Leadership Lessons of a Challenger

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Bertina Grant
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1 Leadership Lessons of a Challenger Himanshu Kapania Managing Director, Idea Cellular Limited 4 th Mar

2 The most important thing is to dream audaciously, and to pursue that big dream with all the passion and fire within you. Its about reaching for that dream, no matter what and riding even the most gigantic waves of turbulence and disruption, much like a champion surfer Kumar Mangalam Birla, Chairman, Aditya Birla Group Taken from The Turning Points in Our Journey of Transformation, AIMA 2

3 Year 2008 A new journey begins for Idea Indian Mobility a Rs 833 Bn industry in FY08 30% 25% 28.4% Revenue Market Share Q1 FY08 20% 15% 10% 17.8% 16.7% 13.5% 9.8% 9.6% 5% 0% 4.2% Bharti Voda RCom BSNL Idea Tata Others Idea a clear challenger at 5 th place Source: TRAI published data 3

4 Finding a Gap & Playing on Strengths 5 existing players became pan-india GSM operators in new players enter the market Chose to intensify the battle in already crowded urban India Idea chose its contrarian path Bharat Focused on hinterland comprising Idea s 15 established markets These now deliver 95% of Idea s revenue & 108% of its EBITDA 4

5 Latent unmet demand for basic voice services 1, % 261 Mobility Subs EoP (Mn) Subs Penetration 33.7% % % % 70.9% 71.7% Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Dec ' % 57.5% Mobility VLR (Mn) Idea VLR (Mn) VLR Penetration (VLR Share %) % 16.7% 16.7% 59.0% % % % 61.7% 65% 63% 61% 59% 57% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1, o VLR penetration today is at just 60% nationally o Factor in multiple-sims and it is further lower o Clear headroom for deeper penetration into rural geographies Population (Mn) 139% 379 Mobility Penetration % 160% 140% 120% 100% 80% 60% 40% 20% 200 Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY 14 55% 0 Urban Rural 0% Source: TRAI published data as of Dec

6 Idea s strength in Rural Markets Industry Mobility Rural Subs Proportion 40.2% 54.4%!DEA Mobility Rural Subs Proportion Large scope of growth for Idea given its strong presence in underpenetrated Rural Markets Source: TRAI published data as of Sep

7 I Potential in voice business that is yet to be captured by the industry 7

8 Internal Next Round The Data Game 886 Mn Indians on Mobile Voice One to One One to Many Internet on Mobile Central Role in the Transition to Digital Lifestyle Source: TRAI published data as of Sep

9 Internal Next Round The Data Game In 2013, 210 Mn Indians had Internet Access 188 Mn of them on Mobile Internet! More than 600 in next 4-5 yrs Mn waiting to be connected Source: TRAI published data as of Sep

10 APAC Data Penetration vis-à-vis India Internal 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 95.0% 95.0% 68.6% 62.6% 49.5% 50.4% 49.9% 38.1% 38.8% 26.0% Smartphone Penetration % Data Users Penetration % 72.0% 52.2% 47.6% 44.6% 37.0% 35.3% 29.8% 26.1% 23.6% 16.0% 10.0% 13.0% Korea Japan Malaysia APAC Avg. Indonesia Taiwan Singapore China Thailand India Philippines 2,500 2,000 1,500 1, Usage/Sub (MB) Data Rev % ARPU 2, % 1, % 1, % 1, % 28.9% 27.1% % 29.6% 20.5% % % Singapore Taiwan Korea Japan APAC Avg. Malaysia Indonesia Thailand China India Philippines 10 Source: UBS Global Research Report APAC Telecom Sector, dated 27 th Feb % 60% 50% 40% 30% 20% 10% 0%

11 Data Adoption increasing among Idea Subscribers 3G Devices on Idea Network (Mn) % Data Users (Mn) 25% 22% 19% 26% 20% % 23% 18% 3G EOP 3G Devices % Total Subs % 10.0% 8.5% 7.8% 7.2% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 14% 12% 10% 8% 6% 4% 2% 0% 20 13% Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 8% 3% -2 % Note: Data Users definition has been revised for Q3 FY14 to users of Data >100kb only 11

12 Rising Data Usage and Revenue for Idea 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Data Revenue Data Rev % GSR 9.5% 8.7% 7.3% 6.4% 6, % 5,415 4,616 3,874 3,108 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 (Rs Mn) 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2G Data Traffic (Mn MB) 3G Data Traffic (Mn MB) 20,840 17,451 13,791 9,469 11,421 7,578 10,040 6,334 5,231 4,512 9,873 11,371 5,528 6,190 7,457 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 39 Data Usage/Sub (MB) Blended ARMB (Ps) 350 Blended Data ARPU (Rs.) Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14*** 0 5 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14*** Usage and ARPU are both computed on Data Usage Subscribers ***Note: Data Users definition has been revised for Q3 FY14 to users of Data >100kb only 12

13 II Data usage is not just an Urban phenomenon Rural consumers are discovering data usage And that s bringing in fast Data growth 13

14 In 6 Years, Idea moved from No.5 to No.3 in RMS High Incremental Revenue Share will continue to drive Idea RMS 29.7% 33.1% 32.3% 31.2% 29.7% 30.2% 30.5% BHARTI [ +0.8% ] IRMS Q % 18.9% 19.9% 20.8% 21.2% 22.3% 22.4% 23.0% VODA [ +4.1% ] 27.2% 15.4% 13.1% 11.4% 12.7% 13.3% 14.4% 14.8% 16.1% IDEA [ +6.4% ] 23.0% 9.7% 9.1% 4.1% 8.9% 7.5% 7.4% 6.6% Others [ +4.8% ] RCom TATA BSNL [ -7.9% ] [ -1.7% ] [ -6.5% ] Q3 08 Q3 09 Q3 10 Q3 11 Q3 12 Q3 13 Q3 14 Source: Collated from TRAI published data 14

