Reliance Communications

Investor Presentation

November 2010
 Forward looking statements – Important Note
This presentation and the discussion that follows may contain “forward looking
statements” by Reliance Communications Ltd ((“RCOM”)
statements RCOM ) that are not historical in nature.
nature
These forward looking statements, which may include statements relating to future
results of operation, financial condition, business prospects, plans and objectives, are
based on the current beliefs,
beliefs assumptions,
assumptions expectations,
expectations estimates,
estimates and projections of the
directors and management of RCOM about the business, industry and markets in which
RCOM operates. These statements are not guarantees of future performance, and are
subject to known and unknown risks,
risks uncertainties,
uncertainties and other factors,
factors some of which are
beyond RCOM’s control and difficult to predict, that could cause actual results,
performance or achievements to differ materially from those in the forward looking
statements. Such statements are not, and should not be construed, as a representation
as to future performance or achievements of RCOM. In particular, such statements
should not be regarded as a projection of future performance of RCOM. It should be
noted that the actual p
performance
f or achievements off RCOM may
y vary
y significantly
g f y ffrom
such statements.

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 Contents

… Reliance Communications – an integrated telco

ƒ Wireless ƒ Enterprise
ƒ Globalcom ƒ Home

… Key takeaways

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Reliance Communications

J
Journey f
so far….
FY 2009 & FY 2010

Mobile
3G
FY 2007 & FY 2008 CDMA & GSM Services

IDC

FY 2005 & FY 2006

Mobile • World’s
Largest N/W
• NGN
Globalcom Enterprise

Globalcom • 2L slots
Infratel • Deepest backhaul
Mobile

Globalcom Enterprise Home

Foundation Growth Integration

Evolution path towards a profitable integrated Telco

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 Reliance Communications

Current position of our businesses

Wireless „ #2 in India, #4 globally (single country), dual technology

„ Largest global private submarine cable network, blue-

Globalcom
chip global clients

„ One stop shop for all large corporates and SMBs for
Enterprise
communications, networking and IT infrastructure needs

„ 200k+ slots, unique ability to provide space and

Infratel
connectivity

„ Rapidly growing national DTH business, rich content

Home
access

Strong market presence in every business

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 Reliance Communications

St t g for
Strategy f focused
f d and
d profitable
fit bl growth
g th
„ Address mass mobility market thru’ GSM with special focus on rural distribution
eless

„ Consolidate data market leadership with high ARPU high speed datacards
Wire

„ Increased revenue from new service streams (share of VAS & In-roaming revenue)
atel

„ Maximize revenues from existing assets of Towers, OFC & Ducts

Infra

„ Huge potential of value unlocking for Reliance Communication shareholders

Netherland
Globallcom

„ Sign long term contracts with existing and new operators to provide pan-India
Spain
Austria France Russia
UK Netherland
London
Germany Belgium Switzerland Japan
Canada
Germany d

infrastructure and bandwidth

Belgium Austria
Italy
Switzerland Saudi Arabia
France
USA
It l
Italy B h i
Bahrain Chi
China
UAE Japan
Spain
Qatar Pakistan
Pakistan South Korea
Qatar Hong Kong
Oman

„ Ramp up Managed Services business; Complete NGN Mediterranean and continue to

Bahrain India Bangladesh
Oman
Taiwan
Saudi Arabia Malaysia Hong Kong
Sudan UAE
NigeriaSudan Malaysia
Taiwan

maintain leadership in the Carriers Carrier market

Sri Lanka
New Zealand
Nigeria South Korea
Australia
South South
Africa Africa New Zealand
Enterprise

„ Increasing IDC capacity and launching new high margin product/service lines
„ Expanding Managed Services portfolio for higher share of customer’s wallet and to
increase stickiness of our products

„ Aggressive acquisitions to build the subscriber base for long-term revenue

Home
e

„ Rigorous program management framework for capex and opex cost efficiencies, esp.
Set-top box and Content

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 Reliance Communications : Recent initiatives

3G li
license in
i 13 circles;
i l P
Pan-India
I di ddata
t leadership
l d hi

Won 13 circles with a spend of Rs.

