Quarterly Report on Results for the Period of the Third Quarter and Nine Months ended December 31, 2004 January 27, 2005 Bharti Tele-Ventures Limited (Incorporated as a public limited company on July 7, 1995 under the Companies Act, 1956) Qutab Ambience, H-5/12, Mehrauli Road, New Delhi 110030, India Phone: (91-11) 51666000 Fax: (91-11) 51666011 Alliances, Innovations & Recognitions The financial statements included in this quarterly report fairly presents in all material respects the financial condition, results of operations and cash flows of the company as of, and for the periods presented in this report. Sunil B Mittal Akhil Gupta Chief Executive Officer Joint Managing Director Chairman & Group Managing Director
Transcript
Quarterly Report on Results for the Period of the Third Quarter and Nine Months ended December 31, 2004 January 27, 2005
Bharti Tele-Ventures Limited (Incorporated as a public limited company on July 7, 1995 under the Companies Act, 1956)
Qutab Ambience, H-5/12, Mehrauli Road, New Delhi 110030, India Phone: (91-11) 51666000 Fax: (91-11) 51666011
Alliances, Innovations & Recognitions
The financial statements included in this quarterly report fairly presents in all material respects the financial condition, results of operations and cash flows of the company as of, and for the periods presented in this report.
Sunil B Mittal Akhil Gupta Chief Executive Officer Joint Managing Director
Chairman & Group Managing Director
Supplemental Disclosures
Safe Harbor: - Some information in this report may contain forward-looking statements. We have based these forward-looking statements on our current beliefs, expectations and intentions as to facts, actions and events that will or may occur in the future. Such statements generally are identified by forward-looking words such as “believe,” “plan,” “anticipate,” “continue,” “estimate,” “expect,” “may,” “will” or other similar words. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We have chosen these assumptions or bases in good faith, and we believe that they are reasonable in all material respects. However, we caution you that forward-looking statements’ and assumed facts or bases almost always vary from actual results, and the differences between the results implied by the forward-looking statements and assumed facts or bases and actual results can be material, depending on the circumstances. You should also keep in mind that any forward-looking statement made by us in this report or elsewhere speaks only as of the date on which we made it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this report after the date hereof. In light of these risks and uncertainties, any forward-looking statement made in this report or elsewhere may or may not occur and has to be understood and read along with this supplemental disclosure. General Risk:- Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Company unless they can afford to take the risk of losing their investment. For taking an investment decision, investors must rely on their own examination of Bharti Tele-Ventures including the risks involved. Convenience translation:- We publish our financial statements in Indian Rupees. All references herein to “Indian Rupees” and “Rs.” are to Indian Rupees and all references herein to “US dollars” and “US$” are to United States dollars. All translations from Indian Rupees to United States dollars were made (unless otherwise indicated) on the basis of the indicative closing rate on December 31, 2004 of Rs.43.45 = US $1.00 provided to us by an Reserve Bank of India (RBI) authorized dealer in India. All amounts translated into United States dollars as described above are provided solely for the convenience of the reader, and no representation is made that the Indian Rupees or United States dollar amounts referred to herein could have been or could be converted into United States dollars or Indian Rupees respectively, as the case may be, at any particular rate, the above rates or at all. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Information contained in our website, www.bhartiteleventures.com and www.airtelworld.com is not part of this Quarterly Report. Use of the Certain Non-GAAP measures:- This result announcement contains certain information on the Company’s results of operations and cash flows that have been derived from amounts calculated in accordance with International Financial Reporting Standards (IFRS), but are not in themselves IFRS measures. They should not be viewed in isolation as alternatives to the equivalent IFRS measure and should be read in conjunction with the equivalent IFRS measure. Further, disclosures are also provided under “Use of Non GAAP financial information” on page 21. Others:- In this report, the terms “we”, “us”, “our”, “Bharti” or “the Company”, unless otherwise specified or the context otherwise implies, refer to Bharti Tele-Ventures Limited (“Bharti Tele-Ventures”) and its subsidiaries, Bharti Cellular Limited (“Bharti Cellular”), Bharti Infotel Limited (“Bharti Infotel”), Bharti Hexacom Limited (“Bhart Hexacom”), Bharti Comtel Limited (“Bharti Comtel”) and Bharti Aquanet Limited (“Bharti Aquanet”). Disclaimer:- This communication does not constitute an offer of securities for sale in the United States. Securities may not be sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. Any public offering of securities to be made in the United States will be made by means of a prospectus and will contain detailed information about the Company and its management, as well as financial statements.
2.1.1 Consolidated Summarised Statement of Income 2.1.2 Consolidated Summarised Balance Sheet
2.2 Segment-wise Information 2.2.1 Mobile Services 2.2.2 Infotel Services 2.2.3 Broadband & Telephone Services 2.2.4 Long Distance Services 2.2.5 Enterprise Services 2.2.6 Others
2.3 Segment-wise Investments and Contribution 2.3.1 Investments in projects 2.3.2 Contribution to Revenue, EBITDA and Capex.
Section III – Operating Highlights………………………………………………………………………………… 12
3.1 BTVL consolidated 3.2 Mobile Services 3.3 Broadband & Telephone Services 3.4 Human Resource Analysis
Section IV – Management Discussion & Analysis 4.1 Key Industry Developments and Highlights………………………………………………………….. 14
4.1.1 Industry 4.1.2 Company
4.2 Results of Operations …………………………………………………………………………………… 17
Section V – Stock Market Highlights ………………………………………………………………………………. 19 Section VI – Use of Certain Non GAAP Financial Information and schedules to financial statements... 21
6.1 Reconciliation of Non GAAP financial information 6.1.1 BTVL Consolidated 6.1.2 Mobile Services 6.1.3 Infotel Services 6.1.4 Broadband & Telephone Services 6.1.5 Long distance Services 6.1.6 Enterprise Services 6.1.7 Others
6.2 Schedule to financial statements 6.2.1 Other costs 6.2.2 Depreciation and amortisation 6.2.3 Finance cost (net) 6.2.4 Income tax
A1.1 Consolidated Statement of Income as per International Financial Reporting Standards A1.2 Consolidated Balance Sheet as per International Financial Reporting Standards A1.3 Cash Flow Statement as per International Financial Reporting Standards A1.4 Trends & Ratio Analysis A1.5 Key Accounting Policies A1.6 Summarised Consolidated Profit & Loss Statement as per Indian GAAP A1.7 Summary of differences in net profit / (loss) between IGAAP and IFRS
G1 Glossary of Financial, Technical, Industry and Other Terms………………………………….…………… 35
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Key Highlights for the period ended December 31, 2004
Chart 1 - Our Customer base (No. in '000)
569
804
9,826
5,501
0
3,000
6,000
9,000
12,000
Q3FY04 Q3FY05
Mobile Broadband & Telephone
Total customer base crosses 10 million mark. Mobile market share of All India GSM market
equals 26.3% with market share of net additionsduring the quarter of 29.5%
Mobile market share of 20.7% of overall wireless
market.
Chart 2 - Revenues, EBITDA (Amt in Rs. Mn) & EBITDA margins (in %'age)
12,687
21,530
7,802
4,728
36.2%
37.3%
0
4,000
8,000
12,000
16,000
20,000
24,000
Q3FY04 Q3FY0510.0%
20.0%
30.0%
40.0%
Revenues Ebitda Ebitda Margin
Incremental revenue for the quarter approximatelyequals incremental revenue for the first half.
Revenue and EBITDA grew by 70% and 65%
respectively over the corresponding quarter lastyear.
Chart 3 - Cash Profit from Operations & Net Profit (Amt in Rs mn)
3,999
7,611
1,613
3,726
0
2,000
4,000
6,000
8,000
Q3FY04 Q3FY05
Cash profit from operations Net profit
Cash profit from operations grew by 90% over thecorresponding quarter last year.
Net Profit grew by 131% over the corresponding
quarter last year.
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SECTION I
AN OVERVIEW 1.1 Introduction We are one of India’s leading private sector providers of telecommunications services based on an aggregate of 10,629,815 customers as of December 31, 2004, consisting of 9,826,156 GSM mobile and 803,659 broadband & telephony customers. We are the largest GSM mobile service provider in the country, based on number of customers. Mobile services constitute the largest portion of our business both in terms of total customer and total revenues. We also provide broadband & telephony services, long distance services and enterprise services. As per un-audited IFRS financial statements, for the quarter ended December 31, 2004, our Total Revenue and Earning Before Interest, Taxation, Depreciation and Amortisation (EBITDA) was Rs. 21,530 (US$ 496 million) and Rs. 7,802 million (US$ 180 million) respectively, and for nine months ended December 31, 2004, our Total Revenue and EBITDA was Rs. 57,174 million (US$ 1,316 million) and Rs. 21,015 million (US$ 484 million) respectively. The net profit for the quarter and nine months ended December 31, 2004 was Rs. 3,726 million (US$ 86 million) and Rs 10,025 million (US$ 231 million) respectively. During the quarter ended December 31, 2004, mobile services represented approximately 69% of our Total Revenue. We continue to capitalize on the growth opportunities prevalent in the Indian telecommunications sector to achieve our vision “to be globally admired for telecom services that delight customers”. Our businesses have been organized by services into two main ‘Strategic Business Groups’ – the Mobility and the Infotel services group. The Mobility group provides GSM mobile services in twenty one telecom circles, while the Infotel group provides broadband & telephony services, long distance services and enterprise services.
