transcript-earning call - q1!07!08

8/8/2019 Transcript-Earning Call - Q1!07!08

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IDEA CELLULAR LIMITED

Conference Call

July 25, 2007

Moderator

Good afternoon ladies and gentlemen. I am Rita, the moderator for this conference. Welcometo Idea Cellular Limited conference call. For the duration of the presentation, all participantslines will be in the listen-only mode. After the presentation, the question and answer sessionwill be conducted for participants connected to SingTel. After that, there will be a question andanswer session for participants connected to WebEx International center. After that, we willhave a question and answer session for participants connected to WebEx India. I would nowlike to hand over the floor to Mr. Suresh Mahadevan from UBS. Thank you and over to you sir.

Suresh Mahadevan

Thanks Rita. Good afternoon ladies and gentlemen or good morning depending on where youare dialing in from. We at UBS are delighted to host Idea Cellulars first quarter of fiscal 08earnings conference call. We have with us the senior management of Idea including the MDMr. Sanjeev Aga, and the CFO Mr. Anil Jhala. First of all, I want to congratulate themanagement team for yet another very successful quarter of excellent results and I also want tothank them on behalf of all the participants for taking valuable time to be with us. Given thesenior management is on the call, I want to make one request. Can I ask all the participants tofocus on key strategic and important questions on the call, just to make sure that we use thesenior management time well. I am sure you may have detail oriented questions which you candirect to Mr. Pradeep Agrawal, who is coordinating Investor Relations at Idea Cellular, who willbe more than glad to answer them. With that, I pass this call to Mr. Sanjeev Aga who is the MDof Idea Cellular. Over to you sir.

Sanjeev Aga

Thank you Rita. Thank you Suresh. On behalf of Idea Cellular, myself, Anil Jhala, and all mycolleagues, I welcome all of you who are on the call. Yesterday we had a meeting of our Boardof Directors where we have adopted results for the first quarter of the fiscal year 07-08. Ourquarterly results along with the quarterly performance report were put on our Idea web siteyesterday evening India time. Learning from the last quarter, we have put it up the same day asthe board meeting and are having the investor conference call the next day, and I hope that hashelped many of you to absorb the numbers in greater detail - which will make this call moreproductive.

Our opening remarks, since our results are already on the web, are going to be rather brief,which I will complete between myself and Anil. Let me start with the sector. The mobile sectorhas had another satisfactory first quarter this year. In terms of subscriber net additions, on anall India basis, we added about 19 million, which means at a rate of between 6 and 7 million onan average per month, which is quite satisfactory and the pace of opening up the markets isbeing maintained. There has been in the last few quarters increasing focus on expandedgeographical coverage contributed by all operators including penetration into smaller towns and


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villages, and among factors, this expanded geographical coverage is providing a fillip to newsubscriber addition even as we find that the penetration and adoption of the services in alreadycovered areas continues to rise. Another trend we find in recent period, more so I would say inthe last one year or year and a half, is that sharing of passive infrastructure amongst telecom

operators has moved beyond 1:1 bartering, it is more wide spread and more broad based now,and it is gathering momentum. Our company Idea Cellular operates as on June end, 13,160cell sites, of course this number changes everyday, and out of our 13,160 cell sites as many as4498 are housed not on our own towers but on towers owned by others. We also act as a hostto 2452 cell sites as on June end on our towers and therefore we have a tenancy ratio ofapproximately 1.3.

Yesterday in our meeting of Board of Directors, the Board has approved the formation of awholly owned subsidiary of the company for a, and I emphasize, for a possible transfer ofpassive infrastructure, and it does not amount to a definite transfer of passive infrastructure atthe moment - it is enabling in nature.

During the quarter (April-June) Idea has added approximately 2.1 million net subscribers, andour subscriber at the end of June is at around 16.1 million. We have traditionally been dividingour areas of operations. We have 11 Service Areas, so in India these used to be called Circles,but the Government of India has last month changed the nomenclature to Service Areas. Soout of our 11 services areas, the original 8 we have, you know, at the time of our IPO, we usedthe description of calling them Established Circles, and the 3 new circles which we startedaround October-December 2006, we call our New Circles. In the Established 8 circles thecompany had a market share by subscriber of 16.9% one year ago i.e. in June 06, and thiswent up to 17.9% i.e. an increase of 1% as on March 07. So we had an improvement of 1%point in nine months and the subscriber market share has further increased to 18.3% as onJune 07. So actually in the quarter our subscriber market share in our Established circles hasgone up by 0.4%. In the New circles, naturally it goes up because we were starting from zeroand that is not really apples to apples.

Our company continues to and is enjoying in fact the stronger consumer preference and it has atop run in the market share. We are either the leaders or close to leadership in most of these 8circles, and turning to the newer circles of Himachal Pradesh, UP East, and Rajasthan, whichwere all launched between October and December 2006, we have achieved a subscribermarket share, I will go circle by circle, as on June end, is 2.1% in Himachal Pradesh, in UP Eastit is 4.2%, and in Rajasthan it is 4.8%.

Also in terms of statistics, during the quarter (April-June) we have increased our total cell siteson air and end of March the number was 10,114 and end of June it is 13,160. So, you can seethat practically in 9 or 10 years of operations, we have added 10,000 cell sites and there in 3months, we have increased that number by 30%.

Similarly, our what we call population centers as opposed to towns and villages, because thedefinition in Indian census is rather confusing, our population centers which as on end of Marchwere 4432 has increased to 6066 as on end of June. So, out a whole lot of our new cell sites,approximately half our cell sites, have gone to new population centers.

As you are aware we have got licenses for the Mumbai circle and Bihar circle, Bihar includesthe state of Jharkhand. We have been awaiting rather anxiously for spectrum from the DOT, but


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in the meantime project work for both these circles is underway in a pretty speedy manner. Wehave already finalized location sites for our switches, a lot of our initial cell sites and a most ofour management team is also in place. So, no sooner we get the spectrum, we would beputting the rest of the operation into fast forward.

During the quarter (April-June) we had, in terms of our NLD (National Long Distance) Division,1.2 billion minutes of use and we do plan to scale up our national long distance operations tosupport our access service business. As you are aware we are predominantly a pure playwireless active service provider but national long distance is a good support to our accessbusiness, and to extend our NLD operations, various options including a combination of buildand buy are under evaluation or execution.

