iBand

The Mobile Information Portal

Founders:

Mayank Goel
Manish Singh
Vinay Mishra

I.I.T. Kanpur, India

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 Table of Content

1. Executive Summary 4
1.1 Purpose 4
1.2 Background 4
1.3 Problem 4
1.4 Solution 4
1.5 Product 5
1.6 Company and management: experienced, motivated team 5
1.7 Business system 5
1.8 Financing 5
1.9 Service idea 6
1.10 iBand-The service 6

2. Management Team 9
3. Market and competition 10
3.1 Market size 10
3.2 Customer needs 10
3.3 Competitor analysis 10
3.4 iBand's competitive advantages 11

4. Marketing and Sales 12

4.1 Promotion and distribution of services 12
4.2 Advertising Budget 12
4.3 Pricing 12
4.4 Customer service 13

5. Business System and Organization 14

5.1 The business system 14
5.2 Organizational structure and management style 15
5.3 Operating Locations 15
5.4 Personal planning 15

6. Implementation Schedule 17
6.1 Growth strategy 17
6.2 Development plan 17

7.Opportunities and Risks 19

7.1 Consumers 19
7.2 Competition 19
7.3 Technology/Proprietary Rights 19

8.Financial Planning and Financing 20

8.1 Financial Plan 20
8.2 Sales Forecast 20

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 8.3 Projected Sales Growth 20
8.4 Summary of Financials 21
8.5 Income Profit and Balance Sheet 21
8.6 Financing 25
8.7 iBand –Financial Assumptions 25
8.8 iBand –Financing Rounds 26
8.9 Evaluation /realization timetable 27

9. Appendix 28

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 1. EXECUTIVE SUMMARY
1.1 Purpose

iBand is the primary provider of mobile Interactive Broadcast solutions which serve as a business
and information portal. It allows consumer to create his own database of lates channels of information
which can be accessed by anyone using a mobile device. Thus helps sharing information and creation of
news groups where one can promote and advertise global/local businesses and information.

1.2 Background

The Indian mobile market increased from approximately 1.2 million subscribers as of March 31, 1999 to
almost 11 million cellular (GSM+CDMA) subscribers as of December 31, 2002,predictions claim this
figure to be 100 million in the year 2005 .Making india one of the fastest growing telecom markets in the
world. The number of mobile users is growing rapidly, and companies are considering how they can best
take advantage of this new media of communication. Its interactivity and multimedia potential make the
cellular phones an ideal publicity and sales tool. Information can be updated quickly and easily, and
disseminated cost effectively, and companies can also gather information on customer preferences.
Information can be updated quickly and easily on this medium and disseminated cost effectively.

1.3 Problem

Mobile operators are looking for VAS (value added services) to increase their ARPU (Average revenue per
user) which is not increasing much due to lack of user involvement and all such services are similar in
nature and can be categorized as entertainment portal. On the other hand for a user all mediums of
information such as print media, television, internet etc.. provide one way flow Of information i.e.
information is created by some devoted group of people which is consumed by the whole community
involved. These two problems can be merged into a single problem as "lack of two way global information
portal on mobile platform".

1.4 Solution

iBand is the primary provider of two way global information portal solutions that enable mobile operators to
increase their ARPU significantly by promoting the use of existing value-added services (VAS) based on
SMS, WAP, MMS, voice and USSD. The platform ensures usage from day one, guaranteeing a quick return
on investment. iBand's global information portal overcomes the three main obstacles to increased VAS
usage:
User awareness
User initiative
User incentive
Using the handset screen as a silent, personalized, location-based medium, advertising its own channels
created by its own user via “Cell Broadcasting (CB)”, subscribers are prompted only to react and take

4
initiative which provides two way interaction of information thus advertisement portal for a new business is
just few clicks away.
In addition to increasing VAS revenues, iBand prompts the sale of CDMA handsets enabled with its
features.

1.5 Product

iBand is both an interactive news/information index and a commercial platform for streaming advertisement
for small and medium-sized businesses .Thus it provides a pefect portal for bi-directional information
transactions. As a news index iBand users create info groups or news channels to share their information
and a user can search within this news index to get the desired information, providing a database for mobile
users.

Using this portal as a medium of business advertisement, which provides information about products, local
events, restaurants, cinemas and the like and commercial information about (local) businesses and what they
have to offer thus It provides local businesses with a channel for publicity and sales.