Mobile Services Infotel Services
Broadband & Telephone Services
Long Distance Services
Enterprise Services
Bharti Tele-Ventures Limited
The Company currently conducts its business through its subsidiaries. It holds 99.66% in Bharti Cellular (operates 20 mobile circles-except for the circle of Rajasthan), 68.5% in Bharti Hexacom (operates the Rajasthan mobile circle) and 100% in Bharti Infotel (operates broadband & telephone services, long distance services and enterprise services). 1.2 Business Divisions
• Mobile Services - We currently offer GSM mobile services in 21 out of the 23 circles in India. Our 9,826,156 GSM mobile
customers in the circles accounted for a market share of 26.3% of All India GSM market and 20.7% of overall wireless market (GSM + Digital Mobile) respectively, as on December 31, 2004. We have recently launched our services in the circle of Bihar (including Jharkhand) and have licenses for two additional circles namely Assam and the North East.
• Broadband & Telephone Services- We currently provide broadband (DSL) & telephony services (fixed line) in over 50 towns in
the circles of Madhya Pradesh, Chattisgarh, Haryana, Delhi, Karnataka and Tamil Nadu. We had 803,659 customers as on December 31, 2004. We have recently launched our services in Noida (part of Uttar Pradesh).
• Long Distance Services - We complement our mobile and broadband & telephone services with national and international long
distance services and provide these services across India. We had over 26,000 route kilometers of fibre on our national long distance arm as on December 31, 2004. We also have a submarine cable landing station at Chennai, which connects the submarine cable connecting Chennai and Singapore.
• Enterprise Services – Our enterprise services group is a solutions-based communication group, especially created to deliver
platinum service to the customers. As a partner committed to the business needs of its customers, the group understands the unique challenges that drive the business and is committed to provide customized offerings through its portfolio of mobile, broadband & telephony and data & internet solutions.
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1.3 Vendors We believe in deploying the finest technology and operating state-of-the-art networks. Our mobile networks equipment suppliers include Ericsson, Nokia, Siemens, and Motorola. In the case of the telephone services and long distance networks, equipment suppliers include Siemens, Nortel, Corning, among others. We also have an information technology alliance with IBM for our information technology requirements of the entire group. 1.4 Partner We have strong strategic alliances with SingTel, which have enabled us to further enhance and expand our telecommunications networks in India to provide quality service to our customers. The investment made by SingTel in our company is one of their largest investments made in the world outside Singapore.
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1.5 Mobile Footprint
ource: S
ulation estimates are as per National Census, 2001 and are as of March 1, 2001. The population for Uttar Pradesh (West) circle is
3. adesh
1. Popapproximately 37% of the total population for the state of Uttar Pradesh.
2. Wireless subscriber statistics are as of December 31, 2004 and are based on number of subscribers published by COAI & number of digital mobile subscribers published by AUSPI. These numbers does not include digital mobile subscribers of Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL). Wireless market size comprises the total number of GSM mobile subscribers and digital mobile subscribers of all the service providers in a circle except the digital mobile subscribers of BSNL and MTNL. Demographics of Maharashtra and Tamil Nadu does not include demographics of state capitals (metros) Mumbai and Chennai respectively.
4. Demographic of Haryana does not include Faridabad & Gurgaon as they are included in Delhi & NCR. Similarly, demographics of Uttar Pr(West) & Uttranchal does not include Noida & Gaziabad as they are included in Delhi & NCR.
Page 7 of 38
Page 8 of 38 Page 8 of 38
SECTION II
FINANCIAL HIGHLIGHTS
Detailed financial statement, analysis and other related information is attached to this report as Annexure. Also, kindly refer to Section VI (use of Non- GAAP financial information on page 21) and Glossary (page 35) for detailed definitions.
The financial statements for the third quarter and nine months ended December 31, 2004 & 2003 are un-audited and are prepared based on International Financial Reporting Standards (IFRS). 2.1 BTVL Consolidated - Summary of Consolidated Financial Statements.
Note: Earning before taxation and net profit for the period ended Dec 2003 does not include Rs. 300 million of unusual income. 2.1.2 Consolidated Summarised Balance Sheet
As atDec. 31, 2004
ASSETSTotal current assets 26,833 Total non - current assets 133,073 Total assets 159,906 LIABILITIES AND STOCKHOLDERS' EQUITYTotal current liabilities 57,300 Total non - current liabilities 38,791 Total liabilities 96,091
Minority Interests 770 Total stockholders' equity 63,045 Total liabilities and stockholders' equity 159,906
Particulars
Rs million
Dec. 2004 Dec. 2003Y-on-Y Grow th Dec.
Total revenues 21,530 12,687 70% EBITDA 7,802 4,728 65% Cash prof it f rom operations 7,611 3,999 90% Earnings/(loss) before taxation 4,545 1,838 147% Current tax expense 330 220 50% Earnings/(loss) af ter current 4,215 1,618 160% tax expense Deferred tax expense / (income) 438 (1) - Net prof it / (loss) 3,726 1,613 131% EBITDA / Total revenues 36.2% 37.3%
2.2.1.2 Existing Mobile operations – comprises of circles operational as on June 30, 2004. The circles include Delhi & NCR,
Chennai, Kolkata, Andhra Pradesh, Karnataka, Himachal Pradesh, Punjab, Haryana, Uttar Pradesh (West) & Uttranchal, Madhya Pradesh & Chattisgarh, Tamil Nadu & Pondichery, Kerala, Gujarat, Maharashtra & Goa, Mumbai and Rajasthan. The Rajasthan circle has been consolidated w.e.f October 1, 2004.
Dec. 2004 Dec. 2003 Y-on-Y Grow th
Dec. 2004 Dec. 2003 Y-on-Y Grow th
Total revenues 14,413 8,580 68% 37,736 22,712 66%
Rs mill ion, except ratios
Particulars
Quarter Ended Nine Months Ended
2.2.1.3 New Mobile Operations – comprises of circles launched/yet to be launched after June 30, 2004. It in
2.2.6 Others - comprises the expenses of the BTVL corporate office.
Dec. 2004 Dec. 2003Y-on-Y Particulars
Nine Months EndeQuarter Ended
Note: EBITDA and EBIT for the period ended December 31, 2003, does not include provision of Rs 48 million of WPC fees pertaining to prior period. 2.2.4 Long Distance Services - comprises the domestic, international long distance operations and landing station operations at
Total re EBITDA 69% 4,108 2,303 78% Earnings before interest & tax 1,116 589 90% 3,080 1,524 102% EBITDA / Total Revenues 30.5% 32.4% 30.2% 28.4%
ParticularsNine Months Ended
Rs million, except ratiosQuarter Ended
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2.3 Segment-wise Investments and Contribution 2.3.1 Investments in projects
ote: The eliminations for capex is on account of transfer of assets from one segment to another.
