Disclaimer 12/13/2012. Forward in India

Transcription

1 Forward in India 14 December 2012 Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ( relevant persons ). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Telenor Group. The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions. This presentation contains statements regarding the future in connection with the Telenor Group s growth initiatives, profit figures, outlook, strategies and objectives. All statements regarding the future are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from what has been expressed or implied in such statements. 1

2 Forward in India Jon Fredrik Baksaas, CEO of Telenor Group Content Business update The Indian wireless market Ambition and strategy Business plan and targets Summary 2

3 Telenor Group perspective on India Value creation built on growth profile Size and governance to manage new markets Operational excellence Learnings across the Group Rational approach to a challenging situation Supreme Court ruling in February to quash licences awarded in 2008 Uncertainty regarding conditions and timeline for licence quashing and reauctioning of spectrum Legal disputes with Unitech Ltd Scale-down from 13 to 9 circles in July Establishing a new platform for continued operations 3

4 Secured spectrum in six best-performing circles Acquired spectrum in six circles Total population of 600 million Real penetration of 40% Value driven and circle-by-circle approach in auction Gujarat 62 From 13 to 6 circles in India UP West 90 UP East Bihar MHz spectrum in 1800 MHz band, valid for 20 years Maharashtra Maharash tra Andhra Pradesh Winning bid INR 40 bn (NOK 4.2 bn) Population (m) Declining operating losses Revenues (INR billion) Operating cash flow (INR billion) 6 circles Other Other circles 6 circles Q211 Q311 Q411 Q112 Q212 Q Other 6 circles -8.7 Other 6 circles circles -9.5 Q211 Q311 Q411 Q112 Q212 Q312 INR/NOK = as of 10 December 2012 Operating cash flow defined as EBITDA before other items capex. 4

5 First circle reaching EBITDA breakeven UP East EBITDA breakeven in November 3 years after launch 7.3 million subscribers* No 5 position in the circle Cost per minute of INR 0.15 Maharashtra and Gujarat expected to break even in early 2013 *) Source: COAI October 2012 Seamless continuation of operations Reached settlement with Unitech Ltd. Business transfer from Uninor to Telewings expected in January 2013 Transfer of assets at fair market value Renegotiated contracts with vendors New partner in place, with targeted ownership structure: Telenor 74% Lakshdeep Investments 26% 10 5

6 Forward in India Sigve Brekke, Managing Director Uninor Content Business update The Indian wireless market Ambition and strategy Business plan and targets Summary 6

7 The Indian wireless market continues to grow Subscribers (million) Gross revenues (INR bn) % % Q312 6 circles Pan-India Several clean-ups in customer bases impacting growth in 2H LTM 6 circles Pan-India CAGR Telecom spending 2.6% of GDP (vs. 4.1% developing Asia average) Source: TRAI (subscribers and revenue), WCIS/EIU (telecom spending and GDP). LTM = Last twelve months Q411-Q312 Large untapped growth potential on voice services 40% real penetration in our 6 circles Data services have not taken off yet Still significant room for growth in basic voice services 7

8 Market concentration lower than in other markets Top 3 revenue market share 6 circles Top 3 revenue market share - Asia UP East 68% Malaysia 99% UP West 68% Thailand 99% Gujarat 71% Bangladesh 92% Maharashtra 75% Bihar 66% Pakistan 81% Andhra Pradesh 69% India 70% Source: Local regulators and company estimates Cluster approach providing results at circle level Subscriber market share & rank* Revenue market share & rank* UP East % UP East % UP West % UP West % Gujarat % Gujarat % Maharashtra % Maharashtra % Bihar % Bihar % Andhra Pradesh % Andhra Pradesh % 40-45% population coverage in these circles Target above 20% subscriber market share in clusters where present *) Source: TRAI Quarterly report September 2012 Revenue market share based on gross revenue 8

9 The path to consolidation has started Recent spectrum auction resulted in fewer players Operators scaling down in underperforming circles M&A Regulations not defined, future spectrum outlays hampering M&A Long term: 4-5 players in each circle Pragmatic and value-driven approach to future consolidation Regulatory framework becoming clearer, with some uncertainties remaining Auction of unsold spectrum, refarming and spectrum payment for incumbents Mobile termination rates TRAI recommendation to cut MTR from INR 0.20 to INR 0.10 MVNO and spectrum sharing M&A regulation not defined 9

