an industry analysis of telecommunication sector focus on ratios

8/8/2019 An Industry Analysis of Telecommunication Sector Focus on Ratios

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PROJECT REPORT

ON

AN INDUSTRY ANALYSIS OFTELECOMMUNICATION SECTOR

UNDERTAKEN ATDEVASHISH SECURITY PVT LTD

Submitted By:AMIT.I.PANDEY

(08MBA41)

Guided By:DR.ANIL SARAOGI

MBA PROGRAMME(Year 2008-10)

SHRIMAD RAJCHANDRA INSTITUTE OFMANAGEMENT AND COMPUTER APPLICATION

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COLLEGE CERTIFICATE

This is to certify that the Summer Project report

entitled AN INDUSTRY ANALYSIS OF

TELECOMMUNICATION SECTOR has been carried

out by Mr. Amit Pandey with ID- 08mba41 at

Devashish security Pvt. Ltd, as a partial fulfillment

of the requirement for the degree of Master of Business

Administration (M.B.A.) during academic year 2009-10.

(Dr. Anil Saraogi) (Dr. Bankim

Patel)

FACULTY GUIDE DIRECTOR

Date:Place: Gopal vidyanagar

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DECLARATION

I, AMIT.I.PANDEY here by declare that the project

report entitled AN INDUSTRY ANALYSIS OF

TELECOMMUNICATION SECTOR is based on my own

work and my indebtedness to other work / publications,

if any have been duly acknowledged.

AMIT PANDEY

(08MBA41)

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ACKNOELEDGEMENT

This project has been made possible through direct and indirect co-

operation of some person for whom I whish to express my heartfelt

gratitude.

I express my heartfelt gratitude to eminent organization DEVASHISH

SECURITIES PVT.LTD. for providing me with such a glorious opportunity

and furnishing me with much of the precious time and resources during

my training.

My sincere thanks toMr. ASHISHBHAI DESAI (Director of the Security) and

Ms. Shah Foram (Company Guide) and other staff members those have

spent their precious time with me and in fulfilling the requirement of this

project. Without their help these project impossible.

I am very much pleased to express my heartiest gratitude to our

vulnerable director Dr. BANKIM PATEL for providing me with such a

glorious opportunity for learning practicality of bookies concepts.

I pay my heartiest gratitude to my college mentor Dr. ANIL SARAOGI sir,

who has provided me with the valuable suggestions, support and

guidance during my training to successfully complete my project work.

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AMIT PANDEY

(08 MBA 41)

EXECUTIVE SUMMERY

The telecom industry is the fastest growing industry in the Indian

market. It has a customer abase of around 250 millions. The research was

conducted to analysis the emerging trend and opportunity exist in the

telecom sector.

With this objective in the mind I have started the research. Theresearch was descriptive in nature and a secondary data collection

method was used.

Indian telecom is more than 160 year old, beginning with the

commissioning of the first telegraph line between Kolkata and diamond

harbor in 1839. In 1948, India had only 0.1 million telephone connection

with a telephone density of about 0.02 telephones per hundred

populations. By 2010 there were 500 million telephone (including cellular

mobile) connections in the country with a telephone density of 13.96

telephones per hundred populations.

After the research was completed the data were analyzed on the

chosen parameters. This analysis data was late converted in to form of

graphs these was to make result easily comprehensible by anyone going

through the report. This is also made at easy to draw conclusion based on

the research and provide a presentable format of the report. Later on this

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information was complied in the form of presentable and highly

comprehensible report.

In fact, Indian has achieved its target of reaching 250 million

telephone subscribers by 2007, two months before time. Simultaneously,

overall tele-density has increased to 233.21 percent.

Table of content

Sr. No. Topic Page No.

1 ABOUT THE COMPANY

7

2 LITERATURE REVIEW & ABOUT THE TOPIC

2.1 Literature Review

2.2 About the topic

11

3 RESEARCH METHODOLOGY

3.1Problem statement

3.2 Research objective

3.3 Research design

3.4 Data collection method

3.5 Method of analysis

37

4 DATA ANALYSIS & INTERPRETATION 39

5 FINDINGS 62

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6 RECOMMENDATIONS 63

7 BIBLIOGRAPHY 64

1. ABOUT THE COMPANY

During June 1996, Devashih started as Devashish Investment, a family

firm with partners Krishnakant Desai and His son Ashish Desai as

partners. Senior Partner Krishnakant Desai had long experience as

Accountant in Bardoli Sugar Factory and in Sardar Bagayat (co-operative

Mandali).

Devashish Investments with a gallop start as Financial Advisors due to

overwhelming support from surrounding residents of Bardoli areas was

converted into Devashish Securities Pvt. Ltd. within three years.

Company has pleasure to introduce our selves as leading Investmentcounseling company in and around Bardoli. Our aim is full satisfaction of

our valued Customers and our motto is Service before self.

Devashish also have our two sister concern, Devashish Commodities Pvt.

Ltd., and Devashish Advisory Services Pvt. Ltd. Devashish Commodities

Pvt. Ltd. is approved recognized member of Indias only Multi-

commodities Exchange(MCX), having rating of Asias third Commodity

Exchange are operating in Surat, Songadh, Unai, Palsana, Bharuch,

Ankleshwar & Kamrej.

Business

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Broking

Equity Broking

Derivatives Broking

Commodity broking

Devashish Securities Pvt. Ltd. is one of the leading providers of broking

services to individuals and institutions in the equity, derivatives and

commodities segment in around the areas of Bardoli.

Company proactively delivers the full depth and breadth of our

broking services to clients through a network of our branches and

franchises across the South Gujarat.

Distribution

Mutual Funds

Insurance Life-non Life

Initial public offering (IPO)

With the objective of meeting all the investment needs of our clients, we

provide distribution services of mutual funds and IPOs. We are an AMFI

registered mutual fund distributor and are also registered with all the

AMCs in India to sell the schemes offered by them. Our distribution

network is backed by in-depth & comprehensive research and a strong

team for marketing and sales support.

Devashish has a dedicated team exclusively for research on mutual funds

and IPO. Company provides monthly publications on mutual fund activity

and fund recommendations and also furnishes reports on New Fund

Offers (NFO) and forthcoming IPOs recommendations. Our

recommendations are objective and unbiased. For us, the clients growth

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is the top priority.

Consistent delivery of high quality advice on mutual funds and IPO

investment has established us as a competent and reliable distributor

across the South Gujarat. We are also amongst the few investment firms

that offer the facility to invest in mutual funds and IPO online, giving our

clients freedom from paperwork and making investing convenient for

them.

Depository Service

Shares

Devashish depository business helps us in providing integrated financial

solutions to our clients. It is led by a team of professionals and the latest

technological expertise, dedicated exclusively for the depository services.

This creates a seamless transaction platform for clients to execute

trades through Devashish Securities Pvt. Ltd. Business and settle them

through Devashish Securities Pvt. Ltd. Depository Services.

Why Choose Devashish

Personal RelationshipAt Devashish, company believes that it is not just the product or service

that we are offering; it is a relationship with our clients which makes us

alive. Being a client you deserve a personal relationship based on trust,

reliability, understanding and respect. This relationship is the real wealthfor us from whom we will make our value & Image in the Market. Our aim

is full satisfaction of our valued Customers and our motto is Service

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before self. We believe to fulfill your need first & ultimately its the way

to fulfill the need of ours

Comprehensive ResearchCompany can help you for better financial portfolio solutions through our

in-depth, unbiased research. Whether you want help managing your own

portfolio or want us to manage it for you, youll get investment guidance

and portfolio planning thats right for you. Our research team will offer

excellent investment opportunities, will help you identify significant

market trends, and will make sure that the information reaches you at the

earliest. We provide an integrated approach of fundamental and technical

research

Array of products and servicesCompany offer wide range of investment products and services that

makes your Portfolio sounds enough for saving and support. Equities,

derivatives, commodities, depository, IPOs, mutual fund, Pan Card

Collection center no matter what investment-related service or product

you need, you can get it at Devashish

Quality Policy and Mission

Quality Policy

Dedication: Company dedicates ourselves in consistently delivering

more than customer expectations and believes in customer delight. To

achieve this, we have utilized our human and technological resources to

provide superior quality financial services.

