The global economy continued to be subdued in 2016. The slowdown in the advancedeconomies of the West adversely impacted growth levels resulting in the slowing of theworld economic growth to 3.1% from 3.4% in the earlier year. The growth in emergingmarkets and developing economies was encouraging. However China and India experienced adeceleration. Financial markets reflected a broad uptrend notwithstanding Brexit and therate hikes by the US Fed.
Recent data reveals that the global economy is gaining momentum. PMIs (PurchasingManagers' Indexes) accelerating trade flows and better business and consumer confidenceare the key pointers. The IMF has projected global growth to notch up to 3.5% in 2017 from3.1% last year. Growth in the advanced economies is estimated at 2% with US growth at2.3% the Euro area at 1.7% and Japan at 1.2%. Growth in the emerging markets is pegged at4.5% driven largely by China India and the ASEAN region. Latin America is expected togrow only 1.1% affected by the weak trend in Brazil.
India is on a roll. There is a buzz about India as it blazes forth as the fastestgrowing economy in the world at 7.1%. The trade deficit in 2016-17 was USD 106 billionlower by 11% over the previous year. The current account deficit has been significantlypared. India's foreign exchange reserves as at March end 2017 were USD 370 billion.Investors are bullish. Foreign investment flows which were at over USD 60 billion inFY-17 are scaling new records. Markets are buoyant. Stock index is at a historic peak.India's global ranking has jumped up in competitiveness and on the innovation index.
The various initiatives and reforms of the Modi Government have built the platform fora quantum leap ahead. High impact national projects coming to grips with structuralissues which were holding back the country's progress innovative approaches in policymaking - have collectively contributed in driving India on a high growth trajectory. Goingforward the abiding sense is one of immense optimism and confidence in the future with thenation slated to grow at 7.5% to 8%. India's narrative is unmatchable.
That said if there is one subject that needs greater attention on the government'sradar for the ensuing years it is the revival of investment activity and creation ofquality jobs in large measure. The Government is seized of these issues. The Governmenthas taken many steps including a sharp focus on improving ease of doing businessspeeding of green clearances and stepping up public sector outlays for infrastructure. Ibelieve it is a matter of time before the private sector investments pick up - as NPAsare resolved and corporate balance sheets are deleveraged.
Your Company's Performance
As you are all aware the Indian wireless industry witnessed an unprecedenteddisruption given the lure of free offerings both voice and mobile data by a new entrant.It has been a 'Period of Telecom Discontinuity' permanently changing mobility businessparameters. Consequently the revenue KPIs and financial parameters for all mobileoperators have sharply declined. For the first time in its history the flourishing IndianMobility industry is trending towards an annual revenue decline of ~2% in FY17 (vs FY16).With the new entrant starting to charge for its services albeit very slowly the sectoris expected to return to growth in the next financial year.
On a consolidated basis your Company for the first time since its IPO reported atotal revenue decline of 0.8% at Rs.358827 million for FY17 (' 361625 million in FY16).While we remain optimistic on the India growth story and Idea continues to expand itsscale of operations this tumultuous phase subdued Idea's EBITDA during the currentfinancial year by 13.1% to Rs.105832 million (vs Rs.121807 million in FY16). Furtherlast two years of high Investment in Spectrum and Network Equipment has increased the'Depreciation and Amortisation' charge to Rs.78272 million and 'Interest and FinancingCost' to Rs.40411 million. This has resulted into loss of Rs.3997 million in FY17 - thefirst ever annual loss in last 11 years since its IPO during Year 2007. The Cash Profitfor the Company stands at around Rs.69981 million.
Inspite of short term challenges Idea remains committed to the process of buildingworld class broadband services. With the slated launch of Mumbai 4G services by end of May2017 the Company will be offering broadband services on its own spectrum across all 22service areas 3G (15 service areas) and 4G (20 service areas). During FY 2017 Ideaintegrated highest ever network telecom site count of 50004 sites (2G+3G+4G) expandingits network sites on GSM (2G) HSPA (3G) and LTE (4G) technologies to an overall EoP of241540 sites including 70% increase in its wireless broadband sites on 3G and 4Gplatform from 64703 sites as at end March 2016 to 110054 sites as at end March 2017.
The wireless broadband population under coverage now expands beyond 500 million Indiansin 21 service areas while GSM presence spreads to nearly 1 billion Indians. The Companyhas also expanded its fibre backbone network by 29100 km from 115500 km as at end March2016 to 144600 km as at end March 2017. The Company's gross investment in fixed assetshas risen nearly to Rs.1185 billion an addition of Rs.198 billion in last 12 months.Idea's overall spectrum holding of 891.2 MHz across spectrum bands of 900 1800 21002300 and 2500 MHz equips it with an ability to rollout wireless broadband which can carry15-20 times of its current mobile data traffic. The monetization of this front loadedlarge investment in spectrum and equipment is inevitable as Digital India mission gathersmomentum.