Rs. Million % of TotalMobile Services 120,601 73%Broadband & Telephone Services 19,893 12%Long Distance Services 20,755 13%Enterprise Services 2,774 2%Other 374 0%sTotal 164,397 100%Accumulated Depreciation & Amortisation (34,234)Net Fixed Assets & Other Project Investm ent 130,164
Segment
Rs million, except ratiosAs at December 31, 2004
Note: The investment in projects comprises gross fixed assets, intangibles assets, capital work in progress, gross goodwill and one time entry fee paid. 2.3.2 Segment-wise Contribution to Revenue, EBITDA and Capex incurred during the period
Rs. Million % of total Rs. Million % of total Rs. Million % of total
onths Ended December 2004Revenue EBITDA CapexSegment
ET
Nine M
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SECTION III OPERATING HIGHLIGHTS
3.1 BTVL Consolidated
Notes: - 1. Wireless Subscribers include GSM mobile subscribers and digital mobile subscribers as published by COAI and AUSPI respectively. These numbers
do not include digital mobile subscribers of BSNL and MTNL. 2. Please refer to the glossary for revised definitions of ARPU, Churn and MoU, The definition has been revised and applied consistently across all
Mobile Customers on Bharti's Netw orks No. 9,826,156 8,702,255 13% 5,500,580 79%Net AdditionsAll India Wireless Subscribers No. 4,940,468 5,162,434 -4% 5,262,467 -6%All India GSM Mobile Subscribers No. 3,806,049 4,369,012 -13% 3,691,186 3%Mobile Customers on Bharti's Netw orks No. 1,123,901 1,030,132 9% 883,562 27%Bharti's M arke t Shareas a % of A ll India GSM Mobile Subscribers % 26.3% 25.9% 1% 25.0% 5%as a % of A ll India Wireless Subscribers % 20.7% 20.5% 1% 19.5% 6%Bharti's Share of Ne t Additionsas a % of A ll India GSM Mobile Subscribers % 29.5% 23.6% 25% 23.9% 23%as a % of A ll India Wireless Subscribers % 22.7% 20.0% 14% 16.8% 35%Pre -Paid Custom e rs (as percentage of)Total Customer Base % 75% 77% -3% 82% -9%Total Net Additions % 67% 69% -3% 74% -9%Other Operating Inform ation
verage Revenue Per User (ARPU) Rs 519 509 2% 555 -6%Average Revenue Per User (ARPU) US$ 12 12 2% 13 -6%
Average Minutes of Use Per User No. of minutes
344 321 7% 301 15%
M onthly ChurnPost-paid Voluntary Churn % 1.3% 1.4% -4% 1.1% 22%Post-paid Company Initiated Churn % 2.5% 2.2% 14% 3.3% -24%Prepaid % 8.5% 8.7% -2% 5.7% 49%Non Voice RevenueSMS Revenue as a % of total revenues % 5.8% 5.8% 0% 3.5% 63%Total Non Voice Revenue as a % of total revenues
% 8.5% 7.4% 15% 4.3% 99%
Subscriber BaseAll Ind Wireless Subscribers No. 47,374,806 42,434,338 12%All Ind GSM Mobile Subscribers No. 37,378,807 33,572,758 11%
A
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Broadband & Telephone Services
Human Resource Analysis
3.3
Parameters UnitDec. 31,
2004Sept. 30,
2004Q-on-Q Grow th
Dec. 31, 2003
Y-on-Y Grow th
Broadband & Telephony Customers on Bharti's Netw orks
No. 803,659 764,872 5% 569,196 41%
Net additions on Bharti's Netw ork No. 38,787 61,049 -36% 72,495 -46%Average Revenue Per User (ARPU) Rs 1,238 1,256 -1% 1,265 -2%Average Revenue Per User (ARPU) US$ 28 29 -1% 29.1 -2%
3.4
Parameters UnitDec. 31,
2004Sept. 30,
2004Q-on-Q Grow th
Dec. 31, 2003
Y-on-Y Grow th
Em ployee ProductivityM obile ServicesNum ber of Custom ers per Em ployeeExisting Circles No. 2,282 2,092 9% 1,863 23%New Circles No. 117 125 -7%Gross Revenue per em ployee per m onth
Rs 1,066,682 907,631 18%
Existing Circles Rs 1,213,836 1,050,894 16% 968,558 25%New Circles Rs 203,814 32,658 -Broadband & Te lephone ServicesNumber of Customers per Employee No. 554 550 1% 438 26%Gross Revenue per employee per month Rs 673,906 674,633 0% 528,131 28%Long Dis tance ServicesGross Revenue per employee per month Rs 3,264,671 2,906,975 12% 1,988,719 64%Enterprise ServicesGross Revenue per employee per month Rs 1,406,088 1,464,234 -4% 1,032,345 36%
Page 13 of 38
SECTION IV
MANAGEMENT DISCUSSION & ANALYSIS 4.1 Key Industry Developments 4.1.1 Industry Telecom Regulatory Authority of India’s (TRAI’s) recommendations on Unified Licensing Regime On January 13, 2005 Telecom Regulatory Authority of India (TRAI) issued its final recommendations to the Department of
elecommunications (DoT) on the unified licensing regime.
salie tions are as follows:
T The nt features of the recommenda
Cate1. gories of licenses: There shall be four categories of licenses - unified license, class license, licensing through authorization and standalone broadcasting and cable TV license.
2. Registration Charge: (a) For unified license, registration charge shall be approximately Rs.1,070 million plus a function of basic service operator's (who have entered in/after 2001) entry fee depending on the service areas or circles where the unified licensee wishes to offer access services. The registration charge shall gradually be reduced and brought down to approximately Rs. 3 million after five years. (b) Integrated operators shall not pay any registration fee for migration to unified license. (c) There is no registration charge to acquire a class license and to offer services that are licensed through authorization.
3. Definition of Adjusted Gross Revenue (AGR): AGR shall include only the revenue accrued out of telecom services and shall not include sale of capital goods, sale of handsets, dividend and interest earned on various deposits.
4. License Fee: For unified license, class license and niche operators, the license fee shall be (contribution to USF of 5% plus administrative cost of 1%) 6% of AGR.
5. Migration to new regime: It is optional at this stage and shall be mandatory after five years. Service specific licenses permitted to be issued for another two years. After two years of the date of implementation of these recommendations, all new service providers shall be licensed under the new unified licensing regime.
6. Roll Out Obligations: Under unified license, rollout obligations for access services are same as existing roll out of UASL (Unified Access Services License). For national long distance services, operators shall have to make arrangement to carry traffic in all service areas. Handover may be at the choice of the unified licensee/National Long Distance Operator (NLDO) at central location or Long Distance Charging Areas (LDCA). Handover at Short Distance Charging Areas (SDCA) level is permitted with mutual consent of interconnecting operators. For international long distance services, the existing rollout obligations are to continue.
7. Broadcasting Service: To offer broadcasting services, a Unified Licensee will have to apply to the Information and Broadcasting (I&B) Ministry in case such clearance is required and fulfill other requirements as prescribed.
8. Spectrum: Existing spectrum pricing and allocation process to continue till the Government issues spectrum guidelines based on TRAI recommendations, which are being finalized.
9. Reselling would not be permitted at this stage.
hese recommendations are subject to approval by the Department of Telecommunications (DoT) for implementation. he website/url: http://www.trai.gov.in/recom13jan05.htm , for further reference/details on the recommendations)
T(Please view t .
Telecommunication Interconnection Usage Charges (IUC) (Fourth Amendment) Regulation TRAI had issued a consultation paper on June 23, 2004, to initiate the process of Access Deficit Charge (ADC) review. After completion of the consultative exercise including open house discussions, the TRAI on January 06, 2005, issued the Telecommunication Interconnection Usage Charges (Fourth Amendment) Regulation (1 of 2005) whereby the revised ADC regime was introduced. The new regime will be implemented effective February 01, 2005. The salient features are as follows: 1. Total ADC amount and methodology of imposing ADC as a ‘per minute’ charge, remains unchanged. 2. ADC as a ‘revenue share’ to be introduced later. 3. Disbursement of ADC altered to ensure that ADC amount received by BSNL is unchanged. Other fixed line operators no longer to
be beneficiaries of ADC from incoming calls on their networks. This ADC to be passed on to BSNL and other fixed line operators shall only retain ADC on calls originating on their networks.
4. ADC (in Rs. per minute) has been revised, as follows: (a) ADC on incoming ILD calls has been reduced from the existing Rs.4.25 per minute to Rs.3.25 per minute, (b) ADC on outgoing ILD calls has been reduced from the existing Rs.4.25 per minute to Rs.2.50 per minute, (c) A uniform ADC @ Rs.0.30 per minute has been imposed on all inter-circle calls, irrespective of distance based slabs.
A new consultation paper will be brought out on admissibility and quantum of ADC for fixed service providers (including transition to revenue share), based on an examination of the relevant network elements data, including the verification of the cost items that are presented in the annual reports of service providers, the implementation of the Universal Service Obligation (USO) regime, admissibility of WLL (F) for ADC, and other factors which have been mentioned in the regulation as affecting the ADC estimates. This review may also cover a review of the Interconnection Usage Charge (IUC) regime. (Please view the website/url: http://www.trai.gov.in/regu6jan05.pdf, for further reference/details on the regulation).
Page 14 of 38
Thirty Third Amendment to Telecommunications Tariff Order (TTO)’99 by TRAI On December 08, 2004 TRAI issued the 33rd herein the regulator introduced the concept of ‘Vertica ariff assuming the nature of anti-
mpetitive conduct that may occur w inputs required by competitors wns operators or its affiliates use those key inputs to compete in the downstream market. The ndm l tariffs in the nature of Vertical Price Squeeze shall be treated as a case of discriminatory
firmed that it shall be permissible for operators to provide differential call charges for off net and on net calls.
