3G auction

• International players with 3g experience will be allowed to bid for the spectrum.

• Incumebent at advantage as incremental cost to upgrade is less and additional invenstment of Rs 16.6bn towards UAS license fee.

• Pricing universally for auction varies from US $ 1.7 to US $583.

• Other parameter prcing per hertz.

• 7 metro and category A cirlce contrbute 57% of industry revenue.

• Any bidding above Rs 42bn Is likely to be negative , more so for operator with pan india operations.

Eligibility”UAS licensees and internations player with 3g experience.One band reserved for bsnl and mtna at highest bid pricec

• Spectrum allcation:2 X 5mhz in band of 2.1 gzhAlso in band of 450 and 800mhz and 1900 subject to availability.Cdma operatio have option to seek 2 X 1.25 in 800mhz at highest bidding prices.No spectrum fee for first year. After which 1% of revenue would be charged.3g spectrum would ease prssure from existing 3g spectrum and improve QOS

• NPV of 84bn dollars based on revenue and profitability of bharti airterl

• Any bidding aove Rs 43bn (50% of npv) shall be negative for all operator.

Resrve Price for Pan India Operation

• Reserve price at $35 bn• Mumbai dElhi and circle a 7*3.2bn• Koklotta and circle b 8*11.2bn• Circle c 5*.3bn• Successful bidder will offer 3g spectrum of 20

years. Not UAS license holder wil be granted license at existing price

Roll out obligation

• Metrosl 90% of metro area in 5 years• A, b , c circle 50% o DHQ out of which 15%

should be rural SDCAs• Tax benefit under section 80IA would be

applicable on 3g services.

3g Expensive?

• In world yes,because of • High license fee and• Using of different frequency for 3g which

requires completely new infrastructure• Upgardation from 2 to 2.5g require• GGSN – gateway GPRS support node• SGSN – serving GPRS support node

• Upgradation from 2.5 to 3 g require• Node b *(equivlanet to bts in gsm)• RNs radio network controlller( equivalent to

BSC in GSM)• Capex require is hence higher • Per site cost of RNC and node b comes aound

US$ 20,000 – 25,000

• 3g has voice capacity of 4-5x times 2g spectrum.• Due to higher voice capacity 3g can deliver higher

cost effective voice services.• Existing network with radio infrastructure can be

upgraded to universal mobile telecommunication system (umts)

• Older site with more than 5 year require new umts.• Increase from 2g to 3g increase capacity to 4-5 times.• Capex for 2g roll ut had been Us$ 100 per subscirber.

Parameter to consider 3g

• Penetration lever: metro 3g next revenue driver

• Arpu per user: Higher ARPU would lead to higher bidding

• No of bloakc and quantum of spectrum: higher participan aggressive pricing. DOT givnig 2X5 mhz , world over 2 x 10mhz

• Existing spectrum constrains.

Fair priace

• Revenue as percentage of movile revenue:• .2% for fy10, 1% fy 11, increading to 10% in

fy18• EBITDA margin for first year at 10%. EBIDTA

margin can be achieved at 45% considering low spectrum usage charges.

• Tax rate of 12.5% for first year and 30% for subsequent years.

capex

• Cpaex at 20,000 to 25000 per • Upgrade to 3g at 21,000 site in metro by fy

12 , 41k by fy 15 fy 56,000 fy 18• Terminal value of 4% , wacc 12%

Gloab exerience

• 3g wireless subsciber increased from 1.7% in dec 2004 to 10% in june 2008

• ARPu incerassed by 225in june 2008• 2g+ gprs ==2.5 gdta speed 160kbps• 2.5g + edge = 2.75 g data speed of 473kbps• Cdma 2000=2.5 g• Cdma 20000+umts = 3g