During this quarter, we have signed and had a press release, a contract of approximately USD$500 million with the Nokia Siemens Networks to expand and strengthen our GSM networks inthe circles of Delhi, Haryana, UP East, UP West, Andhra Pradesh and Kerala. We have alsosigned USD $350 million contract with Ericsson for expansion in the circles of Maharashtra,Gujarat, Madhya Pradesh, and Himachal Pradesh. I think this should also include Rajasthan.These contracts with the two world leaders like Ericsson and Nokia Siemens, the #1 and #2 inthe world, both in quantity and quality, will enable us to access 3G ready GSM equipment aswell as high end, and various other value added services. The architecture we are deployingand the equipment we are buying, will provide a smooth migration path to 3G as and when the3G policy of the government becomes clearer.

Right at the fag end of June, we also awarded a contract for $55 million approximately to IBM,and this contract runs concurrently with the much bigger IT outsourcing contract, we haveawarded a quarter ago. This new contract is for the management of IVR, the interactive voiceresponse system. So, in a way this is an expansion of the earlier contract. The earlier contractwas for 10 years and this new contract is for a shade under 10 years, and all these are steps toincrease and improve our operational efficiency to begin with and going forward, to enhancecapabilities and take on various transformation which will improve not just the capabilities andservice offerings of the company but will directly enhance consumer satisfaction.

During the quarter we were a beneficiary of the fact that the Indian rupee strengthened againstthe dollar and so there was a one-off gain in the profit after tax numbers, and this also helped usin containing capex costs marginally. On the whole, I think Idea is absolutely set to take up theopportunities and challenges thrown up by this most exciting of sectors mobile telephony, avery competitive also, and we look forward to the future with great sense of anticipation. I willnow hand over to my colleague Anil Jhala who will run you through some of the financialhighlights and in any case the rest of the highlights are on the web site for you. Over to you Anil.

Anil Jhala

Thanks Sanjeev. I welcome all the participants who have dialed in today from around the worldand who have dialed from here. We have had a very successful quarter for Financial Year 08,the results are already available on our website and we had also sort of ensured that most ofthe participants who are here, have these also by email. The un-audited results which wasreleased yesterday to the Stock Exchange and also available on www.ideacellular.com, containthese details. You have heard from Sanjeev about the sector and our company, I will now takeyou through the quarterly financial performance of the company.


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We had a good quarter with consolidated revenue, PBDIT and profit after tax recording a veryrobust growth. The consolidated revenue at Rs. 14.8 billion represents a year-on-year increaseof 64%. Just to clarify what we mean by YoY, we are comparing it with the corresponding

quarter last year, i.e. June 07 being compared with June 06. Further, the consolidated PBDITwas at Rs. 5.1 billion representing a YoY growth of 69%. The operating margins for the quarterare at 34.7%, which is 1% higher than the corresponding quarter last year. This is despite thefact that we have three new circles, where we have losses i.e. in Himachal Pradesh, UttarPradesh, and Rajasthan. For our established eight circles we have achieved an operatingmargin of around 38% during the quarter, which is higher by about 4.3% over the correspondingquarter last year. Cash profits from operations during the quarter were Rs. 4.97 billion, anincrease of about 115% over the corresponding quarter last year. The profit after tax at Rs. 3.09billion represents a year-on-year increase of around 259%.

Our treasury income, which Sanjeev briefly touched upon, we have earned about Rs. 458million during the quarter as income from surplus investments mainly consisting of temporaryinvestments of IPO proceeds pending its utilization in accordance with the objects of the issue.Here, I must also add that there is a small change in accounting of foreign gains/loss on importof capital equipments, as earlier they were capitalized and in view of the recent circular fromDepartment of Company Affairs, accounting standards have now become part of theCompanies Act and we have to account these income or losses in the profit and loss account.So there has been a gain of about Rs. 329 million as foreign exchange gain, which is a one timegain and which has been recognized in this quarter.

We have also added Rs. 11 billion to our capital assets during the quarter, which shows ourcommitment to expand and strengthen our network. The return on capital employed for thequarter was 20.5% while the net debt to funded equity ratio stands at 0.53.

I would also like to inform you that the merger process of our various subsidiaries hasprogressed significantly and with the only exception of Delhi High Court approval, which ispending, all other High Courts have approved the merger applications which we had put earlier.We are hopeful of obtaining all the approvals within the month of August so that we can comeout with our audited results for financial year 06-07 soon thereafter. With this I would now like tohand over proceedings to Rita.

Moderator

Thank you very much sir. At this moment I would like to hand over the proceedings to theSingTel moderator to conduct the Q&A session for participants connected to SingTel. Thankyou and over to you Zainab.

SingTel Moderator

Thank you Rita. We will now begin the Q&A session for participants connected to the SingTelbridge. Please press 01 to ask a question. Once again, 01 to ask a question. Thank you. Firstquestion we have from Mr. Tien Doe from GIC.

Tien Doe


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Hi, thank you very much for the call. I just have a question on your coverage figures, as youmentioned in your presentation, the way they have increased in the non-census towns, theyhave accelerated significantly in the last quarter, and I just wondered if you could talk a littlemore about that. What about rate of addition of other population centers? Is it going to continue

at that rate or is going to accelerate? What is the experience of moving more away from thecensus towns into the other population centers in terms of usage of the subscribers that you arenow putting on to the system? Thanks.

Sanjeev Aga

Hi, I will just give you some numbers, but then I will give you a rather complicated answer. Ourcensus towns as on end of March were 1972 and that goes up to 2084, and other populationcenters which were 2460 have gone up to 3982. I am just making an assumption, as I donthave an exact figure, that each one of these has been launched with one cell site. It could, insome cases, be more than one cell site, but roughly it seems to show that approximately half ofour cell sites are going into existing towns and half of them are going into new populationcenters of which there are majority are non-census towns. Now to answer your question that, isthis trend going to be continued, I must tell you that the definition of census towns, villages,urban, other towns is a little incomprehensive to us and very often what happens is that youmight have something which is a separate town but is part of a urban cluster annexed to abigger town, and so in our planning this may be more a geographical expansion, but could getclassified under one bucket or another, and therefore this should not be taken for a literalextrapolation, but having said that, my assessment is that for the next 2 years or in fact in thefuture, you would be seeing roughly this pattern.

Finally, your next question is what kind of experience are we having? The first experience wefind is that when we measure new sites put up in these new places with respect to traffic buildup, we have numbers which are internal and I may not be in a position to share the precisenumbers on the call, but for every new population center we have four buckets of traffic - veryhigh, moderate, low, and very low; and if in a period of 4, 5 or 6 months bulk of the traffic movesinto a top 2 buckets, it is an indication that you are on your way, you are doing alright, and apartfrom this, expansion into a new town also has a beneficial effect on existing towns in terms ofincrease in calling to and fro and increase in market power. So, this is the short answer. Tosummarize, you will be finding more expansion into non-census towns because there is not somuch left amongst census towns to be covered, and therefore that is going to be a pattern.Secondly, at this point of time we are finding reassuring returns from our investments.