Amendment to the Telecommunication Tariff Order, 1999, wl Price Squeeze’. Vertical Price Squeeze means differential t
hen an operator with significant market power controls certain keycoin do tream markets and where such
me ent further states that differentiaAtariff. However, TRAI reafPlease view the website/url: ( http://www.trai.gov.in/recom.htm, for further reference/details on the tariff order).
Recommendations on Funding of TRAI On November 04, 2004, TRAI recommended to the Government to allow it to have 0.05% of the annual license fee paid by telecom service providers and cable operators to the Government, in order to make TRAI independent of Government funding. In its
of its independent source of funding, TRAI is not able to improve the recommendations, the authority stated that in the absence service conditions of its employees and attract necessary talent to the organization. (Please view the website/url: http://www.trai.gov.in/recom.htm, for further reference/details on the recommendations). TRAI Consultation Paper on Growth of telecom services in rural India
ctober 27, 2004, TRAI released a consultation paper on ‘Growth of telecom services in rural India’. The paper invited all holders to participate in a collective thinking process so as to achieve higher quantitative and qualitative growth of telecom
ces in rural India. Authority noted that despite several attempts over the last more than ten years, the gap b
On Ostakeservi etween penetration of
also nal spurt in the growth of tele-
incre O) Fund currently emphasizes on telephone connections and to a limited extent on high-
mak
(Plea
telephony in rural (1.7%) and urban (19.7%) areas is widening. Roll out obligations imposed as part of the licence conditions have not managed to attract telecom infrastructure in rural areas. Whilst there has been a phenome
density in the country, with the evolution of new wireless technologies, the gap between the urban and the rural tele-density is asing. Universal Service Obligation (US
speed telecom information centres. The Authority has opined that a relook at the entire issue of rural communications is needed to e a speedy headway.
Comments were to be submitted latest by November 30, 2004. se view the website/url: http://www.trai.gov.in/27octpr.htm , for further reference/details on the consultation paper).
Company
4.1.2
Othe
r key developments
Launch of Broadband & telephony services in No ida, on January 19, 2005, , on January 18, 2005,
Launch of GSM mobile services in Bihar, on January 17, 2005,
unil Bharti Mittal, Chairman & Group Managing Director, became the first member from India to be inducted on the GSM SM industry, having more than 670
Launch of GSM mobile services in Jharkhand
Airtel became the first GSM operator to cross the 10 million customer mark, on January 17, 2005 Launch of GSM mobile services in Orissa, on December 16, 2004,
SAssociation (GSMA) for the term 2005-2006, the global trade association representing the Gmobile operators including 3G, on January 18, 2005,
Agreement of Airtel mobile services with six other leading mobile operators in the region to form a regional alliance, Bridge Mobile Alliance, on November 03, 2004 – which will operate through a Singapore incorporated company, Bridge Mobile Pte Ltd.
Awards & recognitions India's Second Best Employer 2004 by Hewitt Associates
D conducted by Hewitt
and Peop
ia
dged India's Second Best Employer based on a surveyOn ecember 10, 2004, the company had been adju
Associates. The study identifies 'Best Employers' based on employee opinions, the organization's employment and people practices, the perspective of the organization's senior leadership. The company had also been granted with the "Best le CEO" Award.
Ind ’s Best Managed Company On D m
anaged Companies & Corporate Governance announced by Asiamoney. ece ber 07, 2004, the company had been awarded as India’s best-managed company as per the 2004 poll results on Best
M Airtel awarded with two ”Silvers” for the Brand campaign of the year & the Best advertising film On December 04, 2004, Airtel mobile services was awarded with two ”Silvers” for the Brand campaign of the year & the Best advertising film at the prestigious Advertising Agencies Association Of India (AAAI) awards. It was also awarded with a bronze for its
miley” ad campaign. “S
Page 15 of 38
Ernst & Young Entrepreneur of the Year 2004 On November 02, 2004, Mr Sunil Bharti Mittal, Chairman & Group Managing Director, had been named the Ernst & Young Entrepreneur Of The Year 2004. A distinguished jury chaired by the icon of Indian entrepreneurship Mr N R Narayana Murthy decided the awards. Other Jury members include Mr A K Purwar - Chairman, State Bank of India; Dr. Jamshed J Irani - Director, Tata Sons; Ms. Kalpana Morparia – Deputy Managing Director, ICICI Bank; Mr Naresh Chandra – Chairman, Committee on Civil Aviation Policy; and Mr. T N Ninan – Editor & Publisher, Business Standard. Bharti Mobile - Punjab Litigation The arbitration proceedings for a claim for the refund of license fee and interest paid to the DoT were decided against Bharti Mobile,
the licensee of the Punjab Mobile circle. The company has already paid the license fees and interest thereon before the commencement of arbitration proceedings. The company challenged the award before the Hon’ble Delhi High Court and the matter is now listed for hearing before the Hon’ble Delhi High Court on May 20, 2005.
Page 16 of 38
4.2 Results of Operations The financial statements for the periods ended December 31, 2004 and 2003 are un-audited. The financial statements for period ended December 31, 2004 have been adjusted for International Accounting Standard IAS 22: Business Combinations. Certain adjustment regarding fair valuation of intangible assets on acquisition as per IAS 22 have not been made for the period ended December 31, 2003.
ey Highlights K
Page 17 of 38
(10) million mark. Net profit for the first nine months crosses Rs. 10 billion mark.
m 23% the previous quarter.
TVL Consolidated
s on December 31, 2004, we had an aggregate of 10,629,815 customers, consisting of 9,826,156 GSM mobile and 803,659 roadband & telephony customers. During the quarter, we crossed the 10 million customer mark on our networks. Our total customer ase as at the end of the quarter has increased by approximately 75% compared to the customer base as on December 31, 2003.
uring the quarter ended December 31, 2004, the company had revenues of Rs 21,530 million and EBITDA of Rs 7,802 million, a rowth of 70% and 65% respectively, compared to the quarter ended December 31, 2003. The EBITDA margin for the quarter was 6.2% as compared to 37.3% for the quarter ended December 31, 2003. The movement in the EBITDA margin was due to additional perating expenses incurred due to enhanced coverage and new circle launches during the quarter.
he net finance cost for the quarter ended December 31, 2004 was Rs. 191 million. The interest on borrowings during the quarter was s. 614 million and the finance income (primarily relating to income on marketable securities) was Rs. 239 million. The balance mount was other finance cost, effect of exchange fluctuation and the effect of derivative accounting.
he cash profit from operations for the quarter was Rs. 7,611 million, an increase of 90%, as compared to the prior year quarter ended ecember 31, 2003.
he earnings before taxation for the quarter was Rs. 4,545 million, an increase of 147%, as compared to the quarter ended December 1, 2003.
uring the quarter, the company also had an income tax expense of Rs. 768 million. The current tax expense for the quarter was Rs. 30 million and the deferred tax expense recognized for the quarter was Rs. 438 million.
he net profit for the quarter ended December 31, 2004, was Rs 3,726 million.
uring the quarter ended December 31, 2004, we incurred capital expenditure of Rs. 13.0 billion (US$ 299 million). As on December 1, 2004, the net debt of the company was approximately Rs.36.2 billion resulting in a net debt to stockholder’s equity ratio of 0.57.
obile Services
s at the end of the quarter we had 9,826,156 GSM mobile customers, which accounted for a market share 26.3% of All India GSM arket and 20.7% of overall wireless market (GSM + Digital Mobile) respectively.
f our 9,826,156 GSM mobile customers as of December 31, 2004, postpaid customer contributed to approximately 25% of the overall stomer base while the balance 75% was contributed by pre-paid customers. During the quarter, our share of new additions was
9.5% of the All India GSM mobile net additions and 22.7% of All India wireless net additions. The net addition during the quarter on ur network was 1,123,901 comprising of 753,014 pre-paid and 370,887 post-paid customers respectively. During the quarter, we unched commercial operations in the circle of West Bengal, Jammu & Kashmir, and Orissa.
he monthly churn for the quarter ended December 31, 2004 was 3.8% (1.3% voluntary churn and 2.5% company initiated churn) for ur post-paid segment while; it was 8.5% for the pre-paid segment.
