rcom analyst report

8/6/2019 Rcom Analyst Report

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Strategy, SWOT and Corporate FinanceReport

(includes detailed five-year financials)

Reliance CommunicationsLimited

Mumbai Stock Exchange (532712 )

June 14, 2011

the home of business information

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Company Snapshot

Strategy, SWOT and Corporate Finance Report, June 2011 Page 2

Product Code: A060C499-CED5-46CB-9F4E-BCDB9A0EFDF7 www.datamonitor.com

Company Snapshot

Reference Code : A060C499-CED5-46CB-9F4E-BCDB9A0EFDF7 Publication Date: June 2011

Reliance Communications Limited

H Block

1st Floor

Dhirubhai Ambani Knowledge City

Navi Mumbai 400 710

India

Fax: 91 22 3037 6622

Phone: 91 22 3037 3333

Website: www.rcom.co.in

Industry: Communications

Revenues (US$m) : 4,367

Net profit (US$m): 982

Employees: 30,974

Primary Stock Exchange (Ticker):

Mumbai Stock Exchange (532712 )

Overview

Reliance Communications (RCOM or "the company") is an integrated communications service provider in India.The company is part of the Reliance Anil Dhirubhai Ambani Group. RCOM serves consumer, enterprise andcarrier customers. It operates a full spectrum of wireless, wireline, and long distance, voice, data, video andinternet communication services. It also offers direct-to-home (DTH) TV services under the brand, Big TV. Thecompany also participates in submarine cable network infrastructure, and owns, operates and develops telecominfrastructure, such as wireless communications sites and towers. The company primarily operates in India,where it is headquartered in Mumbai and employs 30,974 people.

The company recorded revenues of INR206,850.5 million ($4,366.6 million) during the financial year endedMarch 2010 (FY2010), a decrease of 0.3% over 2009. The operating profit of the company was INR34,380.7

million ($725.8 million) in FY2010, a decrease of 32.9% over 2009. Its net profit was INR46,550 million ($982.7million) in FY2010, a decrease of 23% over 2009.

SWOT

Strengths Weaknesses

Well integrated operations

Strong brand recognition

Significant operations of Reliance Globalcom andReliance Communications Infrastructure

Decreasing ARPU

Concentrated geographic operations

Significant debt

Opportunities Threats

Low penetration rates

Growth of pay-TV market

Launch of 3G services

Increasing competition

Regulations

Key Employees

Employee Name Job Title Board

Hasit ShuklaPresident, Company Secretary and

ManagerSenior Management


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Company Snapshot



A. K. Purwar Director Non Executive Board

Anil D. Ambani Chairman Non Executive Board

Deepak Shourie Director Non Executive Board

Financial Overview

Reliance Communications Limited: Revenue to NetIncome (2007-2010)

Reliance Communications Limited: ProfitabilityRatios (2007-2010)

Recent Developments

Date Headline Category

Feb 22, 2011 Reliance selects Ericsson's eStore platform Sourcing

Jan 18, 2011Reliance Globalcom deploys Ciena for 40G optical

networking solutionSourcing

Jun 15, 2010Reliance Globalcom signs five-year contract with

Attijariwafa bankSupply contracts

Mar 26, 2010Reliance Communications and Verizon Wireless sign

distribution agreement

Commercialization and distribution

contracts (incl. franchises)


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Table of Contents



Table of Contents

Company Snapshot __________________________________________________________________ 2Table of Contents ____________________________________________________________________ 4Reliance Communications Limited: Company Overview ____________________________________ 8

Reliance Communications Limited: Overview and Key Facts ____________________________ 8Reliance Communications Limited: Overview __________________________________________ 8Reliance Communications Limited: Key Facts __________________________________________ 8

Reliance Communications Limited: Key Employees __________________________________ 10Reliance Communications Limited: Key Employee Biographies ________________________ 11Reliance Communications Limited: Major Products and Services _______________________ 13Reliance Communications Limited: Company History _________________________________ 15Reliance Communications Limited: Management Statement ___________________________ 17Reliance Communications Limited: Locations and Subsidiaries ________________________ 20Reliance Communications Limited: Key Competitors _________________________________ 22

Reliance Communications Limited: Company Analysis ___________________________________ 23Reliance Communications Limited: Business Description _____________________________ 23Reliance Communications Limited: SWOT Analysis __________________________________ 25

Reliance Communications Limited: SWOT Overview ___________________________________ 25Reliance Communications Limited: Strengths _________________________________________ 25Reliance Communications Limited: Weaknesses ______________________________________ 27Reliance Communications Limited: Opportunities ______________________________________ 28Reliance Communications Limited: Threats ___________________________________________ 29

Reliance Communications Limited: Financial Analysis ________________________________ 31Reliance Communications Limited: Financial Overview __________________________________ 31Reliance Communications Limited: Five Year Company Financials ________________________ 32Reliance Communications Limited: Key Income Statement Data __________________________ 32Reliance Communications Limited: Key Balance Sheet Data _____________________________ 33Reliance Communications Limited: Key Cash Flow Data ________________________________ 34Reliance Communications Limited: Key Market Data ___________________________________ 35

Reliance Communications Limited: Corporate Financial Deals Activity ______________________ 37Reliance Communications Limited: Financial Deals Overview __________________________ 37Reliance Communications Limited: Targets and Partners ______________________________ 39Reliance Communications Limited: Top Deals 2007 -YTD*2011 _________________________ 40


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Table of Contents



Reliance Communications Limited: Advisors ________________________________________ 41Reliance Communications Limited: Top Legal Advisors _________________________________ 41Reliance Communications Limited: Top Financial Advisors _______________________________ 41

Reliance Communications Limited: Mergers and Acquisitions __________________________ 43Reliance Communications Limited: Partnership ______________________________________ 44Reliance Communications Limited: Divestments _____________________________________ 45Reliance Communications Limited: Private Equity and Ownership ______________________ 46

Reliance Communications Limited: Recent Developments_________________________________ 47Reliance Communications Limited: News and Events Summary ________________________ 47Reliance Communications Limited: Contracts _______________________________________ 48Reliance Communications Limited: Financial Performance ____________________________ 49Reliance Communications Limited: IT Spending Announcements _______________________ 49

Appendix __________________________________________________________________________ 50Contact Us ____________________________________________________________________ 50Methodology ___________________________________________________________________ 50Definitions _____________________________________________________________________ 51About Datamonitor ______________________________________________________________ 55


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Table of Contents



List of Tables

Table 1: Reliance Communications Limited: Key Facts _________________________________________________ 8Table 2: Reliance Communications Limited: Key Employees____________________________________________ 10Table 3: Reliance Communications Limited: Locations and Subsidiaries _________________________________ 20Table 4: Reliance Communications Limited: Key Competitors __________________________________________ 22Table 5: Reliance Communications Limited: Deal Activity by Deal Type - Volume (TTM) _____________________ 37Table 6: Reliance Communications Limited: M&A Activity by Geography (TTM) ____________________________ 37Table 7: Reliance Communications Limited: Deal Activity by Deal Type - Volume (2007 - YTD*2011) ___________ 38Table 8: Reliance Communications Limited: M&A Average Deal Size - Value (US$m) _______________________ 38Table 9: Reliance Communications Limited: Targets and Partners _______________________________________ 39Table 10: Reliance Communications Limited: Top Deals 2007 -YTD*2011 _________________________________ 40Table 11: Reliance Communications Limited: Legal Advisor Ranking by Value (US$m)______________________ 41Table 12: Reliance Communications Limited: Financial Advisor Ranking by Value (US$m) __________________ 41Table 13: Reliance Communications Limited: M&A Volume and Value Trend (2007 - YTD*2011) ______________ 43Table 14: Reliance Communications Limited: M&A Activity by Geography (2007 - YTD*2011) ________________ 43Table 15: Reliance Communications Limited: Partnership Volume and Value Trend (2007 - YTD*2011) _________ 44Table 16: Reliance Communications Limited: Partnership Trend by Deal Type (2007 - YTD*2011) _____________ 44Table 17: Reliance Communications Limited: Divestments Volume and Value Trend (2007 - YTD*2011) ________ 45Table 18: Reliance Communications Limited: Divestments by Geography (2007 - YTD*2011) _________________ 45Table 19: Reliance Communications Limited: Private Equity and Ownership Volume and Value Trend (2007 - YTD*2011)_______________________________________________________________________________________________ 46Table 20: Reliance Communications Limited: Private Equity and Ownership Volume by Deal Type (2007 - YTD*2011) 46Table 21: Reliance Communications Limited: News and Events Summary ________________________________ 47Table 22: Reliance Communications Limited: Contracts _______________________________________________ 48Table 23: Reliance Communications Limited: Financial Performance ____________________________________ 49Table 24: Reliance Communications Limited: IT Spending Announcements _______________________________ 49


