlets 45,000 42,000 4,600 towns serviced by 242 4,300 towns, serviced by Presence distributors / micro 1,463 dist
Slide 51: Power of distribution - WebWorld
Power of distribution - WebWorld Largest chain of digital entertainment and Channel Dimensions communication stores 1,500 WebWorld stores Presence in 700 towns Provides high level of Over 700,000 sq.ft. of net retail space branding and visibility Services include Multi-city, multi-player gaming High
Slide 52: Proactive management of handset provision
Proactive management of handset provision Driving down the price in the entry level category Increasing the range available in all categories Entry Level CDMA Handset Price (US$) No. of CDMA Handset Models 146 77 % price > 6x increase 37 decline in in model just 3 years range 28 19 78 13 67 12 40 39
Slide 53: Stable ARPUs in dynamic tariff environment
Stable ARPUs in dynamic tariff environment ARPU (US$ per month) ARPU Net ARPU 9.0 9.4 9.3 5.7 6.0 6.1 Q1 FY06 Q2 FY06 Q3 FY06 Note : Net ARPU = ARPU less access, interconnection and termination costs, license fees, spectrum charges Focus on maintaining high Net ARPU Reliance 53 of 76 Communications
Slide 54: Customer base with strong usage habit
Customer base with strong usage habit MOU per User (per month) RPM (US cents) 568 1.80 547 501 1.70 1.70 Q1 FY06 Q2 FY06 Q3 FY06 Q1 FY06 Q2 FY06 Q3 FY06 Pricing plans designed to promote high level of usage Reliance 54 of 76 Communications
Slide 55: Reliance World - a popular entertainment media
Reliance World - a popular entertainment media Reliance World Visitors (Mn) Revenue Distribution by Services 25% increase Ringtones 32% in past 4 Movies 20% months Subscription 17% 4.7 5.0 5.3 4.2 Cricket 9% Games 8% Greetings 8% Sep 05 Oct 05 Nov 05 Dec 05 Others 6% 39% of Reliance World revenue ge
Slide 56: Churn rate far below GSM industry
Churn rate far below GSM industry Churn - Reliance vs Competition Life on-net 19 months Life on-net 5.5% 45 months 5.2% 2.2% Reliance Bharti Hutch Source : Reliance & Bharti – Q3 FY 06; Hutch – Q2 FY 06 Life on-net more than 2 times longer than GSM customers, leading to higher CLV Reliance 56 of 76
Slide 57: Unique competitive strengths
Unique competitive strengths Reliance Bharti Additional spectrum available in Additional spectrum in 1800 MHz Spectrum 800 MHz, subject to allocation occupied by Defence policy Entire network already 2.5G Limited deployment of EDGE, Data capability capable must wait for 3G spectrum Ability to target
Slide 58: Wireless growth drivers
Wireless growth drivers Key Factor Reliance Strategy Entry Level Handset Working proactively with key vendors Cost Developing pre-used handset market Continuously leading through innovation Service Pricing Low unit / micro recharge Bundle SMS to drive usage Network Coverage 54% to 73% pop coverage i
Slide 59: Agenda
Agenda Overview Global Broadband Wireless Performance Summary Reliance 59 of 76 Communications
Slide 60: Pro-forma consolidated P&L
Pro-forma consolidated P&L Total Revenues (US$ Mn) EBITDA (US$ Mn) PAT (US$ Mn) 747 191 626 70 570 93 - 56 -4 38 Q1 FY06 Q2 FY06 Q3 FY06 Q1 FY06 Q2 FY06 Q3 FY06 Q1 FY06 Q2 FY06 Q3 FY06 Note: Pro-forma consolidated P&L prior to minority interest Significant improvement in EBITDA margins – up from 6.5
Slide 61: Improved profitability due to scale benefits
Improved profitability due to scale benefits US$ 191 mn US$ 93 mn US$ 38 mn Q1 FY06 Q2 FY06 Q3 FY06 Fixed Operating Cost Variable Operating Cost EBITDA High operating leverage leading to margin expansion Reliance 61 of 76 Communications
Slide 62: Rankings by operating profit
Rankings by operating profit Company Operating Profit Rank (3QA US$ Mn) RIL 2,837 1 Tata Steel 1,261 2 Bharti 954 3 ITC 793 4 RCVL 760 5 Source: BSE Website, Company reports Among Top 5 companies in the private sector Reliance 62 of 76 Communications
Slide 63: Rankings by operating profit – IT/Telecom