8,585cr

Geographical mix of top 3 metros, 4

“B” circles & 6 “C” circles

Marginal capex for 3G upgrade on

our EDGE GSM network
2G Circles

2G + 3G Circles
Delhi & Mumbai

Nationwide EVDO/ 3G footprint

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 Reliance Communications : Recent initiatives

DigiCom acquisition - Key highlights

‡ RCOM acquired DigiCable, India’s No. 1 Cable TV service provider

‡ Combined entity comprising RCOM DTH and DigiCable to be named “RELIANCE
DigiCom”
‡ Game changing move to usher Digital TV and ultra high speed broadband revolution
across addressable universe of over 100 Mn. homes in India
‡ Offering over 500 Digital quality and 100 HD channels; and ultra high speed
broadband access upto 100 Mbps speeds
‡ Asia’s largest and world’s 5th largest Pay TV service provider
‡ Reliance DigiCom to start with combined subscriber base of 11 million homes
‡ Market leadership in 110 towns,
towns including top 6 metros
metros, with 16% subscriber market
share of pay TV homes

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 Reliance Communications : Recent initiatives

Reliance DigiCom – Market position (India & Globally)

India Top 5 Global Top 5

Subscriber Subscriber
Rank Players Rank Players
Base
ase ((Mn)) Base (Mn)

1 Comcast 24
1 Reliance + Digi 11
2 DirecTV 19
2 S
Sun + SCV 9

3 Hathway 8 3 Dish Network 14

Dish TV + 4 Time Warner 14

4 8
WWIL
5 Reliance + Digi 11
5 DEN 7

Note : Market position, post acquisition.

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 Reliance Communications

Financial Highlights
Key Financial Parameters (Rs. Mn)

Revenue EBITDA Net Profit

229,485 93,050 60,449

221,323
81,989 54,011
190,678 78,205
46,550

144,683 57,208
31,637
107,664

24,762

4,438

FY06 FY07 FY08 FY09 FY10 FY06 FY07 FY08 FY09 FY10 FY06 FY07 FY08 FY09 FY10

Consistent & substantial increase in profitability

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 Reliance Communications

C
Cost management (% off revenue)…
)
Margins 34.1% 31.5% 31.9% 32.4%

100% ‡ Network expenses

- Increase in network cost due to
90%
expansion of coverage & GSM
80% 25.6% 27.2% launch
29.9%
31 5%
31.5% - Opex of other new businesses like
Total Revenue

70%
DTH, Vanco, etc
60%

‡ SG&A expenses
50% 16.5% 14.6%
14 3%
14.3% - Focused marketing & various cost
% of T

11.8%
40% control measures
6.9% 7.0%
30% 6.9% 6.7%
‡ Staff cost
20%

17.6% 19 0%
19.0% 18 8%
18.8% ‡ Access charges & LF
10% 15.7%
- MTC reduction
0% - Expansion of fiber optic assets &
3Q FY10 4Q FY10 1Q FY11 2Q FY11 increase in PoIs

…inspite of launch of multiple new businesses

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 Contents

… Reliance Communications – an integrated telco

ƒ Wireless ƒ Enterprise
ƒ Globalcom ƒ Home

… Key takeaways

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 Wireless Business

Industry outlook : India’s growing mobile market

Industry Subscriber Net Additions Customer Market Share (September, 2010)

682 Mn
Others
4.4% 6.8% Aircel
17 4.4%
18
17 17.1%
18
17 21.3% Airtel
16 Vodafone
451 20
19
Mn 20
19
18
17 17.2%
15
15 10.6%
Reliance
BSNL
11.6% 10.9%
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep TATA Idea

682 Mn wireless subscribers at the end of September 2010

Source: TRAI

India, the world’s fastest growing market, has fifteen service providers
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 Wireless Business

Indian telecom : Fast changing landscape

Operators

Hyper competition - Number of players increased from 7 to 15 in last one year

Price Wars

Multiple product offerings with innovation on price and tariff cuts only

Call Rates

2007 2010

Intense Price cuts reduced the call rate from Rs.2/- in 2007 to just 1p in 2010
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 Wireless Business

Strengths of Wireless Business

1 Dual technology advantage

2 Data leader (HSD / EVDO)

3 100 Million+ customer base

3G License winner in 13 circles

4
(All 900 Mhz circles covered)

5 Integrated Telco with segmented play

All this with only 7 years of existence in industry as compared to 15+

years for competition
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 Wireless Business

India’s billion people can now expect an unbeatable choice

and value proposition across….

