Quarterly report q4_09

!dea Quarterly Report Mar‘09 of 15

Idea Cellular Limited An Aditya Birla Group Company

Quarterly Report

Fourth Quarter ended March 31, 2009

A D I T Y A B I R L A G R O U P

Registered Office: Suman Tower, Plot No. 18, Sector 11, Gandhinagar 382011, India

Corporate Office: 5th Floor, Windsor, Off C.S.T. Road, Near Vidya Nagari, Kalina

Santacruz (East), Mumbai 400 098, India


Supplemental Disclosures

Unless stated otherwise, the financial data in this report is derived from our unaudited / audited consolidated financial

statements prepared in accordance with Indian GAAP. Our financial year ends on March 31 of each year, so all references to

a particular financial year are to the twelve months ending March 31 of that year. In this report, any discrepancies in any

table between the total and the sums of the amounts listed are due to rounding-off. There are significant differences

between Indian GAAP, IFRS, and U.S. GAAP; accordingly, the degree to which the Indian GAAP financial statements will

provide meaningful information is dependent on the reader’s level of familiarity with Indian accounting practices. Any

reliance by persons not familiar with Indian accounting practices on the financial information presented in this report should

accordingly be limited. We have not attempted to explain those differences or quantify their impact on the financial data

included herein.

Unless stated otherwise, industry data used throughout this report has been obtained from industry publications. Industry

publications generally state that the information contained in those publications has been obtained from sources believed to

be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we

believe that industry data used in this report is reliable, it has not been independently verified.

Actual results may differ materially from those suggested by the forward-looking statements due to risks or uncertainties

associated with our expectations with respect to, but not limited to, our ability to successfully implement our strategy, our

growth and expansion, technological changes, our exposure to market risks, general economic and political conditions in

India which have an impact on our business activities or investments, the monetary and interest policies of India, inflation,

deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the

performance of the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and

changes in competition in the industry

Report Structure Page No.. 1. Performance at a glance 3

2. Company Overview 3

3. Reporting Guidelines 5

4. Financial Highlights 6

5. Key Performance Indicators 8

6. Management Analysis & Discussion 10

7. Stock Market Highlights 13

8. Shareholding Pattern 13

9. Glossary 14


1. Performance at a glance – Idea Standalone1

2. Company Overview

Idea Cellular Limited (“Idea”) is a leading mobile services operator in India, with ~ 39 mn subscribers as on March‘09. Idea

has a subscriber market share of 19.5% in its 8 established service areas, and 14.5% in its 13 operating service areas.

After inclusion of Spice Communications, Brand !dea has 43.02 mn subscribers, corresponding to a 11.0% national market

share.

A. Promoter Group

Idea is part of the Aditya Birla Group, India's first truly multinational group. The Group has businesses in sectors ranging

from metals, garments, cement, fertilisers, life insurance and financial services among others. Over 50% of the Group’s

revenues are derived from overseas operations. The group operates in 25 countries, and is anchored by an extraordinary

force of over 125,000 employees belonging to 25 nationalities. The current Group holding of 49.13% in Idea is made up of;

Aditya Birla Nuvo Ltd. 27.02%

Birla TMT Holdings Pvt. Ltd. 9.15%

Hindalco Industries Ltd. 7.37%

Grasim Industries Ltd. 5.52%

IGH Holdings Pvt. Ltd. 0.08%

Total 49.13%


B. Key Shareholders

AXIATA Group Berhad, previously TM International Berhad, through its affiliates has 14.99% shareholding in Idea

Cellular, and a 49.0% holding in Spice Communications. With the proposed merger of Spice Communications into Idea

Cellular, the Axiata Group holding in Idea Cellular would increase to around 20%. The Group, is one of the largest Asian

telecommunication companies, focused in high growth low penetration emerging markets. AXIATA has a controlling interest

in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia with significant strategic stakes in India and Singapore. India

and Indonesia are some of the fastest growing markets in the world. In addition, the Malaysian grown holding company has

assets in telecommunication operations in Thailand, Pakistan and Iran. As of December 2008, the Group, including its

subsidiaries and associates, has close to 90 million mobile subscribers in Asia. The Group provides employment to over

25,000 people across Asia. Upon its de-merger from Telekom Malaysia in April 2008, AXIATA became an independent entity

and simultaneously listed on the Malaysian stock exchange.

Providence Equity Partners, through its affiliates has a 10.6% shareholding in Idea, and has also invested Rs. 20982 mn

in ABTL through Compulsorily Convertible Preference Shares.

