Himanshu Kapania

Managing Director, Idea Cellular Limited

Leadership Lessons of a Challenger

Public 1

4th Mar 2014

Public

2

“ …The most important thing is to dreamaudaciously, and to pursue that big dream with allthe passion and fire within you. Its about reachingfor that dream, no matter what and riding even themost gigantic waves of turbulence and disruption,much like a champion surfer… ”

– Kumar Mangalam Birla, Chairman, Aditya Birla GroupTaken from ‘The Turning Points in Our Journey of Transformation’, AIMA

28.4%

17.8% 16.7%

13.5%

9.8% 9.6%

4.2%

0%

5%

10%

15%

20%

25%

30%

Bharti Voda RCom BSNL Idea Tata Others

Revenue Market Share Q1 FY08

Year 2008 – A new journey begins for IdeaPublic

3

Indian Mobility – a Rs 833 Bn industry in FY08

Idea – a clear challenger at 5th place

Source: TRAI published data

Public

4

5 existing players became pan-India GSM operators in 20083 new players enter the marketChose to intensify the battle in already crowded urban India

Idea chose its contrarian path – ‘Bharat’Focused on hinterland comprising Idea’s 15 established marketsThese now deliver 95% of Idea’s revenue & 108% of its EBITDA

Finding a Gap & Playing on Strengths

379

857

139%

42%0%

20%

40%

60%

80%

100%

120%

140%

160%

0

100

200

300

400

500

600

700

800

900

1,000

Urban Rural

Population (Mn) Mobility Penetration

Public

5

Latent unmet demand for basic voice services

Source: TRAI published data as of Dec 2013

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

261

392

584

806

919868 886

22.8%

33.7%

49.6%

68.0%76.0%

70.9% 71.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

100

200

300

400

500

600

700

800

900

1,000

Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Dec '13

Mobility Subs EoP (Mn)

Subs Penetration

112 120 122 124 130

57.5%

59.0%59.5%

60.0%

61.7%

55%

57%

59%

61%

63%

65%

200

400

600

800

Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY 14

Mobility VLR (Mn) Idea VLR (Mn) VLR Penetration

762739731723702

17%16.7%16.7%16.6%16%

(VLR Share %)

Public

6

Idea’s strength in Rural Markets

Large scope of growth for Idea given its strong presence in underpenetrated Rural Markets

Industry Mobility Rural Subs Proportion

!DEA Mobility Rural Subs Proportion

Source: TRAI published data as of Sep 2013

40.2%

54.4%

Public

7

I

Potential in voice businessthat is yet to be captured by the industry

Internal

886 Mn Indians on Mobile Voice

Next Round – The Data Game

One to One

One to Many

Internet on MobileCentral Role in the Transition to Digital Lifestyle

8Source: TRAI published data as of Sep 2013

Internal

In 2013, 210 Mn Indians had Internet Access

Next Round – The Data Game

188 Mn of them on Mobile Internet!

More than 600 Mn waiting to be connected… in next 4-5 yrs

9Source: TRAI published data as of Sep 2013

Internal

APAC Data Penetration vis-à-vis India

10

95.0% 95.0%

62.6%

50.4% 49.9% 47.6% 44.6%37.0% 35.3%

23.6%

13.0%

68.6%

49.5%

38.1% 38.8%26.0%

52.2%

72.0%

29.8%26.1%

10.0%16.0%

0%

10%

20%30%

40%

50%

60%70%

80%

90%

100%

Korea Japan Malaysia APAC Avg. Indonesia Taiwan Singapore China Thailand India Philippines

Smartphone Penetration % Data Users Penetration %

30.5%34.5%

28.0%

69.7%

28.9% 27.1%20.5%

32.2% 29.6%

10.1% 7.3%

2,300

1,700

1,4011,215

973717

465

440278

242 00%

10%

20%

30%

40%

50%

60%

70%

0

500

1,000

1,500

2,000

2,500

Singapore Taiwan Korea Japan APAC Avg. Malaysia Indonesia Thailand China India Philippines

Usage/Sub (MB) Data Rev % ARPU

Source: UBS Global Research Report – APAC Telecom Sector, dated 27th Feb 2014

18.9 21.8 26.2 30.9 33.6 25.5

16%

19%22%

25%26%

20%

-2 %

3%

8%

13%

18%

23%

28%

0

5

10

15

20

25

30

35

40

Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14

4.1 5.1 5.5 6.28.7

7.2% 7.8%8.5%

10.0%

11.7%

0%

2%

4%

6%

8%

10%

12%

14%

0

2

4

6

8

10

12

14

16

Q3'13 Q4'13 Q1'14 Q2'14 Q3'14

3G EOP 3G Devices % Total Subs

Data Adoption increasing among Idea Subscribers

Data Users (Mn)