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Table of Contents



List of Figures

Figure 1: Reliance Communications Limited: Revenue to Net Income (2007-2010) __________________________ 32Figure 2: Reliance Communications Limited: Revenue/Employee to Net Income/Employee (2007-2010) ________ 32Figure 3: Reliance Communications Limited: Current Assets to Current Liabilities (2007-2010) _______________ 33Figure 4: Reliance Communications Limited: Assets, Liabilities to Total Equity (2007-2010) _________________ 33Figure 5: Reliance Communications Limited: Free Cash Flow to Cash from Operating Activities (2007-2010) ___ 34Figure 6: Reliance Communications Limited: Net Change in Cash (2007-2010) _____________________________ 34Figure 7: Reliance Communications Limited: Market Capitalization to Year-end Share Price (2007-2010) _______ 35Figure 8: Reliance Communications Limited: Enterprise Value (2007-2010) _______________________________ 35Figure 9: Reliance Communications Limited: Deal Activity by Deal Type - Volume (TTM) ____________________ 37Figure 10: Reliance Communications Limited: M&A Activity by Geography (TTM) __________________________ 37Figure 11: Reliance Communications Limited: Deal Activity by Deal Type - Volume (2007 - YTD*2011) _________ 38Figure 12: Reliance Communications Limited: M&A Average Deal Size - Value (US$m) ______________________ 38Figure 13: Reliance Communications Limited: M&A Volume and Value Trend (2007 - YTD*2011) ______________ 43Figure 14: Reliance Communications Limited: M&A Activity by Geography (2007 - YTD*2011) ________________ 43Figure 15: Reliance Communications Limited: Partnership Volume and Value Trend (2007 - YTD*2011) ________ 44Figure 16: Reliance Communications Limited: Partnership Trend by Deal Type (2007 - YTD*2011) ____________ 44Figure 17: Reliance Communications Limited: Divestments Volume and Value Trend (2007 - YTD*2011) _______ 45Figure 18: Reliance Communications Limited: Divestments by Geography (2007 - YTD*2011) ________________ 45Figure 19: Reliance Communications Limited: Private Equity and Ownership Volume and Value Trend (2007 - YTD*2011) 46Figure 20: Reliance Communications Limited: Private Equity and Ownership Volume by Deal Type (2007 - YTD*2011)46


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Reliance Communications Limited: CompanyOverview



Reliance Communications Limited: Company Overview

Reliance Communications Limited: Overview and Key Facts

Reliance Communications Limited: Overview

Reliance Communications (RCOM or "the company") is an integrated communications service provider in India.The company is part of the Reliance Anil Dhirubhai Ambani Group. RCOM serves consumer, enterprise andcarrier customers. It operates a full spectrum of wireless, wireline, and long distance, voice, data, video andinternet communication services. It also offers direct-to-home (DTH) TV services under the brand, Big TV. Thecompany also participates in submarine cable network infrastructure, and owns, operates and develops telecominfrastructure, such as wireless communications sites and towers. The company primarily operates in India,where it is headquartered in Mumbai and employs 30,974 people.

The company recorded revenues of INR206,850.5 million ($4,366.6 million) during the financial year endedMarch 2010 (FY2010), a decrease of 0.3% over 2009. The operating profit of the company was INR34,380.7million ($725.8 million) in FY2010, a decrease of 32.9% over 2009. Its net profit was INR46,550 million ($982.7million) in FY2010, a decrease of 23% over 2009.

Reliance Communications Limited: Key Facts

Table 1: Reliance Communications Limited: Key Facts

Corporate Address: H Block

1st Floor

Dhirubhai Ambani Knowledge City

Navi Mumbai 400 710

Country: India

Fax: 91 22 3037 6622

Phone: 91 22 3037 3333

Web Address: www.rcom.co.in

Turnover (US$m): 4,367

Employees: 30,974

Financial Year End: March

Industry: Communications


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Primary Stock Exchange (Ticker): Mumbai Stock Exchange (532712 )

SOURCE: DATAMONITOR D A T A M O N I T O R


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Reliance Communications Limited: Key Employees

Table 2: Reliance Communications Limited: Key Employees

Employee Name Job Title Board Age

Hasit ShuklaPresident, Company

Secretary and ManagerSenior Management 47

A. K. Purwar Director Non Executive Board 64

Anil D. Ambani Chairman Non Executive Board 51

Deepak Shourie Director Non Executive Board 61

J. Ramachandran Director Non Executive Board 53

S. P. Talwar Director Non Executive Board 71

SOURCE:DATAMONITOR D A T A M O N I T O R


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Reliance Communications Limited: Key Employee Biographies

Hasit ShuklaMr. Shukla is the President, Company Secretary and Manager at RCOM. He has been the Manager at thecompany since 2006. Mr. Shukla is a Fellow Member at Institute of Company Secretaries of India. He has over27 years experience in corporate secretarial, legal, finance and managerial functions.

Board: Senior Management

Job Title: President, Company Secretary and Manager

Age: 47

A. K. Purwar

Mr. Purwar is a Director at RCOM. He was the former Chairman and Managing Director at State Bank of India(SBI). Mr. Purwar also served as the Managing Director at State Bank of Patiala. He is a Director at VardhmanTextiles, Jindal Steel and Power, Jindal Power, India Infoline Investment Services, Deccan Infrastructure andLand Holdings, Apollo Tyres, Engineers India, IL&FS Renewable Energy and India Infoline. Mr. Purwar has beenassociated with a number of prestigious academic institutions, committees set up by various State and CentralGovernments and international institutions.

Board: Non Executive Board

Job Title: Director

Age: 64

Anil D. Ambani

Mr. Ambani is the Chairman at RCOM. He is also the Chairman at Reliance Capital, Reliance Infrastructure,Reliance Natural Resources and Reliance Power. Mr. Ambani also serves on the Board at Reliance Infratel andReliance Anil Dhirubhai Ambani Group. He is the President at Dhirubhai Ambani Institute of Information andCommunication Technology, Gandhinagar, Gujarat. Mr. Ambani has been associated with a number ofprestigious academic institutions in India and abroad. He is currently a Member at Wharton Board of Overseers,The Wharton School; Board of Governors, Indian Institute of Management, Ahmedabad; and Executive Board,Indian School of Business, Hyderabad.


Job Title: Chairman

Age: 51

Deepak Shourie

Mr. Shourie is a Director at RCOM. He has more than 39 years' exposure with an emphasis on media, consumergoods, and corporate affairs. Mr. Shourie was the Executive Vice President and Managing Director at Discovery

Communications of India.


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Job Title: Director

Age: 61

J. Ramachandran

Mr. Ramachandran is a Director at RCOM. He is the Chair Professor of Business Policy at the Indian Institute ofManagement, Bangalore. Mr. Ramachandran is a qualified Chartered Accountant and Cost Accountant. He isalso a Director at Reliance Communications Infrastructure, Sasken Communication Technologies, Redington(India), Bhoruka Power, Indofil Organic Industries, Tejas Networks and Infotech Enterprises.