Tien Doe

Thank you very much.

SingTel Moderator

Thank you, sir. Participants please press 01 to ask a question. Thank you. For next question wehave Mr. Rahul Singh from Citi Group, Singapore.

Rahul Singh


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Good afternoon sir. I just had two questions; one factual was, how much percentage of netadds during the quarter was on account of the new life time schemes of Rs. 495? And also interms of tower co, what is your sense of the emerging pricing expectation which seems to begetting built in into the recent deal on the RCOM Tower Company at $6.7 billion, and also do

you think, there is space for three big tower companies eventually going down that way, ofmaking your own subsidiary as an independent tower company?

Sanjeev Aga

Hi! Rahul. To answer your first question, approximately a little over a third of our net additionsduring the quarter were under the life time scheme, so that is the answer to your first question.To the second question, I anticipate this might be a question to be asked by many otherparticipants and therefore I will even answer some of the things you havent asked. We haveonly taken an enabling step by the formation of a company which is capable of housing ourpassive infrastructure. It is not that we are conceding but we havent actually taken a call. Weare thinking of it deeply but we havent taken a decision as to what way we would like to go, andtherefore to say that we would be forming an independent tower company may be just one ofvarious alternatives, and it is not a very likely alternative. In our assessment there are and theseare things that are known to all of you, ten years after mobile operators have been around andgiven the density of towers and the numbers of towers to be built out and looking at the tariffs inIndia and ARPUs of the marginal consumers, there is a clear economic logic that if we can bringdown our capex cost per subscriber or opex cost for increased speed, there is an economiclogic to doing thing together. Now whether that takes the form of barter, bilateral sharing, thirdparty tower companies, tower companies anchored by individual operators, is something where,in our opinion, the Indian market is at a very very formative stage and people are feeling theway around, it is far from certain how things are going to settle. We are in a state of readiness.We would not like to be slow, we would not like to be too fast, but I think the sensible thing is tokeep watching and as you say in cricket, to play the ball at the last minute. So, if you ask me asto how many tower companies would be there, this is completely conceptual. If there are 6 to 7or 8 operators, if there are 8 companies then it is inefficient, because the whole logic of a towercompany comes from doing some combination in terms of tenancy, in terms of speed and interms of asset inventory. But if you have one company, it is going to be sluggish, monopolistic,it will fall apart, so I think eventually it will come down to 2 or 3 companies. So whether it will befour companies or three companies or two companies, I think it is too early to say.

Rahul Singh

Okay, just one follow-up question on the life time scheme. You are still booking the entire rentalas an upfront income and also the tower company eventually, is it one of the options which youhave, is to possibly sell your towers to someone, if someone approaches you to buy your towersout at presumably some valuation?

Sanjeev Aga

Rahul, Let me take the easy question first. Your first question was about the life time scheme,yeah, we do. We have, consistently from the time our company started 9 years ago, followedconsistent accounting standard booking the revenue upfront and we cant change that becausewe have to have consistency in standards across the period, and therefore these life time thingswould have given us a small increase, but the amount this time was not very large, it was not


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1000 or 2000 rupees, it was 495, and also life time hasnt come down to zero, it continues to bea small portion of the total subscriber. So it has made a small difference to the Q1, but it is nota huge difference. And to your second question, that do you think you will sell your assets, it isat least ruled out for the moment. I dont know how things will evolve, but for the moment it

seems to be ruled out. But as I said we dont really know how things are going to evolve and asthere something happens differently 6 months or 1 year down the line.

Rahul Singh

Okay, thank you sir. That is very helpful.

Sanjeev Aga

Thank you Rahul.

SingTel Moderator

Thank you sir. Participants please press 01 to ask a question. At this moment, there are nofurther questions from participants at SingTel. I would like to hand over the proceeding to otherWebEx International moderator. Over to you Kamisha.

International Moderator

Thank you very much. At this time international participants may press *1 if they would like toask a question. On pressing *1, participants will get a chance to present their questions on afirst-in-line basis. Your first question comes from Sundeep from Lehman Brothers.

Sundeep Bihani

This is Sundeep Bihani from Lehman Brothers, congratulations on another great quarter. Justhad a couple of questions; first of all, your prepaid percentage of mobility net add is at 100.2%,which means that your post paid subscribers are actually down quarter-on-quarter. Can youclarify if I am reading it correctly? Secondly, in terms of you mentioned that there is a IBMcontract provision in your administration expense, can you please explain it and tell us if there isany corresponding savings which will be booked in the next quarter? And the third is, I amwondering what is keeping your MoUs almost flat to slightly declining despite having cleaned upa large part of the low quality subscriber base? Thank you.

Sanjeev Aga

Sundeep let me take the question on the MoU and your other question on prepaid. Yes, actuallyfor our postpaid base it does mean that all our net adds have been on the prepaid side and ourpost paid base has been intact more or less during the quarter. This is not completelysurprising because in many of the new expansion areas, it is predominantly a prepaid marketand a prepaid operation, and I will come back to this when I answer your question on MoU. If Iwas to just look at the figures, for quarter ended December it was 369, next quarter it went up to387, and now it has gone to 381. So it looks to have nominally gone down but if you comparewith what it was two or three quarters ago and if you remove the one off change of the quarterended March, it is still going up. But one of the things, we have done is that we have looked at


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segmentation we have looked at optimization, we have looked in much greater depth and Iwouldnt say this would comprehensively explain the difference of 6 minutes, but we havediscouraged some of the customers who were on postpaid and who were on unlimited freecalling having paid up bundled amount. We found that was being grossly abused and often at

peak times. So those kinds of tariff plans have been discouraged and that is partially anexplanation for the reduced MoU and also partially an explanation for the fact that post paidaddition hasnt gone up. But that is one part of the story. By and large, these results are acombination of so many circles and so many tariff plans that reading too much into a particular 3month period and particularly when two quarters ago this was quite different, is not important.And now if that is okay, then I will ask Anil to answer about the IBM administration.

Anil Jhala

Sundeep, you must understand that IBM transaction which we have reported in our results isnot really a cost saving kind of an instrument which we have used. It is important for anorganization of our size which is expanding with such a rapid pace that we engage some peoplewho are experts in this business so that our IT requirements can be scaled up and there isenough scalability as well as flexibility and it is into the hands of experts who do these things ona day in day out basis. So that was the whole objective of outsourcing our IT thing. And toanswer your question specifically, whether we would have any cost savings, you cant look at itfrom cost saving point of view because we as it is, were spending some money on IT and thereare certain things which will continue to remain in our scope but definitely some of ouremployees have already moved to IBM and that has brought in some kind of a saving in ourmanpower cost. So, you have to look at it on a holistic basis and I think it is important for theorganization that we have a scalable IT platform, and that is what we have done by thisoutsourcing.