Efficiency: We are efficient and committed to total quality by putting ourbest at our resources and services at optimum cost and strive continually

to improve ourselves, our team and our services to get total customer

satisfaction.

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Valuation: Company will achieve our objectives through creation of a

strong, responsive, and innovative organization by a total quality

commitment and by emphasizing on total customer satisfaction, wealth &

Value creation of stakeholders through profitable growth and providing

best working environment to our employees

Mission:

To create enduring value for customers and stakeholders by

providing total quality products & Services at optimum cost, through

creation of a strong, responsive and innovative organization and strive

constantly to improve ourselves, our team & our services to meet

customer expectation.

2. LITERATURE REVIEW & ABOUT THETOPIC

2.1 LITERATURE REVIEW

As my project report concern first I refer s.kevin Portfolio

Management & Punithavathy Pandian, Security Analysis & Portfolio

Management Edition, Vikas Publishing Housing Pvt. Ltd, 2007.books for

the purpose of to obtain knowledge of industry analysis. I take

telecommunication sector due to analysis of telecom sector in India. The

telecom industry is the fastest growing industry in India despite the

recession telecom industry is a one which is not influence.

For the purpose of industry analysis of telecommunication sector, I

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collected data from website as www.businesstoday.intoday.in,

www.nseindia.in, for history of telecommunication I go to www.trai.gov.in

website. I obtain quote of five major companies in India and then

calculating the averages for all ratios. I take SWOT analysis for the

telecommunication industry.

2.2 ABOUT THE TOPIC

TELECOM:

The word Telecom (which is an abbreviated version of '

telecommunication) in real sense refers to the transfer of information

between two distant points in space. This meaning however, has been

subjected to modifications in accordance with further innovations made

be the Telecom Industry.

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http://www.businesstoday.intoday.in/http://www.nseindia.in/http://www.trai.gov.in/http://www.nseindia.in/http://www.trai.gov.in/http://www.businesstoday.intoday.in/


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Industry:

A clear indication of the way in which human effort has been

harnessed as a force for the commercial production of goods and services

is the change in meaning of the word industry. Coming from the Latinword industrial, meaning "diligent activity directed to some purpose," and

its descendant, Old French industries, with the senses "activity," "ability,"

and "a trade or occupation," our word (first recorded in 1475) originally

meant "skill," "a device," and "diligence" as well as "a trade."

Industry analyses:

An Industry Analysis is an assessment of the profitability of an

industry. In order to perform this assessment, your objective is tocharacterize the driving forces of competition within an industry. The

purpose of this analysis is to help management create and maintain a

competitive advantage that allows the company to excel in the industry.

Thepurpose of industry analysis is to review prevailing conditions

within specific industry and its segments. The company's industry

obviously influences the outlook for the company. Even the best stocks

can post mediocre returns if they are in an industry that is struggling.

TELECOM INDUSTRY

The Indian telecommunications sector has

been zooming up the growth curve at a

feverish pace, emerging as one of the key

sectors responsible for India's resurgent

economic growth. It is the fastest growing

telecommunication market in the world, and

with 264.77 million telephone connections, is

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the third largest telecom market and the second largest among the

emerging economies of Asia with an average growth of over 90%. In

fact, India has achieved its target of reaching 250 million telephone

subscribers by 2007, two months before time. Simultaneously, overall

tele-density has increased to 23.21 percent. Today, the Indian telecom

industry represents unique opportunities for U.S. companies in the

stagnant global scenario. According to Broadband Policy 2004,

Government of India achieves the target of 9 million broadband

connections and 18 million internet connections in 2007. In the last 3

years, two out of every three new telephone subscribers were wireless

subscribers. Consequently, wireless now accounts for 54.6% of the total

telephone subscriber base, as compared to only 40% in 2003. Wireless

subscriber growth has bypassed 2.5 million new subscribers per month in

the 2007. The wireless technologies currently in use are Global System

for Mobile Communications (GSM) and Code Division Multiple Access

(CDMA). There are primarily 9 GSM and 5 CDMA operators providing

mobile services in 19 telecom circles and 4 metro cities, covering more

than 2300 towns across the country.

HISTORY

In 1880, two telephone companies namely The Oriental Telephone

Company Limited and The Anglo-Indian

Telephone Company Limited approachedthe Government of India with the objective

of establishing Telephone Exchanges

across the country. Initially, the

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Government denied the permission as it wanted to exercise its monopoly

power over the promising industry once it emerged. By the following

year, it changed its decision and finally on 28 the January, 1882, license

was granted to The Oriental Telephone Company Limited of England for

opening telephone exchanges at Kolkata, Mumbai, Chennai and

Ahmadabad.

Evolution of the industry-Important Milestones

History of Indian Telecommunications

Year

1851 First operational land lines were laid by the government nearCalcutta (seat of British power)

1881 Telephone service introduced in India

1883 Merger with the postal system

1923 Formation of Indian Radio Telegraph Company (IRT)

1932 Merger of ETC and IRT into the Indian Radio and Cable

Communication Company (IRCC)

1947 Nationalization of all foreign telecommunication companiesto form the

Posts, Telephone and Telegraph (PTT), a monopoly run by the

government's Ministry of Communications

1985 Department of Telecommunications (DOT) established, an

exclusive

provider of domestic and long-distance service that would be

its own regulator (separate from the postal system)

1986 Conversion of DOT into two wholly government-ownedcompanies: the

Videsh Sanchar Nigam Limited (VSNL) for international

telecommunications and Mahanagar Telephone Nigam

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Limited (MTNL) for service in Metropolitan areas.

1997 Telecom Regulatory Authority of India created.

1999 Cellular Services are launched in India. New National

Telecom Policy is adopted.

2000 DoT becomes a corporation, BSNL

2001 Convergence Bill to promote, facilitate and develop the

carriage and content of communications tabled in the

Parliament.

Policy for GMPCS service has been announced.

Policy for PMRTS has been announced. Policy for UMS was

announced.

2002 VSNL came under private management.

International Long Distance Service opened for private

competition.

Internet telephony was started.

Targets (by 2010):

500 million telephone connections

Broadband: 20 million subscribers

Geographical coverage: 90%

Rural Connections: 80 million

Scope

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Showcase the latest products, formulation and capabilities. Opportunities for transfer of technology, setting up of R&D base

with

International firms.

Joint ventures, collaborations and investment opportunities. Supply of machineries, process control equipments, projects and

services etc.

One-to-one business meetings and networking opportunities.Indian Economy

An economy is the system of human activities related to the

production, distribution, exchange, and consumption of goods and

services of a country or other area.

The composition of a given economy is inseparable from

technological evolution, civilization's history and social organization, as

well as from Earth's geography and ecology,

India's economy is on the fulcrum of an ever increasing growth

curve. With positive indicators such as a stable 8-9 per cent annualgrowth, rising foreign exchange reserves, a booming capital market and a

rapid rise in FDI in the last year, India has emerged as the second fastest

growing major economy in the world.

The economy has been growing at around 9 per cent in the past

two years recording a growth rate of 9 per cent and 9.4 per cent in 2005-

06 and 2006-07 respectively. Significantly, the industrial and service

sectors have been contributing a major part of this growth, suggesting

the structural transformation underway in the Indian economy.

