EXPANDING THE INDIA PRESENCEPresentation to Shareholders
Extraordinary General Meeting
1 August 2008
-1-COMPANY CONFIDENTIAL
TRANSACTION RATIONALE
TRANSACTION STEPS / RESOLUTIONS
VALUATION & FUNDING PLAN
INVESTORS’ & ANALYSTS’ FEEDBACK
CONCLUSION
Agenda
-2-COMPANY CONFIDENTIAL
Transaction rationale
Meets the Investment Criteria
6
The best long term option
5
Accelerate participation in growth through consolidation/
inorganic means
2
India is a must given significant growth
potential
1
Merger of Idea & Spice brings
additional benefits to both parties
4
Idea and Spice is the ideal combination
3
-3-COMPANY CONFIDENTIAL
COUNTRY BRIEF
Over 5,000 / over 600,000Cities & Towns / Villages
26.2%Teledensity
3.8%Wireline Penetration
42.6 mnNo. of Wireline Subscribers
23%Wireless Penetration
23 No of Telecom circles
255.9 mnNo. of Wireless Subscribers
30 states and 5 Union TerritoriesStates and Union Territories
1.146 bn Population (Mar’2008E)
India Telecom – A Snapshot
Source: COAI, AUSPI, DoT & TRAI
COMMENTS Second largest wireless telecom market globally- adding c 8 mn subs per month
Growth aided by regulatory initiatives, rapidly falling tariffs & intense competition Subs grown at a CAGR of 83% over last 5 years (Dec’02 to Dec’07)
Sector landscape dominated by 7 fixed line service providers and 12 wireless service providers
• New licenses issued in Jan 08 – will intensify competition further
Industry dominated by mobile services - Subscriber CAGR 56% (Dec ’06 – Dec ’07)
Rapid growth of wireless services anticipated• Population growth and demographic changes• Penetration rates of wireless and associated products currently low
Data as of March 2008
-4-COMPANY CONFIDENTIAL
India is a must for TMI given significant potential
India is the fastest growing wireless market by subs and revenues
7m – 8m wireless net adds per month
15 18 22 27 33 41 43 43 44 4314 35 55 96
162256
38 410 1 1 7420
50100150200250300350
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Wireline Wireless
Subs (mn)
41% 42%
63%
85% 90% 97% 100%
129%
23%
0%
20%
40%
60%
80%
100%
120%
140%
Indi
a
Indo
nesi
a
Chi
na
Phi
lippi
nes
Thai
land
Kor
ea
Mal
aysi
a
Taiw
an
Sin
gapo
re
Wireless penetration (Mar 2008)
Source: The Mobile World
Wireless subs growth (Dec 06 – Dec 07)
34%
16% 15%11% 10%
6% 6%1%
56%
0%
10%
20%
30%
40%
50%
60%
Indi
a
Indo
nesi
a
Chi
na
Phi
lippi
nes
Mal
aysi
a
Thai
land
Sin
gapo
re
Kor
ea
Taiw
an
Source: The Mobile World
1
Source: TRAI, DoT, COAI, AUSPI
Net adds growth per month equivalent to Celcom’s total subscribers
Total headroom for growth in India of 250 – 300 mn is equivalent to the combined growth potential of current TMI portfolio countries and other target counties in South East Asia and South Asia region for TMI.