Sundeep Bihani

Sir, a clarification, how much is the cost which is coming this quarter, and secondly, on theprepaid answer by Mr. Aga, should we see 100% as a trend going into future quarters or itshould go back to the 95% number we have seen earlier?

Sanjeev Aga

Sundeep, I myself will have to watch this for a few quarters more. We of course have budgets,but budgets are one thing and how the markets behave is another. But by and large I think itwould be accurate to say that we are having a divergent approach to markets in the future.There will be some markets where we will have, what we can call a full service approach, thefull zing bang of prepaid, postpaid, all kinds of consumer care and the paraphernalia, and wewould have in no way the truncated approach but an appropriate approach tailored to therequirements of the 1000s of new population centers, which is going to be largely prepaid,because in many of these places setting up verification, collection, the cheque drop box and allthat is not very practical. So I think you would definitely find it is not just for us but most of theprivate GSM operators prepaid would grow as a percentage, but having said that whether itwould be more than 100, less than 100, I dont have an accurate handle on it right now.

Anil Jhala


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Sundeep, you asked me about the specific amount which we have debited to our accounts thisquarter. I can give you the exact figure which is about Rs. 230 million, but we must have hadsome corresponding savings. So it is just an IT cost, it wouldnt be much different and I thinkoverall compared to the revenue which we are generating we will remain well within what we are

currently doing.

Sundeep Bihani

Thank you gentlemen for the clarification.

International Moderator

Ladies and gentlemen, if you would like to ask a question please press *1 on your telephone. Atthis moment there are no further questions from participants at the International center. I wouldlike to hand over the proceedings back to the Indian moderator.

Moderator

Thank you Kamisha. We will now begin the Q&A interactive session for participants connectedto India bridge. Participants who wish to ask questions kindly press *1 on your telephonekeypad. On pressing *1 participants will get a chance to present their questions on a first-in-linebasis. Participants are requested to use only handsets while asking a question. To ask aquestion, kindly press *1 now. First in line we have Mr. Irani from ASK Securities. Over to yousir.

Irani

Yeah. Hi. Congratulations both Sanjeev and Anil for the good results. I actually have threequestions; I will start from the macro first. One is on your Mumbai circle. As far as the spectrumis concerned obviously that has delayed the launch of the services there and also your thoughtson the overall spectrum policy within that, as there has been so much talked about anddiscussed in various forums? The second is on your capex plans for the year, which as per thelast quarter, you all had suggested that will be around Rs. 9000 crores, some light on that ifanything changed there? And the third is the value added services as a percentage of therevenues seem to have dropped this quarter to 8.4% which was 9% plus in the previous quarter,so if you can throw some light on that as well? Thank you.

Sanjeev Aga

Hi Sheriar. Let me start with the shortest one. Our Chairman had indicated that we will bespending ballpark of $2 billion over these two fiscal, well that was ballpark, it would be closer tosay Rs. 9000 crores or Rs. 9 billion, because at that time the dollar was Rs. 43, and this wouldcover at the moment our requirements in our 11 circles where we operate in, and Bombay andBihar start up, and also include our national long distance investments. Now at the moment wedo not have licenses beyond this and if something of that nature were to come up or anotherexpansion and the USO fund were to come up that might be extra, but for what we have here innow, this is a kind of number we have.Now your second question was on the value added services, yes I did notice that on percentageterms we have gone down. I think there are 2 or 3 answers to this. This is not going to be a


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permanent factor. I am sure that 2 to 3 quarters from now it will be a different story. But rightnow what has happened is that our value added services revenue has grown but our totalrevenue has grown faster and therefore in percentage terms it has come down. There are oneor two other factors that whenever you have rapid growth of subscribers, as we have had in the

last 12 months, if you remember just 12 months ago we were 7 million and now we are 16million, typically subscribers start on voice first and they get onto value added services after aperiod of familiarity with the service. So to some extent there is an inevitability about this orthere is a staggering about this. The third thing is that some of our value added services arevery successful like Press star to copy. And finally at the moment, we have alreadysignificantly added to our GPRS capacity and this is being further increased by order ofmagnitudes and our data revenues, I expect are going to increase. A year ago or 2 years ago,we were having unacceptable levels of congestion by our standards, but all that has eased, andin the coming quarters we expect this to start rolling back again. So that is the answer to yourquestion.

And the last question is on Bombay and spectrum. I have already said that we are ready and Ialso understand, although we can never be authoritative, that there is now spectrum availablewithin the government for Bombay, and we are first in the queue, but it is a question of thegovernment actually getting its act together in releasing it quickly, so it is hard for me to saywhen that will happen, but it could happen very quickly also, because there is nothing much leftto be done.

Now on overall spectrum, it is a large question and it would be difficult for me to get into toomany answers and questions, but I can give you broadly our companys understanding of it bothon 2G and 3G. Fundamentally there are a few things we believe as something which are given;one is the fact that the license we all have is a license not for 2G or 2.5G or 3G, it is not afrequency license, it is a license for access services, which includes 3G services, so that isnumber one. Number two, the license fee paid is not for a piece of paper. It is for the fact that inIndia the license fee represents part payment or upfront payment for spectrum, and therefore inour opinion there is already an entitlement for spectrum for both 2G and 3G. Now as far as 2Gis concerned the policy of the government which has been enunciated very clearly in severaldocuments surrounding the license and in the license itself, is that when you get the license,you get an allocation of spectrum which is bundled along with the license and the Governmentof India, correctly to avoid spectrum squatting, has had a policy that you get a start up spectrumand then when you demonstrate a need for more spectrum, that need is measured by way ofsubscribers, by way of VLR and some measures like that, apply and take more spectrum whichis your entitlement on a payment basis and that payment is into revenue share. So,fundamentally to us the rules are contractual, they are pretty old. It happens sometimes thatpeople who come into the stage rather new and are not completely familiar with the regulationsand the obligations which have been mutually crystallized over the years, might like to toy withthis concept and that concept. But we are hopeful that when the dust settles, we will have asensible policy, but at the moment as you all know, everydays newspaper there is new story.

Irani

Right, okay, thank you very much Sanjeev and all the best.

Sanjeev Aga


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Thank you.