1.6 Company and management: experienced, motivated team

iBand as a company concentrates on marketing and sales of VAS services and the integration of various
mobile and internet software (e.g., search engines, transaction processing). The core management team is
made up of three people with excellent qualifications and extensively motivated. The team provides
combination of three attributes required to overcome any hurdle having excellent knowledge in mobile
technologies, marketing and comprehensive financial and technological expertise.

iBand also plans to hire experienced managers and technical labor in order to build a solid network across
the country.

1.7 Business system

iBand is a standard for mobile information transactions. For all end users going through any advertisement,
iBand is free of charge. This works as an assurance for the business content provider that their information
will be accessed by a mass community. This observation will increase the business information providers
and will compel them to increase the content they provide, which will lead to further increment in the
consumers of this information entire process will be at equilibrium, encompassing the entire targeted mobile
community as subscriber of iBand.
Rest of the services launched by iBand accepts money from both ends,
information providers pay on the basis of content they provide on the other hand viewers of that information
pay a monthly subscription charge with unlimited access to news and information available with iBand.

1.8 Financing: 73% IRR for first-round investors

The growth forecast suggests that iBand will achieve revenue of 104 crores in year 5, with a net profit after
tax of 45% of sales. By then, iBand will be present in about 85 towns, and will employ a staff of about
620.The founders will provide start-up capital amounting to Rs 10 lakhs. iBand is looking for investors who
know the sector well, and who can actively support the team in building the business. In the first financing

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round, iBand offers investors 39% stake in the business for 100 lakhs rupees. A further 50 lakhs rupees will
be required 12 months later and Rs 50 lakhs further after 12 months. An IPO seems possible after 3 to 4
years of operation. Based on our evaluation of the business in year 5, the IRR for first round investors would
be 73%.

1.9 SERVICE IDEA

Current situation – Cell Phone Users and market forces

Over the past years, the mobile communication has developed into the backbone of information flow. It has
become a tool with potential benefits for millions of consumers. According to the most recent estimates,
there will be 100 million mobile users across the country by the year 2005. Mobile media is being used by
private ones and there exist possibilities of new services for commercial users particularly interesting for
small businesses, as it enables them to operate under the same competitive conditions as large companies.

1.10 iBand – The Service

iBand is a mobile information portal that offers an interactive index (directory) and a commercial mobile
platform for local and global business. The value of iBand lies in the presentation and distribution of
information in a form that is quicker and easier for consumers to access and its database will encompass
every domain of information, providing a single and one step solution for all information flow problems.
iBand plans to start up with an agreement with some national mobile operator, iBand looks forward for an
agreement with Reliance infocom and provides them VAS and revenue.
Information database of iBand can be updated by anyone using iBand shown as follows.

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 Thus information is not only created by a devoted group of people or content providers but normal users of
iBand itself. iBand organizes and broadcasts location specific information using the potential of cell
broadcast (CB) technology.
Services of iBand are as follows-

i-News Channel

iBand maintains some news channels, broadcasting global and location specific information. iBand provides
a comfortable and interactive means of search within these news channels. On the basis of information they
provide they can be classified in two broad categories –

• National news channels -

iBand will broadcast some national news channels using the content provided by some standard content
providers such as news agencies and channels like BBC, CNN, Rediff, Indiatimes.

• Local News channel –

iBand broadcast location specific news channels at different locations, providing local information. These
channels can be further classified in two categories. First type of the channels will contain information
provided by local government/private organization and institutes. Second type of channels will contain
information posted by users of iBand itself giving a freedom of speech to everyone.

m-Commerce

iBand provides a business portal where a local/global business can advertise with us. Mobile screen will
work as a TV screen where advertisements will continuously get scrolled.

g-SMS

iBand provides group SMS service with an upper bound for number of recipients, leading to development of
small SMS communities. The SMS application is hosted on a central server and registered clients(after
subscribing to the service) login to the system, maintain clients lists in address book, send bulk SMS with
discount/sale announcements, birthday/anniversary greetings and payment reminders and alerts. The number
of messages sent are maintained in the system based on prepaid model, where in the client pays for a
predetermined number of messages.
Improves Productivity :
•g-SMS services allow corporations to mobilize critical business applications, enabling timely, secure
delivery of information to mobile devices of employees and partners, anywhere and anytime. This helps to
improve productivity by dramatically shortening decision and response times. Here’s how:
•Mobilize sales force applications to deliver customer order details to sales personnel on their mobiles. This
will ensure quicker response times for customers and more efficient utilization of personnel.
•Enable delivery of corporate e-mail on mobile devices when employees are away from desktop. This can
result in faster turnaround times for critical business decisions.
•Field support messaging applications can help plan the quickest way of dispatching support personnel in
the field to address customer complaints.