uring the quarter, our blended ARPU of Rs. 519 (US$ 12) per month was lower by 6% as compared to the quarter ended December 1, 2003. The blended monthly usage per customer, during the quarter, was at 344 minutes, an increase of 15% on a year on year asis. The non-voice revenue, which primarily includes Short Messaging Service (SMS), voice mail service, call management and ther value added services like hello tunes and Airtel live contributed to approximately 8.5% of the total revenue of the segment, an provement of 244% as compared to the quarter ended December 31, 2003. The Short Messaging Services (SMS) revenue, which is
primarily text messaging accounted for 5.8% of the total revenue of the segment, for the quarter ended December 31, 2004. The consolidated revenues and EBITDA from our mobile business for the quarter ended December 31, 2004 was Rs. 14,826 million and Rs. 4,836 million respectively. The revenue from this segment contributed to 69% of our total consolidated revenues. The revenue and EBITDA grew by 73% and 53% respectively as compared to the corresponding prior year quarter. The EBITDA margin (ratio of
Subscriber base crosses ten Incremental revenue for the quarter approximately equals incremental revenue for the first half. Highest ever addition of 1,123,901 mobile customer during a single quarter. Market share of All India GSM market equals 26.3% with market share of net additions during the quarter of 29.5%. Postpaid forms 25% of overall wireless subscribers, a movement fro
B Abb Dg3o TRa TD T3 D3 T D3 M Am Ocu2ola To D3boim
Page 17 of 38
EBIT o total revenues) for the qDA t uarter was 32.6%. The earnings before interest and taxation (EBIT) for the quarter was Rs 2,772 illion.
pectively over the same period last year. The BITDA margin for our existing mobile circle for the quarter was 35.5%.
er ended December 31, 2004, we incurred capital expenditure of Rs. 10.50 billion (US$ 242 million) on our mobile
dband mers subscribing to DSL
rvic
December 31, 2004, the revenues from our broadband & telephone operations of Rs 2,942 million, represented growth of 43% on year-on-year basis and contributed to 14% of the consolidated total revenues. The EBITDA for the quarter was Rs.
ce services resulted an increase f 80% over the corresponding quarter last year. The increase in the revenues was due to growth in traffic carried by us on our
s Rs 1,497 million, a growth of 69% over the corresponding quarter last year. The EBITDA margin, for the uarter, was 30.5% as compared to 32.4% for quarter ended December 31, 2003. The EBIT of this segment was Rs 1,116 million
nterprise Services
broadband, VSAT and internet services, will cus on providing telecommunications services as an integrated service offering, including mobile, broadband & telephone, long
ers throughout India.
he BITDA margin for this segment in the quarter ended December 31, 2004 was 48.4% as compared to 41.0% in the corresponding
m The revenues for the quarter from our existing mobile circles of Rs 14,413 million grew by 68%, EBITDA of Rs 5,111 million grew by 2% and the earnings before interest and taxes of Rs 3,265 million grew by 64% res6
E During the quartbusiness. Broadband & Telephone Services During the quarter ended December 31, 2004, we added 38,787 customers on our broadband & telephone networks. Our broa& telephony customer base was 803,659 as of December 31, 2004. We have focused on acquiring custo
es and as on December 31, 2004, had approximately 95,000 broadband & telephony customers subscribing to such services. se For the quarter endeda846 million compared to Rs. 446 million in the corresponding prior year quarter, an increase of 90% as compared to the corresponding prior year quarter. The EBITDA margin for this segment was 28.8% for the quarter ended December 31, 2004.
he EBIT for the quarter ended December 31, 2004 was Rs 420 million, a growth of approximately 213% as compared to the quarter Tended December 31, 2003. The ARPU for the quarter was Rs. 1,238 (US$ 28) per month. Long Distance Services During the quarter ended December 31, 2004, the revenues of Rs. 4,907 million from our long distanonetworks (primarily attributable to increased captive subscriber base), and sale of lease line/fibre. The EBITDA from this segment during the quarter waqrepresenting a growth of 90% over the corresponding quarter last year. E The enterprise business group has recently been streamlined, and in addition to providingfodistance and data connectivity services, to key corporate and institutional custom For the quarter ended December 31, 2004, the revenue from this segment was Rs. 1,407 million, a growth of 93% compared to the corresponding prior year quarter. The EBITDA for this segment for the quarter ended December 31, 2004 was Rs. 681 million. TEperiod last year.
Page 18 of 38
SECTION V
.1 General Information
Stock Market Highlights
5
Opinion &
5.2 Bharti Tele-Ventures Daily Stock Price` (BSE) & Volume (combined of BSE and NSE) Movement
140
160
180
200
220
240
0
5,000
10,000
15,000
20,000
Volume in 000's Share Price
Financial Data Stock DataDec. 31,
Million Nos. 1,853 Code/Exchange 532454/BSE
4
No. of Shares Outstanding (as on 2004)Closing Market Price - BSE (January 25, 2004) Rs./Share 203.30 Bloomberg/Reuters BHARTI IN/BRTI.BOMarket Capitalisation Rs. Million 376,789 Shareholding Pattern As on Dec. 31, 200Book Value Per Share Rs. 34.02 Promoters Holding 46.62%Market Price/Book Value Times 5.98 Singtel (Pastel Ltd) 15.95%Net Debt to EBITDA (LTM) Times 1.38 Free Float* 37.42%Enterprise Value Rs. Million 413,034 Enterprise Value/Annualised Q3 Revenue Times 4.80 Foreign Holding 47.84%
(Sept. 01- Jan. 25)hich has fo reign o wnership restrictio ns (no t freely tradable acro ss Indian and
verseas investo rs)
day
Enterprise Value/Annualised Q3 EBITDA Times 13.23 Combined Volume 3.7 million per trading
* Free flo at includes 4.38% shareho lding o f Indian public & institutio n wO
Page 19 of 38
5.3 Comparison of Domestic Telecom Stock Mov x
ement with Sense
90
100
110
120
130
140
150
160
5.4 Comparison of Select Asian Telecom Stock Movement w
Bharti VSNL M TNL
70
90
110
130
150
170
Bharti AISGlobe Telecom SK Telecom
Bharti: 31.2%
Note: The charts given in section 5.2, 5.3 and 5.4 are based on informa
ith Bharti Tele-Ventures
Sensex
SingTel China M obileM axis Comm.
VSNL: 4.5% Sensex MTNL: -7.5%
Bharti: 42.5% Maxis Comm: 10.0% SK Telecom: 6.4% Singtel: 2.1% AIS: 1.9% China Mobile: 1.7% Globe: -15.2%
tion downloaded from Bloomberg.
Page 20 of 38
SECTION VI
Use of Non - GAAP Financial Information
In presenting and discussing the Company’s reported financial position, operating results and cash flows, certain information is derived from amounts calculated in accordance with IFRS, but this information is not itself an expressly permitted GAAP measure. Such non - GAAP measures should not be viewed in isolation as alternatives to the equivalent GAAP measures. A summary of certain of the non - GAAP measures included in this report, together with details where additional information and reconciliation to the nearest equivalent GAAP measure can be found, is shown below.