For example, industrial and services sectors have logged in a 10.9

and 11 per cent growth rate in 2006-07 respectively, against 9.6 per and

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http://en.wikipedia.org/wiki/Economic_systemhttp://en.wikipedia.org/wiki/Goods_(economics)http://en.wikipedia.org/wiki/Technological_evolutionhttp://en.wikipedia.org/wiki/Historyhttp://en.wikipedia.org/wiki/Social_organizationhttp://en.wikipedia.org/wiki/Geographyhttp://en.wikipedia.org/wiki/Ecologyhttp://en.wikipedia.org/wiki/Economic_systemhttp://en.wikipedia.org/wiki/Goods_(economics)http://en.wikipedia.org/wiki/Technological_evolutionhttp://en.wikipedia.org/wiki/Historyhttp://en.wikipedia.org/wiki/Social_organizationhttp://en.wikipedia.org/wiki/Geographyhttp://en.wikipedia.org/wiki/Ecology


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Telephones in Rural and Remote Areas

Promotion of rural telephony and accessibility of telephones to

remote areas is an important thrust area of the department. The

Universal Service Obligation Fund (USOF) of India is one of the few

operational USO Funds in the world. The scope of USOF covers rural and

remote areas with public access and individual household telephones in

Net High Cost rural and remote areas. Under USOF, a scheme has been

launched by the Government to provide support for setting up and

managing 7871 number of infrastructure sites spread over 500 districts in

27 states of the country for the provision of mobile services. The

infrastructure so created, shall be shared by three service providers for

provision of mobile services including other Wireless Access Services like

Wireless on Local Loop (WLL) using Fixed/Mobile terminals in the specified

rural and remote areas, where there is no existing fixed wireless or

mobile coverage. Mobile services through these shared towers are

targeted to be made operational in a phased manner by May 2008.

Broadband

Recognizing the potential of Broadband service in the growth of

GDP through enabling the development of knowledge based society, the

government has announced Broadband Policy 2004. Several measures

have since been taken to promote broadband in the country. As a result

of these measures, broadband subscribers grew from a meager 0.18

million as on 31, March 2005 to 2.61 million, up to September 2007.

INVESTMENT AND GROWTH

In 2005-2006, the telecom industry witnessed a growth of 21% withtotal revenue of Rs. 86,720 crores, and the total investment rising to Rs.

2, 00,660 crores. It is projected that the telecom industry will be enjoying

over 150% growth in the next 4-6 years. The growth also requires a huge

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investment by the players in the sector. Bharti Airtel is planning to invest

about $8 billion by the year 2010.

Liberalization policy and some socio-economic factors are mainly

responsible for the immense growth in the sales volumes. The lifestyle of

the people has changed. They need to be connected to the other people

all the time. With the

lowering down of the

tariffs the affordability of

the mobile phones has

increased. The finance

sector has also come up

with loans for handsets

on 0% interest. Mobile

services providers are

also expanding their coverage area by installing more and more antennas

and other equipments.

Budget 2007 has brought disappointment to the telecom sector.

Mobile service providers have been asked to cut down their roaming

rentals as well as their long distance and international call tariffs. This has

led to discontent on the part of the service providers. However, Telecom

Regulatory Authority of India (TRAI) is of the opinion that this will lead to

increased use of roaming, which will ultimately lead to more revenue

generation. Moreover, with cheaper handsets and lesser tariffs, it is

expected that by the year 2010 there will be over 500 million subscribers

in the Indian telecom market.

The Total Market (TM) for semiconductors in India in 2005 isestimated at $2.82 billion and the telecommunications market accounts

for about 45.4 percent of the TM. The Total Available Market (TAM) for

semiconductors in India was valued at $1.14 billion in 2005 and the

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telecommunications market accounts for 8.0 percent of the TAM. Bulk of

the telecommunication equipment is imported as CBUs and SKDs. The

larger share of the imports in the telecommunication market reflects in

the higher TM and lower TAM. The study is comprehensive and it covers

all the major telecom products contributing the semiconductor TM and

TAM. The major markets of the telecommunication industry that are

covered in this study include Wireless handsets (GSM and CDMA),

Wireless infrastructure equipment , Wire line switches, Access network

equipment, Electronic push button telephones, PBX systems, Modems and

VoIP phones. The wireless handsets and wireless infrastructure

equipment together hold major share of about 88 percent of the

telecommunication TM in 2004. However, with respect to TAM, wire line

switches are the major segment due to the presence of domestic

manufacturing base.

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Telecoms and Indias Growth

Communications is the fastest growing sector in Indias economy.

The average compound rate of growth of the economy works out to 24.02per cent per annum since the turn of this millennium (Table 2). No other

sector of the economy has clocked such a rate of growth. The sector

accounts for about 4 per cent of GDP and the recent high rate of growth

has contributed to about

11 per cent of the growth in overall

GDP of the country. In

information and communications

technology (ICT), it is again

communications that

is more important. This is evident from a dataset on ICT spending

developed by World Information Technology and Services Alliance (2006),

of the total spending on ICT by India, about 63 per cent was in

communications. The communication sector comprises both services and

equipment manufacturing, although in the above characterization the

data refers only to the services segment. The domestic production of

telecom equipments has shown some impressive increases during the

period since 2001, but it accounts for only about 15 per cent of the total

telecoms industry. With some fluctuations, the equipment sector is slowly

seeing a decrease in its share in the total revenues of the

telecommunications industry.

Dimensions of Growth

In 1991, India had just five million telephone subscribers. As at the

end of July 2007, there were 233 million subscribers, an average annual

growth rate of over 27 per cent per annum. No other country in the world,

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other than China, has shown such high rates of growth (see Table3).

Teledensity too which was below one telephone per 100 population has

now risen sharply to about 20. Among the infrastructure industries,

telecommunications is the only one that has shown significant

improvements over the reform period. Consequently, it is generally

opined that a revolution of sorts is taking place in the Indian telecoms

industry. There are at least seven dimensions of this growth performance

that merit our attention.

(i) Dominance of Wireless Technology: The Indian telecom sector is

now heavily dominated by wireless technologies, which include cellular

mobile and fixed wireless technologies. In fact, almost the entire increase

in the availability of

telephones has been contributed by

wireless technologies. India has

one of the highest ratios of

wireless to wire-line services,

which is now almost five (Table 3, p

39). In fact what is interesting is

that since 2005, the wire-line

services have started falling. A

number of factors explain this decrease in the popularity of fixed

telephones, which has now become a worldwide trend. This heavy

reliance of wireless technologies, while extremely positive from the

availability point of view, has some implications for the diffusion of the

internet in the country. This will be analyzed in some detail in one of the

subsequent sections.

(ii) Growing Market for Telecom Handsets: As a corollary of the

above, it is seen that there has been a steady increase in theaverage

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number of mobile subscribers per month since 2003. In 2003, on an

average 1.5 million new subscribers were added to the existing stock.

This increasedto 6.4 million until September 2007. These large increases

in the number of mobile handsets have strong positive implications for

the telecom equipment industry and specifically the mobile handsets

industry, which means that close to six million handsetsare being sold

every month. Consequently, a huge domestic market for telecom

equipment has suddenly emerged in the country spawning the creation of

asignificant manufacturing base. Chennai has become a thrivingcluster

for mobile handsets manufacturing and this has important implications

for the downstream industries such as the semiconductor industry. This

point will be discussed at some depth inthe fourth section.