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Banner-Advertisement

While a user is going trough an i-News channel iBand will fill up some space of the screen using
national/local advertisements. This category of advertisement will ensures user attention as he/she is by
default paying attention on the mobile screen while accessing i-News.
. Location Based Advertisements
. Time-sensitive Advertisements
. Branding

Banner-making

iBand develops its own expertise and dedicated center to design national/local business advertisements as
discussed above.

as a whole iBand services will provide a complete solution from Portal to Brand making of national/local
business.

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 2. Management Team
The management combines the individual strengths of the three founders into a committed management
team with a shared vision.

Mayank Goel: Technical manager

Mayank Goel is a final year year B-Tech. student in the dept. of Materials and metallurgical engineering,
IIT Kanpur with minor in computer sc. and engineering. Before iBand starts, he will be working with
VERIZON, one of the most reputed telecommunication company across the globe, he will be learning
Mobile technologies and networking solutions. He has technical experience and knowledge of current
mobile networking technologies and Future prospects.

Manish Singh: Sales and Marketing Manager

Manish Singh is a final year B-Tech. student in the dept. of Materials and metallurgical engineering, IIT
Kanpur. In the time gap between launch of iBand and completion of his degree he will be working as a
software engineer in “Infosys”. He was also involved with marketing for institute festivals and has abilities
to predict expected market trends.

Vinay Mishra: Finance Manager

Vinay Mishra is a final year B-Tech. student in the dept. of mechanical engineering, IIT Kanpur. In the time
gap between launch of iBand and completion of his degree he will be working as a Control Systems
engineer in “The Mathworks”, reputed multinational software company . He is good in statistical analysis of
financing.

Positions to be filled

iBand also plans to hire experienced managers and technical labor in order to build a solid network across
the country.In particular iBand plans to hire people in the filed of Development, Sales and Marketing,
Administration and Maintenance as discussed in section 5.4.

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 3. MARKET AND COMPETITION
3.1 Market size

Potential customers of iBand are all Reliance Infocomm subscribers which get information via conventional
channels such as the Yellow pages, print media, radio and some SMS based services. Geographically, iBand
will initially be launched in 10 key metro Indian cities, where there are over 15.75 million Reliance
subscribers by the end of 2005 and our target consumers are near about 0.8 million .On this assumption our
target is to have 15.75million customers within 5 years; this represents a market penetration of 6% of the
total potential and 20% of Reliance total subscribers.

3.2 Customer needs

Retailers want a distribution channel that enables them to reach as many consumers as possible cost
efficiently. The products and services must be offered in an attractive fashion, the channel must be easily
accessible and easy to use, regularly updated, and enable interactive communication. The research shows
that wireless can be used as a portal for m-commerce at the prices we are proposing. The consumer behavior
research shows that the following requirements are most important for customers and our product/service
meets all of them-

• Attractive publicity: interactive advertising at comparatively low prices

• Business transactions: the possibility of performing a complete transaction, from advertising, through
order processing, to receipt of payment.
• Location based and time specific information that consumers were always thirsty but never got at such
lower prices.
• Information feedback: rapid and reliable feedback of data on consumer behavior and purchasing
patterns.
• Marketing support: support for marketing products and services – most small companies are fully
occupied with day-to-day business
• Sales enhancement: ultimately, a sales channel will be used only if it has a positive effect on the
company's revenue situation.

iBand addresses all these customer needs. We are therefore convinced that it is an attractive offer for our
target customer segment.

3.3 Competitor analysis

iBand will be in competition with the following types of companies:

Yellow Pages: This is the primary source of local and regional information on small businesses. All
companies listed in the Yellow Pages pay a fee dependent on the size of the entry. Yellow Pages providers
are not at the moment in a position to exploit the advantages of the Mobile media, as they are based on a
different business model, i.e., data are only irregularly updated and there is no customer advice or service
component.