15 In fact, Idea is One Among Top 3, Not No. 3 Growing at 2.5 times over Rest of the Industry Ind. YoY Growth 10.2% Idea YoY Growth 20.0% Total Ind. Rev Industry Revenue Trends Idea Rev Rest of Ind. Rev Incremental Revenue YoY Incr Rev Q3'14 vs. Q3'13 Share of Incremental Revenue RMS Q3'FY % Rs. Bn Industry Incr Rev: Rs.38.6 Bn 90% x 80% 70% % 60% % 1.8x 16.1% 11.2 Bn 27.4 Bn Idea Rest of Ind. 50% 40% 30% 20% 10% 0% Q3 FY 13 Q4 FY 14 Q1 FY 14 Q2 FY 14 Q3 FY 14 Source: Collated from TRAI published data 15

16 Idea Financials* - High Growth Trend Continues Rs. Mn. Gross Revenue EBITDA EBITDA % 60,951 65,355 63,170 66,105 20,000 18,000 16,000 14,000 12,889 12,615 13,173 15,037 18,436 17,430 18, % 27.6% 27.4% 30.0% 28.0% 12, % 55,382 53,481 56,135 10,000 8,000 6,000 4, % 23.6% 23.5% 24.7% 24.0% 22.0% 2,000 Q1 FY 13 Q2 FY 13 Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY 14 - Q1 FY 13 Q2 FY 13 Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY % Cash Profits PAT Dividend from Indus 17,438 4,829 14,556 15,663 3, ,502 12,313 11,085 13, ,981 1,976 1,911 2,670 3,991 3,985 3,981 Q1 FY 13 Q2 FY 13 Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY 14 *Idea Standalone and its 100% subsidiaries Q1 FY 13 Q2 FY 13 Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY 14 16

17 Idea Financials* Improving Investment Efficiency and Strengthening Balance Sheet Investment Efficiency 17.8% 7.1% ROI = EBIT / Net Block Q2 FY 12 + Q3 FY % 7.8% Q4 FY 12 + Q1 FY 13 Capex to Sales Ratio 14.8% 7.3% Q2 FY 13 + Q3 FY % 10.7% RoI Q4 FY 13 + Q1 FY % 11.2% Capex: Rs.19.2 Bn Rev: Rs Bn Q2 FY 14 + Q3 FY 14 (730) Q2 FY 12 + Q3 FY 12 Free Cash Flow (incl. Dividend) (Rs. Mn) 5,909 5,941 Q4 FY 12 + Q1 FY 13 Q2 FY 13 + Q3 FY 13 11,617 Q4 FY 13 + Q1 FY 14 11,092 FCF = EBITDA Interest MAT Capex Q2 FY 14 + Q3 FY 14 Balance Sheet Strength 2.58 Q2 FY 12 + Q3 FY Q4 FY 12 + Q1 FY 13 Q2 FY 13 + Q3 FY 13 Net Debt : Annualised EBITDA 1.53 Net Debt: Rs.89.5 Bn EBITDA: Rs.35.5 Bn Q4 FY 13 + Q1 FY Q2 FY 14 + Q3 FY 14 *Idea standalone including 100% subsidiaries ROCE 6.2% 6.9% 9.9% 7.3% 10.5% 8.0% 5.0% 5.7% 5.9% ROE = PAT Annualized/ Avg. Shareholders Funds 4.0% ROCE = (PAT + Net Int. Post Tax) Ann/ Avg. Net Capital Emp. Q2 FY 12 + Q3 FY 12 ROE Q4 FY 12 + Q1 FY 13 Q2 FY 13 + Q3 FY 13 Q4 FY 13 + Q1 FY 14 Q2 FY 14 + Q3 FY 14 17

18 Width & Depth of Reach remains the Mantra Be it Network Coverage 2G Sites 3G Sites 96,015 12, ,234 17, ,356 19,128 4,763 10,119 29,010 49,856 66,188 73,668 83,190 90, ,228 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Dec '13 or Distribution presence 1,300,000 transacting retailers 930,000 data selling outlets 26,000 distributors 38,000 + DSEs, 4700 TSM/Es, ASMs 18

19 Brand Idea Empowers India 19

20 III Pure-play mobility operator Focusing on basics of building infrastructure Honing our sharp execution skills 20

21 Idea well positioned with all technologies Service Area Current Spectrum Profile (Holding in MHz) Spectrum Utilisation GSM 3G LTE Maharashtra Kerala MP UP West x Andhra Pradesh Gujarat x Punjab Haryana Delhi x Mumbai x x Karnataka x UP East x HP x J&K x North East x 7 Other S.A.s x x Total No. of Service Areas where Idea can deploy Industry Revenue Contribution % 100% 57% 39% IDEA Revenue Contribution % 100% 79% 57% 21

22 IV Important to invest in building cutting edge capabilities Equally important to launch technology at right time neither too early nor too late 22

23 Lessons for ourselves What we believe we do right o We remain a pure-play mobility player and embrace latest technologies at an opportune time o We continue to believe in the mass-market bringing mobility solutions within the reach of Bharat o We stick to our basics and continue to hone our sharp execution skills o We lend a keen ear to our eco-system our consumers, our trade, our partners, our competitors and take our cues for our next move from all of them 23

24 THANK YOU 24

Idea Cellular Limited. Investor Presentation

Idea Cellular Limited. Investor Presentation Idea Cellular Limited Investor Presentation Disclaimer The information contained in this presentation is only current as of its date. All actions and statements made herein or otherwise shall be subject