-5-COMPANY CONFIDENTIAL
81146
230
500
663
Dec-05 Dec-06 Dec-07 DoT TargetDec 2010¹
Est Dec2012²
Accelerate participation in growth through consolidation/ inorganic means
2
Extrapolation of India mobile market growth
Potential slow down as mobile penetration level reaches mid 50% range by end of 2012
The ‘India Opportunity’ is now so need to capitalize on the growth today
Source: TRAI, DoT, Ovum, COAI, AUSPINote: 1. Target set by the Government of India2. Ovum estimate
CAGR 05-07 CAGR 07-10 CAGR 10-12:
Mobile subs (‘000s)
68% 30% 15%
-6-COMPANY CONFIDENTIAL
Idea and Spice is the ideal combination
Current deal expands coverage significantly with no overlaps
NORTH EAST & ASSAM CIRCLES
Idea – Existing Operations (11)
Spice – Existing Operations (2)
Idea – Launch Expected in FY09 (4)
Other States with Idea Licenses (6)
Note: The above is a circle wise map of India displaying telecom circles. The political state boundaries may be different
3
Source: COAI, AUSPI, Idea Disclosures
PAN INDIA PRESENCE – 70% population coverage with > 700m population
NO OVERLAP
# 5 PLAYER ( 28m subscribers ) FROM # 6 (IDEA) AND # 8 (SPICE) RESPECTIVELY
OPPORTUNITY TO LEVERAGE PASSIVE INFRASTRUCTURE- Faster rollout leveraging on Indus Towers (70,000 sites)
IDEA AS A SOLID PARTNER
- Exceeded industry growth with 71% subscriber growth FY07-08. (Industry at 58%)
- Strong partner in the respected Birla Group
-7-COMPANY CONFIDENTIAL
Merger of Idea & Spice brings additional benefits to both parties
Benefits to TMI
• Low cost Indian Telco model
• Economies of scale & bargaining power
• Indian IT and Telco talent
Benefits to Idea
A Business co-operation Forum to
be formed to facilitate synergies
and knowledge sharing
4
• TMI’s mature market experience – 3G , Mobile Broadband
• Roaming, procurement, product / services (eg- m-remittance
• Capital Infusion
-8-COMPANY CONFIDENTIAL
The best option available in India5
AS IS OPERATIONS
AS IS & NATIONAL ROLLOUT
INVEST IN NEW ENTRANTS
EXIT FROM IDEA
ACQUISTION & MERGER WITH IDEA
POTENTIAL FUTURE FINANCIAL IMPACT RISK IMPLICATIONS
• Minimal growth opportunity with 2 circles
• Natural death as new competitors are entering into the 2 circles of operations
• High rollout risk with competition and scarcity of spectrum
• Huge funding requirement and time to rollout
• High rollout risk with competition and scarcity of spectrum
• Huge funding requirements and uncertainty in partners
• Immediate returns but India is no longer an option for TMI. Closed opportunity
• Strong Position to capture the high growth of Indian market through a Pan Indian operator with an established and proven partner
HIGH
VERY HIGH
LOW TO MEDIUM
n/a
VERY HIGH
• Positive but very small
• Significant negative next 4-5 years
• Significant negative next 4-5 years
• Immediate gains from disposal of asset
• Earnings accretive in 2010 and 15-18% of TMI’scontribution in 2012
-9-COMPANY CONFIDENTIAL
Meets the investment criteria
Note: Certain financial data provided on this slide is based on quarterly releases of Idea and may be unaudited or preliminary.
* Post financing cost
IDEA IS A PROFIT MAKING COMPANY - PAT of INR10,423m (USD 243m) in the year ending March 2008 with a CAGR of 123% from 2006 to 2008
1
2 EARNINGS ACCRETIVE* IN THE FIRST FULL YEAR OF OPERATIONS
3 15-18% OF TMI’S CONSOLIDATED PROFITS - Expected by 2012, (based on existing portfolio) with the proportion increasing going forward
4 PROJECT IRR IN THE RANGE OF MID TO HIGH TEENS- over a 5 years
6
5 IMMEDIATE CASH INJECTION OF USD 1,060 mn- into the combined entity to accelerate rollout
-10-COMPANY CONFIDENTIAL
TRANSACTION RATIONALE
TRANSACTION STEPS / RESOLUTIONS
VALUATION & FUNDING PLAN
INVESTORS’ & ANALYSTS’ FEEDBACK
CONCLUSION
Agenda
-11-COMPANY CONFIDENTIAL
Approvals sought from shareholders at the EGM
Ordinary Resolution 1: Proposed subscription by TMI Mauritius Ltd of 464,734,670 new ordinary shares of Rs.10 each in Idea Cellular Limited (“Idea”)
Ordinary Resolution 2: Proposed mandatory general offer by Idea together with TMI, TMI Mauritius Ltd, TMI India Ltd and Green Acre Agro Services Private Limited (“GAASPL”), as persons acting in concert (“PAC”) with Idea, to acquire the remaining 137,985,050 ordinary shares of Rs.10 each in Spice Communications Limited (“Spice”), not held by Idea and the PAC
Ordinary Resolution 3: Proposed merger of Spice and Idea and option for TMI group to acquire additional Spice shares (to be converted to Idea shares under the Proposed Merger) from GAASPL
-12-COMPANY CONFIDENTIAL
Conditionality
Proposed Subscription The Proposed Subscription is not conditional upon any other proposals.