Non - GAAP measure Equivalent GAAP measure Location in this results announcement of reconciliation and further information
Earnings before Interest, Taxation, Depreciation and Amortizations (EBITDA)
Earnings/(loss) before taxation 4,545 11,582Less:- Current tax expense 330 (297)Earnings/(loss) after current tax expenses 4,215 11,878
Earnings/(loss) before taxation to Earnings/(loss) after current tax expenses
Inco t from Op
ating expenses
t
Tota enue to Net Revenue
Pre-operative costs 159 38210 19
7,802 21,015
4,736erations
Other IncomeDepreciation & Amortisa
133,03
Pre-operative costsDonations
15
Financ 19
Current portion of 6,47
Less:Cash 2,92
Net Debt 36,24
Less:-
Net Revenue 16,92
Equipment Costs
Operating m e to Cash Profi
Oper
Net Deb
l Rev
Page 22 of 38
6.1.2 Mobile Services
Quarter Ended Nine Months Ended Dec. 2004 Dec. 2004
Segm ent Result 2,772 7,588Other Income 68 109Depreciation & Amortisation 2,002 5,026Pre-operative costs 131 334Donations 0 6EBITDA 4,836 12,845
Rs million
Particulars
Operating Incom e to EBITDA
6.1.3 Infotel Services
6.1.4 Broadband & Telephone Services
Quarter Ended Nine Months Ended Dec. 2004 Dec. 2004
Segm ent Result 420 1,070Other Income 22 16Depreciation & Amortisation 420 1,250Pre-operative costs 28 48Donations 0 0EBITDA 846 2,352
Rs million
Particulars
Operating Incom e to EBITDA
Quarter Ended Nine Months Ended Dec. 2004 Dec. 2004
Revenues from Broadband & Telephone Services 2,942 8,161Revenues from Long Distance Services 4,907 13,587Revenues from Enterprise Services 1,407 3,857Revenues For Infotel 9,256 25,605
EBITDA from Broadband & Telephone Services 846 2,352EBITDA from Long Distance Services 1,497 4,108EBITDA from Enterprise Services 681 1,815EBITDA For Infotel 3,025 8,275
EBIT from Broadband & Telephone Services 420 1,070EBIT from Long Distance Services 1,116 3,080EBIT from Enterprise Services 596 1,650EBIT For Infotel 2,131 5,800
EBIT For Infotel
Revenues For Infotel
EBITDA For Infotel
Particulars
Rs million
Page 23 of 38
6.1.5 Long Distance Services
Quarter Ended Nine Months Ended Dec. 2004 Dec. 2004
Segm ent Result 1,116 3,080Other Income 21 53Depreciation & Amortisation 402 1,080Pre-operative costs 0 0Donations 0 0EBITDA 1,497 4,108
Rs million
Particulars
Operating Incom e to EBITDA
6.1.6 Enterprise Services
6.1.7 Others
6.2 Schedule to financial statements
Quarter Ended Nine Months Ended Dec. 2004 Dec. 2004
Segm ent Result (164) (388)Other Income 101 288Depreciation & Amortisation 111 284Pre-operative costs 0 0Donations 10 13EBITDA (144) (379)
Rs million
Particulars
Operating Incom e to EBITDA
Quarter Ended Nine Months Ended Dec. 2004 Dec. 2004
Segm ent Result 596 1,650Other Income 14 26Depreciation & Amortisation 100 191Pre-operative costs 0 0Donations 0 0EBITDA 681 1,815
Rs million
Particulars
Operating Incom e to EBITDA
6.2.1 Schedule of Other Costs
Quarter Ended Nine Months Ended Dec. 2004 Dec. 2004
Netw ork and operating expenses 1,940 4,803Sales and marketing expenses 1,795 4,670Other operating expenses 1,740 4,453Total Other Costs 5,474 13,926
Rs million
Particulars
Page 24 of 38
6.2.2 Schedule of Depreciation and Amortisation
6.2.4 Schedule of Income Tax
2.2 Schedule of Depreciation and Amortisation
6.2.4 Schedule of Income Tax
Quarter Ended Nine Months Ended Dec. 2004 Dec. 2004
Current tax expense 330 (297)Deferred tax expense / (income) 438 1,801Incom e tax expense / (Incom e) 768 1,505
Rs million
Particulars
6.2.3 Schedule of Finance Cost (net) 6.2.3 Schedule of Finance Cost (net)
Rs. MillionQuarter Ended Nine Months Ended
Dec. 2004 Dec. 2004Interest on borrow ings 614 2,061Finance Charges 106 321Finance Income (239) (479)Derivatives & Exchange Fluctuation (289) (514)
Total liabilities and stockholders' equity 159,906
Rs million
Curr t Assets
Long terProvision 75OTTMSSSDLoan to TRT
Page 27 of 38
A1.3 Consolidated Statement of Cash Flows
ParticularsQtr ended December
31, 2004Nine Months Ended December 31, 2004
Cash flow s from operating activities
Net profit/(loss) 3,726 10,025
Add: Non Cash item s Depreciation and amortisation 3,031 7,821 Tax expense / (income) 768 1,505 Impact of fair valuation of f inancial instruments (257) (627) Cash generated from operations before w orking capital changes 7,269 18,723 (Increase)/decrease in w orking capital 6,350 19,253 (Increase)/decrease in non-current assets (3,839) (5,124) Increase/(decrease) in non-current liabilities 107 277 Net cash provided/(used) by/in operating activities 2,619 14,406
Cash flow s from investing activities Purchase of property, plant and equipment (12,974) (32,265) Investment / loss in associate (Hexacom) 4,431 - Licence fee paid - (50) Net cash provided/(used) by/in investing activities (8,543) (32,315)
Cash flow s from financing activities Increase/(decrease) in borrow ings (5,909) 2,650 Shareholders Equity 704 2,301 Net cash provided/(used) by/in financing activities (5,205) 4,951
Marketable Securities & Cash and cash equivalents Beginning of the year 14,339 4,712 End of the year 10,477 10,477
Rs million
Page 28 of 38
A1.4 Trend and Ratio Analysis A1.4.1 Financial Performance The figures as given below are as per the results published by the company for the relevant period.
perating Expenses / Total revenues 33% 32% 32% 31% 31%cence fee / Total revenues 9% 10% 9% 11% 12%BITDA / Total revenues 36% 38% 36% 34% 37%ash prof it f rom operation / Total revenues 35% 36% 32% 32% 32%arning (loss) before taxation / Total evenues 21% 21% 18% 18% 17%
et Prof it / (Loss) / Total revenues 17% 18% 17% 20% 15%
eturn on Stockholder's equity (LTM) 24% 22% 18% 13% 8%eturn on Capital Employed (LTM) 16% 15% 13% 10% 8%et Debt to EBITDA (LTM) 1.38 1.66 1.91 2.39 2.69 ssets turnover ratio (LTM) 75% 69% 65% 60% 56%terest Coverage ratio (times) 12.72 9.77 8.50 7.07 6.52
Book Value Per Equity Share (in Rs) 34.0 32.0 30.2 27.6 26.2Net debt to Stockholders' Equity (Times) 0.57 0.65 0.69 0.78 0.77 Per share data (for the period)Net prof it/(loss) per common share (in Rs) 2.01 1.80 1.60 1.64 1.03 Net prof it/(loss) per diluted share (in Rs) 2.11 1.75 1.53 1.64 1.03
OLiECErN
RRNAIn
Page 29 of 38
A1.5 Key Accounting Policies
1. Joint Ventures The Group’s interest in jointly controlled entities where it does not have full control is accounted for by the equity method of
zed at cost. Under this method the Company’s share of the post-acquisition profits or losses of joint venture is recognised in the income statement and its share of post-acquisition movements in equity is
inst the cost of the investment. Unrealised gains on transactions between the Group and its joint venture are eliminated to the extent of the Group’s interest in the joint venture; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in joint venture includes goodwill identified on acquisition (refer note 4 below).
2. Accounts Receivables
Receivables are stated at cost less provision for impairment. A provision for impairment of receivables is established when there is an objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Provision for impairment of receivables is made for dues outstanding for more than 90 days in case of active subscribers and dues from customers who have been deactivated other than those covered by security deposits or in specific cases where management is of the view that the amounts are recoverable.
Provision for impairment of receivables, in case of Other Telecom Operators on account of their International Long Distance (ILD) traffic and on account of Interconnect Usage Charges (IUC), is made for dues outstanding for more than 120 days from the date of billing or in specific cases where management is of the view that the amounts are recoverable. The provision is netted off against any amount payable to that operator.
The carrying amount of net accounts receivable approximates the present value of the expected cash flows.
3. Property, plant and equipment Property, plant and equipment are stated at historical cost, net of accumulated depreciation and accumulated impairment loss, if any. All direct costs relating to the acquisition and installation of property, plant and equipment are capitalized. Site restoration cost obligations are capitalized based on a constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.
Depreciation is calculated on a straight–line method so as to write off items of property, plant and equipment over their estimated useful lives as follows:
accounting and are initially recogni
recognised in equity. The cumulative post-acquisition movements are adjusted aga
Assets Years Building 20 Network Equipment 10-15 Computer equipment 3 Office, furniture and equipment 5 Vehicles 5
Leasehold improvements Period of Lease or 10 years whichever is less
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses arising from retirement or disposal of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the asset are recognized in statement of income.
4. Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of net identifiable assets of the acquired subsidiary or jointly controlled entity at the date of acquisition. Goodwill on acquisition of subsidiaries is disclosed separately. Goodwill on accounting of jointly controlled entities is included in investments in joint venture. Goodwill is stated at cost less accumulated amortization and impairment losses, if any.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the Company’s investments in each circle/segment of operation by each primary reporting segment (refer note 7 below). Amortization of Goodwill is disclosed as part of “Depreciation and Amortization” in the Statement of Income. With effect from the April 1, 2004, the group adopted “IFRS 3”, which prohibits amortisation of goodwill and are required to be tested for impairment.
5. Foreign currency transactions Monetary assets and liabilities in foreign currencies are translated into Indian Rupees at the closing rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated at rates ruling on the transaction dates. The translation differences are accounted for in the profit and loss account.
6. Capital leases
Page 30 of 38
Lessee accounting Assets acquired on lease, which transfer risks and rewards of ownership to the Group are capitalized as an asset at either the lower of the fair value of the leased property or the present value of the related lease payments or where applicable, estimated fair values of such assets. Amortization of capitalized leased assets is computed on the straight-line method over the useful life of the asset. Lease rentals payable are apportioned between principal and interest using the lower of internal rate of return or the incremental borrowing rate.