Job Title: Director

Age: 53

S. P. Talwar

Mr. Talwar is a Director at RCOM. He was a former Deputy Governor at Reserve Bank of India. Mr. Talwar alsoserved as the Chairman-cum-Managing Director at Bank of Baroda, Union Bank of India and Oriental Bank ofCommerce. He has vast experience in financial services sector in India. Mr. Talwar is also a Director atCrompton Greaves, Reliance Communications Infrastructure, Reliance General Insurance, Reliance Infratel,Videocon Industries, Reliance Life Insurance, AB Hotels, Housing Development and Infrastructure, Kalpataru

Power Transmission, Uttam Galva Steels and GTL Infrastructure.Board: Non Executive Board

Job Title: Director

Age: 71


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Reliance Communications Limited: Major Products and Services

Reliance Communications (RCOM or "the company") is an integrated communications service provider in India.The company's key products and services include the following:

Consumer:

Mobile (CDMA and GSM)Calling cardsWireless phoneWireless terminalBlackBerryRoamingLandline phone

Fixed wireless phoneHandsetsWireless broadbandVirtual calling cardsDirect-to-home TVIPTV3G servicesGlobal calling

Business services:

Voice solutions

Office centrexE1-DIDOneOffice duoAudio conferencingToll free servicesITFS

Data solutions

InternetBusiness broadband internetLeased lineEthernet leased linesIPLCVPNSSL VPNWDVPNVideo conferencing

Internet data center:

DC build and maintainColocation servicesManaged hosting services

IT infrastructure services


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Managed security servicesApplication management services

Brands:

Reliance MobileReliance HelloReliance NetconnectReliance Mobile WorldReliance Big TVReliance World


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Reliance Communications Limited: Company History

The foundation of Reliance Communications (RCOM) was laid in 1999, when Reliance Infocomm began projectplanning as business unit of Reliance Industries Limited. In the following year, the company stated optic fiberlaying process in the states of Gujarat, Andhra Pradesh and Maharashtra.

In 2002, its first base transceiver station was made 'ready for electronics'. Subsequently, the company obtainedinternational long distance (ILD) license, commissioned first optic fiber backbone ring and established first pointof interconnect (POI) in New Delhi. Towards the end of the year, Reliance Infocomm was e-inaugurated.

The company introduced its Reliance IndiaMobile service in 2003. Subsequently, it launched RelianceWebWorld in top 16 cities and ILD services. RCOM commissioned all backbone rings and launched RelianceIndiaPhone fixed wireless phone and terminal.

In the following year, FLAG Telecom, an international wholesale telecommunications service provider,

amalgamated with Reliance Gateway, a wholly owned subsidiary of Reliance Infocomm. Subsequently, FLAGTelecom, a subsidiary of the company, announced FALCON Project, a new Middle East loop terabits submarinecable system with links to Egypt and Hong Kong through India. In the same year, Reliance Infocomm introducedWorld Card, a prepaid international calling card for making international calls from India.

In 2005, the company introduced first e-recharge facility in CDMA in India. In the same year, Reliance Infocommlaunched international roaming facility across several countries. Subsequently, Reliance Infocomm and ChinaTelecom signed an agreement to provide direct telecommunication service, including a global hubbing service,to subscribers in the two countries.

As part of the demerger of the Reliance Industries in 2006, the company was separated as individual publiclylisted company, Reliance Communications Ventures Limited (RCVL). The company included Reliance Infocommand Reliance Telecom, and was listed on the Bombay Stock Exchange and National Stock Exchange.

Subsequently, RCVL was renamed as Reliance Communications Limited (RCOM). In the same year, T-Comsigned contract with FLAG Telecom for Europe-US bandwidth.

In the following year, RCOM demerged the tower business into a separate company, Reliance TelecomInfrastructure Limited (RTIL). In the same year, the company sold equity stake in its tower company, RTIL. Thecompany also signed an agreement with SUN TV to offer video streaming of all SUN TV programs online 24x7.At the end of the year, RCOM launched nationwide GSM services under existing unified access service licenses.In 2007, the company completed the acquisition of Yipes Holdings, a provider of managed Ethernet andapplication delivery services for the global enterprise.

In 2008, the company received start-up GSM spectrum. In the same year, it consolidated global telecombusiness under Business Globalcom, and expanded into international mobile market with GSM license inUganda. Subsequently, RCOM entered the IT space by launching Reliance Technology Services. Reliance

Globalcom unit Reliance Infocom BV, Netherlands acquired global WiMAX operator eWave World. Also, in thesame year, the company formed a joint venture with Alcatel Lucent to offer managed network services to telcosacross the globe.

Reliance Globalcom acquired UK based global managed network services provider, VANCO Group in 2008.During the same year, Reliance Globalcom and Stealth Communications formed a strategic alliance to extendVoIP network across 50 countries. Subsequently, Reliance Globalcom and Internap Network Services, aprovider for end-to-end internet business solutions, signed a strategic business alliance to provide a broad set ofcontent and application delivery network services to Indian businesses. RCOM launched its direct-to-home DTHTV services, BIG TV, in 2008. At the end of 2008, the company launched GSM service across India coveringover 1 billion people in 24,000 towns and 600,000 villages, which is one of the widest one-time launches.

In March 2009, RCOM launched its CDMA wireless broadband service, Reliance Netconnect Broadband Plus,India's fastest internet service with downlink speed of upto 3.1 Mbps and a separate uplink speed of upto 1.8


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Mbps. In May 2009, the company's shareholders approved scheme of arrangement for demerger of fiber opticdivision to Reliance Infratel, a subsidiary of RCOM.

In the following month, KRIBHCO, a co-operative society with a marketing network in rural India, and Reliance

Communications Infrastructure, signed an agreement to form a joint venture company, KRIBHCO RelianceKisan, which will utilize the respective strengths of KRIBHCO and Reliance ADA Group to catalyze tele-densitygrowth and provision of products and services to the rural people in India.

In July 2009, Reliance BIG TV launched a new interactive feature, iStock, India's first portfolio trackingapplication through its DTH platform. Subsequently, Etisalat DB Telecom (previously Swan Telecom) and RCOMentered into a long term passive infrastructure sharing agreement which will accelerate Etisalat DB Telecom'sroll-out of telecom services in India. As per the agreement, Etisalat DB and its subsidiary will outsource theirtelecom infrastructure requirements for the 15 telecom circles, encompassing end-to-end tower and transmissioninfrastructure, to Reliance Infratel and RCOM, respectively.

RCOM started a nationwide commercial roll-out of mobile conferencing service through a strategic tie-up withKodiak Networks, a provider of group communications' solutions, in August 2009. Subsequently, the company

and Chinese state owned China Telecom launched a terrestrial cable connecting East Asia with Indiansubcontinent. In the following month, RCOM introduced BIGMaps service, which allows search across business,directions, events and movies by organizing local information on a pan-India basis, on its GSM network.

In October 2009, Reliance Webstore, the retail venture of Reliance ADA Group, signed a strategic and exclusivedistribution agreement with Coolpad Communication, the Indian joint venture of the Hong-Kong listed company,China Wireless Technologies. This agreement marks entry of Reliance Webstore into open market handsetretailing business through its Reliance World and Reliance Mobile stores. In the following month, RCOM formeda strategic partnership with atom technologies, the leading m-commerce solutions provider from the FinancialTechnologies India group. This partnership enables RCOM to offer a secure, inter-operable and the convenientplatform to conclude payment transactions using Reliance Mobile.

The company introduced Cartoon Network Comics on Mobile, a value added service which enables users tobrowse through comics of Cartoon Network's globally popular and iconic toon stars on their mobiles, in January2010. In the following month, RCOM in partnership with iseemedia, a provider of messaging and contenthandling technology, launched push e-mail service on SMS. In April 2010, RCOM and GetJar, the world'ssecond largest app store, formed a strategic alliance. As part of the alliance, RCOM's subscribers will gainaccess to GetJar's library of applications via a GetJar apps store through RCOM's VAS platform R-World.

In August 2010, the company signed an exclusive strategic partnership with Universal Music to offer music-related services and content across RCOM's GSM, CDMA, 3G mobile and wireless broadband platforms. In thesame month, Reliance Mobile introduced Braille bill service for visually impaired. Subsequently, the companyand Nokia India formed a business alliance to promote greater use of mobile services, giving consumers anopportunity to get richer experiences and do more with their phones.


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Reliance Communications Limited: Management Statement

A statement by Anil D. Ambani, Chairman at Reliance Communications is given below. The statement has beentaken from the company's 2010 annual report.

Reliance Communications has had a year of creditable performance where we crossed the historic 100 millionwireless subscribers mark, consolidating our position as the 2nd largest wireless operator in the country.

With a customer base of 109 million, Reliance Communications has entered the prestigious league of being oneof the only 4 telecom operators in the world to have more than 100 million subscribers in a single country.