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Print media: Newspapers and magazines are one way flow of information and may lose a part of their
advertising revenue to the Mobile media. The first online newspapers with classified advertisements are
already on the market but they provide information created by devoted groups of people and is not an
interactive portal. They can be classified as information supplier instead of information organizer.

Own networks: Access providers offer their own services for a monthly fee, which represents the major
part of their income. However, we are convinced that these services will not survive, as private customers
are not willing to pay for them.

World Wide Web, and its directories: iBand is exploiting the fastest growing media of world that is
mobile communication. Number of mobile customers in India is far more than internet users. One of the key
observations is that WWW is getting saturated. On the other hand iBand is not a substitute of internet but it
explores a new domain where a user can access any information remotely using compact handsets. iBand
plans to make partnerships with presence providers .

Telecom companies and operators: There exist many telecommunication companies providing VAS but
most of them are not more than an entertainment portal such as 8888 of Indiatimes. Rest of the services
providing information use SMS based services supporting one way flow of information such as Rworld.
These services are not cost effective in nature such that a user can not use them in unlimited manner. iBand
uses CB (Cell Broadcasting ) as the technology of communication which is very much cost effective with
negligible load on the network. Some of the investors in India such that Hutch has launched CB based
service, “Hutch Alive” but a user has neither a choice of content ,views nor he can post anything of his own.
iBand provides a one step information portal with full user interaction overcoming all these difficulties.

3.4 iBand's competitive advantages

"First Mover" advantage: iBand plans to encompass the entire business of the area thus it will be difficult
for a competitor to entice individual business away. Economies of scale in advertising: It will be difficult for
competitors to match the cost-efficient flow of information including advertising campaigns – unless they
are able to spread their costs over a large number of customers. As the number of towns in which we are
present increases, we will be able to develop and test several advertising campaigns simultaneously and use
these insights to continually enhance our advertising impact.

Brand name: The name “iBand “stands for information – band. For the consumer, our brand name will
represent an information medium that provides people and accepts from the people up-to-date,
comprehensive information on everything they want to know and share about their location including
business specific information. For businesses, our brand will represent a service that, for a reasonable price,
makes local consumers aware of their location and time specific information.

Economies of scale in technological development: Consumers will be attracted to our broadcast only by
leading-edge technology and the "hottest" CB features. iBand plans to employee the best specialists in this
area. iBand also plans to apply experience from individual cities and different phases of expansion to the
entire network .

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 4. MARKETING AND SALES

Within three to five years, we see iBand as the established mobile information portal for local users
throughout India. iBand will therefore make every effort to get new cities into the network as quickly as
possible. To ensure continuous growth, we are concentrating our activities on marketing and sales as
follows:

4.1 Promotion and distribution of services – trade and consumer advertising

iBand addresses both the trade and consumers. If a large number of consumers are interested, this will be an
incentive for businesses to be present on iBand; we want to get as many consumers and content provider on
iBand as possible to make the service as attractive as possible.

Trade: iBand look forward for an agreement with a mobile service operator with Reliance Infocom as the
target. iBand plans to launch its service available by default with new SIM cards and embedded handsets of
the operator as a part of deal.
Thus iBand will start with a bang with a huge market same as the market of targeted mobile operator.

Consumers: the upper bound for the number of consumers will be defined by the market of mobile operator
but iBand has its own strategy to initiate mobile users to use iBand. – Print media, local TV, internet,
banners, posters, pamphlets and advertisement of iBand with iBand itself. Advertisements campaign will
start 3 months before the launch of iBand services.
By concentrating on one area or cities at a time, we can reduce advertising expenditure, while still deriving
synergies from neighboring communities already served by iBand. Developed campaign policy and
resources will be reused for new cities entering iBand network.

4.2 Advertising budget

Our budget for trade and consumer advertising is Rs 9 lakhs per city per year. In the first year iBand is
introduced in a new city, we allow an additional Rs 8 lakhs for the development of the iBand brand identity,
making a total of Rs 17 lakhs per city. The calculation assumes a city with 15 lakhs of which 80,000 should
become customers in one year. As the iBand introduction process will be the same in every city, we expect
some saving on the cost of developing advertising campaigns. iBand will make every effort to continuously
improve its advertising program to maximize the impact of the money spent.

