Spice Communications LimitedInvestor Presentation
03 Mar 2008
PRIVATE & CONFIDENTIAL
Spice is poised to become a pan-India player
2
PRIVATE & CONFIDENTIAL
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.
PRIVATE & CONFIDENTIAL
Strong case for additional licenses
S.No Circle Priority Ist Priority II nd Priority III rd Priority IV th Priority V Priority VI Priority VII Priority VIII Priority IX
1 AP Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
2 Delhi Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
3 Maharashtra Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
4 Haryana Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
5 Gujarat Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
6 HP Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
7 Kerala Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
8 M.P Spice(01.09.06) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)9 Mumbai Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Unitech (24.09.07) Shyam (25.09.07)
10 Rajasthan Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07)
11 U.P(E) Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
12 U.P(W) Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
13 Bihar Bycell (31.01.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
14 Chennai & T.N Idea(26.06.06) Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
15 Kolkatta Idea(26.06.06) Spice(01.09.06) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)16 W.B Bycell (31.01.06) Idea(26.06.06) Spice(01.09.06) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
17 J&K TTSL(21.06.06) Idea(26.06.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
18 Orissa Bycell (31.01.06) Idea(26.06.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)
19 Assam Bycell (31.01.06) TTSL(21.06.06) Idea(26.06.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07)Shyam (25.09.07)
20 N.E Bycell (31.01.06) TTSL(21.06.06) Idea(26.06.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07)Shyam (25.09.07)
Priority of Licensing as per Date of Application
PRIVATE & CONFIDENTIAL
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
CircleSpectrumAlready Allotted
Available Spectrum
with Government
Spectrum # of parties Spice order
Andhra Pradesh 41.20 5.00 4.40 1.00 YesDelhi 49.20 5.80 4.40 1.00 YesMaharashtra 41.20 4.80 4.40 1.00 YesHarayana 37.40 7.60 4.40 1.00 YesGujarat 38.40 4.00 4.40 1.00 YesHimachal Pradesh 27.40 9.40 4.40 2.00 YesKerela 37.20 6.00 4.40 1.00 YesMadhya Pradesh 35.40 10.20 4.40 2.00 YesMumbai 50.40 4.60 4.40 1.00 YesRajasthan 39.80 9.60 4.40 2.00 YesUttar Pradesh (E) 38.80 5.80 4.40 1.00 YesUttar Pradesh (W) 37.20 5.80 4.40 1.00 YesBihar 35.40 5.80 4.40 1.00 NoChennai & Tamil Nadu 34.80 17.20 4.40 2.00 YesKolkatta 34.60 6.60 4.40 1.00 NoWest Bengal 25.60 12.00 4.40 2.00 NoJ ammu & Kashmir 23.00 12.60 4.40 2.00 NoOrissa 24.80 10.00 4.40 2.00 NoAssam 23.00 12.00 4.40 2.00 NoNorth East 19.40 10.60 4.40 2.00 No
PRIVATE & CONFIDENTIAL
Recent developments reinforce our case
• Recent judgments preserve our priority in Spectrum queue
• Further strengthen our case for additional Licenses
The Economic Times, New Delhi, Feb 28, 2008
Financial & Operating Highlights
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PRIVATE & CONFIDENTIAL
Financial Statements
Operating Parameters
Financial Statements Analysis
PRIVATE & CONFIDENTIAL
Financial Statements
Operating Parameters
Financial Statements Analysis
PRIVATE & CONFIDENTIAL
Spice Comm: P&L Account
Rupees ( Million )
Year Ended 31 December
2007
6 Months Ended 31
December 2006
Operating Income 9,578 3,892
Other Income 768 106
Profit on Sales of Passive Infrastructure 4,393 -
Total Income 14,739 3,998
Total Operating Expenditure 7,343 3,053
EBITDA 7,396 945
Finance Costs 1,659 631
Depreciation & Amortisation 1,814 696
Amortisation of share issue expenses 40 -
Profit before Tax 3,884 (382)
Tax 82 5
Profit after Tax 3,801 (387)
PRIVATE & CONFIDENTIAL
Spice Comm: Operating Expenses
Rupees ( Million )
Year Ended 31 December 2007
6 Months ended 31 December 2006
Amount
% of
Amount
% of
Operating
Income Operating
Income
Operating Costs
4,213 44.0%
1,653 42.5%
Administrative Costs
1,209 12.6%
624 16.0%
Sales & Marketing Costs
1,391 14.5%
566 14.5%
Revenue Sharing License Fee
529 5.5%
210 5.4%
Total Operating Expenditure
7,343 76.7%
3,053 78.4%
PRIVATE & CONFIDENTIAL
Balance Sheet Snapshot – December 2007
Rupees ( Million )
Dec'07 Period ended
Dec'06
Equity Share Capital 6,899 5,519
Reserves & Surplus 4,943 -
Loan Funds 15,725 12,079
Total Liabilities 27,567 17,598
Gross Block 27,835 20,440
Depreciation 10,418 10,263
Net Block 17,417 10,177
Investments 972
Net Current Assets (excluding cash) 4,233 (1,176)
Cash & Bank Balances 1,087 1,273
Net Current Assets 5,320 97
Misc. Expenditure 596 281
P&L Account 3,263 7,043
Total Assets 27,567 17,598
