GICS Industry : Wireless Telecommunication Services l Sub Industry : Wireless Telecommunication Services l Website : www.rcom.co.

in

Reliance Communications Ltd

Key Stock Indicators

NSE Ticker : RCOM CMP (as on 16 Dec 2010—Rs/share): 129.0 Shares outstanding (mn) : 2064.0
Bloomberg Ticker : RCOM:IN 52-week range up to 16 Dec 2010 (Rs)(H/L): 201.65/122.25 Free Float (%) : 32.3
Face value / Share: 5.0 Market Cap as on 16 Dec 2010 (Rs mn): 266,156 Average daily volumes (12 months) : 5,176,846
Div. Yield (%): 0.7 Enterprise Value as on 16 Dec 2010 (Rs mn): 555,125 Beta (2 year) : 1.5

Reliance Communications Limited (RCOM) is the flagship company of Reliance Anil Dhirubhai
Ambani (ADA) Group. It is one of India’s leading integrated telecommunication companies with Key Financial Indicators
over 111 million customers. RCOM encompasses a complete range of telecom services covering Mar-08 Mar-09 Mar-10
mobile and fixed line telephony. It includes broadband, national and international long distance
services and data services along with an exhaustive range of value-added services and applications. Revenue (Rs mn) 188,712.2 226,041.5 219,227.3
EBITDA ma rgins (%) 42.6 39.6 34.7
KEY HIGHLIGHTS PAT (Rs mn) 65,338.0 59,246.1 44,849.5
PAT ma rgins (%) 34.6 26.2 20.5
Second largest player in mobile segment
Gea ring (x) 1.1 2.2 1.4
RCOM is the second largest player (after Bharti Airtel) in mobile segment with a presence in 22 EPS (Rs /s ha re) 31.7 28.7 21.7
circles. The company has around 111 million subscribers in June 2010 with market share of 17.4%. PE (x) 16.1 6.1 5.9
RCOM is India’s first telecom service provider offering nationwide CDMA and GSM mobile services.
RCOM having 56.48 million subscribers as of June 2010 continues to be the largest CDMA mobile
P/BV (x) 4.3 2.0 1.3
operator with market share of around 52%. The company’s minutes of usage increased from 277 RoCE (%) 18.8 13.5 7.6
billion in FY09 to 350 billion in FY10 a rise of 26%. RoE (%) 33.7 27.9 22.8
EV/EBITDA (x) 16.1 8.2 7.3
Huge pan India presence
n.m. : Not meaningful
RCOM has established a pan-India, next generation, integrated (wireless and wireline), convergent
(voice, data and video) digital network that is capable of supporting best-of-class services spanning Shareholding (As on September 30, 2010)
the entire communications value chain, covering over 24,000 towns and 6,00,000 villages across FII DII
India. RCOM operates in 22 circles a total of 49,300 telecommunication towers across India. 8% 9%
Others
RCOM acquired 3G licence in 13 circles 15%

RCOM through its wholly owned subsidiary company has acquired 3G licence in 13 circles. RCOM is
the only operator in India that has both the highest coverage in 3G (13 circle) as well as having pan
India 3G-like capability in CDMA.

KEY RISKS

• Rapid changes in technology that can make the company’s technologies, products or services
obsolete. Promoter
68%
• Mobile Number Portability (MNP) limits the acquisition of new subscribers and the retention
of existing ones. Indexed price chart
• Intense tariff based competition in the industry (index) ('000)
140 35000
Stock Performances vis-à-vis market 120 30000
Returns (%) 100 25000
80 20000
YTD 1-m 3-m 12-m
60 15000
RCOM -25 -20 -18 -26
40 10000
NIFTY 12 -1 2 18 20 5000
0 0
Note:
Jul-10
Feb-10

Sep-10
Dec-09
Jan-10

Jun-10
May-10

Aug-10

Oct-10
Apr-10

Nov-10
Mar-10

1) YTD returns are since April 1, 2010 to Dec 16, 2010.