Proposed Offer The Proposed Offer is not conditional upon any other proposals
Proposed Merger The Proposed Merger is conditional upon the Proposed Subscription and
Proposed Offer
Other than the above, there is no conditionality among the Proposals
-13-COMPANY CONFIDENTIAL
Shareholding Structure of Idea and Spice (pre announcement)
IDEA
STRUCTURE OF IDEA
BIRLA GROUP COMPANIES*
OTHER SHAREHOLDERS
57.7%
42.3%
SPICE
STRUCTURE OF SPICE
MODI GROUP ENTITIES
OTHER SHAREHOLDERS
40.8%
20.0%
TMI India Ltd
39.2%
The shareholding structures are as on 24 June 2008, a day prior to the announcement of the proposed transactions
*Includes Birla Group Companies which are classified as Promoters; i.e. Aditya Birla Nuvo, Grasim Industries, Hindalco Industries and Birla TMT HoldingsNote: 1. The diagrams have been simplified for illustration purposes, only TMI holdings have been described in detail2. The shareholdings presented are based on issued and subscribed share capital
TMI Mauritius Ltd
TMI
100%
100%
-14-COMPANY CONFIDENTIAL
Ordinary Resolution 1 :Proposed Subscription of Idea Shares
Proposed subscription by TMI Mauritius Ltd of 464,734,670 new ordinary shares of Rs.10 each in Idea Cellular Limited (“Idea”)
POTENTIAL SHAREHOLDINGSTRUCTURE OF IDEA POST PROPOSED SUBSCRIPTION
IDEA
BIRLA GROUP COMPANIES
OTHER SHAREHOLDERS
49.0%
36.0%
TMI Mauritius
TMI
14.99%
100%
TMI could become the second largest shareholder in Idea post the proposed subscription of shares
Note: 1. The diagrams have been simplified for illustration purposes, only TMI holdings have been described in detail2. The shareholding presented is based on issued and subscribed capital
Ordinary Resolution 1
-15-COMPANY CONFIDENTIAL
Ordinary Resolution 2 : Proposed MGO of remaining shares in Spice not held by TMI & Idea
Proposed mandatory general offer by Idea together with TMI, TMI Mauritius Ltd, TMI India Ltd and Green Acre Agro Services Private Limited (“GAASPL”) as persons acting in concert (“PAC”) with Idea, to acquire the remaining 137,985,050 ordinary shares
of Rs.10 each in Spice not held by Idea and the PAC
SPICE
Idea
GAASPL
41.2%
9.8%
TMI India Ltd
49.0%
TMI Mauritius Ltd
TMI
100%
100%
POTENTIAL SHAREHOLDING STRUCTURE OF SPICE POST PROPOSED MGO
The above assumes 100% acceptance to the MGO and assumes purchase of Spice shares in the MGO by TMI India, Idea and GAASPL
Note: 1. The diagrams have been simplified for illustration purposes, only TMI holdings have been described in detail2. Assumes purchase of 49% of shares offered in MGO by TMI India, 49% by GAASPL and remaining by Idea. Actual purchases would be determined by number of shares tendered and foreign ownership limits in India
MGO of Spice Shares not held by TMI & Idea
SPICE
Others
39.2%
TMI India Ltd Idea
40.8%
20.0%MGO MGO
GAASPL
As a result of the acquisition of Modi Group shareholding in Spice by Idea, an obligation to carry out a MGO is triggered
in accordance with SEBI Takeover Regulations
GAASPL is a vehicle for the Birla Group
Ordinary Resolution 2
-16-COMPANY CONFIDENTIAL
Ordinary Resolution 3 : Proposed Merger of Spice and Idea
Proposed merger of Spice and Idea – Spice shareholders to receive 49 Idea shares for every 100 Spice shares held by them