1. Coverage 2. Customer choice

3. HSD/Internet on the move 4. Product & Service innovations

5. Distribution & Reach

Unmatched customer proposition

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 Wireless Business

C
Coverage
24,000
Towns

600,000 Villages

1 Billion Indians

Voice Data VAS

CDMA GSM

Seamless coverage wherever you go

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 Wireless Business

C
Customer Choice
Ch i
Mobility

117 million
Happy customers

Wireless Data

Fixed Wireless Market leadership

in all segments

PCO
*
*CDMA

… shall replicate success with nationwide GSM service

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 Wireless Business

HSD/Internet on the Move

Competitive differentiation
‡ Fastest internet broadband service of up to 3.1
31
Mbps in India’s top 84 cities

‡ Seamless handover & connectivity through CDMA

g covering
1X in over 24K towns and 6 lakh villages g
90% of the Indian population

‡ Wide reach compared to limited reach of wireline

networks
- Broadband coverage expansion the wireless way

‡ ARPUs are 3-4 times higher than the voice usage

‡ Increased capacity utilization in CDMA network

‡ Easy availability & instant activation within

minutes compared to few weeks or even months in
case of wired broadband

Fastest internet connectivity under wireless platform

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 Wireless Business

Product & Service innovations

Group Talk Tune Maker Simply Music Nokia Life Tools

Bubbly (voice twitter)

Handsets ISD Packs Mobile Net

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 Wireless Business

Distribution & Reach

‡ World-class design , fit out & ambience
att 2,000
2 000 exclusive
l i retail
t il showrooms
h on
High streets/Malls

‡ High
g qquality
y reach & national ffootprint
p
through 5,000 distributors & 1.2
million retailers

‡ 5,000+
5 000+ Direct & indirect outbound sales
force to cater to customers at their
premises

‡ Dimensioned to handle over 35 mn

sales transactions annually

One of the largest retail distribution network in the industry

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 Wireless Business

Fi
Financial
i lPPerformance
f
Revenue (Rs. Mn) EBITDA (Rs. Mn)

40 225
40,225 40 900
40,900 41 528
41,528 41 613
41,613 12,545 12 101
12,101
11,815 11 989
11,989
40,000 12,000

8,000
20,000
4,000

0 0
3QFY10 4QFY10 1QFY11 2QFY11 3QFY10 4QFY10 1QFY11 2QFY11

EBITDA Margin
80%

60%

40% 31.2% 28.9%

8 % 29.1%
28 9%
28.9%

20%

0%
3QFY10 4QFY10 1QFY11 2QFY11

Short term impact due to competitive intensity and tariff rebalancing

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 Wireless Business

R
Revenue Per
P Minute
Mi (RPM) trend
d
Change
2Q‘10 3Q‘10 4Q‘10 1Q'11 2Q'11
over last 5 Qtrs.

Player 1 0 56
0.56 0 52
0.52 0 47
0.47 0 45
0.45 0 44
0.44 -21.4%
21 4%

Player 2 0.56 0.51 0.47 0.44 0.42 -25.0%

RCOM 0 47
0.47 0 45
0.45 0 44
0.44 0 44
0.44 0 44
0.44 -6 4%
-6.4%

0.60
Revenue Per Minute (Rs.)

0.55

0.50

0.45

0.40
2QFY10 3QFY10 4QFY10 1QFY11 2QFY11
RCOM Player 1 Player 2

RCOM, the only operator which has held on to the RPM over last 3 quarters

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 Contents

… Reliance Communications – an integrated telco

ƒ Wireless ƒ Enterprise
ƒ Globalcom ƒ Home

… Key takeaways

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 Globalcom Business

B i
Business O
Overview
i

Data Voice NLD WiMAX

‡ Among Top 10 Enterprise ‡ # 1 Retail brand for ‡ # 1 NLD ‡ Spectrum Bank: foray
Access Provider in the US calling India from the Infrastructure and to deliver end to end
‡ Among Top 5 Enterprise U.S. Bandwidth services broadband on
Solution provider in US ‡ # 1 Carrier’s carrier for provider in India WiMAX
and Europe ILD inbound traffic into
‡ # 1 Carrier Bandwidth India
service provider