(iii) Increasing Privatization: The share of the private sector in the

overall telecoms industry has been raising and the ratio of private to

public actually crossed unity in 2006. This again is due to the fact that the

public sector is more dominant in wire-line (or fixed) and the private

sector is dominant in the wireless (mobile) segment. This sort of a

structure is largely the product of historical reasons. The two public

sector service providers (BSNL and MTNL) dominated the wire-line sector,

while the private sector was able to dominate the new wireless

technology. In fact it was only in the late 1990s, early 2000s that the

government allowed the public sector entities to provide wireless

communication services.

(iv) Competition Fixed v/s Mobile and GSM v/s CDMA: An

interesting feature ofthe industry is

that after a very long time, it hassuddenly become very competitive.

There are three dimensions to this

competition. First, it is competition

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between two standards or technologies, namely, the Global System for

Mobile Communications(GSM) v/s CodeDivision Multiple Access(CDMA)

standards. Second, it is competition between various service providers,

althoughthis competition was restricted to public policy designedspaces

or markets known as telecom circles. A yet another dimensionis the type

of market. There are essentially three types of markets based on the

geographic coverage of the service. They are: (i) the local telephone

market; (2)long distance or nationaltelecom services; and (3) foreign or

the overseas market. We focus here on all the three dimensions of

competition betweenthe service providers.

Competition in Fixed and Mobile Technologies: The markets for

mobile services are much more competitive than the one for fixed line

services. In the latter, the incumbent service provider, BSNL continues to

have the lions share of the market. However, the existence of mobile

communication services has made the market for fixed line services

contestable and as a result despite high concentration, the prices of fixed

telecom services kept falling or kept under check over the last five years

or so.

(a) Competition in Fixed Telephone Services: If one goes by overall

summary measures of domestic competition, the market for fixed

telephone services is much more concentrated than the one for mobile

services. For instance (as on May 31, 2007), The market for fixed telecom

services is highly concentrated in all the telecom circles, although in

seven of them, namely, Delhi-NCR, Chennai, Madhya Pradesh, Mumbai,

Punjab and Karnataka, the H-Index has a value less than 0.8. Of course,

this does not mean that the market for fixed telecom services is notcompetitive. There are two dimensions to this level of competition for

fixed services. First, the consumers are increasingly substituting mobile

for fixed services, so the fixed service providers face intense competition

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from mobile services. Second, the existence of the telecom regulator too

has acted as a check on the dominant service provider, Bharat Sanchar

Nigam (BSNL), from charging high prices. Instead what one sees is a

significant improvement in the performance of BSNL during this period.1

First of all, BSNL is one of the leading profit-making central public sector

enterprises in the country: in 2005-06 it made a net profit of Rs 8,940

crore one of the few non-oil public sector enterprises (PSEs) in the top

10 profit-making PSEs in the country. Three areas where the firm has

made performance improvements are: (i) considerable reductions in the

number of consumers on the waiting list for a connection; (ii) reductions

in the number of faults per subscriber; and (iii) number of personnel per

1,000 subscribers. On all the three indicators BSNL has made substantial

progress [Department of Telecommunications 2007] and I argue that this

is entirely due to the force of competition leading to efficiency gains for

this rather monopolistic firm which has had a previous history of being

completely impervious to the demands of consumers.

(b) Competition in Mobile Services Industry:

Compared to the fixed services,

the mobile services industry has a

number of distinguishing features.

First, the industry started as one

dominated by private sector

enterprises and the government

religiously followed a policy of

managed competition by licensing

more than one service provider in a telecom circle. In fact majority of the28 circles have at least four services providers and in a number of cases

there are six service providers well. In short, right through inception the

government envisaged an oligopolistic form of competition. Second, most

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of these private sector enterprises had some of foreign equity holding of

sorts. Third all of them are based on new technologies that were state-of-

the art. Fourth, the conduct of the industry was, relatively speaking, more

regulated by the newly created independent regulatory agency, the

Telecom Regulatory Authority of India (TRAI). Fifth, it is the rapid growth

of this industry that has catapulted the communications sector into one of

the major growth-contributing sector of Indias economy. Sixth, the

mobile communications industry, especially the equipment part of the

industry is the second largest in the world (next to China) and therefore

has attracted considerable FDI in the manufacture of handsets leading to

the employment of skilled manpower. Seventh, India is supposed to be

having the cheapest mobile telecom tariffs in the world. Since all the

services providers were new and had the same vintage of technology,

their competition was more in terms of price and conditions of sale and of

late these two aspects are much in public scrutiny thanks to the timely

intervention, on various occasions, by the regulator. If one computes the

H-Index for the industry, at the national level (which is not exactly a

meaningful as some of the providers are only at specific telecom circles),

it shows a mild increase: the H-Index for the industry increases from

0.1370 in 2002 to 0.1593 in 2007. Most of the service providers have

focused on specific regional markets, with the exception of Bharti (the

largest mobile service provider). In fact, there are only four service

providers who have a presence in at least 20 of the 29 circles. It is also

interesting to see that the circles where BSNL has a monopoly position

are also those with very low revenue potential. In other words, the private

sector

providers have positioned themselves in the most revenue earningcircles. Also it is seen that it is the circles with high revenue earning

potential where there has been an increase in the intensity of competition

in the metros of Delhi, Mumbai and Chennai for instance.

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Competition between Mobile Standards: It was seen above that

mobile phones were introduced in the country towards the latter half of

the 1990s and specifically in 1997. Ever since that year and until the end

of 2002, the market was dominated by

just one technology, namely, GSM. But in

December 2002, a Reliance Info-com

launched CDMA services across 17

circles on a countrywide basis. CDMA

has since been growing faster than GSM,

although there are some year-to-year

variations (see Figure 3, p 41). Most

Indian consumers are unaware of the

nitty-gritty of the two technologies. So

the deciding factor between the two technologies is often based on price

and other conditions of offer such as the coverage of the service ease of

obtaining a new connection and whether a handset is available at a

reduced price as part of the deal. Given this sort of a possibility of perfect

substitution between the two types of technologies, the existence of the

two standards has made both the markets for GSM and CDMA services

very competitive. This is especially so when the market for CDMA services

is highly concentrated with just two service providers accounting for

almost the entire output. This is further indicated by the higher Herfindhal

Index for CDMA services. What is being argued here is that despite being

highly concentrated, CDMA service providers have to compete with GSM

service providers and this has prevented the CDMA service providers

from wielding any excessive market power. One of the most importantinstitutional requirements for competition to emerge and sustain is the

introduction of number portability. Number portability allows a customer

to move from one mobile service to another within GSM, and also

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between GSM and CDMA, while retaining the same number. TRAI had

recommended in March 2006 to the Department of Telecommunications

(DoT) that mobile number portability be introduced by April 2007.

(v) Price of Telecom Services: One of the more direct effects of this

competition is lower prices. Before the deregulation of the telecom

services industry and indeed the entry of mobile service providers,

telecom consumers were periodically subjected to increases in the tariff.

This has now been effectively checked. The price of telecom services

basically follows a two-part tariff,

both in the case of fixed and

mobile services: first an activation

charge followed by a charge for

each type of calls. For mobile

communication consumers then

there is the additional cost of calls

according to whether it is post or

prepaid. Based on estimates made

by TRAI (2006), I have obtained the minimum effective charge derived

out of an outgoing usage of 250 minutes per month per quarter during

2003 through 2005. This is plotted for both fixed and mobile services as

well. Although charges for both the calls have come down, a higher

reduction is noticed in the case of mobile services. In fact, India now has

one of the cheapest mobile tariffs in the world (Table 7) and this can give

an additional fillip to the growth of ICT industry in the country. If one were

to plot the price of telecom services and the number of subscribers, one

can see an inverse relationship in the case of mobile services although inthe case of fixed services such an inverse relationship is not visible. This

is because of the relative advantages which mobile technology can

bestow on its user.