4.3 Pricing

Customers pay a one-time installation fee for setting up their page, and a monthly fee as long as they make
use of iBand’s services. iBand’s commercial advertisement revenue will generate from as small enterprises
as local restaurants ,cinema halls, shopping complexes ,schools an health care services and big enterprises as
Technology sector companies or Cold drink company e.g.Coke,pepsi etc. The pricings are different for
every kind of advertising facility as M-commerce ,Banner advertisement( it would occur in display of
Global as well as local news channels.) and banner making. The pricing division is shown as follows:

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. Pricing: Setup Monthly fee
Sever installation cost 5.5 lakhs (per center)
Sevrice 1: iNews Channel 30/- (per month)

Service 2: g-SMS 45/- (per month approx)

Service 3: M-commerce *500/- per month (for 5 times/day)

*750/- per month (for 10 times/day)
*1000/-per month (>10 times/day)

Service 4: Banner Advertisement * 10000/-per month (Category in Channel)

*

Service 5: Banner making * 50/- per content

4.4 Customer service

We aim to achieve a high level of customer and consumer loyalty to our services. We will therefore make
every effort to put the customer at the center of our operations, and to root this attitude firmly in our
corporate culture .Our toll-free customer service number will be served by specially-trained, customer-
friendly staff.

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 5. BUSINESS SYSTEM AND ORGANIZATION
5.1 The Business System

iBand business system will be comprise of following subsystems-

• Research and development subsystem

• Core unit (network and services)
• Sales and Marketing subsystem
• Customer relationship subsystem

iBand specializes in its Customer Relationship subsystem which will work as a feedback or decision factor
for the Core Unit. The entire system will use software resources and partnership with mobile operator/s.

Research and Development

This subsystem will focus on the development of software development, transaction modules, network
topologies and marketing campaigns.

Core Unit (network and services)

This subsystem will be heart of iBand. This will host the core services on iBand servers with network
connecting mobile operator. This subsystem will be monitored continuously by automated tools and
technical expertise hired by iBand at different centers.

Sales and Marketing

This subsystem will concentrate on the development of excellent skills in marketing and sales to consumers
and corporate clients and content providers who are broadcasting their business information via iBand.

Customer Relationship

iBand is market oriented business with focus to learn the need of its customers so that it can offer superior
customer value that is iBand can satisfy its customer needs better than its competitors. This subsystem will
comprise of feedback unit, manuals, and call centers. The feedback will be used as a major factor while
making decision regarding extension and modification of iBand services.

Resources and Partnerships

iBand looks forward for resources like software, mobile operators and system setup. iBand plans to buy
some major software required for networking such as requirement for cell broadcast to be fulfilled by
“swapcom service providers”, iBand has its own software development unit which will make transaction
and billing automated. One of the most important resource iBand is looking for the network of mobile
operator. iBand plans to use the network of Reliance Infocom as the analysis suggests it as the largest

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telecom network in the country with fastest rate of growth. Some attributes of this partnership are as
follows-

The partnership: Win-win situation. Both sides will gain a fair advantage from the relationship. The use
of network is a VAS for the mobile operator for which he will get paid directly or indirectly (via iBand).
This will also help mobile operator to be in the competition, for iBand existence of network is one of the
backbone thus there exist incentive for both sides, to sustain the partnership.

The Closed partnerships: The partnership will have a high degree of interdependence. It is very difficult
for both sides to change partners as once mobile users start using iBand in their daily life, they will not be
able to accept their mobile connection without this service for iBand it will go hard to shift from one
network to another because in that case it will require to reestablish the market. The advantage for both
sides is the security of a binding relationship and the possibility of concentrating on one's own strengths
while benefiting from the strengths of partners. This is to be noted that there always exist a possibility for
iBand to extend its services with more than one mobile operators without effecting any relationship with
existing ones. It will also depend upon the deal with individual operators.

5.2 Organizational structure and management style

The management team consists of the three founding members, who fulfill the functions of CEO, head of
finance, head of technological development, and head of marketing. iBand is looking for further members to
strengthen our team, which might result in a shift of the current responsibilities. iBand's management will
practice a cooperative style of management, and intends to work as a team. Remuneration will be strictly
performance-related; all members of the team will have a share in the financial development of the company.

5.3 Operating location(s)

iBand will begin operations in Bangalore with its head office and will cover 10 major cities of the country
within an year. The presence of a number of information technology and communication development
companies in the Bangalore offer excellent opportunities to find talented staff and make use of new
technologies.

5.4 Personnel planning

Our personnel forecast for the first five years of operation is set out in the following table.