On 20th March 2017 we announced a merger between Vodafone India and IdeaCellular. The two companies will combine their operations in India (excluding Vodafone's42% stake in Indus Towers) to create India's largest telecom operator. The merger of Ideaand Vodafone is founded on the shared commitment to deliver substantial stakeholder valueoffer strong consumer choice to 1.3 billion Indians and contribute towards realising thePrime Minister's vision of Digital India and financial inclusion goals. The combinedcompany would become the leading communication provider in India with ~ 400 millioncustomers 35% Customer Market Share and 41% Revenue Market Share (based on Q3FY17 TRAIrelease). The merger transaction is subject to approval from the relevant regulatoryauthorities and Idea's shareholders. Vodafone and Idea have initiated necessary steps toobtain regulatory approvals. A joint merger notification has been filed with the'Competition Commission of India' (CCI) and the Scheme of Arrangement has been filled withSEBI and Stock Exchanges for their approvals.
In the meantime Idea will remain nimble agile adaptive and focused on its executioncapabilities. The company remains confident to capitalise on the emerging opportunities inmobile voice digital content mobile banking and wireless data business as telecom marketinvariably moves towards consolidation with 5 major providers.
A big thank you to all of our employees
Organizational agility excellence in execution customer centricity and costoptimization are a given. I believe to drive business growth in a sustainable manner thecriticality of our people - our intellectual capital is beyond expression. We deeplyvalue our employees' engagement and their commitment to our culture of innovation andperformance accountability.
Aditya Birla Group: In perspective
At the Group level our performance both in terms of revenue and earnings has beengrowing. In fact our EBIDTA has been the highest ever. In line with our people focus wehave strengthened the capacity of our leadership bench as well as employees across levels.Our Group's HR agenda is even more sharper and defining of our future. Our HR function hascollectively developed and clearly articulated the HR 2020 strategy across theorganization. It has clear actionables and review mechanisms focused on talenttechnology productivity and employer brand.
On the people front it has truly been an exciting year of development building on thestrong foundations of the earlier years.
As I had shared with you earlier we have 3 accelerated leadership programs. First -The Turning Point which prepares high potential leaders for P&L roles. Second - StepUp which infuses a ready pipeline for Functional Head roles and Third - Springboarddesigned especially for high caliber women leaders. These have enabled us set up therequisite bench strength of leaders.
We have prepared 123 leaders for higher responsibilities over the last one year. Ofthis 26 have already taken on new roles. The Business leadership and I have personallyreviewed talent across the business and am happy to see the evolution of our structuredsuccession plans.
The hiring freeze came into effect in January 2016. This coupled with our leadershipdevelopment actions has resulted in extremely encouraging people moves. Over the lastyear we witnessed 5500+ career movements across the Group. Of these 600+ wereinter-business movements 150% higher than the previous year.
The Aditya Birla Group Leadership Program (ABGLP) is another strong source of buildingleaders. It has gained greater traction this year with 67% higher intake. From the earlierbatches 95 participants have over the last 2 years been given cross business andfunction exposures grooming them for a holistic perspective. I am happy to share that wecontinue to be an employer of choice amongst the top B schools in India. Our Groupfeatures among the formidable Top-5 in the A C Nielsen - CRI Campus Recruitment IndiaIndex 2016 as well.
Additionally to accelerate opportunities for our talent we have set up Talent Councilsled by Business Heads and Directors at the business and Group levels. Up until now morethan a 100 Talent Councils meetings have happened across the Group where the developmentplans of approximately 3000 colleagues have been discussed and actions taken.
Project Vega is yet another initiative launched this year. Its basic objective is toreview the agility of decision making in the organization keeping in view end-customerimpact. This has yielded significant changes to internal processes delegation ofauthority and speed of decision making in turn empowering teams and freeing up leadershipbandwidth. This along with our focus on technology enabled processes I believe willkeep us sharp and nimble.
Furthermore to hone and enhance our functional expertise Gyanodaya the Aditya BirlaGlobal Centre for Leadership & Learning launched Functional Academies last year. TheSales Marketing & Customer Centricity Academy and HR Academy enabled 1150 leadersbuild deeper expertise in their domain areas. Gyanodaya continues to deliver superiorlearning programs with over 1583 managers enrolled last year.
Additionally the Gyanodaya Virtual Campus hosts more than 500 e-learning modules inmultiple languages. During the year over 31664 employees accessed these e-learningprograms. I am happy to update you that we are doubling our capacity in Gyanodaya throughupcoming expansion plans.
Our Group's solid reputation robust financials the quality and commitment of ourtalent our leadership positions in our businesses our operational excellence and our CSRengagement are our strengths that I believe will see us ride the wave of success.
Kumar Mangalam Birla.