POTENTIAL SHAREHOLDING STRUCTURE OF IDEA POST PROPOSED SUBSCRIPTION, MGO & MERGER
IDEA
BIRLA GROUP COMPANIES
OTHER SHAREHOLDERS
46.1%
33.8%
TMI Mauritius
TMI
14.1%*
100%
GAASPL
1.0%
TMI India
100%
5.0%
TMI could, directly or through subsidiaries, hold 19.1% in Idea if all the proposals are completed and assuming 100% response tothe MGO. In addition, TMI would have the option to acquire GAASPL stake in Idea (accrued from Spice shares acquired in MGO)
Note: 1. The diagrams have been simplified for illustration purposes, only TMI holdings have been described in detail2. Assumes purchase of 49% of shares offered in Spice MGO by TMI India, 49% by GAASPL and remaining by Idea. Actual purchases would be determined by number of shares tendered and foreign ownership limits in India3. The shareholding presented is based on issued and subscribed capital* due to the dilution on account of the merger, as new shares are issued to Spice shareholders.
Ordinary Resolution 3
SPICE
TMI India Ltd Idea
41.2%49.0%
GAASPL
9.8%
Merge with Idea
-17-COMPANY CONFIDENTIAL
Transaction step 1
Transaction steps# of shares
issued/purchased by TMI in Idea (m)
1Preferential issuance of Idea shares to TMI Rs 72,945 m
(US$1,699 m)
464.7 14.99%
PROPOSED SUBSCRIPTION BY TMI MAURITIUS LTD OF 464,734,670 NEW ORDINARY SHARES OF INDIAN RUPEE 10 EACH IN IDEA CELLULAR LIMITED
ORDINARY RESOLUTION 1
• Subscription represents approximately 14.99% of the enlarged issued and paid up share capital of Idea
Cumulative % stake of TMI in Idea
Note: 1) For the purpose of this document exchange rate has been assumed at 1 US$ = INR 42.94
Total outlay for TMI
-18-COMPANY CONFIDENTIAL
Transaction step 2
Transaction stepsTMI’s stake in
Spice pre MGO
2
Idea acquires Modi Group stake in Spice, participate in Spice MGO as a person acting in concert
Rs5,227 m
(US$122 m)
49.0%
PROPOSED MANDATORY GENERAL OFFER (“MGO”) BY IDEA TOGETHER WITH TMI, TMI MAURITIUS, TMI INDIA LTD AND GREEN ACRE AGRO SERVICES PRIVATE LIMITED, AS PERSONS ACTING IN CONCERT (“PAC”) WITH IDEA, TO ACQUIRE THE REMAINING 137,985,050 ORDINARY SHARES OF RS.10 EACH IN SPICE COMMUNICATIONS LIMITED, NOT HELD BY IDEA AND THE PAC
ORDINARY RESOLUTION 2
• As a result of the acquisition of MCPL (MCorp Global Communications Private Limited) shareholding in Spice by Idea, an obligation to carry out a MGO is triggered in accordance with SEBI Takeover Regulations
• MGO is made to the remaining Spice shares not held by Idea and PAC after Spice acquisition representing approximately 20% of the issued and paid-up share capital of Spice
• TMI will acquire 49% of Spice Shares under the Proposed Offer
TMI’s stake in Spice post MGO
39.2%
Total outlay for TMI
-19-COMPANY CONFIDENTIAL
Transaction step 3
Transaction steps# of shares
issued/purchased by TMI in Idea (m)
3Merger of Spice into Idea (49 Idea shares for 100 Spice shares)
– 165.7 19.1%
PROPOSED MERGER OF SPICE AND IDEA
ORDINARY RESOLUTION 3
• Proposed Merger will involve the merger of Spice into Idea whereby all Spice Shares shall be exchanged for Idea Shares on a basis of 49 Idea shares for every 100 Spice Shares held.