Year 1 Year 2 Year 3 Year 4 Year 5

Development 5 6 7 10 15
Sales/Marketing 5 15 30 80 140
Administration 8 18 43 88 153
Maintenance 30 42 50 110 200
Total 48 81 160 343 618

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The number of staff will be increased proportional to the number of new customers. The development and
maintenance of innovative software will also require an experienced Research and Development department.

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 6. IMPLEMENTATION SCHEDULE

6.1 Growth strategy

We will achieve growth by establishing iBand in new cities and regions in India. With its very large number
of mobile users, Bangalore will serve as a pilot city. It will be followed by other large cities such as Mumbai,
Delhi, Chennai and Calcutta, with other cities to follow.

Projected Growth of iBand

90
80
70
60
50
40 Number of Cities
30
20 No. of Customers (in
10 millions)
0
Year Year Year Year Year
1 2 3 4 5
Year

6.2 Development plan

In the first six months of business, we shall focus on the following: building up the management and
software development teams, developing a prototype for the iBand product, market analysis, contacts with
potential customers and acquiring capital.

Year 1 Year 2 Year 3 Year 4 Year 5

Number of Cities 10 14 25 55 85

No.of Potential Customers 15.75 24.86 36.09 65.66 79.02

(in millions)
No. of Customers 0.8 1.98 4.33 9.84 15.8
(in millions)

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The milestones during the iBand setup are:
. 1st iBand prototype launched in Southern zone at the start of 6th month.
. At the end of 1st year 10 major cities of East ,West, North, South and Central zone are covered .
. At the end of 5th year total number of targeted cities=85.

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 7. OPPORTUNITIES AND RISKS
The success of iBand will depend on several factors; the most important are:

7.1 Consumers: Will consumers use the mobile media for local and regional
information?

The answer depends on whether the mobile communication achieves recognition as the medium that offers
users more information more quickly and more easily. It is to be observed that mobile media is not
comparable to internet because its users are far more in number and a users access it wherever he/she is,
thus a user will be happy finding a new service appearing on the mobile using which he/she can always be
connected to each and every incident of the country. During the development stage, iBand will use
consumer market research to find out how it needs to present itself in order to convince target customers of
the specific benefits of iBand. As the pilot city, Bangalore will also serve to check the validity of the iBand
idea. Should the results be negative, only limited damage would be done, and iBand could take remedial
measures before continuing.

7.2 Competition

iBand provides unique services and is a complete information portal. iBand has a leading edge over all of its
present competitors in terms of services it provides and their uniqueness. iBand will be the first index of
information where anyone can post anything using a mobile handset. Once iBand establishes its market the
area can’t be taken over by any of the competitor because consumers, iBand and partners all have a closed
interdependent relationship. There exist some of the competitors like “Hutch Alive” but they only provide
local advertisements without any information which is not able to attract devotion of mobile user on the
other hand iBand is a one step bidirectional information flow solution.

7.3 Technology/Proprietary rights

iBand services are enabled with manufactured sim card as a software created using J2EE (java 2 enterprise
edition) as all of the handsets are java enabled and anybody can use this without any licensing. The network
of mobile operator is already established and nothing regarding that is required as far as the case of licensing
is concerned.

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 8. Financial Planning and Financing
8.1 Financial Plan

We expect that iBand will have 15.8 million customers and sales of Rs 104 crores within 5 years; we
estimate net profit after tax of Rs 46.2 crores.

8.2 Sales Forecast

Our sales forecast is based on the expected distribution of customers between the various services.Our total
target customers after year 5 are 15.8 million of which 80% customers will use iNews channel service
(revenue=84%).G-SMS service will be used by 12% customers (revenue=4%), M-commerce by 4%
customers (revenue= 4%),Banner advertisement by 3.5% customers(revenue= 7%) and Banner making by
0.5% (revenue=1%).

Projected sales distribution be services(Year 5)

7% 1%
4%
4% iNews Channel
g-SMS
M-commerce
Banner advertisement
Banner making

84%

8.3 Projected sales growth

The sales growth forecast is based on the assumption that by the end of year 5 we will have reached 15.8
million (20%) of our potential customers. This growth is fairly underestimated by the fact that total Reliance
users in 85 cities at the end of year 5 would be 79 million. Yet we can expect fairly significant growth as
number of users would increase significantly over the years as well as scope of marketing. The growth
scenario is based on the average 1.5 million customers in A+ cities, 1.1 million customers in A cities,0.8
million customers in B cities and 0.5 million customers in C cities.