We have completed this feat in less than 7 years of launching our pan-India mobile services and within only 2years of launching pan-India GSM services - the fastest ever ramp-up of mobile customers anywhere in theworld. We are now closer than ever to achieve our goal of becoming one of the world's leading Telecom serviceproviders across the entire value chain of telecom businesses.

Over the past year, we have launched several path-breaking initiatives, leading to new revenue streams thatcompensate for the expected decline in ARPU as more and more customers, including those less affluent, takeup mobile services. We look forward to strengthening our leadership in data services in addition to driving to aleadership position in voice services. Our business strategy has been based on aligning ourselves to thechanging dynamics of technology, while providing our subscribers with cost effective and innovative services,accompanied by simplicity and transparency in tariffs.

Reliance Communications, through its wholly owned subsidiary company, has won 3G spectrum for 13 keyCircles in the auction recently completed by the Department of Telecommunications, Govt. of India. 3G telecomservices will provide our customers faster connectivity and offer a host of applications like mobile TV, video-on-demand, video calls and high-speed internet access. Our win of 13 3G circles, the highest number of circleswon by any operator in the auction, maximizes our company's 3G coverage on a much more conservative

spend. Today, our company is the only operator in India that has both the highest 13 circle coverage in 3G aswell as having pan India 3G-like capability in CDMA.

Performance review

The financial year 2010 has been one of the most challenging years for the telecom sector. Over the pastfinancial year, the entire telecom sector was faced with growing pressure on revenues and margins on accountof intensifying competition in the Indian telecom sector.

The key financial highlights on a consolidated basis are:

Total income of INR22,132 crore ($4,903 million), as against INR22,948 crore ($4,525 million) in the previousfinancial year.

Cash Profit of INR8,524 crore ($1,888 million), against INR9,856 crore ($1,943 million) in the correspondingperiod last year.

Net profit of INR4,655 crore ($1,031 million), against INR6,045 crore ($1,192 million) in the previous financialyear.

Cash Earnings Per Share (Cash EPS) of INR41.30 ($ 0.91), against INR47.75 ($ 0.94) in the previous year andBasic Earnings Per Share (EPS) of INR22.55 ($ 0.50), against INR29.29 ($0.58) in the previous financial year.

Net Worth of INR38,363 crore ($8,499 million), keeping Reliance Communications amongst the top Indianprivate sector companies.

Growth platform


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Reliance Communications has established a pan-India, next generation, integrated (wireless and wireline),convergent (voice, data and video) digital network that is capable of supporting best-of-class services spanningthe entire communications value chain, covering over 24,000 towns and 600,000 villages.

Our customer base exceeds 109 million (including over 2.5 million overseas retail customers and 2.4 millionBigTV DTH customers).

We rank among the top four telecom companies in the world, by number of customers in a single country.

Our corporate clientele includes 2,100 Indian and multinational corporations, and over 800 global, regional anddomestic carriers. Our enterprise customers include 850 of the top 1000 enterprises in India.

We have the largest portfolio of multi-tenancy towers offering integrated infrastructure solutions.

We operate the world's largest submarine cable network with a presence in over 60 countries.

We are a one-stop-shop across the entire range of enterprise connectivity solutions.

We have captured about 12% of the DTH market in India within a short span of launch - achieved by the fastestramp-up ever by any DTH operator in the world.

Transformational initiatives

We are discussing an agreement with GTL Infrastructure Limited on a transformational proposal to restructurethe passive infrastructure business carried on through Reliance Infratel Limited, a subsidiary of the company, byde-merging this business, excluding the optic fiber network. This transaction will create the world's largestindependent telecom infrastructure company with over 80,000 towers and 1,25,000 tenancies from nearly adozen telecom operators. Upon completion, the company will derive huge benefits from the transaction by wayof reduction of consolidated debt, improvement in leveraging ratios and enhanced financial flexibility. We havealso agreed to acquire Digicable, India's No.1 Cable TV Service Provider. The deal will create India's largest

and the world's fifth largest entity offering the full-suite of Triple Play services viz. Digital TV, High-SpeedBroadband and Voice services.

Both the above transactions are expected to be concluded during the current year, subject to requisiteapprovals as may be necessary.

Segments

1) Wireless

We are among India's top two operators with over 105 million wireless subscribers across a comprehensiveportfolio of services, including mobile, PCO, fixed wireless and data card segments. During the year, we sawour minutes of usage increase from 277 billion to 350 billion, a rise of 26% as compared to last year.

We have been at the forefront of innovation in the wireless sector:

Effectively broken the clutter of tariffs by introducing the Simply Reliance plan.

Spearheaded the wireless broadband revolution with our market-leading high speed data-card offering.

Leading the national roll out of 3G services, which will see another wave of growth opportunities.

Unique world class infrastructure network spread across the country giving us a strong platform to launch our3G services in very short time.

2) Global


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We are market leaders across different segments, having the largest private sub-sea cable in the world and thelargest NLD network in India. To sustain our leadership, we have joined the consortium of $400 million, 8,300km, 17 Tbps design capacity Singapore - Hong Kong - Japan (SJC) cable system. The SJC cable system isexpected to be completed by third quarter of 2011. This will give us the capability and reach to provide voice,

internet and data services to our customers in the South East Asian markets of Indonesia, Singapore and thePhilippines.

Our Next Generation cable "Hawk" in the Mediterranean between Middle East and Europe remains on track forcompletion by the end of the ongoing financial year.

3) Enterprise Broadband

Currently, we operate in almost 50 cities of India with over 1 million buildings connected directly to our network.In all, we serve nearly 1.5 million access lines. Over 850 of the top 1,000 companies in India are our customers.

We have augmented our building connectivity programme through the deployment of WiMAX 802.16 IEEEstandards technology.

We have one of the largest Internet Data Center (IDC) capacities occupying more than 400,000 sq ft in India,across 9 data centers with a market share of more than 60%.

4) Home

Our Home business currently comprises Direct to Home (DTH) services targeting one of the largest and fastestgrowing markets for pay television services in the world.

We have commenced the roll-out of India's first High Definition set-top box with Digital Live TV Recordingcapabilities. Reliance Big TV is rolling out its HD DVR set-top box across top 100 cities in India.

Corporate Governance

Our Company is a proud member of the Reliance Anil Dhirubhai Ambani Group. We have adopted the Group'sCorporate Governance Policies and Code of Conduct. These guidelines prescribe a set of systems, processesand principles that conform to the best global standards and are aimed at promoting the interests of all ourstakeholders.

Social Commitment

We have undertaken several important initiatives and measures in the area of education, green environmentand healthcare, signifying our continued and long-standing commitment to social and community welfare.

Our Commitment

At Reliance Communications, we have always derived inspiration from the vision of our legendary founder, ShriDhirubhai Ambani, who wanted to bring the power of communication to every Indian by making calling on thephone cheaper than sending a postcard.

Seven years ago, we set about realizing that dream by breaking the price barrier that had hitherto limited thereach of India's telecom sector to a privileged few. Today, we are breaking the barriers of remoteness bydeploying the latest communications technology to bridge the digital divide, leapfrogging every part of rural Indiainto the national economic mainstream - while remaining true to our founder's commitment about thefundamental affordability of our services.

In one word, we are laying the foundation, in less than a decade, for a second wave of fundamental change,India's second telecom revolution...