2) 1-m, 3-m and 12-m returns are up to Dec 16, 2010.
Volumes (RHS) RCOM NIFTY

CRISIL COMPANY REPORT | 1

Reliance Communications Ltd
BACKGROUND

India’s leading integrated telecom company RCOM is the flagship company of the Anil Dhirubhai Ambani Group (ADAG) of companies. RCOM (formerly Reliance India
Mobile) was launched on 28th December 2002. RCOM encompasses a complete range of telecom services covering mobile and fixed line telephony. It includes broadband,
national and international long distance services and data services along with an exhaustive range of value-added services and applications.

With a customer base of over 111 million (including over 2.5 million overseas retail customers and 2.4 million Big TV DTH customers), RCOM corporate clientele includes
2,100 Indian and multinational corporations, and over 800 global, regional and domestic carriers. RCOM enterprise customers include 850 of the top 1000 enterprises in
India.

RCOM owns and operates the world’s largest next generation IP enabled connectivity infrastructure, comprising over 277,000 route kilometers of fiber optic cable systems
in India, USA, Europe, Middle East and the Asia Pacific region. RCOM operates nationwide Direct-to-Home satellite TV services under its wholly owned subsidiary, Reliance
Big TV Limited (Big TV).

COMPETITIVE POSITION

Peer Comparison
Reliance Mahanagar Telephone Tata teleservices
Communications Ltd Idea Cellular Ltd Nigam Ltd. (Maharashtra) Ltd Tata Communications Ltd Bharti Airtel Limited.
Mar-10 Mar-10 Mar-10 Mar-10 Mar-10 Mar-10
Revenue (Rs mn) 219,227.3 124,048.9 37,654.8 22,465.9 110,822.5 418,991.2
EBITDA margi ns (%) 34.7 26.3 -79.4 23.6 9.1 40.1
PAT (Rs mn) 44,849.5 9,711.1 -26,104.0 -3,180.0 -6,867.9 93,615.2
PAT margins (%) 20.5 7.8 -69.3 -14.2 -6.2 22.3
Gea ri ng (x) 1.4 0.8 - -2.5 1.8 0.3
EPS (Rs /s hare) 21.7 2.9 -41.4 -1.7 -24.1 24.7
PE (x) 5.9 23.1 n.m n.m n.m 14.6
P/BV (x) 1.3 2.3 -5.0 -2.7 1.8 3.4
RoCE (%) 7.6 9.4 -51.1 1.7 0.3 23.3
RoE (%) 22.8 9.9 -46.5 - -16.0 27.4
EV/EBITDA (x) 7.3 9.2 0.5 13.1 14.1 8.6
n.m: Not meaningful

FINANCIAL PROFILE Key Financial Indicators

Faces pressure on top-line as well as profitability Units Mar-08 Mar-09 Mar-10
Revenue Rs mil li on 188,712.2 226,041.5 219,227.3
RCOM reported revenues of Rs.219 billion in FY10 as compared to Rs.226 billion in
FY09, a drop of around 3%. The decrease in revenue was mainly on account of 11% EBITDA ma rgins Per cent 42.6 39.6 34.7
drop in mobile services segment. In FY10 RCOM’s operating margins stood at 34.7% PAT Rs mil li on 65,338.0 59,246.1 44,849.5
in FY10, as against 39.6% in FY09 due to an increase in operating cost with respect
to access charges, license fees and network expenses of around 16% from previous PAT ma rgi ns Per cent 34.6 26.2 20.5
year. Revenue growth Per cent -5.0 19.8 -3.0
Also net profit margins dropped from 26.2% in FY09 to 20.5% in FY10 on account of EBITDA growth Per cent 22.1 11.5 -15.0
decrease in revenue as well as increase in operating cost. PAT growth Per cent 95.0 -9.3 -24.3
Gea ring Ti mes 1.1 2.2 1.4
RoCE Per cent 18.8 13.5 7.6
RoE Per cent 33.7 27.9 22.8
INDUSTRY PROFILE

Telecom Services – Fixed

The fixed telecom services sector consists of wireline services provided over copper lines connected to local exchanges. Generally, the capital expenditure to roll out fixed
wireline services is higher as compared with mobile or fixed wireless services. The demand for fixed services has declined marginally over the last 4 years due to declining
initial subscription costs of mobiles (leading to substitution of fixed services with mobile services) and expanding coverage of cellular services. In 2009-10, the fixed-line
subscriber base declined by 1.01 million as against a decline of 1.45 million in 2008-09. The fixed-line subscriber base reached 36.9 million in March 2010. Since fixed lines
help provide superior quality broadband services, the rising penetration of broadband would help arrest the decline in the fixed-line segment. Players are increasingly
looking at positioning fixed line as a triple play device by offering voice, video and data on the same platform to prevent further market erosion.