12.7

10.69.58.2

3G Devices on Idea Network (Mn)

Public

15.1

Note: Data Users definition has been revised for Q3 FY14 to users of Data >100kb only11

52 55 54 55

91

5

15

25

35

45

55

65

75

85

95

Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14***

167 163 160178

309

31.0

33.9 33.5

31.029.6

0

50

100

150

200

250

300

350

21

23

25

27

29

31

33

35

37

39

Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14***

Data Usage/Sub (MB) Blended ARMB (Ps)

3,108

3,874

4,616

5,415

6,169 5.6%

6.4%7.3%

8.7%9.5%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14

Data Revenue Data Rev % GSR

5,528 6,190 7,4579,873 11,371

4,512 5,2316,334

7,5789,469

Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14

2G Data Traffic (Mn MB) 3G Data Traffic (Mn MB)

Rising Data Usage and Revenue for Idea

10,04011,421

13,791

17,451

(Rs Mn)

Blended Data ARPU (Rs.)

Usage and ARPU are both computed on Data Usage Subscribers

Public

20,840

***Note: Data Users definition has been revised for Q3 FY14 to users of Data >100kb only

12

Public

13

II

Data usage is not just an Urban phenomenon

Rural consumers are discovering data usage

And that’s bringing in fast Data growth

9.7%

11.4%12.7%

13.3%14.4% 14.8%

16.1%

29.7%

33.1%32.3%

31.2%

29.7% 30.2% 30.5%

18.9%19.9%

20.8% 21.2%22.3% 22.4%

23.0%

15.4%

7.5%9.1%

7.4%

13.1%

6.6%

4.1%

8.9%

Q3 08 Q3 09 Q3 10 Q3 11 Q3 12 Q3 13 Q3 14

In 6 Years, Idea moved from No.5 to No.3 in RMSHigh Incremental Revenue Share will continue to drive Idea RMS

Public

14Source: Collated from TRAI published data

[ -6.5% ]

[ -1.7% ][ -7.9% ]

IDEA

RComTATABSNL

31.3%

27.2%

23.0%

IRMSQ3 ’08-’14

Others [ +4.8% ]

BHARTI

VODA

[ +0.8% ]

[ +4.1% ]

[ +6.4% ]

Q3 FY 13 Q4 FY 14 Q1 FY 14 Q2 FY 14 Q3 FY 14

Idea Rev Rest of Ind. Rev

In fact, Idea is One Among Top 3, Not No. 3Growing at 2.5 times over ‘Rest of the Industry’

Public

15Source: Collated from TRAI published data

11.2 27.4

29.0%

71.0%

16.1%

83.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

5

10

15

20

25

30

Idea Rest of Ind.

Incr Rev Q3'14 vs. Q3'13Share of Incremental RevenueRMS Q3'FY14

Rs. Bn

409.2388.0377.2

Total Ind. Rev

Industry Revenue Trends

415.8

1.8x

0.85x

Industry Incr Rev: Rs.38.6 Bn

Incremental Revenue YoYInd. YoY Growth – 10.2%Idea YoY Growth – 20.0%

Bn Bn

402.1

1,981 1,976 1,911 2,670

3,991 3,985 3,981

1543

838

Q1 FY 13 Q2 FY 13 Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY 14

PAT Dividend from Indus

10,502

12,313

11,085

13,067

17,438

14,556

15,663

Q1 FY 13 Q2 FY 13 Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY 14

Cash Profits

12,889 12,615 13,173 15,037

18,436 17,430 18,135

23.3% 23.6% 23.5%

24.7%

28.2%27.6% 27.4%

20.0%

22.0%

24.0%

26.0%

28.0%

30.0%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Q1 FY 13 Q2 FY 13 Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY 14

EBITDA EBITDA %

55,382

53,481

56,135

60,951

65,355

63,170

66,105

Q1 FY 13 Q2 FY 13 Q3 FY 13 Q4 FY 13 Q1 FY 14 Q2 FY 14 Q3 FY 14

Gross Revenue

Idea Financials* - High Growth Trend Continues

Rs. Mn.