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8.4 Summary of Financials

The expected financial results are shown in Cash flow calculation , Income statement for the first five years
and balance sheet.

8.5 Income,profit and Balance Sheet

Sales in year 5 are projected to touch Rs 104 crores.Net profits after tax will be positive from the start of
second year of operations,and will rise to 45% or Rs 46 crores in year five. Network provider would get
largest share of revenue close to 23%.Operating costs will be incurred primarily in marketing, sales, and
advertising campaigns.Initially,software development and the start-up of operations will also incur
significant costs.

The balance sheet reflects iBand’s profit mechanism, based on fee income and variable cost. Capital
investments are minimal as no manufacturing plant is required and offices can be rented. Computer
hardware, servers and application development represents a significant investment.

Break even of iBand is expected to occur at the first quarter of 2006(Second year).

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Income Statement:

22
 Cash Flow Statement:

(Rs Lakhs) 2005 2006 2007 2008 2009

Beginning Cash 70.8 812.5 2321 5184
Sources of cash
Net income -27.5 697.7 1369 2890 4620
Plus depreciation/amortization 3 12 39 54 79

Plus changes in:

Account payable 48 134 315 500 726
Pension reserves 10 35 75 96 115
Tax provision 0 7 12 19 45
Long-term debt 0 0 0 0 0
Total source of cash 33.5 956.5 2622 5880 10769

Uses of cash
Less changes in:
Net account receivable 15 122 241 531 868
Gross fixed assets 57.7 22 60.5 165 165
Total uses 72.7 144 301.5 696 1033

Changes in cash(cash flow) -39.2 812.5 2321 5184 2066

Financing(equity investment) 110 0 0 0 0

Ending cash 70.8 812.5 2321 5184 8703

. The assumptions for the base case scenario correspond to the figures given;on the basis there is financing
requirement of Rs2 crores in 3 rounds by Venture capitalists.Payback is expected in start-year 2007.First
round investors can expect an IRR of 73%.
. The best case scenario assumes an annual growth rate of 10%,10% more income from our customers ,and
10% less income to be shared with our partners.With this scenario,the financing requirement is Rs1.4
crores.Payback is expected about an year earlier.The IRR for first round investors is 96%.
. The worst case scenario assumes 10%less growth,10% more income to be shared with our partners and
10% less income from our customers.The financing requirement is Rs2.7 crores with payback of 2007.

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Balance Sheet Statement:

(Rs Lakhs) 2005 2006 2007 2008 2009

1. Assets
Fixed assets
Equipment 55 77 137.5 302.5 467.5
Other fixed assets 2.7 3.9 7.5 16.5 25.5
Total fixed assets 57.7 80.9 145 319 493

Current assets
Inventories 0 7 12 14 32
Accounts Receivable 15 122 241 531 1399
Cash 72.8 851 2334 5204 9773
Total Current assets 87.8 932 2397 5749 11204

Total Assets 145.5 1061 2720 6068 11697

2.Liabilities (capital)
Equity
Founder's equity 10 10 10 0 0
Investor's equity 100 150 200 0 0
Net income/loss -27.5 670.2 2039 4819 9439
Total equity 82.5 830.2 2249 4819 9439

Provisions
Pension Reserves 10 45 55 151 266
Tax provisions 0 7 19 38 83
Total Provisions 10 52 74 189 349

Liabilities
Bought-in services 5 47 75 138 261
Loans and long term debt 0 0 0 0 0
Accounts Payable 48 182 422 922 1648
Total Liabilities 53 229 497 1060 1909

Total equity and liabilities 145.5 1111 2770 6068 11697

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8.6 Financing

The initial financing of Rs 10 lakhs will be provided by the founders. This sum will be required for the
initial phase, in which application software will be developed and tested and investors sought. We expect to
obtain Rs 100 lakhs by March 2005, in exchange for 39% of the shares in company. These funds will enable
us to buying the severs, develop the software applications to ready-to-use status, employ sales staff and
begin marketing activities. We don’t need further financing rounds as profit earned by company itself would
be suffice.
We are looking primarily for a venture capital company with profound knowledge of the Mobile
Communication sector, able to assist us in attracting experienced software developers and marketing staff. A
significant part of the start-up capital is reserved for the members of Administration team.