PRIVATE & CONFIDENTIAL
Financial Statements
Operating Parameters
Financial Statements Analysis
PRIVATE & CONFIDENTIAL
11921358
14971666
2031
0
500
1000
1500
2000
2500
Dec 06 Mar 07 Jun 07 Sep 07 Dec'07
Punjab: Expanding network and subscriber base
1,9121,749 2,1992,327
2,113
23%23% 23% 23% 22%
500
1,000
1,500
2,000
2,500
Dec-06 Mar-07 Jun-07 Sep-07 Dec'07
0%
10%
20%
30%
Total Subs (Nos '000) Market Share
Network Minutes (Mn per month)
Network expansion strategy to maintain Spice position as top two operators
453 new towns covered since Dec 0670% increase in Cell Sites in one year
839
466
537
631
919968
74750%53%
58%63% 67%
300
550
800
1050
Dec 06 Mar 07 J un 07 Sep 07 Dec '07 Total Towns
0%
20%
40%
60%
80%Spice Presence % Population Covered
365
172
610667
733 716785
200
400
600
800
Dec-06 Mar-07 Jun-07 Sep-07 Dec'07
Total Market Share
169 116
166 139
9471
PRIVATE & CONFIDENTIAL
8381019
11581328
1632
0
500
1000
1500
2000
Dec 06 Mar 07 Jun 07 Sep 07 Dec'07
701817
1,057
1,283
1,474
10%
7% 7%8% 9%
0
500
1,000
1,500
Dec-06 Mar-07 Jun-07 Sep-07 Dec'07
0%
10%
20%
Total Subs (Nos '000) Market Share
223 new towns covered since Dec 0695% increase in Cell Sites since Dec 06
Expansion strategy leading market share gain Network Minutes ( Mn per month )
Network investments & increasing coverage has led to growth in market share
794
178230 245
302401
950
20%27% 29%
36%40%
0
250
500
750
1000
Dec 06 Mar 07 J un 07 Sep 07 Dec'07 Total Towns0%
10%
20%
30%
40%
50%Spice Presence % Population Covered
304
99
265307
374
469533
0
150
300
450
600
Dec-06 Mar-07 Jun-07 Sep-07 Dec'07
170 57
181139
1552
Karnataka: Expanding network and subscriber base
PRIVATE & CONFIDENTIAL
Investments Beginning to Yield Results
Increasing Subscriber Base Leading to Strong Growth in Revenues
* Revenues are given as the average monthly revenues for the quarter ended
Punjab – ARPU Karnataka – ARPU
Karnataka - Revenue Run Rate*Punjab - Revenue Run Rate*
- - -
535
478 477 496 524
-
100
200
300
400
500
600
Dec'06 Mar'07 Jun'07 Sep'07 Dec'07
In R
s. M
io
332317
277236
204
-
100
200
300
400
Dec'06 Mar'07 Jun'07 Sep'07 Dec'07
In R
s. M
io269
305313321364
0
100
200
300
400
Dec'06 Mar'07 Jun'07 Sep'07 Dec'07
In Rs
.
313374
413
260
423
-
100
200
300
400
500
Dec'06 Mar'07 Jun'07 Sep'07 Dec '07
In R
s.
PRIVATE & CONFIDENTIAL
Financial Statements
Operating Parameters
Financial Statements Analysis
PRIVATE & CONFIDENTIAL
Analysis- Income
Operating Income Component Grew by (Rs. Mio)
Call Charges 110
Activation / Administrative Charges 15
VAS Revenue 19
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 -
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 -
Other Income
VAS revenue contribution grew to 8.3% in the year 2007 in comparison to 7.4% in previous six months
Rs. Mio
Forex Gain 277
Interest Income 99
Operating Lease write back 250
Profit on sale of towers is Rs. 4,393 Mio in comparison to Rs. NIL in the previous six months
PRIVATE & CONFIDENTIAL
Analysis- Expenditure
Increase as a % of Operating Income
Repair Network 0.5%
Power & Fuel 2.8%
Rent 0.9%
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.
Operating Cost
The above increase in cost has been partially offset by savings in the following cost –
This increase in cell sites resulted into increase in following major costs -
Savings as a % of Operating Income
Roaming Cost 1.4%
VAS outsourcing cost 1.2%
PRIVATE & CONFIDENTIAL
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 -
Expenses Savings as a % of Operating Income
Salary 0.4%
Legal & Professional 1.5%
Traveling Cost 0.3%
Rent 0.2%
Provision for doubtful debt 0.3%
PRIVATE & CONFIDENTIAL
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
PRIVATE & CONFIDENTIAL
Analysis– Expenditure
Finance Cost
Major items for increase are -
Finance cost during the year 2007 increased to 17.3% of operating income in comparison to 16.2% in the previous six month
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
Particulars Percentage
Interest on USD Debt 0.5%
Prepayment Charges on INR Debt 1.2%
Provision for Interest on WPC 0.7%
Interest on Finance Lease 2.5%
Others 0.5%
PRIVATE & CONFIDENTIAL
Analysis– Balance Sheet
Company raised Rs. 6,322 Mio through IPO during the year
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 -
Rs. Mio
Network Equipment 518
Assets taken on trial 3,026
Network Equipment on finance lease 4,375
Software 430
Handsets 394
Shareholding Fund
Loan Funds
PRIVATE & CONFIDENTIAL
Analysis– Balance Sheet
Rs. Mio
Increase in deposit to BOL operators 145
Deposit with Spice Corp 100
ICD 250
WPC payment under protest 455
Rs. Mio
Advance from customers 412
Sundry Creditors 223
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
Rs. Mio
Provision for WPC Interest 67
Provision for MAT 66
PRIVATE & CONFIDENTIAL
THANK YOU
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