Lessor accounting
The present value of the lease payments is recognised as a receivable for assets leased out under a finance lease. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. The lease income is recognised over the term of the lease using the net investment method which reflects a constant periodic rate of return.
7. Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
8. Revenue recognition
i. Service revenues Service revenues include amounts invoiced for airtime charges, call revenue, fixed monthly subscription charges and VSAT/ internet usage charges, roaming charges, activation fees, and fees for value added services (‘VAS’). Service revenues also include revenues associated with access and interconnection for usage of the telephone network of the incumbent access service operator for local, domestic long distance and international calls. Service revenues are recognized as the services are rendered and are stated net of discounts and taxes. Revenues from
zed based on the actual usage. Activation revenue and related activation costs, not exceeding zed over the expected life of the customer. Excess of activation costs over
e, if any, is expensed as incurred.
g distance operations comprise revenue from provision of voice services which are recognized
Unearned revenue includes unused amounts of revenue billed in respect of pre-paid cards. The related services/billing are
9.
Licenses signed prior to New Telecom Policy – 1999 (NTP- 1999) regime License fee costs incurred by the Group under the old license fee regime until the date of migration to the NTP, i.e. July 31, 1999, and revenue-share fee from the date of migration are exp as incurred. However, Company’s share of licenses acquired under business combinations arising after applicability of NTP 1999, have been accounted for at their respective fair values and straight-line basis over the peri icense from the date of acquisition of respective circles. Am disclosed as part of “Deprecia d Amortization” in the Statement of Income.
pre-paid cards are recognithe activation revenue, are deferred and amortiactivation revenu Service revenues from the internet and VSAT business comprise revenues from registration, installation and provision of internet and satellite services. Registration fee is recognized at the time of dispatch and invoicing of start up kits. Installation charges are recognized as revenue on satisfactory installation of hardware and service revenue is recognized from the date of satisfactory installation of equipment and software at the customer site and provisioning of internet and satellite services. Revenue from prepaid dialup packs is recognized on the actual usage basis and is net of sales returns and discounts.
Revenues from national lonon completion of services while revenue from provision of bandwidth services is recognized over the period of use. Revenue is stated net of discounts and waivers. Revenue from international long-distance operations comprises revenue from provision of voice services, which is recognized on completion of services. Unbilled receivables represent revenues recognized in respect of cellular, access and national long distance services provided from the bill cycle date to the end of each month. These are billed in subsequent periods as per the terms of the billing plans.
expected to be performed within the next operating cycle.
ii. Equipment sales Equipment sales consist primarily of revenues from sale of VSAT equipment (hardware) and sim cards, access service handsets and related accessories to subscribers. Equipment sales other than sim cards are recognized at the time when significant risks and rewards of ownership of the goods are transferred to the buyer. Sim card sales are treated as activation revenue and are deferred and amortized over the expected life of the customer.
License Fees
ensed
are amortized on a od of the l anortization of Licenses is tion
Page 31 of 38
Licenses sLicense agreements signed/awarded post March 31, 2001, und P 1999, stipulate the payment of one time fee termed as ‘license ht to operate services an he basis of the percentage of revenues i.
cense entry fee has been recognized as an intangible asset and i ally at cost. After initial recognition, license s amortized
rations in the respective circles. Amortization of License Entry Fee is disclosed as part of “Depreciation and Amortization” in the Statement
10. ble assets comprise of Enterprise Resource Planning software, Bandwidth capacities, Brand, Customer
d for acquiring the licence for use and
11.
etween the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax assets and liabilities are measured using the tax rates expected to apply to taxable
ies. Deferred tax assets are recognized able profits will be available against which the deferred tax assets can be utilized. At
ate, the Group re-assesses unrecognized deferred tax assets and the carrying amount of deferred tax
12.
as incurred in the books of account as they are not directly related to the construction of the network and are separately e statement.
13.
in the fair value of any derivative instruments that do not qualify for hedge accounting under IAS 39 y in the income statement.
igned under NTP 1999 er NT
entry fee’ to obtain the rige. ‘revenue share’.
d annual usage charge on t
s measured initiLientry fee is measured at cost less accumulated amortization and any other impairment losses. License entry fee ion a straight-line basis over the period of the license from the date of commencement of commercial ope
of Income. The revenue-share fee is computed on the basis of AGR and is expensed as incurred. Other intangible assets Other intangiRelationships and Distribution Network. Brands, Customer Relationships and Distribution Network are capitalized at theCompany’s share of respective fair values on the date of respective acquisitions. Brands are amortized on a straight-line basisover the period of expected benefit, not exceeding the life of the license and are written off on the launch of the Company’sown brands in respective circles. . Customer relationships and Distribution Network are amortized over the period of expected benefit, generally not exceeding three years. Software is capitalized at the amounts paiare amortised over the period of such licence. Bandwidth capacities are capitalized at the amounts paid for acquiring the capacities and are amortised over the period of the agreement subject to maximum of 15 years. Amortization of intangible assets is disclosed as part of “Depreciation and Amortization” in the Statement of Income. Income Taxes The income-tax charge is based on the profit/loss for the year or a part thereof and includes deferred taxation. Deferred taxes are calculated using the balance sheet liability method. Deferred income taxes reflect the net tax effects of temporary
fferences bdiincome-tax purposes. Deferred income in the years or parts thereof in which those temporary differences are expected to be recovered or settled and based on tax rates enacted or substantially enacted by the balance sheet date. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the
, to recover or settle the carrying amount of its assets and liabilitbalance sheet datewhe is probable that sufficient taxn it each balance sheet dassets. Pre-operative costs The pre-operating costs represent certain marketing and administrative expenses incurred prior to the commencement of commercial operations of the new licenses. These costs, identified specifically for each of the new licenses, are expensed
disclosed in the incom
Derivative Financial instruments Derivative financial instruments are initially recognized in the balance sheet at cost and subsequently are re-measured at
The fair value of the derivative instruments – the interest rate swaps and the foreign currency swaps is determined on the basis of quotes from dealers / banks. The fair value of embedded derivatives is determined on the basis of valuation report obtained from foreign currency consultants / computation made by the company.
Page 32 of 38
A1.6 Consolidated Profit & Loss Statement as per Indian GAAP
Qtr ended December 31, 2004
Nine Months Ended December 31, 2004Particulars
Audited AuditedTotal InOperatin and expenses,deprecia amortisation, preoperative expenditure, charityand don
7,995 21,391
Finance ) 220 1,914 DepreciaAmortisaPreoper of f 159 382 Charity &Prof it BeTax ExpProf A f ter Tax 3,219 8,567 Min 43 66 Prof it fo 6 8,501
Rs million
com e 21,716 58,218
g prof it before f inance incometion,
ation, signif icantly non recurring items and taxation
expenses (nettion 2,850 7,321 tion 521 1,549
ative Expenditure Written Donation 10 19
fore tax 4,235 10,207 enses/ (Income) 1,017 1,640
it
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ority Interestr the period 3,17
Summary of differences in Net Profit/(loss) between IGAAP and IFRS A1.7
ParticularsQtr ended December
31, 2004Nine Months Ended December 31, 2004
Net proAdd: Dif
inority I 8 84Being difRemeasper IGAA 12 (49)
Less: Diffe rences on account of:eferred Tax expense 248 160
Dif ferences in accounting for f inance charges 1 437
Dif ferential depreciation provided in IGAAP due to forex f luctuations not considered in IFRS.
4 (70)
Amortisation of Goodw ill 222 638License fee amortisation 148 445
Net profit/(loss ) as per Indian GAAP 3,176 8,501
Rs million
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fit / (loss ) as per IFRS 3,726 10,025fe rences on account of:nterest and loss of Joint VentureMference in revenue recognition 54 53
urement of f inancial instruments as per IFRS 39 not applicable in P
D
G1 GLOSSARY Technical and Industry Terms
Financial and Operational (Company Related)
Annualized EBITDA Annualized EBITDA is defined as 12 multiplied by EBITDA for the period divided by number of months during the period.
ARPU (for Mobile and Broadband & Telephone services)
Average Revenue per customer per month is computed by: dividing the total revenues, excluding equipment sales and the connection fees, during the relevant period by the average customers; and dividing the result by the number of months in the relevant period.
Asset Turnover
Asset Turnover is defined as Total revenues, for last 12 months from the end of the relevant period, divided by average assets during last 12 months from the end of relevant period. Asset is defined as the sum of non current assets and net current assets. Net current assets means current assets minus current liabilities. Average Assets is calculated by considering average of quarterly average for last 4 four quarters from the end of the relevant period.
Access and interconnect charges / Total revenues
Access and interconnect charges for the relevant period divided by total revenues for the relevant period.