8.7 iBand – Financial Assumptions

Revenues:
. First revenues are generated 5 months after start of operations.
. Pricing: Setup Monthly fee
Sever installation cost 5.5 lakhs (per server)
Sevrice 1: iNews Channel 30/- (per month)

Service 2: g-SMS 45/- (per month approx)

Service 3: M-commerce *500/- per month (5 times/day)

*750/- per month (10 times/day)
*1000/-per month (>10 times/day)

Service 4: Banner Advertisement * 10000/-per month (Category in Channel)

Service 5: Banner making * 50/- per content

Split of fees with Network provider:

iBand Reliance Infocom

Service 1: iNews Channel 70% 30%

Service 2: g-SMS 60% 40%

Service 3: M-commerce 70% 30%

Service 4: Banner advertisement 70% 30%

Service 5 : Banner making 100% 0%

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Operating expenses:

. Salaries are based on competitive compensation: (per annum)

Software developer = 3, 60,000 Sales and marketing person=1, 20,000,
Administrative person= 2, 50,000, Marketing person=1, 00,000

. Salaries increase by 3.7% per annum.

. The model for annual number of employees can be found in the financial plan.
. Sales commissions are built into sales salaries.
. Content providers get market rates for various kinds of services.
. Rent is assumed at 25 per square meter per month for big cities and 15 per square meter per month for
medium size cities.
. Combined income taxes are 25% for initial phase and 30% at later stage.
. Payables and receivables are settled within 30 days.
. Fixed assets include Servers, Computers, Software, and office equipment.
. Depreciation period: Server = 7 years, Computers = 5 years, Software= 3 years.
. Taxes are paid at the end of the tax period.

8.8 iBand-Financing Rounds

Date Amount(Rs lakhs) Source

Own Reserves Jan-05 10 Founders
Round 1 Mar-05 100 Venture capital
Round 2 start of 2006 50 Venture capital
Round 3 start of 2007 50 Venture Capital

Founders of iBand would invest Rs10 lakhs at the time of start up. First round investment of Rs100 lakhs
will be provided by Venture capitalist in first round after 3 months of start up. Second round of financing at
the end of first year (Rs50 lakhs) and third round of financing at end of two years (Rs50 lakhs).

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8.9 Evaluation /realization timetable

On the basis of the assumptions described and the resulting growth, an initial public offering at the end of
the year five is conceivable. If we conservatively
Estimate a price earning ratio of 6 ,the company’s market capitalization in year five would be 107.6 crores.
With the proposed financing structure, the investors in the first financing round (VC1 )would earn an IRR of
73%,round two investors (VC2) an IRR of 65% and round three investors an IRR of 59% in line with the
normal case scenario.

Source of funds Size of stake Equity IRR

percent Rs crores percent
Founders 46 0.1 178
VC1 39 1 73
VC2 10 0.5 65
VC3 5 0.5 59
Total 100 2.1 79

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 9. APPENDIX
A. Network Topology of iBand

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B. Cell Broadcast (CB) Technology

Cell Broadcast is a technology used by iBand, similar to a radio / TV system with channels and
coverage zones. First static CB service introduced in1994 and started in Lebanon-1997. The
technology is Compatible with existing handsets as a standard since 1996.a brief description of this
technology is as follows

What is Cell Broadcast (CB)

.
Using other technology/protocols like SMS sending 1 message to 1 user requires sending 1 request
to the SMS center and 1 to the network. Thus if one plans to send 1 message to n users, it will
require sending n requests to the SMS center and n to the network. Thus it will increase the load of
network proportionately with number of intended recipients. On the other hand with CB sending 1
message to n users requires to the CB center and network sending single requests. CB is a
broadcast service and is very efficient for distributing information quickly to many users.

Advantages

• CB does not require an expensive traffic channel but uses the radio control channel.
• CB is location sensitive - messages can be targeted at the geographic area served by one or
more radio cells Longer messages that can be updated regularly without overloading
networks.
• CB Can be linked to SMS/WAP/IVR services.
• Users can “opt-out” at any time by closing a channel on the handset.
• Messages are not stored in the customer handset (prevent jamming).
• Messages are received simultaneously an by users located continuously in the same cell.
• Efficient mass information distribution low cost, real-time, save SMS bandwidth.
• Location Based Services without attempting user privacy.

iBand
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