Annual Report 2008 - Axiata Group Berhad - Investor Relations

Acquisition of Idea: Expansion into IndiaAxiata, on 25 June 2008 entered into an agreementwith Idea, Aditya Birla Group and Spice, which sawAxiata expanding its presence significantly in India froma two circle operator in Spice to a 13 circle operator inone of the fastest growing mobile markets in theworld.Post merger with Spice, Idea will be the fifth largestmobile player in India with an aspiration to emerge asa pan-Indian mobile operator with presence in all 22circles in India.Through Idea, Axiata has access to over 38 millionsubscribers representing an 11.0% (pan-India) marketshare with a presence in the 15 operating circles inIndia as at end 2008.The strategic expansion in India was the best option forAxiata for a faster, most economical and least riskinvestment for an India-wide presence to capture thewindow of growth opportunity and position ourselvesagainst bigger players and new entrants.Amongst the key rationales of our expansion in Indiaare as follows:Significant Growth PotentialThe Indian market is in a rapid growth phase withapproximately 10 million net additions per month and49.0% YoY growth recorded in 2008. With the currentlow penetration level of 20.0% - 30.0% range (one ofthe lowest in the region) and improving economics,future growth is expected to be strong withapproximately 200 - 300 million net additionalsubscribers expected over the next three years*.Accelerate Participation ThroughConsolidationAs a regional telecommunication investor, it is essentialfor Axiata to capitalise on the current high growthphase, especially as the headroom for growth is in thenext three to five years. By 2012, it is expected thatpenetration will reach the 50.0% - 60.0% level andbeyond 2012 the country is expected to record slowergrowth*. As such, the ‘India opportunity’ prevails verymuch now and any delay would reduce the ability tocapitalise on the rapid growth.Idea and Spice – The Ideal CombinationThe combination of Spice and Idea has no operationaloverlaps in its circles. Furthermore, the combinedentity will become the fifth largest operator in Indiaagainst Idea’s standalone fifth position and Spice’sstandalone eighth position. Idea has also securedlicences for all the remaining circles and national rolloutis in the pipeline. The investment also brings a verystrong partnership to the Axiata Group with Idea‘sexcellent financial performance, and the addedadvantage of enabling collaboration with the BirlaGroup.Idea has been performing extremely well, recording 61.6%YoY growth in subscribers together with revenue of49.5% up to quarter ended 31 December 2008.Benefits to Both PartiesThe investment leverages Axiata’s regional experienceespecially in the more mature markets includingexpertise in 3G businesses and rollout experiences asIndia moves into the next technology wave.For Axiata, the transaction will provide additionalexposure to new emerging business models vis-a-vispay-as-you-grow, managed services, active/passiveinfrastructure sharing, hosted Value Added Services(VAS), etc. Together, Axiata and Idea will form abusiness co-operation forum to help facilitate synergiesand share knowledge as well as best practices betweenthe two groups of companies.46Axiata Group Berhad Annual Report 2008(formerly known as TM International Berhad)