Telecom Services – Wireless

The wireless segment has witnessed rapid growth in 2009-10, adding about 192 million subscribers. As of 31st March 2010, the total wireless subscriber base stood at 584
million as compared to 391 million subscribers at the end of March 2009, exhibiting the growth of 49 per cent y-o-y. Deeper penetration into existing areas and expansion
into rural India has led to wider availability, while declining tariffs has increased affordability, resulting in proliferation of the service. However, the industry is characterised
by severe competition which is expected to intensify further with service expansion of new licensees, implementation of mobile number portability (MNP) and launch of 3G
services. Given the shift in the competitive landscape in the mobile services sector, driven by intense pricing pressure, profitability of existing players is expected to remain
under pressure.

CRISIL COMPANY REPORT | 2

Reliance Communications Ltd
ANNUAL RESULTS

Income Statement Balance sheet

(Rs million ) Mar-08 Mar-09 Mar-10 (Rs million ) Mar-08 Mar-09 Mar-10
Net Sales 170,935.8 207,304.5 206,486.1 Equity share capital 10,320.1 10,320.1 10,320.1
Operating Income 188,712.2 226,041.5 219,227.3 Reserves and surplus 233,214.9 170,932.1 201,494.6
Tangible net worth 243,535.0 181,252.2 211,814.7
EBITDA 80,363.0 89,575.3 76,128.8 Deferred tax liablity:|asset| 1,027.6 281.0 990.5
EBITDA Margin 42.6 39.6 34.7 Long-term debt 141,078.7 272,903.9 192,518.2
Short-term-debt 117,138.3 118,718.6 104,636.0
Depreciation 28,052.6 36,077.0 37,465.1 Total debt 258,217.0 391,622.5 297,154.2
Interest 9,032.1 14,042.8 -7,894.0 Current liabilities 156,212.5 159,718.3 147,084.6
Other Income 12,253.0 19,239.0 2,980.2 Total provisions 44,563.7 41,095.7 40,266.7
Total liabilities 703,555.8 773,969.7 697,310.7
PBT 68,128.7 58,734.6 49,308.0 Gross block 420,572.9 546,426.2 578,315.1
PAT 65,338.0 59,246.1 44,849.5 Net fixed assets 487,742.3 531,168.0 534,138.9
Investments 109,996.3 95,657.0 41,598.9
PAT Margin 34.6 26.2 20.5 Current assets 105,817.2 147,144.7 121,572.9
Receivables 27,223.7 39,617.7 33,116.7
No. of shares (Mn No.) 2064.0 2064.0 2064.0 Inventories 4,058.8 5,427.2 5,446.3
Cash 8,781.8 16,829.0 8,185.4
Earnings per share (EPS) 31.7 28.7 21.7 Total assets 703,555.8 773,969.7 697,310.7

Cash flow Ratio

(Rs million ) Mar-08 Mar-09 Mar-10 Mar-08 Mar-09 Mar-10
Pre-tax profit 55,531.3 58,694.5 49,537.9 Revenue growth (%) -5.0 19.8 -3.0
Total tax paid -1,789.1 -235.1 -3,749.0 EBITDA growth(%) 22.1 11.5 -15.0
Depreciation 28,052.6 36,077.0 37,465.1 PAT growth(%) 95.0 -9.3 -24.3
Change in working capital 1,382.4 -33,242.5 3,465.5
EBITDA margins(%) 42.6 39.6 34.7
Cash flow from operating activities 83,177.2 61,293.9 86,719.5 Tax rate (%) 2.6 0.8 7.6
Capital Expenditure -213,058.8 -256,565.3 -20,711.4 PAT margins (%) 34.6 26.2 20.5
Investments and others -32,882.3 14,339.3 54,058.1
Dividend payout (%) 2.4 2.8 3.9
Cash flow from investing activities -245,941.1 -242,226.0 33,346.7 Return on Equity (%) 33.7 27.9 22.8
Equity raised/(repaid) 6,220.5 -3,254.9 -2,893.0 Return on capital employed (%) 18.8 13.5 7.6
Debt raised/(repaid) 83,833.7 133,405.5 -94,468.3
Dividend (incl. tax) -1,811.1 -1,931.8 -2,045.8 Gearing (x) 1.1 2.2 1.4
Others (incl extraordinaries) 11,296.2 60,760.5 -29,302.7 Interest coverage (x) 8.9 6.4 0.0
Debt/EBITDA (x) 3.2 4.4 3.9
Cash flow from financing activities 99,539.3 188,979.3 -128,709.8
Change in cash position -63,224.6 8,047.2 -8,643.6 Asset turnover (x) 0.5 0.5 0.4
Opening cash 72,006.4 8,781.8 16,829.0 Current ratio (x) 0.6 0.7 0.6
Closing cash 8,781.8 16,829.0 8,185.4 Gross current assets (days) 195 236 202
n.m : Not meaningful;