Moderator

Thank you very much sir. Next in line we have Mr. Vinay Jaisingh from Morgan Stanley. Overto you sir.

Vinay

Thank you sir. Firstly congratulations on the great set of results, great EBITDA numbersespecially. I have three questions. First on your net adds. The net adds have been very strongespecially in the last 1 to 2 months, I assume all your prepaid pain for identification is history,and now the 750 and 800k number is here to stay. Some thoughts on that, if you could say the800 or 850k number, are you seeing that to sustain, grow or reduce in the next 3 months, 6months, whatever format you want to give it to us? The second question was a pleasantsurprise on your ARPUs inching up, more importantly average revenue per minute inched up to84 paise, some light there on your future expectations. Your ARPU numbers are again lowerthan the rest of the peers you deal with, and as you are getting into new circles you will havesome pressures there but usage is going up, so you know you probably could go up, somethoughts there on your ARPU and ARPM. And finally, losses, probably I was building it wrong,but you know I had expected losses to be a little more because you have been so aggressive onyour advertisements in the new circles, is it fair to assume the losses of this quarter x 4 wouldbe your average losses in the new circles or do you expect them to be EBITDA positive soonerthan a year? I will stop here sir.

Sanjeev Aga

Hi, all tough questions, let me see, let me answer ARPU and subscribers together. I believethat, we all believe that, we are a strong company in the circles that we do operate. When youtake national averages it may tell another story, but when you look at averages that matter, it isquite another story, and therefore we would like to think that in terms of movement of subscribermarket share and ARPUs trends, there is no reason why we should aim to perform poorer thanthe sector average. Like any self-respecting company, we would like to do better than theaverage, which of course is an oxymoron but we would certainly like to do better. Now thedanger in answering your question is that I have to make an assumption as to what is going tohappen in the total market and what is going to happen to our market share. So I would not liketo make the first assumption, it is always risky in telecom to do so, but we would like to believethat if the market continues to grow at this rate, we would like to make sure that our share ofsubscribers and our ARPU terms are at least as good if not better, that is the first point. Yes, wehave not got any subscriber who fails the subscriber verification test, who is reported as on endof period subscriber, so whoever had to be scrubbed out has been scrubbed out. In terms ofARPU trends, you know I did answer a question a little earlier about and that was just to giveyou one flavor of several flavors about what happened with the people who were closed usergroups, but there has been a lot of effort in the company, on the part of our senior management,in the corporate and in the circles, into looking at this market in a very scientific manner and in avery segmented market manner. There has been a lot of work which has gone into improvingrealizations, improving our product offerings, and to extent when you improve your coverageyou have more opportunities to fall, so it is a combination of all these factors and the fact thatwe are a strong market share company in our areas of operation, I think we have actually done


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better than the sector in terms of ARPU performance during the quarter. Now, obviously if thisis not something which can be indefinitely maintained at the same rate, but I think the gapbetween us and some of our peers, we had an opportunity recently to analyze this, becausenow we start getting indicative revenue data on a circle basis, which was not so easy to get 1

year ago, and now the COAI brings out the revenue share numbers based on or rather revenuenumbers based on revenue share, which may not be point accurate but is indicative enough,and when we analyzed the revenue in our 8 established circles against our peers, we actuallydo not find the difference there at all. There are differences within the 8 circles, for example,you know places like Delhi may be or within Andhra Pradesh or Gujarat we are not that strong,but then in any of our other circles we are stronger. So on the whole, we do not find anydifference between us and any peer, and we would be one of the high ARPU companies. Forother companies, operating in metros might have greater roaming revenue here and there, andsome of them may be operating in circles where there arent that many operators at themoment, so it is difficult to do a complete comparison, but at least in our circles we do not findany significant difference at all.

Anil Jhala

Vinay, you also asked a question about the loss in the new circles, if you recall at the lastconference call we had stated that within a period of 24 months we will go cash breakeven in allthese 3 new circles, and we are trying to see that it can happen during this financial year itself,that is all I can say to you for the time being and the current performance is showing that we arewell on our way to achieve that.

Jaisingh

Sure sir, now if you can just push on that point on average revenue per minute inching up orARPU inching up a bit, are you seeing that even in this quarter or you know, are you seeing thatin the rest of the year or is that too difficult to address now?

Sanjeev Aga

It is too difficult to address, you know, to be honest we all work with budgets, but when we getthe figure at the end of the month, at this level of accuracy, you know , it may be Rs. 5 here orRs. 5 there.

Jaisingh

No but plus minus 5%, I mean are we seeing a 10% decline for the year end, if that what wasquestion, you know, if that is an extreme?

Sanjeev Aga

No, we had in our previous quarter said that we expect both in terms of rate per minute andARPUs, there might be a general decline but we do not expect to precipitate the decline, unlesssomething very unexpected happens.

Jaisingh


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Right sir, thank you very much.

Moderator

Thank you very much sir. Mr. Mahadevan you can go ahead with your question sir.

Suresh Mahadevan

Yeah, thanks a lot for the opportunity to ask question. I had 2 big picture questions for the seniormanagement. One is on 3G. Do you see any specific risk relating to 3G spectrum options? Thatis one. I just wanted to hear your perspective on how Idea is viewing the 3G spectrum option?The second thing is, you know, obviously things are growing very well for the industry, we areaveraging over 7 million now as per the latest monthly numbers, but, I just want to hear fromyou, what in your perspective, are the risks facing the industry as well as Idea as the company?Thanks a lot.

Sanjeev Aga

Suresh as the anchor you are suppose to answer your own questions. But since you arewearing two hats I will take over your role. In a way I have already clarified this. As I read thepolicy and the documentation surrounding the policy, 3G in my opinion should be a seamlessmigration from 2G and 2.5G. It may not be exactly the same in the sense that the governmentmay charge a different entry fee, but I do not think the policy allows companies which areentitled to that spectrum to be left out. Therefore, I believe that once everything is studied,eventually the policy will come out robust and sensible. But since the policy is not out and youcan take nothing for granted. For the second question, here again, it is people like you do havea better sense because we have a better sense of what is happening in the market but you lookat economic data. It is people like you who are trained better, but I would tend to agree thatgiven the fact the three drivers we keep talking of, the low prices of service, the low prices ofhandsets, and expanding coverage, unless something silly is done or stupid is done, chances ofwhich reduces as the sector matures and becomes an important sector. I think we should be atthe reasonable confidence looking at this number to be broadly maintained over the next coupleof years.

Moderator

Are you done with your questions sir?

Suresh Mahadevan

Yeah, yeah, thanks a lot.

Moderator

Thank you very much sir. Next in line we have Ms. Reena from DSP Merrill Lynch. Over to youmam.

