Analysts/Investors Meet 17 th June 2005

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Leslie Miles
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1 Analysts/Investors Meet 17 th June 2005

2 Safe Harbor Statement Some of the statements herein constitute forward-looking statements that do not directly or exclusively relate to historical facts. These forward-looking statements reflect our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from our intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained herein with caution. VSNL does not undertake any obligation to update or revise forward looking statements, whether as a result of new information, future events or otherwise.

3 Agenda Financial Highlights FY 05 Network, Infrastructure and Services Strategies for growth Q&A

4 Financial Highlights FY 04-05

5 Highlights FY 05 Signing of landmark deal with Bharti for 23,000 kms fibre NLD back bone NLD services rolled out to 200 locations TATA Indicom Chennai Singapore Submarine Cable launched Setting up of US & UK PoPs to garner a larger share of the voice traffic. Acquisition of Undersea Cable division of TYCO First Telecom Service Provider to qualify for TL 9000 certification and implemented BS7799 Information Security System Initiated the SOX Section 404 compliance procedures

6 Audited Financial Results for year ended March 31, 2005 Particulars Unaudited for the quarter ended March 31, Audited for year ended March 31, Net Sales/ Income from operations 9,017 7,783 33,030 31,642 2 Other Income ,074 1,578 3 Interest on Income Tax Refunds Total Income 9,340 8,132 34,104 33,711 4 Total Expenditure 6,994 6,116 25,339 26,340 a. Network Cost 5,063 4,584 20,031 22,049 b. Operating and Other Expenses 1,571 1,250 3,895 2,919 c. Salaries and Related Costs ,413 1,372 5 Depreciation ,439 1,724 6 Prior Period Adjustments 3 (26) - (16) 7 Profit before taxes and exceptional items (1+2+3)- (4+5+6) 8 Exceptional Items: a. Expenditure on Voluntary Retirement Schemes 1,601 1,539 6,326 5,663 - (75) - (1,030) b. Profit from sale of long term 4,109-4, investment, net of licence fee c. Provision for recoverable pension (473) - (473) - obligation. 9 Profit Before Tax (7+8) 5,237 1,464 10,540 5, Provision for Taxation 1, ,976 1,656 -Current Tax ,050 1,356 -Deferred Tax Net Profit [9-10] 3, ,564 3,777

7 Financial Highlights FY 05 Gross Revenues are up after 3 years. All the revenue streams have shown growth Extraordinary gains through sale of investments in NSS and Intelsat Capex of more than Rs.1,000 Cr in FY 05, to continue this year also NLD business ends the year on a strong note. Investment in own NLD backbone justified through revenues and cost rationalization. Cash position as on is Rs.1,719 Cr.

8 Major Capex Last Year NLD Backbone Tata Indicom Chennai Singapore Cable Metro Area Network Last Mile NLD Points of Interconnect Sustenance capex Major Capex Current Year Tyco acquisition South Africa Metro Area Network Last Mile SMW 4 CNMS NLD Points of Interconnect CDN Sustenance capex Other growth

9 YoY Analysis Overall increase in the revenues, but competitive pressures on the ILD voice business continues. Corporate Data Services and NLD voice record significant gains. Drop in other income is due to reduction in investible surplus. Drop in Network cost is on account of VSNL using its own network (NLD acquisition) Operating & Other Expenses have increased due to the increase of spend on following fronts: Advertisement and Publicity, Repairs and Maintenance, Outsourced Manpower and Legal & Professional Fees.

10 Q3 v/s Q4 Analysis Increase in revenue is primarily due to increase in revenues from NLD voice, corporate date and internet services which was partly set off due to marginal reduction in revenues from ILD Staff cost has increased primarily due to increase in average staff strength Increase in operating expenses is due to repairs to plant & machinery, marketing expenses, legal & professional, and advertisement expenditure. Increase in depreciation is primarily attributable to capitalization of broadband equipment, TICS cable, NLD etc., During the current quarter sale of investment in Intelsat resulted in higher gains - compared to the sale of investment in NSS in Q3.

11 Share of Data Services increases 12% 6% % % 11% 68% International and Domestic Voice Corporate Data Services Internet and Other Revenues 17% % 57%

12 EBIDTA margins have improved 25% 25% 25% 24.80% 13.1 % 25.10% 27% 26% 25% 24% 18.9% 25.70% 25% 23% 24% 22% 21.50% 24% 21% 24% Q3 FY'05 Q4 FY'05 20% FY FY 04-05

13 Network, Infrastructure and Services

14 International Infrastructure in place Submarine Cable & Carrier Level Redundancy TATA Indicom is the Only Carrier having capacity on all sub-marine cables landing in India

15 International Infrastructure after acquisition of TGN Tyco Acquisition: 60,000 Km of sub-marine & terrestrial cable capacity