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(vi) Institutional Support: An interesting feature of the growth of

telecommunications industry in the 1990s and beyond, compared to the

earlier period is the strong public policy support that the industry has

received. It was manifested in the form of the following policies: (i)

National Telecom Policy of 1994, (ii) Telecom Regulatory Authority Act of

1997, (iii) New Telecom Policy of 1999, and (iv) Broadband Policy of 2004.

Of these four main policies, in my view, the most important piece of

legislation that is determining the growth performance of the industry is

the establishment of the regulatory agency TRAI.2 the 10-year history of

telecommunications regulation in India can be divided into two phases:

the first covering the period 1997- 2000, when TRAI had just been

established and the second covering the period 2000 onward, when

considerable amendments were made to the original TRAI Act. On the

whole, TRAIs functioning has been marred by a number of bitter disputes

between it, the DoT and the service providers, although in more recent

times (especially since 2001) it has been rather effective in shaping the

conduct of the industry in terms of pricing behavior and indeed in quality

of service. TRAIs functions can be broadly categorized into two:

recommendatory and mandatory. It is seen that in most of the important

conduct variables such as the promotion of competition, pricing,

technology and quality of service and in the efficient use of spectrum,

etc, the pronouncements of TRAI are merely recommendatory and the

final decision is to be taken by the government. The mandatory powers of

TRAI are restricted to a number of technical issues such as fixing the

terms and conditions of inter-connectivity between the service providers,

laying down the standards of quality of service and to ensuring that theseconditions are actually met by the service providers and ensuring the

effective compliance of the Universal Service Obligation.

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After a detailed review of its functioning during the earlier period

(1997-2000), Mani (2002) referred to the TRAI as a muddled regulator.

This is because during this phase, TRAIs functions were poorly

articulated, and it was generally viewed as driven by the well-organized

and vociferous lobby of private phone service operators. TRAI did little to

hide its pronounced contempt for the DoT and the state-owned providers,

BSNL and MTNL. At the same time, it failed

to ensure that private operators adhered to

their license conditions. Its authority and

credibility were undermined by court rulings

that clearly exposed its lack of power. Its

reputation suffered even more when it

allowed the private operators to fight its

court battles. In short, it would not be

incorrect to state that there was regulatory

capture during this first and initial phase of

its operations.

TRAIs recommendations to the

government are binding only with respect to

the non-compliance and efficient use of the

spectrum. On the crucial issues of timing and

licensing of new service providers, TRAIs

recommendations are not binding. In sum,

the TRAI has been reduced to a tariff setting

body empowered only to fix tariffs and inter-

connection charges and to set norms on quality of service. And on thesetwo and especially on the tariff issue, TRAIs role is generally considered

to be very satisfactory.

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(vii) Growing R&D Outsourcing: It is generally held that India has

emerged as a major R&D hub. The Technology Information and

Forecasting Assessment Council (TIFAC) (2007) study confirmed this

commonly held proposition: R&D investment worth of $ 1.13 billion has

flowed into India during the five-year period 1998-2003. The total receipts

of R&D services have doubled from $ 221 million in 2004-05 to $ 519

million in 2005-06 [Reserve Bank of India 2006, p 1355].

Three Disquieting Features

In the previous section I have outlined several dimensions of the

growth of the industry. All these were positive features the phenomenal

growth of the industry, significant

reductions in the waiting time to get a

telephone connection and indeed in the

price of telecom services. However, this

growth has also been with some

disquieting features. Three such

disquieting features of the growth of the

industry have been identified. They are:

(1) the growing digital divide; (2)

increased dependence on imports as far

as the equipment is considered; and (3)

the relatively low penetration of the

internet in India.

(i) The Growing Digital Divide: Several commentators, notably Desai(2006), had referred to the growing inequalities in the availability of

telephones especially between states and indeed between the rural and

urban areas within a state. This is so severe that the national picture that

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I presented above is only representative of the urban areas of some of

the states. This growing digital divide, as it is usually referred to, is of

course a reflection of the growing divides within the country as far as

income and wealth is considered. The ratio of urban to rural tele-density,

which was falling until 2002 has started rising again since 2003 and in

2005 was much higher than what was in 1996, when the mobile

revolution was just about to begin. To illustrate, the ratio of urban to rural

tele-density increased from 14 in 1996 to nearly 20 by the end of 2005

[Department of Telecommunications 2006]. A yet another dimension of

the digital divide is the variation in teledensity across the various telecom

circles (Table 9). Teledensity (in 2005) ranged from as high as 60 per 100

people in the national capital region to just two in the backward state of

Chhattisgarh. The urban divide within each of the telecom circles is

presented in Table 9. It shows that Kerala, Tamil Nadu (excluding

Chennai) and Punjab have one of the lowest urban-rural divides, while

Uttar Pradesh, Bihar and Assam have the highest digital divides. The

table also shows that rural teledensity is significantly below the urban one

across all the circles and even for the nation as whole it has remained at

a very low level. This confirms the oft-expressed view that the telecom

revolution spearheaded by the mobile phones has remained largely an

urban phenomenon. The government has put in place an institutional

arrangement for bridging the digital divide. Specifically, the National

Telecom Policy of 1999 envisaged implementation of the Universal

Service Obligation (USO) Fund to provide telecom services in rural,

remote areas and non-remunerative areas. This fund is raised through a

universal access levy, which is 5 per cent of the adjusted gross revenueearned by the service providers under various licenses. The Universal

Service Support Policy for Implementation of USO took effect from April 1,

2002. It is administered by the DoT and it has three major components:

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(1) providing public shared access; (2) providing individual access; and

(3) infrastructure support for mobile service providers. The latter policy is

on the anvil and is yet to take shape. The overall performance of the USO

fund is far from satisfactory, as cumulatively

speaking only about a third of the funds

accumulated have actually been disbursed.

The service providers, excepting for the

state-owned BSNL, are rather reluctant to

provide shared access. However, the private

providers are keen to participate in the

provision of individual access in rural areas

as it is more profitable than providing shared

access [Department of Telecommunications

2007]. Hitherto, the USO funds have been

utilized only for provision of fixed line

connections. Given the fact that the future is

in mobile communications, it is prudent to

involve mobile service providers too. Some

amendments made to the utilization of USO

funds have expanded the scope of the funds

to include more items.3 The following

additional four items were included: (i)

Creation of infrastructure for provision of

mobile services in rural and remote areas;

(ii) provision of broadband connectivity to villages in a phased manner;

(iii) creation of general infrastructure in rural and remote areas fordevelopment of telecommunication facilities; and (iv) induction of new

technological developments in the telecom sector in rural and remote

areas. Only the first of four are in the form of some implementation. In

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fact, the four metros have ceased to be the major force behind the

growth of the mobile connections in the country. Encouraging the growth

of mobile communications in the other circles and the rural areas within

the circles can increase tele-density in the country. Such increases in

tele-density through mobile phones also have some negative

consequences, which is discussed below.