Reena


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Hello, good afternoon everybody, and thank you very much for this opportunity to speak withyou. I have three questions. One is, Mr. Aga, you were very careful in kind of emphasizing thatyou have only taken an enabling resolution for a de-merger of the tower company. Would yoube kind enough to please share what are the risks, you know, why would you stop short of a de-

merger? Because from a consolidation or an accounting standpoint, I do not think it wouldmatter. So could you please help us understand the risks of going down that route? My secondquestion pertains to your margins, both in Established and New circles. Overall I just wanted tounderstand in the established circles broadly, could you help us understand if the margin trendwould have been any different if one were to strip out the impact of life time plans? And on thenew circles, is there any significant cut back in your discretionary promotion spending, becauseyour promotion expenses have lagged your top line growth quite substantially or is this likely tobe the trend going forward? My last question is, with regard to your inorganic growth plans.There has been a lot of buzz through this quarter about various inorganic opportunities. Arethere any clear hurdle rates or valuation benchmarks that you have in mind that you could sharewith us? Thank you.

Sanjeev Aga

Reena, hi, let me take your questions in the order you asked them. It is enabling because youare right between forming a company and between transferring assets to a 100% subsidiary.There is no risk, but just because there is no risk we may not necessarily take the step if it is notleading to somewhere, and these are steps which need to be approved by the Board ofDirectors. So at the moment, we have just taken the first enabling step. Your assessment iscorrect, that if you were to take the second step there is no risk, but it may be unnecessary ifyou are not 100% sure, and at this point of time our Board of Directors has not taken thatdecision.

Reena

Sir 100% sure of what?

Sanjeev Aga

You know, what is the requirement of taking a second step, if you are not going to take the thirdstep?

Reena

Which is what?

Sanjeev Aga

Third step could be anything for the whole gamut of possibilities that people are writing about.All I am trying to say is that these are decisions which require a Board of Directors approval andat this point of time, it is an enabling step, though I am not disagreeing with your analysis thatthe second step does not harm you, all I am saying is that step has not been taken, that isnumber one. Number two, in terms of margins, you know, our margins in our established circleswas 37.6% in March, and it is 38% June quarter, so there is an improvement of 0.4%. If youwere to even it out for the so called lifetime phenomena, may be there is be no change. But the


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lifetime is not such a big thing in terms of, one, the number of subscribers. If subscribers come ,they pay something. So if you are talking of the incremental subscribers quarter-to-quarter andthe fact that the amount this time was much lower, and two, the cost of acquisition is alsohigher, and cost of acquisition is also reduced up front, so once you take all these factors it

would make a blip but it is not going to dramatically change the trend. It will probably smaller thedifference from 0.4 to 0.3 or something in that ballpark or 0.2, but it will not be more than that.This is the second answer.

On the promotion side, promotion would include advertising, mass media advertising. We had alittle extra expenditure on on-the-ground promotions, but in terms of our mass media we havecomparatively under spend this quarter, and it is quite possible that in the third quarter of theyear, particularly closer to the launch of our new circles, our advertising spend will be steppedup. So I would agree with you that the promotion cost need not be just multiplied by 4. It couldgo up, but we have not really cut back on anything, it is more sequencing and planning andworking to a strategy.

Your last question was inorganic, you know, beyond a general statement, our company hascome through the merger of four companies, RPG, Escotel, TATA cellular, Birla AT&T,acquisition or merger, and rollouts in Delhi, Himachal, UP East, and Rajasthan. So we havedone it in the past, but at this point of time we see there is nothing at all in the horizon.

Reena

Sir, thank you very much.

Moderator

Thank you very much mam. Next in line we have Mr. Chawla from JP Morgan. Over to you sir.

Chawla

Hi, good afternoon everybody. Thanks for the earnings call. I just have two questions; first oneis for Mr. Aga. Mr. Aga, beyond the 13 licenses do you think that Idea could have priority overVodafone for the remainder of the circles as far as spectrum is concerned? And also secondquestion is for Mr. Jhala on depreciation. The depreciation seems to have come down onquarter-on-quarter. This may be due to elimination of some of the fully depreciated assets. Doyou expect this sort of elimination of some of the assets going forward as well in the comingquarters Mr. Jhala?

Sanjeev Aga

Mr. Chawla, let me take first question, which was about actually something which came in thepapers, it was completely off the mark. We have never represented to the government that weshould be given preference in spectrum allocation. There are certain rules of the Government ofIndia with respect to spectrum allocation and we respect them. So we never asked for it, andour fellow competitors and operators have never refuted it. But someone thought it fit to have itprinted in papers that we asked for this. It never happened at all. But what we did do is, we havewritten as part of our routine follow-up to the government that we would like our pendingapplications to be taken up for consideration early and we have actually a justification, which I


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will just take a minute to explain, as this is also in the public domain. The TRAI had aconsultation paper and we made a single point reply to the consultation paper, apart from thecommon reply of the COAI and this is already on the website of the TRAI. So theres nothing tohide there. Now, I am just going back a little historically. Until 2003, 11th November, there was

no concept of just making an application for a license. There were two licenses, and then inNTP 99, BSNL MTLN came in as third and in 2002 or 2001 in the auction, there was a fourthlicense, and there was no concept of just making an application. On 11th November 2003 thegovernment, as a consequence of the WLL controversy, patched up things by creating a UnifiedAccess Service License policy and in that policy, the government brought in a rule that the crossholding clause which was an intrinsic part of licenses, there was a one off exemption given toexisting licensees from the application of that clause, so that two concerned licensees at thatpoint of time would have been the Reliance group and the Tata group. We have no problem withthat exemption. But an unintended effect of that exemption was, that a company like Idea whichhad a shareholder, who was both here and in another company, unintentionally but got into asituation that if it wanted to expand its footprint, the cross holding clause would restrict it. So in away that policy of the Government of India deprived Idea of its inherent right to seek to apply fornew licenses, and that being the case, Idea did want to take the licenses. Application forBombay was not processed, and there is a justification, given the fact that we have beenpioneering operators, given the fact that we are large, and given the fact that we have beenunintentionally but unjustly deprived for sometime. There is a clear case that our applicationsshould be treated on a special footing. That is the substance of our request. It does not extendto jumping the queue in spectrum, which is what the newspaper has reported.

Anil Jhala

Mr. Chawla, your question regarding depreciation, you said that we have lower depreciation, butit is not so, in fact our gross block has increased and in line with increase of our gross block ourdepreciation has also increased by nearly 9% during this quarter. So I am not able tounderstand that what your specific question is. It is provided according to well-stated accountingpolicy based on the capitalization which we have done during the quarter.