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Reliance Communications Limited: Locations and Subsidiaries

Table 3: Reliance Communications Limited: Locations and Subsidiaries

Reliance Globalcom - Taiwan

4/F

No 200

Sec 1

Keelung Road

Taipei

Taiwan

886 2 2722 7222

886 2 2345 1914

Reliance Globalcom - UAE

Masaood Tower

7th Floor

Al Maktoum Street

Dubai

United Arab Emirates

971 4 227 1880

971 4 223 8275

Reliance Globalcom - UK

Units 1 & 2

Great West Plaza

Riverbank Way

Brentford

Middlesex TW8 9RE

United Kingdom

44 208 636 1700

44 208 636 1701

Reliance Globalcom - Egypt

Nile City Towers

North Tower

23rd Floor

Cornish El Nil

Cairo

Egypt

202 2461 8590

202 2461 8501

Reliance Globalcom - France

Tour Ariane

5 place de la Pyramide

La Defense 9

92088 Paris La Defense

France

33 1 46 96 54 00

33 1 46 96 54 01

Reliance Globalcom - Germany

Triforum

Haus A1

Frankfurter Strasse 233

63263 Neu-Isenburg

Germany

49 6102 785555

49 6102 785556

Reliance Globalcom - Hong Kong

Suite 3901-02

39/F

Lippo CentreTower Two

89 Queensway

Hong Kong Special Administrative Region of China

852 2848 0077

852 2848 0081

Reliance Globalcom - Italy

Torre Tonda

P.zza Don Mapelli, 120099 Sesto San Giovanni

Milano

Italy

39 02 2412191

39 02 2409422

Reliance Globalcom - Argentina

Edificio Laminar Plaza

Ing Butty 240

4 Piso

C1001AFB Capital Federal

Reliance Globalcom - Australia

Suite 102

Level 1

201 Elizabeth Street

Sydney


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Buenos Aires

Argentina

54 11 4590 2345

54 11 4590 2201

New South Wales 2000

Australia

61 2 8272 5900

61 2 8272 5901

Reliance Globalcom - Brazil

Avenida Paulista

2300 - andar Pilotis

Cerqueira Cesar

Sao Paulo

Brazil

55 11 2847 4700

55 11 2847 4550

Reliance Globalcom - China

1208, Tower C1

Oriental Plaza

1 East Chang An Ave

Dongcheng District

Beijing 100738

China

86 10 8515 1188

86 10 8515 0837

Reliance Globalcom - Japan

Sawada Kojimachi Bldg. 5F

1-10

Kojimachi

Chiyoda-ku

Tokyo 102-0083

Japan

81 3 3511 5760

81 3 3511 5757

Reliance Globalcom - Netherlands

Boeing Avenue 1-3

1119 PC Schiphol-Rijk

Netherlands

31 20 316 5250

31 20 316 5255

Reliance Globalcom - New York600 3rd Avenue

7th Floor

New York

New York 10016

United States

1 212 891 5980

1 212 750 0225

Reliance Globalcom - Singapore

No. 4 Shenton Way

07-05/06 SGX Centre 2

Singapore 068807

Singapore

65 6281 1181

65 6533 3343

Reliance Globalcom - South Korea

Suite 2303

23/FCity Air Tower

159-9, Samsung-Dong, Kangnam-Ku

Seoul 135-973

Republic of Korea

82 2 60003400

82 2 60003410

Reliance Globalcom - Switzerland

Forrlibuckstrasse 30

8005 Zurich

Switzerland

41 44 520 35 02

41 43 366 94 69



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Reliance Communications Limited: Key Competitors

Table 4: Reliance Communications Limited: Key Competitors

Bharat Sanchar Nigam Ltd. Bharti Airtel Limited

Mahanagar Telephone Nigam Limited (MTNL) Virgin Mobile Holdings (UK) plc

Vodafone Group Public Limited Company



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Reliance Communications Limited: CompanyAnalysis



Reliance Communications Limited: Company Analysis

Reliance Communications Limited: Business Description

Reliance Communications (RCOM) is one of the leading providers of communications services to consumer,enterprise and carrier customers in India. The company provides wireless, wireline and long distance servicesvoice, data, video, direct-to-home (DTH) and internet based communications services. It also owns through itssubsidiaries, a global submarine cable network infrastructure and offers managed services, managed Ethernetand application delivery services. RCOM mainly operates in India.

The company operates through five business segments: wireless, global, broadband, investment, and others.

The wireless segment provides code division multiple access (CDMA) and global system for mobilecommunications (GSM) based wireless services in India, including mobile and fixed wireless voice, data and

value added services for individual consumers and enterprises. It is an integrated telecom service provider,offering total telecom solutions to corporate, small and medium size enterprises (SME) and small-office home-office (SoHo) customers. The segment's portfolio of products includes mobile handsets, fixed wirelessphones/terminals, high-speed internet data cards and Blackberry services. Its primary brands comprise RelianceMobile for the mobile portfolio of services, Reliance Hello for the fixed wireless portfolio of services and RelianceNetconnect for wireless data services. The company also offers wireless multi media experience under thebrand Reliance Mobile World.

The company's wireless segment also offer public calling office (PCO) services over its wireless network throughindependent retail operators. Additionally, the company provides connectivity for devices such as point of saleterminals, lottery terminals and ATM terminals. At the end of FY2010, the company had a wireless subscriberbase of 102.5 million.

The global segment offers national long distance (NLD) and international long distance voice (ILD) operations ofthe company and the wholesale operations of its subsidiaries including Reliance Globalcom and its subsidiaries.The segment is organized into four business segments: data, voice, WiMAX and NLD. It provides wholesale,enterprise and retail product in each business segment. In India, the segment provides long distance businessservices including wholesale voice, bandwidth and infrastructure services. Globally, it provides carrier's carriervoice, carrier's carrier bandwidth, enterprise data and consumer voice services.

The voice business segment's wholesale product offering include ILD carriage and termination services to othercarriers and other business units of RCOM. Its retail offering include virtual international calling services to retailcustomers which allows calls to 200 international destinations including India under the brand Reliance GlobalCall. The retail services are available to customers in eight countries including the US, Canada, the UK,Australia, New Zealand, Hong Kong and Malaysia. The segment has over 2.5 million customers for RelianceGlobal Call service.

Its WiMAX business segment is focused on acquiring licenses in several emerging markets.

The NLD business segment offers NLD carriage and termination to other carriers as well as to other businessunits of RCOM. It also offers bandwidth and infrastructure services to other operators. Its international databusiness owns the largest private submarine cable system in the world, directly connecting 40 countries from theEast coast of the US, to Europe, the Middle East, India, South and East Asia, through to Japan. The companyowns and operates the world's largest private undersea cable system spanning 65,000 kilometers integratedwith domestic optic fiber running over 190,000 kilometers. It is further expanding global network withimplementation of the FLAG Next Generation Network cable system.

The broadband segment includes broadband operations of the company, Reliance CommunicationsInfrastructure and Reliance WiMax. The segment offers a portfolio of enterprise voice, data, video, internet andIT infrastructure services. The segment provides services across various customer groups including residential,


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SMEs and large enterprises. Its services include national and international private leased circuits, broadbandinternet access, audio and video conferencing, MPLS-VPN, remote access VPN, Centrex, toll-free servicesvoice services for offices, voice VPN for enterprises and managed internet data centre (IDC) services. It offersvalue added products and services to large, medium and small enterprises for their communications, networking,

and IT infrastructure needs across the country.

The company offers enterprise broadband services in 50 cities in India with over 1 million buildings connecteddirectly to network serving close to 1.5 million access lines. It augmented building connectivity program throughdeployment of WiMAX 802.16d technology. The company's enterprise customer base includes over 850 of thetop 1,000 Indian enterprises. Reliance Communications operates one of the largest internet data center (IDC)capacities occupying more than 400,000 square feet in India, across nine data centers with a market share ofmore than 60%.

The investment segment includes investment activities of the company's subsidiaries, including RelianceTelecom, Reliance Infratel, Reliance Webstore, Reliance Globalcom, Gateway Net Trading, Reliance InfocommInfrastructure and Reliance WiMax.

The others segment includes the customer care activities of Reliance Webstore, facility usage activities ofReliance Infocomm Infrastructure and DTH activities of Reliance Communications Infrastructure and RelianceBig TV.

The company launched nationwide satellite TV services through wholly owned subsidiary, Reliance Big, in 2008.These services are available on the DTH format to consumers in India, under the Reliance Big TV brand. Thecompany's DTH operations uses MPEG 4 technology to deliver services over 230 broadcast channels, sixinteractive services and a range of 'subscription video-on-demand / pay per view' offerings to its subscribers.The company also commenced the roll-out of India's first high definition (HD) set-top box with Digital Live TVRecording capabilities. Reliance Big TV is rolling out its HD DVR set-top box across top 100 cities in India. As ofFY2010, Reliance Big TV had 2.4 million subscribers.

Reliance World (formerly Reliance WebWorld) is a chain of retail outlets offering products and services of theReliance Anil Dhirubhai Ambani Group in India. The Reliance World outlets are connected to RCOM'scountrywide optic fiber network. The company operates 241 Reliance World outlets across 105 cities in India.