(ii) Import Dependence for Telecom Equipment: The country had

earlier assiduously built up a domestic telecom equipmentmanufacturing

industry in all the three segments of the industry, namely in switching,

transmission and terminal equipment.Until 1985 or so, the manufacture

of telecom equipment was exclusively reserved for the public sector,when in that year certain customer premises equipments like the

Electronic Private Automatic Branch

Exchanges (EPABX) were thrown open

to the private sector. In fact, the very

first public sector enterprise

established in independent India,

Indian Telephone Industries (ITI) was

devoted to the manufacture of

telephone switching and terminal

equipment. In 1985, the government

established the stand-alone laboratory,

Centre for Development of Telemetric

(CDOT) to develop a family of digital switching technologies, which it

licensed to both government and private sector enterprises. In fact, Mani

(2005) had argued that the C-DOT is credited with the establishment of a

modern telecom equipment industry in the country. The governments

policy of public technology procurement practiced through its DoT, which

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was the only telecom service provider for a very long time until the late

1980s also contributed to the emergence and sustenance of a domestic

manufacturing industry in telecom equipment which fitted very well with

the overall policy of import substitution that being followed. The

deregulation of both the equipment and services industries, the

liberalization of the economy, the virtual abandoning of the public

technology procurement policy and above all the growth of the mobile

communications industry put a leash on the growth of a domestic

manufacturing industry. This is because both the research and production

components of the industry focused only on fixed telephone technologies

and with the mobile communications becoming very important, the

demand for such equipment had to be increasingly met through imports. I

have attempted to estimate the net self-sufficiency rate for Indias

telecom equipment industry during the period 1992-93 to 2004-05.

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iii)Low Penetration of the Internet: Internet services in India were

launched in 1995 by Videsh Sanchar Nigam (VSNL). By the end of March

1998, the number of subscribers had barely reached 140,000. In

November 1998, the government recognized the need for encouraging

the spread of the internet in the country and opened the sector for

provisioning of services by private operators. To date there are 389 ISP

licensees, but only 135 are operational. Public sector providers dominate

with 56 per cent of the market (2006).. Approximately 60 per cent of the

users still use dial-up internet access. Broadband access was introduced

in October 2004, but its diffusion remains low. According to TRAI

estimates (Table 10, p 43), there were 9.27 million internet subscribers as

of end March 2007 and 2.34 million broadband subscribers.

Only about a quarter of the internet subscribers have changed over

to broadband access technologies. Majority of the subscribers use the

older dial-up technologies for accessing the internet. According to a

recent study on internet in the country by the internet and Mobile

Association of India (2006), almost 76 percent of PC users have taken

internet connections. This means that the two technical reasons militating

against the higher internet diffusion in the country is the lack of

ownership of PCs and not having a fixed telephone for accessing the

internet. Although it is possible to access internet over a mobile phone,

the current generation of mobile technology that is common in the

country is 2 G and 2.5 G. Of course, it is generally held that whenever the

country moves over to 3G phones, accessing the internet over mobile

phones is easier. But given the much higher prices of 3G handsets, it is

not very likely that its diffusion will be high in the initial years. So the lowinternet diffusion in the country is a direct consequence of the country

becoming too reliant on mobile phones.

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Major Players:

There are three types of players in telecom services:

State owned companies BSNL

MTNL

Private Indian owned companies Reliance Communication

Tata Teleservices

Bharti airtel

Tata Communication

Foreign invested companies Vodafone-Essar

Bharti Tele-Ventures

Idea Cellular

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3. Research Methodology

3.1 Problem Statement:

An Industry analysis of Telecommunication sector

3.2 Research Objective:

To study the emerging trend of telecom sector

To study the opportunity exist for telecom market

To know the future out let of telecom sector

To know the emerging technologies in the telecom sector

To study the financial performance of telecom sector

3.3 Research design:

Descriptive

Descriptive study is used to study the situation. This study helps to

describe the situation. A detail descriptive about present and past

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situation can be found out by the descriptive study. In this involves

the analysis of the situation using the secondary data.

3.4 Data collection method:

Secondary data

This report is based on the secondary data, which is collected through

internet and various magazine or news paper, for evaluation purpose

the data collected through www.nseindia.com,

www.businesstoday.intoday.in

Site.

3.5 Method of analysis:

SWOT analysis

Ratio analysis1. Profitability Ratio 4. Liquidity Ratio 6. Per share ratio

2. Payout Ratio 5. Leverage Ratio

Limitation of the Study

As the project based on the secondary data the data may not be

updated.

The data are collected from the various sources as they may not be

accurate.

40
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4. DATA ANALYSIS & INTERPRETATION

BHARAT SANCHAR NIGAM L IMITED (BSNL)

Founded in 2000, Bharat Sanchar Nigam Ltd. is India's largest

public sector Telecommunications Company providing a wide variety of

telecom services. Its service range covers Wire line, CDMA mobile, GSM

Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP

services, IN Services, etc.

In 2005-06, the BSNL earned revenues of Rs. 40,177 crore,

representing a growth rate of 11.32 % over the previous year. BSNL's

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Board of Directors consists of CMD Shri A.K. Sinha & five full time

Directors- Director of Human Resource Development (HRD), Director of

Planning & New Services, Director Operations, Director Finance and

Director of Commercial & Marketing.

BSNL offers both fixed line and mobile services with broadband

connections.

BHARTI-AIRTEL

Established in 1995 by Sunil Mittal as a Public Limited Company,

Airtel is the largest telecom service provider in Indian telecom sector.

With market capitalization of over Rs. 1,360 billion, Airtel has 31% of total

market share of GSM service providers. Providing GSM services in all the

23 circles, Airtel was the first private player in telecom sector to connect

all states of India. Also, Airtel is the first mobile service provider to

introduce the lifetime prepaid services and electronic recharge systems.

After establishing itself in the domestic market, Airtel is now spreading its

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wings in US by providing its mobile service under the name 'CALLHOME'

to the NRIs.

Having achieved huge success in mobile services- postpaid and

prepaid- Airtel has now entered fixed-line telephony providing broadband

services in 92 cities across India. The company has an optical fiber

network of 35,016 km and a customer base of 35,440,406 GSM mobile

and 1,819,083 broadband subscribers.

Airtel is listed on The Stock Exchange, Mumbai (BSE) and The

National Stock Exchange of India Limited (NSE).

Bharti Airtel

Bharti group plans

to roll out cellular

services under Airtel

brand in SAARC

countries like Bhutan,Nepal, Maldives, etc. It

will soon start

exploratory talks with

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relevant telecom regulators to secure GSM licenses to operate 2G/3G

mobile services in these countries. It has no plans to take the Airtel brand

to Pakistan.

Bharti's bid to enter SAARC markets comes at a stage when the

Indian govt is trying to play a decisive role in bringing about a sharp

reduction in the ultrahigh global roaming rates within the SAARC group.

Bharti Airtel plans to kick off cellular services in Sri Lanka by April 2008.

While telecom penetration in Sri Lanka is 30%, there's a huge opportunity

for new entrants.

Bharti Airtel and Western Union today decided to jointly develop

and pilot a Mobile Money Transfer service in India. They expect the

service to be launched within the next six months. Only banks and the

Indian Post, through money orders, are currently allowed such transfers.

RELIANCE INFOCOMM

Established in 2002, Reliance communication is the wholly owned

subsidiary of Anil Dhirubhai Ambani Group of Companies providing the

telecommunication services.

Reliance offers prepaid and postpaid mobile services with R-world

and fixed line services with broadband services. During the financial year

2005-06, Reliance's subscriber base had crossed the mark of 25 millions.

Having its operations in 673 cities, Reliance Communications offers a

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wide range of telephony services. The company's business line varies

from providing Fixed Line Telephony services to wireless mobile

telephony services.

Reliance is the only telecom company that is providing mobile

services over both- CDMA and GSM networks. With an optical fiber

network of 80,000 kms, the company aims at providing best services to

its customers. It also has 15,000 Base Transceiver Stations across the

country providing reliable wireless network.

Reliance Communication

RCom has an upper

edge over all its rivals and is

a step ahead than the major

telecom players.

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Department of Telecom has awarded an India GSM license to Reliance

Communications. The company had already paid the requisite license fee

of Rs 1,651 crore for an India GSM license on October 19, 2007, after

DOT, in its new telecom policy, had said telcos could offer services using

dual technology.