Rankings by operating profit – IT/Telecom Company Operating Profit Rank (3QA US$ Mn) Bharti 954 1 RCVL 760 2 TCS 750 3 Infosys 748 4 Wipro 650 5 Source: BSE Website, Company reports Among the leading companies in the sector Reliance 63 of 76 Communications
Slide 64: Profitability – Global
Profitability – Global Revenue and EBITDA (US$ Mn) 2,000 12 401 1,800 11.1% 363 10 1,600 331 1,400 8 1,200 1,000 6 800 5.5% 4 600 1.9% 400 44 2 200 20 6 0 0 Q1 FY06 Q2 FY06 Q3 FY06 Revenue EBITDA % EBITDA margin Increased contribution from FLAG and FALCON Reliance 64 of 76 Communications
Slide 65: Profitability – Broadband
Profitability – Broadband Revenue and EBITDA (US$ Mn) 28 15% 19% 23 21 5 3 -5 -24% Q1 FY06 Q2 FY06 Q3 FY06 Revenue EBITDA % EBITDA Margin Increased profitability after Q1 start-up costs absorbed Reliance 65 of 76 Communications
Slide 66: Profitability – Wireless
Profitability – Wireless Revenue and EBITDA (US$ Mn) 25000 35 441 30 20000 403 31.9% 25 337 28.1% 15000 20 22.6% 10000 15 143 114 10 5000 76 5 0 0 Q1 FY06 Q2 FY06 Q3 FY06 Revenue EBITDA % EBITDA Margin EBITDA up from 22% to 32% - fixed costs remaining flat Reliance 66 of 76 Communications
Slide 67: Financial position – Balance sheet
Financial position – Balance sheet In US$ Mn As at 31/12/05 Equity Capital 137 Net Worth 2,483 Net Debt 829 Capital Employed 3,312 Share capital – 1,220 million shares of Rs 5 each, to increase to 2,045 million shares post re-organisation Net debt : equity ratio of 0.33 : 1 Conservative financial pl
Slide 68: Future growth – strategic focus areas
Future growth – strategic focus areas Product innovation Wireless Network coverage Distribution reach FLAG + FALCON Global Managed data services OneIndia Metros and IDC expansion Broadband Customer up-sell Consumer multi-play Integrated product bundles Cross-business Out-sourcing – M-NOC, contact ce
Slide 69: Embedded opportunities for value creation
Embedded opportunities for value creation Contact Centres 6,000 seat multi-location, multi lingual Largest single location facility in the country Retail Presence - WebWorld 1,500 exclusive stores in 700 towns Largest chain of digital entertainment centres in the country Network Operations and Data
Slide 70: Agenda
Agenda Overview Global Broadband Wireless Performance Summary Reliance 70 of 76 Communications
Slide 71: RCVL – Domestic Business
RCVL – Domestic Business CDMA based mobile, fixed wireless phone, and PCO services, with over 17 million customers Nationwide CDMA wireless network, with coverage of over 4,500 towns across India, and 30 million customers capacity Wireline and broadband services, currently active in 29 leading India
Slide 72: RCVL – International Business
RCVL – International Business International long distance calling services, with over 500,000 customers through Reliance IndiaCall International data services, with over 600 major enterprise and carrier customers FLAG Telecom, a 54,000 route kilometer submarine optic fibre cable network connecting 2
Slide 73: Reliance Communications Infrastructure Ltd.
Reliance Communications Infrastructure Ltd. Wireless multimedia services for over 5 million customers through unique offerings on Reliance World Wireless internet access services for over 350,000 customers through Reliance Connect Over 200,000 sq. ft. of multi-location Internet Data Centre facilitie
Slide 74: Reliance Telecom Ltd.
Reliance Telecom Ltd. GSM based mobile phone services, with over 1.7 million customers GSM wireless network providing coverage in 7 circles in eastern and central India, covering nearly 40% of country’s population The most profitable GSM business in the country, experiencing rapid and exponential gr
Slide 75: Unique value proposition
Unique value proposition An integrated platform, facilitating convergence Growth engines covering the entire telecom spectrum Largest market shares in highest growth segments Sustainable capital cost advantage High operating leverage; rapid margin expansion Embedded capabilities that competitors do
Slide 76: Thank you
Reliance Communications Thank you 76