3Q.2011 India Mobile Operator ForecastIndia to have 1.42 million mobile subscriber connections in 2015 with Reliance Communications taking 16% market share

October 2011

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

INDUSTRY AVERAGE SUBSCRIBER GROWTH IN THE INDIAN WIRELESS MARKET REMAINS STRONG

The operator-wide average subscriber growth (YoY) was 32.9% in 2Q.2011 (down from 49.8% in 2Q.2010).

Double-digit subscriber growth continues across operators. Subscriber growth (YoY) at Reliance Communications was 27.0% in 2Q.2011 (down from 39.2% in 2Q.2010).

Subscriber growth at Vodafone Essarwas 29.8% in 2Q.2011, down from 42.7% in 2Q.2010.

Subscriber growth at Bharti Airtel is lower than that of Reliance Communications and Vodafone Essar. In 2Q.2011, subscriber growth at BhartiAirtel was 23.8% (down from 33.4% in 2Q.2010).

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4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Reliance Communications Ltd. Vodafone Essar Limited (Hutchison)

Bharti Airtel Limited Industry Total

Chart 1: Subscriber Growth (4Q08 – 2Q11), %

Strong subscriber growth continues in India32.9% industry average subscriber growth in 2Q.2011

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

INDUSTRY AVERAGE ARPU GROWTH IN INDIA CONTINUES TO BE NEGATIVE

The industry average monthly ARPU was US$ 3.16 in 2Q.2011, down from -21.7% YoY.

At the operator level, ARPU growth at Reliance Communications was -20.8% (YoY) in 2Q.2011, up from -38.1% in 2Q.2010.

ARPU growth (YoY) at Vodafone Essar increased from -22.7% in 2Q.2010 to -11.5% in 2Q.2011.

ARPU growth at Bharti Airtel was -11.6% in 2Q.2011, up from -22.7% in 2Q.2010.

Chart 2: ARPU Growth (4Q08 – 2Q11), %

ARPU growth in India remains negative-21.7% industry average ARPU growth in 2Q.2011

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Reliance Communications Ltd. Vodafone Essar Limited (Hutchison)

Bharti Airtel Limited Industry Total

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

The operator-wide average Minute of Use (MOU) per subscriber was 346 minutes per month in 2Q.2011, -9.5% YoY.

MOU/Sub at Reliance Communications continues to decrease. MOU/Sub growth (YoY) was -18.3% in 2Q.2011 (up from -27.2% in 2Q.2010).

MOU/Sub growth at Vodafone Essar was -5.1% in 2Q.2011, up from -5.7% in 2Q.2010.

On the other hand, Bharti Airtel’sMOU/Sub continues to be higher than that of Reliance Communications and Vodafone Essar. But, In 2Q.2011, Bharti Airtel’sMOU/Sub growth was -7.3%, down from 0.4% in 2Q.2010.

MOU per subscriber at Reliance Communications, Vodafone Essar, and Bharti Airtel was 241 minutes, 331 minutes, and 445 minutes respectively in 2Q.2011.

Chart 3: MOU/Sub Growth (4Q08 – 2Q11), %

Minutes of Use per Subscriber is decreasingIndustry average MOU/Sub is about 346 minutes per month

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Reliance Communications Ltd. Vodafone Essar Limited (Hutchison)

Bharti Airtel Limited

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

1.8% INDUSTRY AVERAGE EBITDA GROWTH IN 2Q.2011

• The industry average EBITDA growth rate turned positive. In 2Q.2011, the industry average EBITDA growth was 1.8%, up from -14.1% in 2Q.2010.

• EBITDA growth at Reliance Communications was -2.2% in 2Q.2011, up from -35.2% in 2Q 2010.

• Also, EBITDA growth rate (YoY) at Bharti Airtel increased from -7.0% in 2Q.2010 to -6.3% in 2Q.2011.

Chart 3: EBITDA Growth (4Q08 – 2Q11), %

Negative EBITDA growth at both Reliance Communications and Bharti Airtel in 2Q.2011

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4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Reliance Communications Ltd. Bharti Airtel Limited Industry Total

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

We forecast that the number of total wireless subscriber connections in India will increase from 749.9 million in the end of 2010 to 1.42 billion in the end of 2015.

Given the latest quarter numbers, our model predicts that Reliance Communications will have approximately 229 million mobile subscribers in 2015.

In our view, market share of Reliance Communications will be approximately 16.1% in 2015.

We forecast that Vodafone Essar will have 217 million mobile subscribers in 2015 (15.3% market share).

Our model predicts that Bharti Airtelwill have 265 million mobile subscribers in 2015 (18.6% market share).

Chart 4: Subscribers by operator (CY09 – CY15F)

So what is IEMR’s Forecast? Total mobile subscriber connections in India to reach 1.42 billion in 2015

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Reliance Communications Ltd.

Vodafone Essar Limited (Hutchison) Bharti Airtel Limited

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

WE EXPECT THE OPERATOR-WIDE AVERAGE ARPU LEVEL TO DECREASE TO INR 125 OVER THE TWO YEARS

Our forecasting model predicts that ARPUs will continue to decrease across major operators over the forecast period.

We forecast that the industry average ARPU will be approximately INR 125 per month in 2013, down from INR 167 in 2010.

We expect that Bharti Airtel’s ARPU level will continue to be higher than those of Reliance Communications and Vodafone Essar over the forecast period.

We forecast that Bharti Airtel’sARPU level will be approximately INR 172 in 2013.

Chart 5: Average Revenue per User (ARPU) per month (CY09 – CY13F), INR

So what is IEMR’s Forecast?ARPU levels in India to decrease

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Reliance Communications Ltd. Vodafone Essar Limited (Hutchison)

Bharti Airtel Limited Average

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

Bharti Airtel will continue to be the operator with the highest level of profitability in India’s wireless market over the forecast period.

Our model is predicting that BhartiAirtel’s EBITDA margins (calculated as EBITDA/service revenue) will be approximately 29% in 2013.

We expect that Reliance Communications' EBITDA margins will be approximately 27% in 2013.

Chart 6: EBITDA margins (CY09 – CY13F), %

So what is IEMR’s Forecast? Bharti Airtel to enjoy the highest profitability

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Reliance Communications Ltd. Bharti Airtel Limited Average

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