Chawla

If I had to just rip out the amortization of the entry fee that you have paid, you know, from thedepreciation and amortization combined amount, then the amount with them left with is.

Anil Jhala

I think my amortization has just remained the same, amortization has not changed at all. I havetotal regular information available with me. It is exactly the same between the two quarters. So,it is primary deprecation which has gone up.

Sanjeev Aga

If you are not able to reconcile it, you can reconcile it off line. But I think answer which Anil hasgiven you, is the correct answer.

Chawla


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Alright, thank you sir.

Moderator

Thank you very much sir. Next in line, we have Mr. Rajiv Sharma from HSBC. Over to you sir.

Rajiv Sharma

Thank you sir for the call. I have just two quick questions. One is the break up of towers, youprovided initially, 4598 is you were sharing with other and 2452, I am not just clear with that andyou also mentioned about the tenancy ratio of 1.3, if you could just help me with that numberhow you are arriving at that number? And also if you could help me with the kind of compositionof how many ground base and roof tower sites you have? And the second question is on themargin expansion, what kind of margin you are getting from the infrastructure sharing, and if youstrip that out, what you are left with? And third is that, is there any policy which the companyhas taken on the postpaid side, because despite lot of promotions and lot of up marketpromotions, you have not been able to garner postpaid this quarter. So, is it a policy that it willbe just 100% prepaid? That is it, thanks.

Sanjeev Aga

Rajiv, I will have to ask you to repeat one or two questions, but let me just start with thequestions which I have noted. Your first question was about breakup of towers, and whileknowing that you are strong in math, we had left you with a simultaneous equation to solve. Butnow that you are not doing it, I will have to do it for you. We have 13,160 cell sites with thenumber of our towers is a little under 9000 as on end of June, and tenancy ratio means thatapart from ourselves, approximately 30% other cell sites of other operators who are driving onthese towers. The majority of them would be 1 plus 1 but in rare cases, you have two moreoperators. Apart from our cell sites which are placed on other operators, we also have about600-700 towers which are owned by independent tower companies, which are build-operatescheme, so thats broadly the breakup. Your question about ground based and roof top -ground based are approximately 70-75% of the total number of roof tops, so it is a 7:10 ratioroughly. If the number of ground based is about 7 7.5, roof tops would be about 10, that is theratio.

Rajiv Sharma

Okay, and my second question was on your margin expansion, just purely if you were not to doinfrastructure sharing what is your benefit in terms of margin because of infrastructure sharing?

Sanjeev Aga

Your question is that if we neither had a host neither we were a guest.

Rajiv Sharma

No, if you were not a host.

Sanjeev Aga


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If you were not a host, so you want to know the rental incomes we get? Is that your question?

Rajiv Sharma

No, no, my question is like how much margin you are able to garner just because of sharing andI mean both the activities?

Sanjeev Aga

This is a little sensitive data so I cant give you because basically from that, you can calculateour rentals. But I will give you because this is widely known in the industry and rentals are in therange of, let me just get the number right, or let me finish your postpaid question.

Let me put it very philosophically. When you are doing postpaid, it is extremely managementintensive business, and it requires apart from higher cost of acquisition, a higher cost ofmaintaining the subscriber. The market has changed; When you are doing subscriber additionsin millions, you need to make sure that your postpaid tariff plans are targeted to the people whoneed that benefit and vice versa. Sometimes what normally seems a reduction, may actually bepart of doing something in a superior manner. It means that you have better targeting tariffplans and services to customers who really needed instead of force splitting something tosomething else. So in absolute terms there is no question that if the Indian sector is going to do7 million, it is just not possible to give the kind of hand holding which postpaid requires. Youmust also remember that from the time, 5 to 6 years ago, prepaid used to be a limited productoffering, it could not do closed user groups, it could not do a lot of tariff plans, it could not do alot of value added services, but by and large, technically, the difference between a prepaid andpostpaid has disappeared. So it is more a mode of payment, it is more a habit forming, some ofyou like Vinay Jaisingh, who is a club member, some people like to settle them on the spot,some like to pay bill once a month, some like to pay once in three months. So it is a function ofall these factors and companies postpaid reflects that reality. So I would not give too muchimportance to the number going up or going down as it does not mean necessarily good or bad,and let me just come back during the call with the numbers on your margins, in the mean timewe will just take the next question and get back to you in few minutes.

Rajiv Sharma

Okay. Not a problem. Thanks a lot sir.

Moderator

Thank you very much sir. Next in line we have Mr. Shubam from Macquarie. Over to you sir.

Shubam

Hello every one. I have two questions. One was on the existing eight circle operations. I justwanted to know the reason why your EBITDA margins would have possibly gone down on anquarter-on-quarter basis, any particular reasons? Just a clarification, you have restated theEBITDA margin on the existing circles on a quarter-on-quarter basis in this quarter for the Marchquarter. So what EBITDA margins you had given for existing circles in March, you have


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changed that number in this quarter for the March quarter. So why is that, but more importantly.

Sanjeev Aga

We understand the question, go ahead with your second question

Shubam

Yeah. Second is, basically you will have a significant rural led growth going forward in the next12 or 24 months, so I would really appreciate if you can give us some colour on how your keyoperating metrics are looking like on the ground as you go into more deeper rural coverage withregard to ARPUs or MOUs or any marketing and distribution costs?

Sanjeev Aga

Okay. Let me first complete the answer to the Rajivs incomplete answer. I wouldnt like to bevery precise but if we did not have anyone as a receiver or if our towers had not guest and wewere all by ourselves, our operating cost on the network side would be up by between 10 to15%. I wouldnt like to be more precise at this point of time, but that is just to give you an ideaof the order of magnitude.

Shubam, to your question, Objects of our IPO were five, and IPO funds have to be used againstthe objects of the issue. Now one of the major objects of the issue was the Bombay roll out,and since the Bombay roll out has got slightly delayed that fund cant be just used to pay off thedebt, and so that fund lies and it generates income by virtue of short term investments. Thatbeing the case, what we have done at the end of March was reporting it as other income, whichwas not operational income, it was other income, but to make it completely transparent, lastMarch also, the idea was to be make it transparent, but that was what the accounting standardcompelled us to do. But we have taken an opinion from our auditors and this time that incomefrom short term investments is clubbed in the treasury and financing charges, which would havebeen the case had you actually used that money to pay off your debt and reduce your debt, andtherefore the revenue figures from March are restated and now they are pure operationalrevenue numbers and they become absolutely comparable. So our margins have declined, theyhave actually gone up on a quarter-on-quarter basis in the eight circles.