C. Corporate Structure

Idea Cellular Limited (Idea)

100% -- Idea Cellular Infrastructure Services Limited (ICISL)

100% -- Idea Cellular Services Limited (ICSL)

100% -- Swinder Singh Satara & Co Limited (SSSL)

41.1% -- Spice Communications Limited (Spice)

100% -- Aditya Birla Telecom Limited (ABTL)

100% -- Idea Cellular Tower Infrastructure Limited (ICTIL)

16% -- Indus Towers Limited (Indus)

IICCIISSLL – tower company owning towers in Bihar and Orissa service area.

IICCSSLL – provides manpower services to operating entities i.e. Idea & ABTL.

SSSSSSLL – holds MSC real estate in the Delhi service area.

SSppiiccee – provides GSM based mobile services in Punjab and Karnataka service areas.

AABBTTLL – provides GSM based mobile services in Bihar service area, and has 16% shareholding in Indus.

IICCTTIILL – holds towers de-merged from Idea, which will subsequently merge in Indus.

IInndduuss – a joint venture between Bharti Infratel, Vodafone Essar and Idea (through ABTL), to provide passive infrastructure

services in 15 service areas.


DD.. Operating Service Areas (as on April 2009))

3. Reporting Guidelines:

To facilitate an analytical perspective, the results have been formatted and grouped as under:

a) Standalone – Idea, and its 100% subsidiaries, grouped together on a standalone basis. Effectively, this encompasses

all mobile operations in India, excluding Spice and Indus.

b) Consolidated – Idea and its 100% subsidiaries, and JVs, grouped together. This covers Idea operating service areas

and the ABTL operating service area of Bihar, the proportionate consolidation of Indus (16%), and the proportionate

consolidation of Spice (41.09% w.e.f. October 16, 2008).

JV financials have been consolidated as jointly controlled entities as per “AS 27 - Financial reporting of Interests in

Joint Ventures”. It may be noted that the consolidation of financials of two or more entities requires elimination of inter

entity transactions. Illustratively, rentals paid by Idea to Indus, become expenses for Idea and revenues for Indus, on a

standalone basis. However, upon consolidation, the proportionate revenue of Indus gets reduced to the extent contributed

by Idea. The rental expenses of Idea also stand correspondingly reduced in the consolidated financials.

Brand “!dea” covers 16 telecom service areas, viz, Maharashtra & Goa, Gujarat,

Andhra Pradesh, Madhya Pradesh & Chhattisgarh, Delhi, Kerala, Haryana, Uttar

Pradesh West & Uttaranchal, Rajasthan, Uttar Pradesh East, Himachal Pradesh,

Mumbai, Bihar & Jharkhand, Orissa, Punjab and Karnataka, covering ~ 80% of

the all India subscriber base. Of these, the 3 service areas of Rajasthan, UP East

and Himachal Pradesh, were rolled out during Sep-Nov’06, while the 2 service

areas of Mumbai and Bihar became operational during Aug-Oct‘08. The service

areas of Punjab and Karnataka were added through Spice w.e.f October 16,

2008.

Brand Idea has only recently extended to the Orissa service area with the launch

of commercial operations in April 2009.


4. Financial Highlights

A. Standalone Profit & Loss Account IINNRR mmnn

B. Consolidated Profit & Loss Account IINNRR mmnn


C. Revenue & Profitability Break-up

INR mn INR mn


D. Summarized Balance Sheet IINNRR mmnn

5. Key Performance Indicators

A. Financial Indicators – Idea Standalone


B. Operational Indicators – Idea Standalone

C. Operational Indicators – Spice


6. Management Discussion & Analysis

Fastest Growing Major Telco – Back to Back Years of Strong Market Gains

Standalone revenues for the quarter at Rs. 28,626 mn, grew 9.2% on a QoQ basis. In a period marked by economic

downturn and increased competitive and price pressure, Idea was able to maintain its strong growth momentum. Annual

revenues of 99,622 mn show a growth of 47.9% compared to the last year. This revenue growth of 47.9%, on the back of

the FY08 revenue growth of 53.6%, places Idea as the fastest growing major operator in one of the largest, fastest growing,

and most competitive telecom markets in the world.

*due to change in subscribers recognition criteria

In the newly launched service areas of Mumbai and Bihar, Idea has acquired a 4.0 % share of the combined market, with a

net adds market share of 16.6%, during last 6 months.