• Upon completion of the Proposed Merger, TMI Group equity interest in Idea will increase to 19.1%
• TMI also has the option to purchase Green Acre stake in Idea corresponding to Spice shares acquired by Green Acre
Cumulative % stake of TMI in Idea
Total outlay for TMI
-20-COMPANY CONFIDENTIAL
Complete Transaction steps1
• TMI has earned ability to equity account Idea stake• TMI has option to purchase Green Acre stake in Idea corresponding to Spice shares
acquired by Green Acre in MGO
Note:
1 Numbers mentioned in this slide have been calculated assuming 100% response to the MGO. Actual numbers will depend on the response to the MGO and could differ from the numbers presented in this slide
Transaction steps# of shares
issued/purchased by TMI in Idea (m)
1Preferential issuance of Idea shares to TMI 464.7 14.99%
2
Idea acquires Modi Group stake in Spice, participate in Spice MGO as a person acting in concert
– 14.99%
3Merger of Spice into Idea (49 Idea shares for 100 Spice shares)
– 165.7 19.1%
TOTAL Rs 78,172 m (US$1,821 m) 630.4 19.1%
Cumulative % stake of TMI in Idea
The transaction is expected to complete by 2Q 2009
Total outlay for TMI
Rs 72,945 m (US$1,699 m)
Rs 5,227 m (US$122 m)
-21-COMPANY CONFIDENTIAL
TRANSACTION RATIONALE
TRANSACTION STEPS / RESOLUTIONS
VALUATION & FUNDING PLAN
INVESTORS’ & ANALYSTS’ FEEDBACK
CONCLUSION
Agenda
-22-COMPANY CONFIDENTIAL
Source: Company filings, consensus estimates, TheMobileWorld.
EV/EBITDA (T+1)*
TMI’s acquisition is in line with recent Indian telco precedent multiples
14.0
12.5
15.0
16.1
17.3
0.0 4.0 8.0 12.0 16.0 20.0
HTIL/Hutch Essar
TMI/Idea(Blended)
Maxis/Aircel
Vodafone/Bharti
Vodafone/HutchEssar
EV/EBITDA (x)
14.5
• Recent acquisitions in India come with a premium due to the expectations of high growth and scarcity of assets.
• However the implied premium of TMI’s acquisition is still in line with recent comparable transactions when compared using the low end multiple of 12.5x and high end of multiple of 14.5x. A 2009 multiple is used as the transaction is expected to complete by 2nd Quarter 2009
12.5x
13.4x
14.5x
Effective valuation of entire transaction. TMI’s 39.2% in Spice valued at cost of
acquisition in 2006
Effective valuation of entire transaction. TMI’s 39.2% in Spice valued at pre-
announcement price
Effective valuation of entire transaction. TMI’s 39.2% in Spice valued at
transaction price for swap with Idea
IMPLIED EV/EBITDA 2009E of entire transaction
12.5 14.513.4
Range of Multiples
LOW
HIGH
Spice valued at investment cost of USD179m
Spice valued using pre announcement price if INR52 (as of 6 of June) before news flows of transaction
Spice valued at open offer price of INR 77, implying Idea price of INR157
Note :
The valuation includes the transaction of the preferential offer of Idea shares, Spice MGO and merger of Spice into Idea. The valuation variable is the value of Spice which TMI has viewed as its investment cost in 2006 in arriving at a blended multiple of 12.5x
Implied Valuation Multiple range are in line with comparables
* EBITDA based on forward 12 months consensus. Idea multiple based on 2009 estimates
Most Analysts had used this approach
-23-COMPANY CONFIDENTIAL
37.3% 29.3% 21.5%
47.0%
77.0%
0%20%40%60%80%
Premium toannouncement
- 24 June
Premium to 3month VWAP
Premium to 6month VWAP
India M&Apremium -before 3months
India M&Apremium -before 6months
Pre
miu
m
58.4%49.3%
40.2%
Premium is in line with past M&As
Source: Factset, Bloomberg-*As at 14 Jul 2008- market price per share is the closing price as per date of announcement
Deal announced when Idea is off its peak price