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Reliance Communications Limited: SWOT Analysis

Reliance Communications Limited: SWOT Overview

Reliance Communications (RCOM or "the company") is an integrated communications service provider in India. The

company is part of the Reliance Anil Dhirubhai Ambani Group. RCOM serves consumer, enterprise and carrier customers. It

operates a full spectrum of wireless, wireline, and long distance, voice, data, video and internet communication services. It

also offers direct-to-home (DTH) TV services under the brand, Big TV. The company also participates in submarine cable

network infrastructure, and owns, operates and develops telecom infrastructure, such as wireless communications sites and

towers. Integrated operations provide a competitive advantage to the company by allowing it to maintain control on quality of

services delivery and expand its offerings. However, increasing competition may affect the company's market share in

coming years.

Strengths Weaknesses



Significant operations of Reliance Globalcom andReliance Communications Infrastructure

Decreasing ARPU


Significant debt

Opportunities Threats





Regulations

Reliance Communications Limited: Strengths


RCOM is an integrated telecom operator in India. The company's operations encompass wireless, wirelineand long distance retail operations, data center and IT related operations, telecom infrastructure business,and retail network. It has established a pan-India, next generation, integrated (wireless and wireline),convergent (voice, data and video) digital network that is capable of supporting services spanning theentire communications value chain, covering over 24,000 towns and 600,000 villages and all major railwayroutes and highways which covers 90% of the country's population. RCOM also owns and operates theworld's largest next generation IP enabled connectivity infrastructure, comprising over 2,77,000 kilometersof fiber optic cable systems in India, the US, Europe, Middle East and the Asia Pacific region.

The company's national networks are integrated with its international networks. It has relationship withover 800 global, regional and domestic carriers capable of offering services in 230 countries. RCOM'smanaged network services are available in over 40,000 locations across 163 countries. It also owns22,000 kilometers of metro fiber network in the US in 14 metros allowing it to offer connectivity to thesekey business markets.

RCOM's consumer and SME offerings are supported by one of the extensive distribution networks in Indiawith throughput capacity for over 24 million handsets per annum. The company's nearly 2,000 exclusiveReliance World and Reliance Express stores with a presence in over 700 Indian cities form the backbone

of its retail presence. Furthermore, through preferred retailers, it has a branded retail presence in over


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1,300 towns, as well as 600,000 retailers providing the company's offerings.

The company's infrastructure businesses are mainly handled by its subsidiaries, Reliance Globalcom andReliance Infratel. Reliance Globalcom encompasses enterprise services, capacity sales, managed

services, and retail products and services comprising of global voice, internet solutions and value addedservices. Reliance Infratel owns, operates, and develops telecom infrastructure, primarily consisting ofwireless communication sites and towers. It currently owns all of the towers used by RelianceCommunications' CDMA and GSM wireless networks and is developing additional towers to meet theneeds of Reliance Communications and other customers. Its customers include the top 5 telecomoperators in India along with five new entrants in the telecom market.

RCOM's retail and distribution reach and infrastructure base has allowed it to expand into related fieldssuch as DTH and GSM services. The company's established infrastructure made it the only player in Indiaoffering both GSM and CDMA services on a nationwide basis, as well as significantly reduced the capitalrequired to establish infrastructure for launch. As of FY2010, the company has a customer base of 109million, including over 2.5 million individual overseas retail customers. It is one of the top two

telecommunication companies in India and ranks among the top four telecom companies in the world bynumber of customers in a single country. RCOM's integrated operations provide synergies from presencein different areas of the telecom market to launch several new services to diversify its portfolio and to havea control on quality of service delivery.

Integrated operations provide a competitive advantage to the company by allowing it to maintain control onquality of services delivery and expand its offerings.


The Reliance brand has a strong brand value in India and international markets. Despite the amicableseparation of Reliance into two separate groups: Reliance Anil Dhirubhai Ambani Group (Reliance ADAG),headed by Anil Dhirubhai Ambani; and Reliance Industries, headed by Mukesh D. Ambani, the Reliancebrand continues to have significant recognition. RCOM is part of the Reliance ADAG, which has apresence in different industries ranging from communications (RCOM) and financial services (RelianceCapital), to generation, transmission and distribution of power (Reliance Energy), infrastructure andentertainment. Reliance ADAG is among India's top three private sector business houses, with net worthin excess of INR640,000 million ($13,600 million), cash flows of INR130,000 million ($2,800 million), andnet profit of INR84,000 million ($1,800 million). Furthermore, the group, through its products and services,serves one in every 10 Indians every day, and has a presence in over 24,000 towns and 600,000 villagesin India, and five continents across the world.

Further, Reliance Mobile has been rated as "India's Most Trusted Service Brand" amongst all servicebrand categories in the consumer survey conducted by "The Economic Times". Strong brand valueenhances the company's ability to penetrate new markets and enhance customer loyalty.

Significant operations of Reliance Globalcom and Reliance Communications Infrastructure

RCOM's principal operating companies, including Reliance Globalcom (RGL) and RelianceCommunications Infrastructure (RCIL) have significant operations. RGL manages the global telecomoperations of RCOM. The company's global business serves over 2,100 enterprises, 200 carriers and 2.5million retail customers over 160 countries across five continents. RGL encompasses enterprise services,capacity sales, managed services and a range of retail products and services comprising of global voice,internet solutions and value added services. Its major assets are the FLAG Atlantic, FLAG North AsiaLoop, FLAG Europe Asia and FALCON submarine cable systems. Further, during FY2010, in the carrierdata segment, RGL signed contracts of over INR5,000 million ($105.5 million) with the company's existingcustomer base. It also joined the $400 million, 8,300 km, 17 Tbps design capacity Singapore - Hong Kong

- Japan (SJC) cable system consortium. The SJC cable system is expected to be completed by Q3 2011and will give RCOM the capability and reach to provide voice, internet and data services to its customers


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in the South East Asian markets of Indonesia, Singapore and the Philippines.

RCIL, a wholly owned subsidiary of RCOM, provides wireless multimedia (through Reliance Mobile World)and internet access (through Reliance Netconnect) services to customers of RCOM. Its subsidiary,

Reliance Infratel owns, operates, and develops telecom infrastructure, primarily consisting of wirelesscommunication sites and towers. In addition, during FY2010, RITL signed contracts with all major new andexisting operators for providing passive Infrastructure. It also signed a large bulk IRU lease agreementwith Aircel for providing ducts on pan India basis.

Significant operations of RGL and RCIL will enhance the company's top line growth in the coming years.

Reliance Communications Limited: Weaknesses

Decreasing ARPU

The company has been experiencing decline in its average revenue per user (ARPU) in India duringrecent years. Despite having one of the world's lowest tariffs for local and long distance calls, the companycontinued to decrease its charges to cope up with the competition. As a result, RCOM's ARPU decreasedfrom INR244 ($5.2) at the end of 2009 to INR165 ($3.5) in FY2010 and INR122 ($2.6) at the end ofquarter ended September 2010. Although, the company managed to register revenues growth due to newcustomer additions, its overall revenue growth rate and margins continued to decline. As a result, thecompany's future success in India depends on its ability to attract new customers and retain existingcustomers, lack of which will affect the company's revenues and profitability.


RCOM's operations are concentrated mainly in India. Despite being one of the leading players in the

Indian telecom market, the company has not been able to expand its presence into international market.By contrast, the company's major competitors have diversified geographic presence. For instance,Vodafone Group, one of the company's competitors, is a leading telecom company with presence acrossAmericas; Europe, Middle East and Africa; and Asia. Furthermore, Bharti Airtel, another competitor of thecompany, has a presence in Channel Islands, Sri Lanka, and Bhutan. Further, In June 2010, Bharti Airtelacquired Zain Africa, which includes the operations in Burkina Faso, Chad, Democratic Republic of theCongo, Republic of the Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Sierra Leone,Tanzania, Uganda and Zambia.

The company's growth has not been affected by lack of geographic diversification, as its operations inIndia which provides a base of potential growth in near time. However, its concentrated geographicoperations may affect its operating performance in long term.