10 Content Business update The Indian wireless market Ambition and strategy Business plan and targets Summary Our ambition Create value by taking a credible mass-market position 10

11 Our strategy Best in servicing basics Best in mass market distribution Best in low cost operations Position brand as best price on local voice Sabse Sasta - most affordable Build on-net communities Become preferred second SIM in cluster Network capacity-based pricing Focus on recharge 11

12 Reduce rotational churn and build customer loyalty ARPU Loyals (1st or 2nd SIM) ARPU Prospects ARPU < 50 Rotational churners Location Business Intelligence leads to action at micro level Monitoring Execution Traffic Distribution Customer behaviour KPIs up-to smallest units Execute immediately on micro level 12

13 ARPU discount towards market to narrow ARPU development (INR)* Churn development* 15% 13% % 9% 11% 9% Q310 Q311 Q312 Sep'10 Sep'11 Sep'12 Prepaid market average Very local traffic patterns 80% of traffic stays within the local area ARPU 30 40% below market, with potential for narrowing the gap *) 6 circles, on comparable basis Excellence in mass market distribution 350,000 outlets 8 million customer interactions every day Transformation System DMS 13

14 Cluster approach Very local traffic patterns 80% of traffic stays within the local area Build positions in identified intra-circle clusters Network coverage and capacity Excellence in distribution Affordable prices (on-net focus) Profitability followed up and measured at cluster (and site) level Cluster profitability (illustrative)* July 2012 Dec 2011 Oct 2012 *) Cluster profitability measured on contribution, i.e. revenues minus direct costs Best-in-class on spectrum efficiency Network efficiency (Example UP East) Erlang/Site/MHz vs Indian peers Feb'12 Jul'12 Nov'12 Network utilisation 78 % 83 % 87 % Erlang/TRX Erlang/Site/MHz No new capacity sites in

15 Jan Feb March April May June July Aug Sep Oct Nov Dec Jan Feb March April May June July Aug Sep Oct 12/13/2012 Extreme outsourcing enables cost efficient operations from smaller scale Business Strategy Regulatory Plan Deploy Operating Centre Field Operations Application & Service development Billing Customer Care Sales, Marketing Traditional In house Outsourced Partially outsourced Opex split (2012) No legacy and established outsourcing business model give late entrant advantage Creating scale from a small base Personnel Marketing and Sales Other Network Cost per minute already below incumbents Uninor UP East cost per minute Q312 Incumbent ~29 paise ~24 paise 60 >150m subs ~41m subs Source: TRAI and company reportings 15

16 Content Business update The Indian wireless market Ambition and strategy Business plan and targets Summary Targeted return on business plan Return on equity on new money above 25% High regulatory and legal risk Increase non-recourse debt over time to reduce equity exposure Capital employed Debt Equity 16

17 2013 focus: Operating cash flow breakeven by end of year INR 155 bn peak funding maintained Moderate funding need until breakeven INR 13 bn upfront part of licence fee to be offset by 2008 licence fee of INR 16.6 bn Tax effect of loss recognition Operating cash flow (INR billion) M INR/NOK = as of 10 December 2012 Mid term ambitions Continue subscriber growth to build scale and market position No 2-3 market position in clusters where present Reduce rotational churn and increase customer loyalty Best in low cost operations Consolidation and more rational pricing behaviour to add further value Subscribers (mill)* Monthly churn (%) UP East Q3 2012: 8% *) 30 days definition, 2012 figure as of Q3 17

18 Low capex requirement going forward Capex-light operating model from 100% tower sharing - no own towers Capex primarily related to radio network equipment Re-allocation of equipment from scaled-down circles Long term capex/sales around 5% Number of sites ( 1000) * *) 6 circles Content Business update The Indian wireless market Ambition and strategy Business plan and targets Summary 18

19 Ready to move forward in India Operational focus execution of strategy Bring company to operating cash flow breakeven by end of 2013 Value creation potential beyond 2013 Forward in India 14 December

20 Circle characteristics Circle category Population (million) GDP per capita (INR) Mobile SIM penetration SIM mkt share Top 3 UP East B ,300 60% 50% UP West B 90 42,200 57% 51% Gujarat A ,300 86% 60% Maharashtra A ,600 72% 57% Bihar C ,400 44% 49% Andhra Pradesh A 86 85,100 79% 53% Source: TRAI 20