Average Customers Average customers are computed by considering the average of the monthly average customers for the relevant period.
Book value per equity share Total stockholder’s equity as at the end of the relevant period divided by issued, subscribed and fully paid equity shares as at the end of the relevant period.
Capital Employed Capital Employed is defined as sum of Stockholder’s equity and net debt.
Cash Profit from Operations nd is computed as operating income adjusted for other
Cash profit from operations for the relevant period divided by Total revenues for the relevant period.
Churn
Churn is calculated by dividing the monthly total number of disconnections during the relevant period by the average monthly total reported customer base during the relevant period; and dividing the result by the number of months in the relevant period. For the purpose of reporting postpaid churn has been subdivided into voluntary and company initiated churn.
Earnings (loss) before taxation / Total revenues
Earnings (loss) before taxation for the relevant period divided by Total revenues for the relevant period.
EBITDA
EBITDA represents Earnings/(loss) before Depreciation, Pre-operating costs, Amortization, donations, writedown of property plant & equipment, Interest and Taxation. {It is not an IFRS GAAP measure} and is Computed as operating income minus other income plus depreciation & amortization, pre-operative costs, donations, write down of property, plant & equipments and IT capex charge.
EBITDA Margin or EBITDA / Revenue
EBITDA for the relevant period divided by total revenues for the relevant period.
EBIT EBIT represents Earnings / (Loss) before Interest and Taxation for the relevant period.
Existing Mobile Operations / Circles
Existing mobile operations/circles comprises of 16 mobile circles operational as on June 30, 2004. The circles include Delhi & NCR, Chennai, Kolkata, Andhra Pradesh, Karnataka, Himachal Pradesh, Punjab, Haryana, Uttar Pradesh (West) & Uttranchal, Madhya Pradesh & Chattisgarh, Tamil Nadu & Pondichery, Kerala, Gujarat, Maharashtra & Goa, Mumbai and Rajasthan.
Broadband & Telephony customers per employee
Number of Broadband & Telephony customers on our networks as at end of the relevant period divided by number of employees in the Broadband & Telephone segment as at end of the relevant period.
Interest coverage ratio EBITDA for the relevant period divided by interest on borrowing for the relevant period.
Licence fee / Total revenues Licence fee for the relevant period divided by total revenues for the relevant period.
Market capitalization Number of issued, subscribed and fully paid up equity shares as at end of October 27, 2004 multiplied by closing market price (BSE); as at end of October 27, 2004.
MoU/Sub/Month
Minutes of Usage. Duration for which a customer uses cellular services. It is typically expressed over a period of one month. An average minutes of usage per subscriber per month is calculated by: dividing the total minutes of usage (both incoming & outgoing) during the relevant period by the average customers; and dividing the result by the number of months in the relevant period.
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Mobile customers per employee
Number of mobile customers on our networks as at end of the relevant period divided by number of employees in the mobile segment; as at end of the relevant period.
Net Debt {It is not an IFRS GAAP measure} and is defined as the long-term debt, net of current portion plus current portion of long-term debt plus short-term borrowings minus cash and cash equivalents and marketable securities at the end of the relevant period.
Net Debt to EBITDA Net Debt to EBITDA is defined as net debt as at the end of the relevant period divided by EBITDA for last 12 months from the end of the relevant period.
Net Debt to stockholder’s equity
Net Debt to stockholder’s equity is defined as net debt as at the end of the relevant period divided by stockholder’s equity as at the end of the relevant period.
Net Debt to Market capitalisation
Net Debt to Market capitalisation is defined as net debt divided by the market capitalisation.
Net Profit/ (loss) margin or Net Profit / (Loss) / Total revenues
Net Profit / (loss) for the relevant period divided by total revenues for the relevant period.
Net Profit/ (loss) per common share
Net Profit/ (loss) per common share is computed by dividing net profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Net Profit/ (loss) per diluted share
following: (1) dividends on potential ordinary shashares); (2) interest recognised on potential ord
The calculation of Net Profit/ (loss) per diluted share adjusts net profit or loss and the weighted average number of ordinary shares outstanding, to give effect to all dilutive potential ordinary shares that were outstanding during the year Net profit or loss attributable to ordinary shareholders is adjusted for the after-tax effect of the
res (for example, dilutive convertible preferred inary shares (for example, dilutive convertible
debt); and (3) any other changes in income or expense resulting from the conversion of dilutive potential ordinary shares (e.g., an entity's contribution to its non-discretionary employee profit-sharing plan may be revised based on changes in net profit due to the effects of items discussed above).
Net Revenues {It is not an IFRS GAAP measure} and is defined as total revenues minus access and interconnection costs for the relevant period.
New Mobile Operations / Circles
New mobile operations/circles comprises of circles launched/yet to be launched after June 30, 2004. It includes Uttar Pradesh (East) circle and the pre-operative expenses of the new circles, which have been launched in the month of October, 2004 (West Bengal and Jammu & Kashmir) , and circles which are yet to be launched.
Post-paid services
Provision of mobile services to customers, in which the customers pay for usage of mobile services at the end of the billing period for services, including airtime, value added services, access and interconnection charges and other charges.
Pre-paid services
Provision of mobile services to customers, in which the customers pay a fixed amount, which is valid for a certain period, for usage of mobile services, including airtime, value added services, access and interconnection charges and other charges.
Return on Capital Employed
Return on Capital Employed is computed by dividing the sum of net profit / (loss) & net finance cost for last 12 months from the end of the relevant period by average Capital employed. Average Capital employed is calculated by considering average of quarterly average for last 4 four quarters from the end of the relevant period.
Return on Stockholder’s Equity
Net profit / (Loss) for last 12 months from the end of the relevant period divided by average Stockholder’s equity for last 12 months. Average Stockholder’s equity is calculated by considering average of quarterly average for last 4 four quarters from the end of the relevant period.
Total Operating expenses / Total revenues
Total operative expenses for the relevant period divided by total revenues for the relevant period.
Total Operating expenses It is not an IFRS GAAP measure and is defined as sum of equipment costs, employee costs and other costs for the relevant period.
Regulatory
ADC Access Deficit Charges
AGR
Adjusted Gross Revenues. Used for computing the license fees and WPC charges payable by a cellular services provider and have been provisionally defined as total income of a cellular services provider net of access and interconnection charges actually paid to other telecom service providers, roaming revenues passed on to other telecom service providers and service tax and sales tax, if included in the total income.
AUSPI Association of Unified Telecom Service Providers of India.
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The Cellular Operators Association of India (COAI) was constituted in 1995 as a registered, non - profit, non - governm to the advancement of communication in India, in particular of modern communication through Cellular Mobile Telephone Services. The main objective of the COAI is to protect, promote and upgrade cellular operations in India
ter the commo nd collective interests of its members.
ental society dedicated
COAI and also to look af n a
DoT
Department of Telecommunications. The DoT is a department under the Ministry of
regulatory measures and
Telecommunications, Government of India. The Department of Telecommunications is responsible for the policy formulation, licensing, wireless spectrum management etc.. The department allocates frequency and manages radio communications in close coordination with the International bodies and is responsible for enforcing wireless monitoring the wireless transmission of all users in the country.
QoS
Quality of Service. Quality of service is the main indicator of the performance of a telephone network and of the degree to which the network conforms to the stipulated norms. The subscriber’s perception of the Quality of Service (QOS) is determined by a number of performance factors.
TRAI
India Act, 1997 in January 1997, as an autonomous body with quasi-dicial powers to regulate telecommunication services in India.
Telecom Regulatory Authority of India. TRAI is a statutory body established under the Telecom Regulatory Authority of ju
Others (Industry) BS ThE e Stock Exchange, Mumbai
GS subsequently modified for the 850, 1800 and 1900MHz bands. Originally stood for Groupe Spth
M
Stands for Global Syte
stem for Mobile Communications. This is a second generation digital chnology originally developed for Europe. Initially developed in the 900 MHz band and
eciale Mobile. It is an open and non-proprietary system with one of its great strengths being e international roaming capability.
IFRS International Financial Reporting Standards
IG AAP Generally Accepted Accounting Principles in India.
NSE St
ands for the National Stock Exchange of India Limited.
Sensex
Secoyear of Sensex is 1978-79 and the base value is 100. The index is widely reported in national and
nsex is a stock index introduced by The Stock Exchange, Mumbai in 1986. It is a basket of 30 nstituent stocks representing a sample of large, liquid and representative companies. The base
international markets through print as well as electronic media. SM
M es the user to send short messages to other users.
S S S stands for Short Messaging Service. It is a text messages service which enabl
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Written correspondence to be sent to: Bharti Tele-Ventures Limited