QUARTERLY RESULTS

Profit and loss account

(Rs million) Sep-10 % of Rev Sep-09 % of Rev Jun-10 % of Rev Sep-10 % of Rev Sep-09 % of Rev
No of Months 3 3 3 6 6
Revenue 30,896.3 100.0 30,610.0 100.0 31,859.1 100.0 62,755.4 100.0 62,580.7 100.0
EBITDA 48.7 0.2 3,781.2 12.4 1,263.7 4.0 1,312.4 2.1 7,932.1 12.7
Interes t 1,105.6 3.6 3,429.7 11.2 2,111.5 6.6 3,217.1 5.1 (2,282.6) (3.6)
Depreci a tion 3,707.8 12.0 2,130.3 7.0 4,060.3 12.7 7,768.1 12.4 7,693.5 12.3
PBT (4,764.7) (15.4) (1,778.8) (5.8) (4,908.1) (15.4) (9,672.8) (15.4) 2,521.2 4.0
PAT (4,764.7) (15.4) (1,178.8) (3.9) (4,908.1) (15.4) (9,672.8) (15.4) 2,521.2 4.0

CRISIL COMPANY REPORT | 3

Reliance Communications Ltd
FOCUS CHARTS & TABLES

Rs mn Quarterly sales & y-o-y growth Per cent

Quarterly PAT & y-o-y growth
36,000 15 Rs mn Per cent
15,000 200
35,000 10 12,000 100
34,000
33,000 5 9,000 0
32,000 0 6,000
-100
31,000 3,000
-5 -200
30,000 0
-10 -3,000 -300
29,000
28,000 -15 -6,000 -400

Dec-07

Jun-08
Sep-08
Dec-08

Jun-09
Sep-09
Dec-09

Jun-10
Sep-10
Mar-08

Mar-09

Mar-10
Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Sep-08

Sep-09

Sep-10
Mar-08

Mar-09

Sales Sales growth y-o-y (RHS) Mar-10 Net Profit Net profit growth y-o-y (RHS)

Rs/share EPS Per cent Movement in operating and net margins

6 50
5 40
4
30
3
2 20
1 10
0 0
-1
-10
-2
-20
-3

Sep-08

Sep-09

Sep-10
Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Mar-08

Mar-09

Mar-10
Sep-08

Sep-09

Sep-10
Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Mar-08

Mar-09

Mar-10

OPM NPM

Shareholding Pattern (Per cent) Board of Directors

Dec 2009 Mar 2010 Jun 2010 Sep 2010 Director Name Designation
Promoter 67.5 67.6 67.7 67.7 Ani l Dhi rubha i Amba ni (Mr.) Non-Executi ve Cha irma n, Promoter-
FII 7.6 7.7 8.0 8.4 Di rector
DII 9.7 9.8 9.4 9.3 Arun Kuma r Purwa r (Mr.) Non-Executi ve Di rector
Others 15.3 15.0 14.9 14.6 Ja ya ra ma n Ra ma cha ndra n Non-Executi ve Di rector
(Prof.(Dr.))
Deepa k Ha ri dev Shourie (Mr.) Non-Executi ve Di rector
Sa tya Pa l Ta l wa r (Mr.) Non-Executi ve Di rector

Additional Disclosure
This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

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CRISIL COMPANY REPORT | 4