The license will guarantee that RCom will be in queue for GSM

spectrum ahead of the 46 others that have applied for licenses recently.

The development comes even as leading GSM players have challenged

the policy of allowing dual technology in the telecom tribunal.

RCom will now have to wait for DOT to allot 4.4 MHz of GSM

spectrum in each of the circles to launch commercial operations.

IDEA CELLULAR

Established by AT&T, Aditya Birla Group and Tata Group as joint

venture, Idea Cellular, is a part of Aditya Birla Nuvo, a flagship company

of the Aditya Birla Group, Idea is growing its network in 11 circles. Idea

offers both prepaid and post paid services in the GSM network. Having

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13% market share, Idea has a base of 2.3 crores subscribers all over the

country. A three-year contract was signed between Idea cellular and

Ericsson for GSM expansion. The network will now cover Maharashtra,

Gujarat, Rajasthan, Madhya Pradesh and Himachal Pradesh telecom

circles (operator-licensed areas). Idea is also in the process of setting up

new networks to provide wider coverage area to its subscribers. It also

keeps on announcing attractive discount schemes for the value added

services.

Idea was the first cellular service provider to launch GPRS and

EDGE in the country. For the very first time in India, 'Background Tones',

'Group Talk', 'Super Power', 'Women's Card', etc. were launched by Idea.

Idea has remained popular among the customers because of tariff plans

such as free I -I calls, '2 Minutes Outgoing Free', and other discount

schemes and GPRS enabled services.

Idea CellularAditya Birla group

firm Idea Cellular is a

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wireless telecom company, operating in various states of India. Idea

Cellular was the first to offer flexible tariff plans for prepaid customers. It

also offers GPRS services in urban areas.

The Ericsson Idea Cellular $100m contract could be a precursor to

Idea Cellular getting spectrum from the Government to commence

services in the Circle.

The company will also be responsible for network deployment and

integration, as well as managed services including network and field

operations. Rollout is planned to begin shortly, with commercial launch

rescheduled for May 2008.

TATA TELESERVICES:

Established in 1996, Tata Teleservices, one of the 96 companies of

Tata Group, has its network in 20 circles. It is the first company to launch

CDMA mobile services in India. With investment of Rs.36, 000 crores

during financial year 2005-06, Tata Teleservices has reached the mark of

1.07 crore subscribers.

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The company covers a wide range of services like Mobile services,

Wireless Desktop Phones, Public Booth Telephony and Wire line services.

It also offers some value added services like voice portal, roaming, post-

paid Internet Services, 3-way conferencing, group calling, Wi-Fi Internet,

USB Modem, data cards, calling card services and enterprise services.

Tata Teleservices has partnered with Motorola and Ericsson for

providing reliable services to its customer base. Tata Teleservices Limited

along with Tata Teleservices (Maharashtra) Limited serves over 15.9

million customers (with 75% increase in FY 2007 over March 06-sub base)

covering over 3200 towns. Income from Telecommunication reached to

1,095.13, with 7.9 lakhs mobile subscribers and 8.3 lakhs fixed wireless

subscriber.

Formerly named as Hughes Tele.com (India) Ltd., Tata Teleservices

Maharashtra Limited (TTML) with 70.83% equity shareholding by TATA

Group is the premier telecommunication service provider licensed to

provide services in Maharashtra (including Mumbai) and Goa. In February

2002, the Government of India released 25% of VSNL's equity to Tata

Teleservices.

MAHANAGAR TELEPHONE NIGAM LIMITEDMahanagar Telephone Nigam Limited popularly known as MTNL is an

India-based telecommunication service providing company. MTNL

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operates under the guardianship of the Ministry of Communication,

Government of India and Department of Telecommunication, Government

of India. Mahanagar Telephone Nigam Limited operates according to the

telecommunication policy laid as per the Indian Telecommunication Acts

and Rules. MTNL enjoyed virtual market monopoly till the end of the year

2000.

Mahanagar Telephone Nigam Limited operates in two major metro

cities of India, Mumbai and Delhi and this giant telecommunication

company enjoyed complete market leadership till the aforesaid time. With

the entry of private players in the cities of Mumbai and Delhi, Mahanagar

Telephone Nigam Limited lost its market monopoly. This led to lowering

of tariff by the Mahanagar Telephone Nigam Limited.

This Indian telecommunication company is one of the market

leaders in the Indian telecommunication industry and enjoys market

dominance in the area of basic telephony, rural telephony and Internet

connection. Furthermore, the company is also planning to expand its

Internet services and IT related services to help it grow along the lines of

other major telecommunication players operating in India. As per the

latest company policy in accordance with the tenth telecommunication

plan of India, the company is expected to add 27.56 lakh basic telephone

connections along with 11.57 lakh cellular phone connections.

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LIFE CYCLE CLASSIFICATION OF THE INDUSTRIES

AND/OR MAJOR PRODUCT GROUPS OF THE SECTOR .

SWOT Analysis-:

SWOT analysis can provide a framework for identifying and analyzing

strengths, weaknesses, opportunities and threats

Strengths: attributes of the organization those are helpful to achieving

the objective.

Weaknesses: attributes of the organization those are harmful to

achieving the objective.

Opportunities: external conditions those are helpful to achieving the

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Objective.

Threats: external conditions that is harmful to achieving the objective.

SWOT Analysis:

| StrengthThird largest telecom marketand the second largest amongthe emerging economy ofAsia.

Despite global economicrecession, telecom is onesector which is still goingstrong.

Huge wireless subscriberpotential.

Government proposes to hikeFDI limit in telecom to 74%.

Unified license regime.

| WeaknessLowest call tariffs in the world.

Domestic market saturation.

Market strongly regulated bygovernment body governingboth ISP and Telecom sector.

Huge potential for low end

cheap handsets.

Lack of infrastructure facility.

Language and literacy problem.

| Opportunity Joint venture, collaborationsand investment opportunities.

An opportunity for newinvestor in the telecom sector.

To supportive governmentpolicies and regulatoryenvironment.

To offer value added services

on GSM, CDMA and IP.Foreign investor in form ofequity or technology.

| Threat The quickly changing pace ofthe global telecommunication inindustry.

Indian Telecom Company couldalso be the target for thetakeover.

To quick changing in technology.

Changing consumer

preferences.Political instability.

Regulatory interference

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RATIO ANALYSIS:

Ratio analysis is a process of comparison of one figure against

another, which make a ratio, and the appraisal of the ratios to makeproper analysis about the strengths and weakness of the firms

operations. The calculation of ratios is a relatively easy and simple task

but the proper analysis and interpretation of the ratios can be made only

by the skilled analyst. While interpreting the financial information, the

analyst has to be careful in limitations imposed by the accounting

concepts and methods of valuation. Ratio analysis is extremely helpful in

providing valuable insight into a companys financial picture.

For the ratio analysis purpose we have taken five major companies

which are represent the entire industry such companys are given below.

1. BHARTI AIRTEL LIMITED

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2. RELIANCE COMMUNICATION LIMITED

3. IDEA CELLULAR LIMITED

4. TATA COMMUNICATION LIMITED

5.MAHANAGAR TELEPHONE NIGAM LIMITED

COMPANY NAME MARKET CAP IN CRORESBharti Airtel 108066.23Reliance Communication 32683.44Idea Cellular 14368.92Tata Communication 13181.25Tata Teleservices 4393.06MTNL 4136.13Spice Communication 4044.6

PROFITABILITY RATIO:

54

FOUR MAJOR TYPES OF

RATIOS

LEVERAGE

RATIOS

PROFITABILITY

RATIOS

LIQUIDITY

RATIOS

ACTIVITY

RATIOS


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The profitability of a company can be measured by the profitability ratio.