Shubam

Okay, perfect.

Sanjeev Aga

And also going forward this is the format which will make it simpler for all analysts, so I think wehave got onto something which is going to be good for everyone.

Shubam

And sir with regard to my second question, as to what do you see as the likely changes in thekey operating metrics as you go into a rural led expansion program, get outside of the census


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towns, especially you know some of the key operating metrics and finally the impact on payback periods and ROCEs?

Sanjeev Aga

I think it is axiomatic to say that as you penetrate deeper the low hanging fruit become higherand higher. I think it is absolutely correct that you will not have the kind of juicy returns whichyou might have had 8 years ago, 5 years ago or even 2 years ago. But what does happen in abusiness is that we all respond to the circumstances. So you will find industry and the sectorresponding in variety of ways. You will streamline your distribution channels, you will look atyour product offerings very differently, you will look at your infrastructure sharing very differently.These are all responses to a challenge, and at the end of the day you know everyone hasshareholders and everyone has management. I would not go to the extent of saying that this isgoing to necessarily mean that the business case is going to get bust, it may be that ARPUswould be little lower, at least in the beginning because the share of wallet you can get frommarginal consumers is less, but we also need to remember on the other hand that, India ishaving a 9% GDP growth which means that many of our subscribers are participating in that 9%GDP growth, and many of our existing subscribers have increasing ability to spend. So this isthe way it is spanning out. It is difficult to identify one cause and one effect and to give you ananswer, overall I would say, yes, there is pressure and the industry will have to keep tweakingits models to maintain profitability. One of the good things, of course, is that when you get thesekinds of numbers, your fixed costs do get amortized over a much larger base.

Shubam

Right, and finally do you foresee, this is not something which will definitely happen in the shortterm, but do you foresee a move towards some sort of dabbling in handsets from GSM universewhich was hitherto not been the case, especially as we hear about Vodafone employing that asa key entry strategy into India and instrumentally, you see a lot more operators actually startingto think about it in terms of either vending handsets or making it a bundle plan and so on and soforth.

Sanjeev Aga

You know, this is one of the things which I will have an accurate answer two years down theline, but I will tell you what the two conflicting things are. On one hand, the whole advantage ofGSM and I think this is where Indian GSM has been a lot smarter than for example EuropeanGSM. I am being a little anecdotal here or a little philosophical here, but look at Europe, theypay huge subsides upfront by bundling handsets, and then to recover the subsidy you have twothings, you got to have high lock-ins, one year, two year, three year contracts, and you have tohave high rates per minute. On the whole, I think the Indian system, where you dont subsidiesthe handset, is one of the reasons why we have been able to liberate consumers from beinglocked in and we have been able to liberate consumers from high rates. So in one way or theother it is paid. So I think one of the strengths of the Indian system and of the GSM technologyis that you dont need to bundle handsets. Secondly, in India you are finding brand newhandsets of very high quality, just over a 1000 bucks, and India is a big market for second handhandsets also, which are well under 1000 bucks, and that being the case you could truly haveconsumers making independent choices of handsets and independent choices of serviceproviders, and I think this is inherent strength of the Indian GSM market. At the same time, in


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the Indian market we also have some operators who have a handset driven strategy, and we alloperate in the same market and competition requires you to have response for every situation.So our company is also ready for any such response. We do certain amount of handsetbundling, it is not major contribute to our net adds, but we do handset bundling to advantage

here and there wherever, particularly where we find there are first time users coming in to themarket and if you have good controls by which handsets are not debundled and end up being apseudo subsidy to the handset maker. If you have good controls, which we have put into place,it is a strategy which can be used to advantage in a limited manner, and if the market changesand that is why I said two years later, we are equipped and ready for all eventualities.

Shubam

This is the very interesting point you just made at the end of your statement, how do you ensurea network lock on GSM to ensure that customers stay within the well guarded service area ofIdea Cellular?

Sanjeev Aga

Well you know there are network locks and there are post usage methods of determiningwhether the handset and the SIM are staying locked, and through a combination, not these arefull proof, but there is enough technology and methods to make it strong enough deterrent tomake misuse an aberration.

Shubam

Okay thank you very much, really appreciate.

Moderator

Thank you very much sir. Next in line we have Ms. Deepti Chowhan from Asit C. Mehta. Overto you mam.

Deepti Chowhan

Sir I just had one question, recently we have read this news that in case of those circles whereyou just got licenses but were not been able to get spectrum because of scarcity, you will berequired to start fixed lines services, so are we seeing that risk for Idea?

Sanjeev Aga

No. It is like someone said that, it is like the government first describing Sachin Tendulkar assportsman and then abrading him as to why he hasnt won Wimbledon for India? So, it is asabsurd as that. So, I did read that article, but none of us took it seriously.

Deepti Chowhan

Okay, and secondly what are the initiatives we are taking on the VAS front?

Sanjeev Aga


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I had mention a little earlier in the call that this is something which in this fiscal year, more soduring the period starting two or three months from now, we will see a fair amount of action. Ihave already mentioned to you about on the data side, we are up grading our capacities. And I

would not at this stage like to be very specific, but value added services until last year, given thefact that our capital expenditure was not on par with the tigers of the industry, voice was the firstpriority, VAS on the second priority. But there is something which we are on to right now and asI said, I expect that by the end of the 4th quarter or 3rd quarter of the year, you would find valueadded services contribution to the pie increasing.

Deepti Chowhan

Okay sir, thank you

Moderator

Thank you very much mam. At this moment, I would like to hand over the floor back to Mr.Suresh Mahadevan from UBS for the final remarks. Over to you sir.

Suresh Mahadevan

Yeah thanks a lot to the senior management for taking time on this call. I would pass it toMr. Aga for any concluding remarks.

Sanjeev Aga

Thank you Suresh. Thank you all the ladies and gentlemen who have asked questions. Wehave had a satisfactory quarter. This is a great sector, it has got great opportunities, it has alsogot great scope for missed opportunities, and I am grateful to all of you for your support. Sometimes, we learn a lot from your questions because we ourselves get blind to many ways oflooking at data, we find these exchanges useful also managerially. We have also got a verystrong management team in place in our company and I am very hopeful that their collectiveeffort will help us continue to do reasonably well. Thank you being on the call.

Anil Jhala

Thanks Suresh. Thanks Rita, and thanks all the participants.

Moderator

Thank you very much sir. Ladies and gentlemen, thank you for choosing WebEx conferencingservice. That concludes this conference call. Thank you for your participation. You may nowdisconnect your lines. Thank you.

transcript-earning call - q1!07!08

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