Significant debt

RCOM has reported high debt in recent years. It reported total debt of INR244,782.8 million ($5,167.4million), INR309,036.1 million ($6,523.8 million), and INR202,864.3 million ($4,282.5 million) in FY2010,2009, and 2008, respectively. As a result of this high debt, the company incurred interest expenses ofINR13,422 million ($283.3 million), INR12,118.4 million ($255.8 million), and INR8,492.4 million ($179.3million) in FY2010, 2009, and 2008, respectively. In addition, the company's total debt to equity ratio was0.6, 0.7, and 0.8 in FY2010, 2009, and 2008, respectively.

Moreover, the company's operating profits have been declining in recent years. The operating profit of thecompany decreased from INR51,696.1 million ($1,091.3 million) in FY2008 to INR34,380.7 million ($725.8million) in FY2010. Further, RCOM's interest coverage ratio declined from 6.1 in 2008 to 2.6 in FY2010. In

addition, the company's debt service coverage ratio also declined to 0.3 in 2010 from approximately 1 in


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2008. Also, the company has to raise additional capital to launch its 3G services. Declining operatingprofits and interest coverage ratio will make it difficult for the company to raise additional debt. Further,substantial debt limits RCOM's flexibility to plan for, or react to, changes in its business and the industry inwhich it operates.

Reliance Communications Limited: Opportunities


Growth of Indian telecom marketThe Indian telecom market is one of the less penetrated markets in the world. The Indian market has lowpenetrations rates in the mobile, broadband and related services segments. The market recordedsignificant growth in recent times to register about 600.7 million telecom customers at the end of 2009.This allowed it to surpass the US to become the second largest market in the world after China.Furthermore, the telecom penetration rate in India was 51.1% at the end of 2009 with a wirelesspenetration rate of 47.91% and broadband penetration of 0.73%. Low penetration rates signify potential forgrowth in coming years. The government of India is targeting 1 billion telecom customers by 2015 and 20million broadband customers by 2010. Further, the total broadband subscribers in India are forecast toreach 85.8 million by 2014, compared to 8.8 million as of March 2010. The growth in telecom market isbeing driven by increasing urbanization, rising income levels and a large young population.

RCOM is one of the leading telecommunications players in India and ranks among the top four telecomcompanies in the world by number of customers in a single country. In addition, during FY2010, thecompany rolled out CDMA wireless broadband service, Reliance Netconnect Broadband+, with downlinkspeed of up to 3.1 Mbps. The initial rollout of the Netconnect Broadband+ service consisted of 38 citiesincluding the metros. This was later expanded to 62 cities towards the end of the FY2010. The companyplans to extend this service throughout India. RCOM retails Netconnect Broadband+ in 12,000 IT retail

outlets across India as well as 2,300 exclusive Reliance Communication retail stores and nearly 240Reliance World outlets. In enterprise broadband segment, RCOM operated in almost 50 cities of India withover 1 million buildings connected directly to its network as of FY2010. The company served nearly 1.5million access lines.

Low penetration rates in Indian market will allow the company to enhance its revenue in the coming years.


The pay-TV market in India is expected to grow in the coming years. According to the industry sources,India is the third largest Asian market in terms of pay-TV penetration, behind Korea and Taiwan. The pay-TV penetration in India is expected to increase from 78% in 2009 to 90% by 2014. It is also forecast that

the number of pay-TV subscribers in India will grow from 104 million in 2009 to 148 million by 2014.Further, India is expected to become the largest DTH market in the world in terms of subscribers by 2012,overtaking the US.

RCOM offers satellite TV services in India through its wholly owned subsidiary, Reliance Big. Thecompany's DTH operations uses MPEG 4 technology to deliver services over 200 broadcast channels andover 30 exclusive movie channels to its subscribers. Reliance Big TV is available at more than 100,000outlets across 6,500 towns in the country. As of FY2010, Reliance Big TV currently had 2.4 millionsubscribers, representing about 12% of the DTH market in India. During FY2010, the companycommenced the roll-out of India's first high definition (HD) set-top box with Digital Live TV Recordingcapabilities. Reliance Big TV is rolling out its HD DVR set-top box across top 100 cities in India.

Growth of pay-TV market will allow the company to increase its revenues in the coming years.


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RCOM is planning to launch 3G services in India by the end of 2010. The company, through its whollyowned subsidiary company, has won 3G spectrum for 13 key circles in the auction recently completed by

the Department of Telecommunications (DoT) of India. The company has successful bid for 13 of the 3Gcircles in India, the highest number of circles won by any operator in the auction, maximizes its 3Gcoverage on a much more conservative spend. RCOM is the only operator in India that has both thehighest 13 circle coverage in 3G as well as having pan India 3G-like capability in CDMA.

The company through 3G services will be able to provide its customers faster connectivity and offer a hostof applications, including mobile TV, video-on-demand, video calls and high-speed internet access.According to the industry sources, there will be 145 million 3G connections in India by the end of 2014.Further, the 3G broadband subscriber base is expected to reach 105 million by 2015, with total revenuesforecast to reach INR260,000 million ($5,488.6 million) by 2015.

Launch of 3G services will enable the company to enhance its subscribers and revenues in the coming

years.

Reliance Communications Limited: Threats


The competition in the Indian telecom market has been increasing in recent time owing to expansion ofexisting players and entry of new players. In recent times, the market has experienced launch of servicesin new circles by existing players and migration to GSM technology by CDMA players. Furthermore,mobile players are also entering the enterprise business by launching their national and international longdistance operations.

For instance, international players such as Vodafone and NTT DOCOMO made a direct entry into themarket. Vodafone acquired a controlling stake in Hutchison Essar, which operated as Hutch brand, andrebranded Hutch to Vodafone. NTT DOCOMO entered the market as TATA DOCOMO through an alliancewith Tata Teleservices, a CDMA service provider operation under the brand name Tata Indicom.Additionally, Tata Teleservices also launched Virgin Mobile services targeting young generation through abrand franchise agreement with Virgin Group. Some of the other competitors of the company includeAircel, Idea Cellular, and Tata Teleservices Maharashtra.Additionally, in 2009, Telecom Regulatory Authority of India (TRAI) recommended the entry of mobilevirtual network operator (MVNO) in India, further increasing the competition. Increasing competition mayaffect the company's market share in coming years.

Regulations

The telecom regulations in India have been increasing in recent times. The regulatory for communicationin India are handled by the DoT and Telecom Regulatory Authority of India (TRAI). In recent times, therehave been significant modifications and additions to regulations. For instance, TRAI issued revised qualityof service (QoS) regulation for cellular mobile telephone service (CMTS) and wire line services in March2009. The existing benchmarks have been tightened and some new parameters, including basetransceiver station (BTS) accumulated downtime, worst affected BTSs due to downtime, worst affectedcells having more than 3% TCH drop, have been added. The benchmark for call drop ratio has beenreduced to 2% from 3% earlier. The revised regulation came into existence from July 2009.In December 2009, DoT issued a directive to all the unified access service as well as NLD, ILD and ISPlicensees in December 2009. As per the order, prior approval has to be taken from the licensor beforeprocurement of any telecom equipment/software. Further, DoT implemented number portability in Haryanain November 2010 and plans to implement the same across India by January 2011.

The regulatory changes may affect the company's revenues, and requires it to make changes in


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organization to adapt to new regulations.


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Reliance Communications Limited: Financial Analysis

Reliance Communications Limited: Financial Overview

Reliance Communications

The company recorded revenues of INR206,850.5 million ($4,366.6 million) during the financial year endedMarch 2010 (FY2010), a decrease of 0.3% over 2009. In FY2010, India, the company's largest geographicmarket, accounted for 78.4% of the total revenues.

RCOM generates revenues through five business divisions: wireless (64.7% of the total division revenues inFY2010), global (21.6%), broadband (10.6%), investment (0.9%) and others (2.1%).

Revenues by Division

In FY2010, the wireless division recorded revenues of INR143,121.1 million ($3,021.3 million), a decrease of10.4% over 2009.

The global division recorded revenues of INR47,897.3 million ($1,011.1 million) in FY2010, an increase of14.6% over 2009.

The broadband division recorded revenues of INR23,476.4 million ($495.6 million) in FY2010, an increase of18.5% over 2009.

The investment division recorded revenues of INR2,094.9 million ($44.2 million) in FY2010, a decrease of36.1% over 2009.

