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Spice Communications Limited

Spice Communications Limited. Investor Presentation 03 Mar 2008. Spice is poised to become a pan-India player. Critical Success Factors Licenses and Allocation of Spectrum.

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Spice Communications Limited

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  1. Spice Communications Limited Investor Presentation 03 Mar 2008

  2. Spice is poised to become a pan-India player

  3. Critical Success FactorsLicenses and Allocation of Spectrum • Company is an incumbent and strong player in the states of Punjab & Karnataka, with conspicuous market-share (~4 million subscribers) • Company had applied for 20 more licenses representing over 90% market opportunity in Aug ‘06 and is having 1st priority based on date of application in 12 circles and 2nd/ 3rd priority in balance circles • TDSAT (Telecom Tribunal) has already directed the Dept. of Telecommunications to keep priority of Spice Comm while allocating Spectrum on the same basis Spectrum available for allotment to 2 new players. Spice being one.

  4. Strong case for additional licenses

  5. Entry BarriersLicense / Spectrum • Without considering allocation for existing players (which is a dire need for most) and the need to allocate a minimum of 4.4 MHZ per new player per circle, it is apparent that there is a strong entry barrier for a new player to get allocation of spectrum. • At best, the aforesaid would imply there could be one or maybe 2 players who could get a Pan-India license. • Spice is the only existing player that has the opportunity to roll out on a Pan-India play – has the opportunity to address 90% market opportunity

  6. Recent developments reinforce our case The Economic Times, New Delhi, Feb 28, 2008 Recent judgments preserve our priority in Spectrum queue Further strengthen our case for additional Licenses

  7. Financial & Operating Highlights

  8. Financial Statements Operating Parameters Financial Statements Analysis

  9. Financial Statements Operating Parameters Financial Statements Analysis

  10. Spice Comm: P&L Account

  11. Spice Comm: Operating Expenses

  12. Balance Sheet Snapshot – December 2007

  13. Financial Statements Operating Parameters Financial Statements Analysis

  14. Punjab: Expanding network and subscriber base 70% increase in Cell Sites in one year 453 new towns covered since Dec 06 839 172 365 139 166 169 94 116 71 Network Minutes (Mn per month) Total Market Share Network expansion strategy to maintain Spice position as top two operators

  15. Karnataka: Expanding network and subscriber base 95% increase in Cell Sites since Dec 06 223 new towns covered since Dec 06 794 304 139 170 99 57 15 181 52 Network Minutes ( Mn per month ) Expansion strategy leading market share gain Network investments & increasing coverage has led to growth in market share

  16. Investments Beginning to Yield Results Punjab - Revenue Run Rate* Karnataka - Revenue Run Rate* Punjab – ARPU Karnataka – ARPU * Revenues are given as the average monthly revenues for the quarter ended Increasing Subscriber Base Leading to Strong Growth in Revenues

  17. Financial Statements Operating Parameters Financial Statements Analysis

  18. Analysis- Income Operating Income Operating Income during the year 2007 grew by 23% in comparison to annualized operating income of previous six months Average monthly operating income grew by Rs. 149 Mio and reached to Rs. 798 Mio in comparison to Rs. 649 Mio in previous six months. Major contributors are - VAS revenue contribution grew to 8.3% in the year 2007 in comparison to 7.4% in previous six months Other Income Other income grew by Rs. 662 Mio during the year 2007resulting into 263% growth over annualized other income of previous six months. Major contributors are - Profit on sale of towers is Rs. 4,393 Mio in comparison to Rs. NIL in the previous six months

  19. Analysis- Expenditure Operating Cost Operating Cost in the year 2007as a percentage of operating revenue grew to 44% against 42.5% during previous six months Number of cell sites increased by 1,633 during the year 2007 and reached to 3,663 in Dec 2007 in comparison to 2030 in Dec 2006. This increase in cell sites resulted into increase in following major costs - The above increase in cost has been partially offset by savings in the following cost –

  20. Analysis- Expenditure Administrative Cost Admin cost as a percentage of operating income during the year 2007 decreased to 12.6% against 16% in the previous six month Economy of scale has started getting reflected Major expense head for savings are following -

  21. Analysis– Expenditure Sales & Marketing Sales & Marketing cost as a percentage of operating income in the year 2007 remains at 14.5% as in the previous six months Advertising & Marketing cost as a percentage of operating income in the year 2007 gave savings of 0.7% over previous six months The above savings has been offset by increase in dealer commission by 0.7% due to higher gross additions of 2,732 K in the year 2007 in comparison to 992 K in the previous six months. Revenue sharing license fees during the year 2007 is 5.5% of operating income in comparison to 5.4% in the previous six months

  22. Analysis– Expenditure Finance Cost Finance cost during the year 2007 increased to 17.3% of operating income in comparison to 16.2% in the previous six month Major items for increase are - Above increase has been partially offset by savings of 4.1% in interest on INR Debt due to repayment of debt by Rs. 3,420 Mio during the year

  23. Analysis– Balance Sheet Shareholding Fund Company raised Rs. 6,322 Mio through IPO during the year Loan Funds Balance of USD 10 Mio (Rs. 441 Mio) out of USD facility drawn down during the year Rs. 3,420 Mio has been paid towards INR Debt repayment Finance Lease obligation of Rs. 4,596 Mio has been created on account of capitalization of financial lease of towers Rs. 323 Mio has been paid towards Vendor debt repayment Deferred capital liability of Rs. 2,582 had been created on account of network assets procured on trial basis Fixed Assets worth Rs. 9,054 Mio has been added during the year. Major assets added are -

  24. Analysis– Balance Sheet Loans and Advances increased by Rs 983 Mio mainly on account of - Other current assets of Rs. 5,122 Mio is on account of amount recoverable from tower sale Current liabilities increased by 668 Mio mainly on account of - Provisions have been increased by Rs. 154 Mio mainly on account of - Miscellaneous expenditure increased by Rs. 315 Mio mainly on account of shares issue expenses

  25. Thank You

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