Public

3,519

4,829

16*Idea Standalone and its 100% subsidiaries

5.0% 5.7% 5.9%

7.3%8.0%

4.0%

6.2%6.9%

9.9%10.5%

Q2 FY 12 + Q3 FY 12

Q4 FY 12 + Q1 FY 13

Q2 FY 13 + Q3 FY 13

Q4 FY 13 + Q1 FY 14

Q2 FY 14 + Q3 FY 14

ROCE ROE2.58

2.30 2.27

1.53 1.26

Q2 FY 12 + Q3 FY 12

Q4 FY 12 + Q1 FY 13

Q2 FY 13 + Q3 FY 13

Q4 FY 13 + Q1 FY 14

Q2 FY 14 + Q3 FY 14

Net Debt : Annualised EBITDA

(730)

5,909 5,941

11,617 11,092

Q2 FY 12 + Q3 FY 12

Q4 FY 12 + Q1 FY 13

Q2 FY 13 + Q3 FY 13

Q4 FY 13 + Q1 FY 14

Q2 FY 14 + Q3 FY 14

Free Cash Flow (incl. Dividend) (Rs. Mn)17.8%

12.3%

14.8%

13.1%

14.8%

7.1%7.8% 7.3%

10.7% 11.2%

Q2 FY 12 + Q3 FY 12

Q4 FY 12 + Q1 FY 13

Q2 FY 13 + Q3 FY 13

Q4 FY 13 + Q1 FY 14

Q2 FY 14 + Q3 FY 14

Capex to Sales Ratio RoI

Idea Financials* Improving Investment Efficiency and Strengthening Balance Sheet

Public

17

Bala

nce

Shee

t St

reng

th

FCF = EBITDA – Interest – MAT – Capex

ROE = PAT Annualized/ Avg. Shareholders FundsROCE = (PAT + Net Int. Post Tax) Ann/ Avg. Net Capital Emp.

Capex: Rs.19.2 BnRev: Rs.129.3 Bn

Net Debt: Rs.89.5 BnEBITDA: Rs.35.5 Bn

Inve

stm

ent E

ffic

ienc

y

ROI = EBIT / Net Block

*Idea standalone including 100% subsidiaries

4,76310,119

29,01049,856

66,188 73,66883,190 90,094

100,228

12,82517,140

19,128

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Dec '13

2G Sites 3G Sites

Public

18

Width & Depth of Reach remains the Mantra

1,300,000 transacting retailers

930,000 data selling outlets

26,000 distributors

38,000 + DSEs, 4700 TSM/Es, 600 + ASMs

…or Distribution presence

Be it Network Coverage…119,356

107,23496,015

Public

19

Brand Idea Empowers India

Public

20

III

Pure-play mobility operator

Focusing on basics of building infrastructure

Honing our sharp execution skills

Public

21

Idea well positioned with all technologies

900 1800 2100 GSM 3G LTEMaharashtra 7.8 11.0 5.0 √ √ √Kerala 6.2 11.8 5.0 √ √ √MP 6.2 8.8 5.0 √ √ √UP West 6.2 1.8 5.0 √ √ xAndhra Pradesh 6.2 7.8 5.0 √ √ √Gujarat 6.2 1.6 5.0 √ √ xPunjab 7.8 8.0 5.0 √ √ √Haryana 6.2 6.0 5.0 √ √ √Delhi 5.0 8.6 - √ √ xMumbai - 6.4 - √ x xKarnataka 6.2 5.0 - √ x √UP East - 6.2 5.0 √ √ xHP - 4.4 5.0 √ √ xJ&K - 5.0 5.0 √ √ xNorth East - 10.0 - √ x √7 Other S.A.s - 38.1 - √ x xTotal 64.0 140.5 55.0

No. of Service Areas where Idea can deploy 22 12 8Industry Revenue Contribution % 100% 57% 39%IDEA Revenue Contribution % 100% 79% 57%

Service AreaCurrent Spectrum Profile

(Holding in MHz)Spectrum Utilisation

Public

22

IV

Important to invest in building cutting edge capabilities

Equally important to launch technology at ‘right time’ –neither too early nor too late

Public

23

Lessons for ourselvesWhat we believe we do right …

o We remain a pure-play mobility player and embrace latesttechnologies at an opportune time

o We continue to believe in the mass-market – bringingmobility solutions within the reach of Bharat

o We stick to our basics and continue to hone our sharpexecution skills

o We lend a keen ear to our eco-system – ourconsumers, our trade, our partners, our competitors – andtake our cues for our next move from all of them

THANK YOU

Public

24