The others division recorded revenues of INR4,733.1 million ($99.9 million) in FY2010, a decrease of 0.9% over2009.

Note: *As reported by the company.

**Divisional segments percentage rounded off.

Revenues by Geography

India, RCOM's largest geographical market, accounted for 78.4% of the total revenues in FY2010. Revenuesfrom India reached INR173,590.4 million ($3,664.5 million) in FY2010, a decrease of 4.5% over 2009.

Outside India accounted for 21.6% of the total revenues in FY2010. Revenues from outside India reachedINR47,732.4 million ($1,007.6 million) in FY2010, an increase of 0.2% over 2009.

Note: *As reported by the company.


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Reliance Communications Limited: Five Year Company Financials

Reliance Communications Limited: Key Income Statement Data

Figure 1: Reliance Communications Limited:Revenue to Net Income (2007-2010)

Figure 2: Reliance Communications Limited:Revenue/Employee to Net Income/Employee (2007-2010)


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Reliance Communications Limited: Key Balance Sheet Data

Figure 3: Reliance Communications Limited: CurrentAssets to Current Liabilities (2007-2010) Figure 4: Reliance Communications Limited: Assets,Liabilities to Total Equity (2007-2010)


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Reliance Communications Limited: Key Cash Flow Data

Figure 5: Reliance Communications Limited: FreeCash Flow to Cash from Operating Activities (2007-2010)

Figure 6: Reliance Communications Limited: NetChange in Cash (2007-2010)


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Reliance Communications Limited: Key Market Data

Figure 7: Reliance Communications Limited: MarketCapitalization to Year-end Share Price (2007-2010) Figure 8: Reliance Communications Limited:Enterprise Value (2007-2010)


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Reliance Communications Limited:Corporate Financial Deals Activity




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Figure 11: Reliance Communications Limited: DealActivity by Deal Type - Volume (2007 - YTD*2011)


Figure 12: Reliance Communications Limited: M&AAverage Deal Size - Value (US$m)


Table 7: Reliance Communications Limited: DealActivity by Deal Type - Volume (2007 - YTD*2011)

Deal Type 2007 2008 2009 2010 2011

ACQ 1 3 - 1 -

CR - - 1 - -

CV - - - - -

DIV 2 - - - -

Pship - 3 - 2 -

PE - 1 - 1 -

Total 3 7 1 4 -


Table 8: Reliance Communications Limited: M&AAverage Deal Size - Value (US$m)

Year Deal VolumeAverage Deal

Size (US$m)

2007 1 300

2008 3 25.3

2009 - -

2010 1 -

2011 - -


*ACQ = Acquisition; CR = Capital Raising; CV = Corporate Venturing; DIV = Divestment; Pship = Partnership; PE =PrivateEquity & Ownership


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Reliance Communications Limited: Targets and Partners

Table 9: Reliance Communications Limited: Targets and Partners

Reliance

Communications Limited-

Target/Partner (Country)

Deal Headline Deal Type Deal DateDeal Value

(US$m)

Nokia India Pvt., Ltd.

(India)

Reliance Communications to form business

alliance with Nokia IndiaPartnership

Aug 20,

2010-

Digicable Network (India)

Pvt., Ltd. (India)Reliance Communications to acquire Digicable Acquisition Jul 01, 2010 -

Reliance BIG TV, Ltd.

(India) , UTV Indiagames,Ltd. (India) Reliance Big TV partners with Indiagames Partnership

Jan 14,

2010 -

LG Electronics, Inc.

(Republic of Korea) ,

Reliance BIG TV, Ltd.

(India)

Reliance BIG TV partners with LG Electronics

for DTH servicesPartnership

Oct 30,

2008-

MTN Group Limited (South

Africa)

Reliance Communications and MTN Group

mutually end talks for business combinationAcquisition Jul 18, 2008 -

Vanco plc (United

Kingdom)Reliance Globalcom to acquire Vanco Acquisition

May 26,

200876

Alcatel Lucent (France)Reliance Communications forms joint venture

with Alcatel-LucentPartnership

May 12,

2008-

eWave World, Ltd. (United

Kingdom)Reliance Globalcom acquires eWave World Acquisition

Apr 24,

2008-

Electroteks Network

Services (Pte) Limited (Sri

Lanka)

Reliance Communications forms joint venture

with ElectroteksPartnership

Apr 07,

2008-

Anupam Global Soft (U)

Ltd. (Uganda)

Reliance Communications acquires Anupam

Global Soft (U)Acquisition

Feb 21,

2008-

Yipes Holdings, Inc.

(United States)

Reliance Communications acquires Yipes

HoldingsAcquisition

Dec 16,

2007300

Telkom Kenya Limited

(Kenya)

Airtel, Reliance and Tata lose bid to acquire

51% stake in Telkom KenyaAcquisition

Nov 16,

2007-



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Reliance Communications Limited: Top Deals 2007 -YTD*2011

Table 10: Reliance Communications Limited: Top Deals 2007 -YTD*2011

Target/Partner

(Country)Deal Headline Deal Date Deal Status Deal Type

Deal Value(US$m)

Reliance Infratel

Limited - Tower

Assets (India)

GTL Infrastructure withdraws

acquisition of tower assets from

Reliance Infratel

31 Aug 2010 Terminated Acquisition 11,000

Reliance Infratel

Limited (India)

Securities and Exchange Board of

India approves Reliance Infratel

IPO

24 Sep 2009 Announced IPO 1,023

Vanco plc (UnitedKingdom) Reliance Globalcom to acquireVanco 26 May 2008 Announced Acquisition 76

Reliance

Communications

Limited (India)

Life Insurance Corporation

increases stake from 4.99% to

5.01% in Reliance

Communications

13 Mar 2008 Completed Acquisition 4

Yipes Holdings, Inc.

(United States)

Reliance Communications acquires

Yipes Holdings16 Dec 2007 Completed Acquisition 300

Reliance Infratel

Limited (India)

Reliance Communications may sell

further stake in Reliance Telecom

Infrastructure (RTIL)

08 Aug 2007 Announced Acquisition 1,736

Reliance Infratel

Limited (India)

Reliance Communications sells 5%

stake in Reliance Telecom

Infrastructure

08 Aug 2007 CompletedPrivate

Equity338



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Reliance Communications Limited: Advisors

Reliance Communications Limited: Top Legal Advisors

Table 11: Reliance Communications Limited: Legal Advisor Ranking by Value (US$m)

Company Name Deal Volume Deal Value (US$m)

Amarchand & Mangaldas & Suresh A.

Shroff & Co.2 1,023


Reliance Communications Limited: Top Financial Advisors

Table 12: Reliance Communications Limited: Financial Advisor Ranking by Value (US$m)

Company Name Deal Volume Deal Value (US$m)

JP Morgan Chase & Co 1 338

Deutsche Equities India Private Limited 2 128

Enam Securities Private Limited 2 128

HSBC Securities and Capital Markets(India) Private Limited

2 128

ICICI Securities Limited 2 128

J.P. Morgan India Private Limited 2 128

JM Financial Consultants Private

Limited (formerly JM Morgan Stanley

Private, Ltd.)

2 128

Macquarie Capital Advisers (India)

Private Limited1 128

UBS Securities India Private Limited 2 128

Macquarie India Advisory Services

Private Limited1 -

SBI Capital Markets Limited 1 -

Kotak Mahindra Capital Company

Limited1 -

Lehman Brothers Securities Private

Limited1 -


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ABN AMRO Securities (India) Private,

Ltd.1 -



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Reliance Communications Limited: Mergers and Acquisitions

Figure 13: Reliance Communications Limited: M&AVolume and Value Trend (2007 - YTD*2011)


Figure 14: Reliance Communications Limited: M&AActivity by Geography (2007 - YTD*2011)


Table 13: Reliance Communications Limited: M&AVolume and Value Trend (2007 - YTD*2011)

Year Deal VolumeDeal Value

(US$m)

2007 1 300

2008 3 76

2009 - -

2010 1 -

2011 - -


Table 14: Reliance Communications Limited: M&AActivity by Geography (2007 - YTD*2011)

Geography Deal Volume

Asia-Pacific 1

Europe 2

Middle East and Africa 1

North America 1

South and Central

America-



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Reliance Communication

rcom analyst report

Documents