Total Minutes on the Network at 44,224 mn grew by 9.9% on a QoQ basis. The Average Realised Rate per Minute, which

had moved up from 62p to 64p in the previous quarter, settled at 63p.

Indus IRU Impact

Idea (standalone) rent-paying cell sites jumped from 21,459 at Dec’08 quarter end to 36,573 at Mar’09 quarter end. This

increase of 15,294 cell sites includes 11,094 cell sites on Idea towers, transferred to Indus, through the IRU effective

January 1, 2009. As of March’09, out of the 36,573 rent paying cell sites, 25,150 cell sites are on Indus Towers. The

accounting treatment of the IRU arrangement increased the network operating cost for the March’09 quarter. Rental income

that Idea was deriving from guest sites also ceased w.e.f. January 1, 2009, as these would accrue to Indus. The combined

impact of these 2 factors was the equivalent of ~ 3.4 % EBITDA contraction for the quarter ended March’09. Until the

merger into Indus is consummated, Idea will account for depreciation for the IRU towers. However, Idea will receive an IRU

income for the transferred towers until the merger, which for the quarter ended March’09 was the equivalent of ~1.2% of

the EBITDA. Therefore, the net negative EBITDA impact for the quarter was ~2.2 %. The above treatment does not include

Idea’s pro-rata share of Indus’ profit/loss. The financials do not also capture the notional capex cost saving derived because

of Indus, and the speed to market benefit.

Upon consolidation, Idea’s share of 16% of Indus revenues is Rs. 1,870 mn. However, with consolidation eliminations, no

revenue has been consolidated. An equal amount has been eliminated from the Indus rentals accounted by Idea. Further

Idea has consolidated Rs. 1,196 mn as 16% share of Indus operating expenses, after elimination of IRU income received

from Indus.

Idea on a standalone basis, added 4.7 mn subscribers in the

quarter, its highest ever. For the entire year FY09,

subscriber base has grown by 79.2 %. In its 8 established

service areas, Idea strengthened its market position by

gaining 1% market share, and consolidating its position

close to the market leader. In the 3 gestating service areas,

Idea also increased its market share to 6.3%, from 5.8% a

year ago.


Network Capacity

Idea rolled out 4,941 cell sites during the March’09 quarter, taking the FY09

tally to 19,437, and the EoP cell sites to 44,230. In the preceding year FY08,

Idea had added 14,679 cell sites. Thus, in the last 2 fiscal years, Idea has

enhanced its cell site capacity 4.4 times, representing a massive

enhancement of capacity to build competitive strength.

The capacity already built, together with improved spectrum availability and

enhanced technology features will result in greater capex efficiency in FY10,

and reduced capex intensity.

Total capex for FY09 was Rs. 54.5 bn. For FY10, including for new service area launches, the capex will indicatively be in the

region of Rs. 60.0 bn. This estimate does not factor the unknown impact of a possible 3G auction.

Financial Performance

At the EBITDA level the net negative impact of Indus IRU is 2.2% for the quarter. However, EBITDA margin for Q4 at 25.9%

is almost similar to the Q3 margin, indicative of other operational efficiencies which have absorbed the negative Indus IRU

impact.

Depreciation & Amortization for FY09 at Rs.13,212 mn increased by 50.7% on a YoY basis. Net interest and finance cost for

FY09 at Rs.4,070 mn increased by 46.6% on a YoY basis.

PAT for the quarter at Rs.3,032 mn was higher by 18.3% on a QoQ basis. After absorbing the losses of the new launches of

Mumbai and Bihar, Profit after Tax for FY09 was Rs.9,754 mn.

New Launches

Brand Idea has expanded its wings to its 16th service area, with the commercial launch of Orissa in April 2009. With this,

Idea now covers ~ 80% of the national subscriber base. Preparatory work for other roll outs is on track, with Tamil Nadu

planned for the Jun’09 quarter. Within the calendar year 2009, Idea plans to have pan India operations.

Tailored Approach for Different Service Areas

Idea holds 900 MHz GSM spectrum in 9 service areas, which make up ~50% of

the national market. This frequency band confers capex and opex benefits. It is

also accompanied by early mover advantage. Idea is the mobility revenue market

leader in 3 of these service areas, and is overall in the second spot. The twin

advantages of spectrum and scale underpin Idea’s enduring competitive edge.