Unique play on the exponential growth of digital application and

content distribution spanning developed and emerging markets
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 Globalcom Business

B i
Business O
Overview
i
We are more than… Who we are…
‡ Global service delivery provider of internet,
‡ Just a cable network developer data and rich media on an all IP-enabled
network

‡ Higher Revenue from Enterprise; Over 1,500

‡ Just a wholesale bandwidth provider Enterprise customers

‡ Established customer relationships spanning

‡ Just an India focused company developed & emerging markets, including
China, Asia, Middle East

‡ Strong revenue and EBITDA momentum,

‡ Just an “emerging carrier” scalable low cost base, expansion financed
from cashflows and customer commitments

Strong franchise, uniquely positioned for profitable growth

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 Globalcom Business

N t
Network
k reach
h
‡ Over 277,000 RKms of optic fiber cable with landing points in 30 countries
‡ Managing over 60,000 customer sites in 160 countries through 700 carrier partners

FEA FA-1 FNAL FALCON Hawk

     

Network connecting over 85% of the world’s population

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 Globalcom Business

Di
Diverse and
d extensive
t i customer
t base
b
‡ Over 200 wholesale customers based on strong
long term relationships with over 70% repeat
Carrier orders;
‡ Particularly strong in China, Asia, the Middle East
and India.

‡ Among
g Top
p 5 Managed
g Network Service p
providers
(Gartner 2008) with over 200 corporate customers;
‡ Among Top 6 Global Ethernet Service providers
Enterprise (Vertical Systems 2009) with over 1,200
customers;
‡ # 1 or # 2 service provider to world’s top
exchanges including CME, NYSE, NASDAQ.

‡ Over 2.5 million retail customers in 15 countries

including U.S, Canada, U.K., Australia, New
Retail Zealand, Hong Kong, Singapore, Malaysia, France,
Canada, Spain, Belgium, Netherlands, Austria and
India

Over 1,500 enterprise and 2.5 million retail customer base outside India
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 Globalcom Business

Fi
Financial
i lPPerformance
f
Revenue (Rs. Mn) EBITDA (Rs. Mn)
25,000
4,194
19 818
19,818 20 278
20,278
20,000 18,137 18,391 4,000 3,555
3,317 3,393

15,000

10,000 2,000

5 000
5,000

0 0

3QFY10 4QFY10 1QFY11 2QFY11 3QFY10 4QFY10 1QFY11 2QFY11

EBITDA Margin
40%

30%

20%
21 2%
21.2%
17.5%
18.3% 18.4%
10%

0%
3QFY10 4QFY10 1QFY11 2QFY11

Short term margin pressure; due to macro global environment

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 Contents

… Reliance Communications – an integrated telco

ƒ Wireless ƒ Enterprise
ƒ Globalcom ƒ Home

… Key takeaways

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 Enterprise Business

B i
Business overview
i

Enterprise Segment Retail Segment

‡ Data Connectivity Solutions ‡ Plain Old Telephony

Services (POTS)
‡ Voice Solutions
‡ Broadband Internet
‡ Data Center based Services
Access (BIA)

Ser es Enterprise
Serves Enterprise, SME and Retail ccustomers
stomers for their
connectivity needs
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 Enterprise Business

Market leadership

Segments where we lead the market

‡ Largest share in the MPLS-VPN market

‡ Largest share of the Centrex market
‡ Market leader in Data Centers – More than 50% market share

Our customer portfolio

‡ 850 of top 1000 Enterprises in India

‡ 10,000+ Small & Medium Businesses (SMBs)
‡ 1.48 Mn. Access lines

India’s leading provider of enterprise services

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 Enterprise Business

IDC: Largest in India with >50% market share

‡ Nine data centres with level 3+ accreditation –
more than 400,000
400 000 sq ft of facilities space
‡ Hosting >20,000 systems and >1400 terabyte
of information
‡ Geographic redundancy