16 Increased offerings to the market ILD Minutes NLD Minutes Telex Telegraph Inmarsat Calling Cards International Transit Business Sri Lanka Nepal Dial-Up Access Net Telephony Cable Net Access DSL Net Access Cybercafes Broadband IPLC ++ NPLC ILL ++ IP-VPN (MPLS) Domestic International Frame Relay ATM MDNS/VAS Data Centre ++ TV Uplinking Internet Telephony Carrier Services Transponder Lse Enterprise Wholesale Cable Assets Wholesale Services Retail Services Enterprise Services IBG Services Common Infrastructure- Domestic and International Services prior to privatization Old Services on their way out New Services added after Privatization

17 Strategies for growth

18 Business Units VSNL Retail Broadband Enterprise Services Wholesale Services International Business Internet, Video, Voice: 3 Play Data & Voice: Managed Svcs ILD, NLD, calling cards Carriers, Enterprise, Cable Network & Wireline Access (*) Metro Fibre Network National Backbone International Sub Cable IT Billing Systems Cust Svc Systems CNM System International POPs

19 Market Overview Wholesale Enterprise Retail IBG Market Potential (estimates) ILD - 7 bn minutes p.a. NLD 18 bn minutes p.a. 20 gbps p.a. now. Expected to grow upto 200 gbps. 20 million broadband subscribers by Where will growth come from -TTSL/TTML, -Cellular Operators, -Increase in VSNL s NLD interconnection. - CAC. -Corporate Voice. -Managed solutions. -Bundling & Solution. -Outsourced Telecom offerings. -Increase in NPLC & IP based VPN services. -Logistic Solutions like Fleet mgmt etc. -Broadband. -Retail Telephony. -Carriers carrier/ wholesale. -Global Solutions. -UK Voice PoP and Calling cards -US Voice PoP and Calling cards Vsnl s Strengths --Carrier Relationship. -Intl & Dom Bw availability. -Intl & Dom Bw. Availability. -World wide capacity. --Reliability and QoS. -Bundled offerings. -Bw on all cables terminating in India. -Wide range of services on a single platform. -TATA Brand. -Reliability and Qos. -Unparalled domain expertise. -TATA Brand. -Reliability and QoS. -Diverse & reliable. -Unparalled domain expertise. -Nw admn for SMW4. Impact on bottom line -Margins will be more or less flat. -Increase in margins. -Increase in margins over a period of time. -Increase in margins.

20 Wholesale - Voice Outgoing volume growth due to aggressive pricing Aggressive rates offered to the major carriers. Increase in the volumes in recent months Incoming volumes maintained Major share of un-aligned NLD Traffic Aggressively pursuing un-aligned Access providers to route their Inter-Circle traffic Inter-connectivity with major cellular operators established. TTSL subscriber growth likely to help build volumes. Overseas Sri Lanka Commercial traffic flowing with all operators including SLT Major share of non - SLT outgoing traffic Growth in data services VSNL Lanka Now profitable Overseas UK/US Commercial voice traffic commenced

21 Enterprise Business: Initiatives Push for end-to-end Customer Ownership Increase NPLC sales through coverage extension Last Mile thru MAN & RF Leverage TGN s international infrastructure Move up the Value Chain Launch of Managed & Value added services Industry Vertical Solutions Enhance VSNL s image as a Global Carrier Synchronized effort by IBG and EBU sales teams interlock Increased customer mapping at both ends Cement existing International Relationships Drive up revenues for MNC customers Launch new joint service offerings: C&W, NTT, KDDI, etc. Increased Geographical reach thru enhance channel partner organization to tap SME market

22 Aggressive thrust on Broadband Content Portfolio VSNL pioneered Internet in India Leading the migration to Broadband Targeting the mass market High Speed Internet at affordable tariffs o e.g. 512kbps home packages from Rs. 375 per month Partnering with: o Content providers o PC manufacturers o CPE / STB vendors Entertainment - Movies - Music Videos - Trailers - 24 x 7 music - Games - Cartoonz and more Others - Learning zone - Yoga - Fashion - Live darshan zone (Siddhivinayak, Haji Ali, Shirdi) - Spirituality - PC Security - Encyclopedia Britannica

23 Retail initiatives MAN rollout completed in 10 cities Customer access via LCO More than 1,000 LCOs signed-up Competitive pricing State of art backend in place including and a robust customer service setup Retail platform built on a sound technological and organizational foundation Limitations: PC penetration is limited Incumbent has an advantage of access

25 IBG: Strategies Phase 1: Consolidate position as Global Carrier s carrier Establish end-to-end capability to offer network services to top global markets. Service scope to include IPL, Managed IPL, IP-VPN and Global LAN Phase 2: Develop Value Added Services Disaster Recovery and Business Continuity Services Turnkey Call Center solutions Phase 3: Network management services for global enterprise networks Network Device Management Managed Security

Analyst s Meet November 05, 2004 Mumbai, India AGENDA

Analyst s Meet November 05, 2004 Mumbai, India AGENDA FINANCIAL & OPERATIONAL HIGHLIGHTS FOR HALF YEAR ENDED SEPTEMBER 2004 STRATEGIES FOR GROWTH Q & A Safe Harbor Statement Some of the statements herein