In some of the remaining service areas, Idea pursues a strategy of optimisation

as opposed to maximisation. It plans to achieve a pan India footprint and

leverage synergies of scale and wider presence, and calibrated capex spend

through infrastructure sharing. The focus is on operational and financial goals,

and not on league tables.

The service area tailored strategy is designed to enhance Idea’s long term

competitiveness.

1843 3049 4763

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20000

30000

40000

50000

FY04 FY05 FY06 FY 07 FY08 FY09

Cell sites


Update on Spice Communications

The accounts of Spice continue to be consolidated in proportion of the shareholding of 41.09%, until its eventual merger

into Idea. Finalisation of the merger scheme is in an advanced stage and will be effective after the court order.

Update on Indus Towers

As the 3 shareholders, Bharti Infratel, Vodafone Essar Ltd and ABTL (100% subsidiary of Idea) signed the IRU with Indus

effective January 01, 2009, Indus has started invoicing respective entities for the sites covered by the IRU. Idea has filed

the scheme for demerger of towers to ICTIL. This will be followed by the filing of the merger scheme of ICTIL with Indus.


7. Stock Market Highlights

Idea Cellular Daily Stock price (NSE) & Volume (Combined of BSE & NSE) Movement Volume (no. of Shares) Closing Price

0

4,000,000

8,000,000

12,000,000

16,000,000

20,000,000

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9

06-J

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20-J

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06-F

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11-F

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16-F

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19-F

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02-M

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05-M

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20-M

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25-M

ar-09

30-M

ar-09

30

35

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45

50

55

BSE & NSE Combined Volume NSE Cl Price

8. Shareholding Pattern as on March 31, 2009:

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88..8811%% bbyy GGrreeeenn AAccrree AAggrroo SSeerrvviicceess PP.. LLttdd..


9. Glossary

Definitions/Abbreviation Description/Full Form

Annualized EBITDA Annualised figure of quarterly EBITDA

ARPU (Average Revenue Per User) Is calculated by dividing services revenue (exclusive of activation charges and infrastructure revenues) for the relevant period by the average number of subscribers during the period. The result obtained is divided by the number of months in that period to arrive at the ARPU per month figure

AS Accounting Standards as issued by the Institute of Chartered Accountants of India

ARR (Average Realised rate) ARR is calculated as ARPU divided by MoUs

Churn Churn relates to subscribers who are removed from the EoP base for discontinuing to use the service of the company.

Circle/ Service Area Unless otherwise specifically mentioned, means telecom circles in India (including metropolitan circles) as defined by the DoT. Circles are classified as metropolitan circles and as category ‘A’, ‘B’ or ‘C’ Circles. The Circles are classified on the basis of the revenue generation capacity of each circle with category ‘A’ being considered the most revenue generating

EBIT Earnings Before Interest and Tax

EBITDA (Earnings before interest,

tax, depreciation and amortisation)

This is the amount after deducting operating expenditure from total

income. Total income is comprised of service revenue, sales of trading goods and other income. Operating expenditure is comprised of cost of trading goods, personnel expenditure, network operating expenditure, license and WPC charges, roaming and access charges, subscriber acquisition and servicing expenditure, advertisement and business promotion expenditure and administration and other expenses

EoP End of period

FY /Fiscal Financial year ending March 31

GSM Global System for Mobile communications, the most popular standard for mobile phones in the world

Indian GAAP Indian Generally Accepted Accounting Principles

IRU Indefeasible right of use

MoUs/Sub (Average Minutes of Usages per Subs)

We calculate the MoUs/Sub as , total Minutes of Use in our network during the period divided by average of subscribers during the period

Net Adds Refers to net customer additions which is calculated as the difference between the closing and the opening customers for the period

Net Debt Total loan funds reduced by cash and cash equivalents

Net Worth Calculated as summation of Share Capital and Reserves & Surplus reduced by debit balance of profit & loss account

PBT Profit before tax

PAT Profit after tax

ROCE ROCE is calculated as a) for the year : PAT plus gross int. & fin. cost divided by average capital employed for the year, b) for the quarter : PAT plus gross int. & fin. cost for the quarter is annualised and divided by capital employed for the quarter. Capital employed is taken as average of opening and closing of Shareholders funds and Loan Funds reduced by debit balance of P&L account, for the respective period

Subscribers Mobile telephone service customers

TRAI Telecommunications Regulatory Authority of India, constituted under the Telecommunications Regulatory Authority of India Act, 1997

Quarterly report q4_09

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