‡ Wide & complex application hosted

- Core Banking, ATM/ Internet Banking
- Complex ERP/ SAP Applications
- Complex Intranet/ Customized Apps.
- Large Messaging Applications

Expanding capacity to cater to fast growing demand

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 Enterprise Business

850 of Top 1,000

1 000 Indian enterprises are our customers
FMCG Segment Services Segment Telecom Operators

IT/ ITES Segment BFSI Segment Media Segment

Winning >50% of new business generated in the segment

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 Enterprise Business

Fi
Financial
i lPPerformance
f
Revenue (Rs. Mn) EBITDA (Rs. Mn)
8,000 3,000 2,755
7,045 ,
6,798 6,763
6, 63 6 617
6,617 2,526 2 477
2,477 2 481
2,481

6,000
2,000

4,000

1,000
2,000
,

0 0
3QFY10 4QFY10 1QFY11 2QFY11 3QFY10 4QFY10 1QFY11 2QFY11

EBITDA Margin
60%

39.1% 37.2%
40% 36.6% 37.5%

20%

0%
3QFY10 4QFY10 1QFY11 2QFY11

Steady business with strong margins

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 Contents

… Reliance Communications – an integrated telco

ƒ Wireless ƒ Enterprise
ƒ Globalcom ƒ Home

… Key takeaways

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 Home Business

Indian Cable & Satellite Market

180

18
160
20

22
140
26

120 33
41
100 110
47 Cable Dark
108
C&S
80 105
DTH
98
60
90

83
40
70

20 45
37
28
21
12
0 2 5

2007 2008 2009 2010 2011E 2012E 2013E

Source : Industry
y Estimates

DTH penetration at 14% of TV homes; gaining momentum

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 Home Business

R li
Reliance Bi
Big TV (DTH)
‡ Pioneering
g HD experience
p in India
‡ Pioneering DVR – “Watch when you
want”
‡ Key
y service differentiators
ff
- More channel choice
- Pure Digital viewing
- 32 Cinema channels
- Easy program guide
- Quick channel select
- Interactive applications (iNews, iGames,
iCricket, iCooking, etc)
- Superior MPEG 4 technology

Digital viewing experience will create revolution in TV entertainment platforms

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 Home Business

BIG TV Services: Complete suite of services

BroadcastTV and Radio EPG / Mini EPG Mosaic Portal

Information News Stock

Entertainment Game VoD / MoD / PVR Karaoke / Photo Album

Services Advertisments Interactive Promotion Dedicated Advertiser Location

Messaging SMS / MMS Mail Polling / Voting

Commerce Shopping / Banking

Public Service T - Government / T - Learning

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 Home Business

Th 4 Pillars
The Pill off Growth
G h
Content Reach and service
‡ 200+ channels ‡ 6,500 towns
‡ 32 exclusive movie channels ‡ 2,000+ exclusive Reliance
in English, Hindi and other retail stores
regional languages
‡ 24x7, 11 language
‡ Interactive features – Games, customer service
News, Cricket, Stocks,
Astrology, Cooking
‡ High-definition channels

Technology Experience
‡ MPEG 4 ‡ High-definition DVR box
‡ Digital Picture ‡ Next generation easy-to-
‡ Digital Sound use guide
‡ Most advanced mini guide

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 Contents

… Reliance Communications – an integrated telco

ƒ Wireless ƒ Enterprise
ƒ Globalcom ƒ Home

… Key takeaways

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 Looking ahead

Drivers for future growth and shareholder value

Drivers Impact
‡ Financials at inflection point as GSM momentum
Increase revenue
scales up
generating ability

‡ RCOM not only reliant on wireless business for

future growth; massive opportunity in newer Large pipeline of
segments including DTH and expansion of untapped business to
support growth
Enterprise/IDC

‡ Potential for unlocking shareholder value at Operational

subsidiary level (Infratel, Globalcom, DTH) leverage improves margin &
profitability
‡ Peak investment phase is over

‡ Acquisition of DigiCable creates leadership Potential of unlocking

position in Indian Pay TV market shareholders value

Further integration of Telecom, Media and IT will be levers of future growth

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Thank you