Effective premium for Idea compared against historical prices
60
90
120
150
180
7/03/2007 9/28/2007 12/26/2007 3/24/2008 6/19/2008
Sha
re p
rice
(INR
)
Idea
Transaction announcement:24 June 2008
Note: Based on effective price paid for Idea in the range of INR 136.2 ps – INR 157.2 ps
Indian M&As
• The premium is analysed against the recent and historical VolumeWeighted Average Price (VWAP) of Idea as the traded price has fluctuated over the last year . The last traded price may not reflect the intrinsic price of Idea
• Premium is in line with recent Indian M&As
• Examples of past acquisitions which were perceived by the market to be expensive include the following:
– Vodafone’s entry into Bharti in Oct ’05 was at market price of INR 328.35 per share and partially exited in Feb ‘07 at market price of INR 752 per share.
– Tata exited Idea with an implied 100% equity value of INR91.5 bnwhile the market capitalisation of Idea is now at INR216.5 bn*
INR157
VS.
-24-COMPANY CONFIDENTIAL
• In the interim we have several bridging financing facilities in place ranging from 6 months to a year to finance the transaction.
• Combination of USD and Ringgit Malaysia to mitigate the foreign exchange movements.
FINANCING THE TRANSACTION
BRIDGING LOAN
• We will announce our funding plan for the transaction within 3-6 months • Structure will be aimed at optimising the capital structure of the company and minimisedilution impact to shareholders.
FUNDING PLAN
-25-COMPANY CONFIDENTIAL
TRANSACTION RATIONALE
TRANSACTION STEPS / RESOLUTIONS
VALUATION & FUNDING PLAN
INVESTORS’ & ANALYSTS’ FEEDBACK
CONCLUSION
Agenda
-26-COMPANY CONFIDENTIAL
• Largely agree with the strategic rationale of the acquisition and the strong potential of the Indian market. Remaining as sub scale would be value destructive.
• Acknowledge that premium is on the high side but given the strategic case and acquisition multiples that are in line with precedent transactions, investors largely understand the premium.
• Primary concern to be addressed moving forward is the funding plan for this transaction.
FEEDBACK FROM INSTITUTIONAL INVESTORS & ANALYSTS
INSTITUTIONAL INVESTORS
• Idea acquisition, though gives TMI a meaningful exposure in the fast growing Indian mobile market, we cannot deny that this is an expensive acquisition. - Macqaurie
• Transaction mildly dilutive on its own given it is acquiring a minority stake at a premium to trading price. Longer term makes strategic sense as it largely enhances TMI’s footprint from sub scale operations. Deal to be considered in conjunction with TMI’s regional expansion plans as India had been its weak spot. - UBS
• Recent de-rating has been misdirected. TMI will have a meaningful exposure in the world’s second (India) most populous country with strong market position. – ABN AMRO
ANALYSTS
-27-COMPANY CONFIDENTIAL
TRANSACTION RATIONALE
TRANSACTION STEPS / RESOLUTIONS
VALUATION & FUNDING PLAN
INVESTORS’ & ANALYSTS’ FEEDBACK
CONCLUSION
Agenda
-28-COMPANY CONFIDENTIAL
Conclusion
The combined entity has the potential to become one of the largest players in the wireless telecom market in India, one of the largest markets (apart from China) in the world
The best option for faster, most economical and least risk investment for an India-wide presence to capture window of growth opportunity now and position against bigger players and new entrants
A unique proposition of both accelerated growth potential and earnings accretive by 2010with lower execution risks
The only real option for TMI
-29-COMPANY CONFIDENTIAL
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