These ratios are calculated by relating the profits either to sales, or to

investment, or to the equity shares. Thus, we have calculating three

profitability ratio.

Operating Margin:

Operating margin is a measurement of what proportion of a companys

revenues is left over after paying for variable cost of production such a

wages, raw material etc.

EBIT

Operating margin=______________________

Sales

Gross Profit Margin:The gross profit margin ratio tells us the profit a business makes on its

cost of sales, or cost of goods sold. It is a very simple idea and it tells us

how much gross profit per Rs. of turnover our business is earning.

Gross profit (Sales Cost of good sold)

Gross profit margin =______________________________________

Sales

Net Profit Margin:This ratio is the percentage of sales after subtracting the Cost of Goods

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Sold and all expenses, except income taxes. It provides a good

opportunity to compare your company's "return on sales" with the

performance of other companies in your industry. It is calculated before

income tax because tax rates and tax liabilities vary from company to

company for a wide variety of reasons, making comparisons after taxes

much more difficult.

Earning after tax (EAT)Net profit margin =_____________________

Sales

Profitability ratio:

YEAR

RATIO 2006 2007 2008 2009

OPERATING MARGIN 22.342 32.756 31.738 26.33

GROSS PROFITMARGIN 12.652 19.906 19.388 14.232

NET PROFIT MARGIN 16.766 13.414 13.888 16.762

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Interpretation:

The above graph represents averages of operating margin, gross profitmargin, and net profit margin of five major companies. Operating profit

margin and gross profit margin have slightly decreased as approximately

5.41% and 5.16% respectively. On other hand net profit margin has

slightly increase as approximately 2.88%. It represent the profit of

telecommunication industry has no influence in recession.

LEVERAGE RATIO:

Leverage ratios are also known as capital structure ratio. They measure

the companys ability to meet its long-term debt obligation. They throw

light on the long- term solvency of a company.

Total Debt equity ratio :

Debt equity ratio is calculated to measure the proportion of debts &

equity in capital structure. This relationship is describing the lenders

contribution for each rupee of the owners contribution is called debtequity ratio. This ratio is calculated by dividing by total debt by net worth.

Total debtTotal debt equity ratio=_______________

Total asset

Assets turnover ratio:

The assets turnover ratio measures the efficiency of a firm in

managing and utilizing its assets. Higher ratio indicates the more

efficiency of company in managing and utilizing its assets. So it implies

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that company can expand its activity level without additional capital

investment.

SalesFixed asset turnover ratio=________________

Fixed asset

Leverage ratio:

YEAR

RATIO 2006 2007 2008 2009

TOTAL DEBT-EQUITY

0.61 0.638 1.368 0.648

FIXED ASSET TURNOVER

0.652 0.69 0.656 0.526

Interpretation:

The above chart represents the averages of total debt-equity ratio and

fixed turn over. Debt equity ratio is calculated to measure the proportion

of debts & equity in capital structure here the ratio is 0.648:1 indicate

total debt proportion is more than total asset and the assets turnover

ratio measures the efficiency of a firm in managing and utilizing its assets

here the ratio is 0.526:1 indicate the efficiency of industry.

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LIQUIDITY RATIO:

Liquidity ratios measure the companys ability to fulfil its short-term

obligations and reflect its short-term financial strength or liquidity. The

commonly used liquidity ratios are:

Current Ratios:

The current ratio is a measure of the firms short term solvency. It

indicates the availability of the current assets in rupees for every one

rupee of current liability. A ratio of greater than one means that the firm

has more current assets than current claims.

Current assetCurrent ratio=________________________

Current liabilities

Quick Ratios

The Quick Ratio is sometimes called the "acid-test" ratio and is one of the

best measures of liquidity. Other means it establishes a relationship

between quick or liquid, assets and current liabilities. Measures assets

that are quickly converted into cash and they are compared with current

liabilities. This ratio realizes that some of current assets are not easily

convertible to cash e.g. inventories.

Quick asset (current asset inventory)Quick ratio = _____________________________________________

Quick liabilities (current liabilities bank overdraft)

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Liquidity ratio:

YEAR

RATIO 2006 2007 2008 2009

CURRENT RATIO 2.35 1.4 1.282 1.388

QUICK RATIO 2.306 1.362 1.236 1.33

Interpretation:

The above chart represents averages of current ratio and quick ratio.

Here current ratio and quick ratio have increase compare to previous

year. It indicate current asset has more value than current liability.

PAYOUT RATIO:

Divident payout ratio:

Divident payout ratio represent the persentage earning paid to

shareholder in dividend.In other world internal growth to give us those

dividend increases that we want each year.

DPS (divedend per share)Divedend payout ratio= ______________________________

EPS (earning per share)

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Retention Ratio :

The retention ratio is the opposite of the dividend payout ratio. It

represents the percent of earnings credited to retained earnings . In otherwords, the proportion of net income that is not paid out as dividends.

Net incom - DividendEarning retention ratio= _________________________

Net incom

Payout ratio:

YEAR

RATIO 2006 2007 2008 2009

DIVIDEND PAYOUT 16 19.806 25.75 16.522

EARNINGRETENTION

83.58 78.85 76.87 74.208

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Interpretation:The above chart indicates averages of dividend payout ratio and earning

retention ratio. Here dividend payout ratio has high changes as

approximately 9.23% decrease to previous year and earning retention

ratio has slightly decrease as approximately 2.66% to previous year.

PER SHARE RATIO:

Earning Per Share

The value is maximized when market price of equity shares is maximized.

EPS is one of the most important ratios which measure the net profit

earned per share. EPS is one of the major factors affecting the dividend

policy of the firm and the market price of the company. Growth in EPS is

more relevant for pricing of shares from absolute EPS.Profit

Earning per share= ___________________________Weighted average share

Cash Earnings Per Share :

A measure of financial performance that looks at the cash flow generated

by a company on a per share basis. A companys cash EPS can be used to

draw comparison to other companies or to the companys own past

results.

Operating cash flow

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Cash earning per share=__________________________Diluted cash outstanding

Dividend per share:

Dividend per share represents the dividend over a year for each shareheld. On other hand the amount of dividend that a stock holder will

receive for each share of stock held.

Dividend paid to equity shareholderDividend per share=________________________________________

Weighted average share

Per share ratio:

YEAR

RATIO 2006 2007 2008 2009

ADJUSTED EPS 12.396 10.968 12.94 14.186

ADJUSTED CASHEPS

18.612 20.614 22.322 25.292

DIVIDEND PERSHARE

1.7 1.8 1.85 1.66

Interpretation:

An above graph represents averages of earning per share, cash earning

per share and dividend per share. Earning per share and cash earning per

share have gradually increased as approximately 1.25% and 2.97%

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respectively. Here, dividend per share has look like a constant at that

time.

5. FINDINGS

As my project report operating profit and gross profit margin ratio

have been slightly decrease as approximately 5%. Net profit margin

have been approximately 13%-16%, in 2009 the sector showed a

2.85% increase.

As my project report current ratio and quick ratio have been slightlydecrease approximately 0.20-0.90, in 2009 both ratios have been

increase approximately 0.1

The industry is in booming there are 110million subscriber in 2005 the

target of 250 million subscriber was achieved before 6 month of its

maturity and it targeted to achieved 500 million subscriber in India by

2010 which shows the emerging growth of the company.

The demand for wireless internet and broadband is going to increase

by 40% from 2010 to 2012. The industry players having great

opportunity in this era.

As technological trend wi-max & G3 technology has been introduction

stage, wireless internet has been growth stage and fixed line has been

decline stage.

The telecom sector in India is experiencing a stage of mature growth.

The growth in sales is still above normal. Due to rapid growth of sales

and profit margins, new players are getting attracted to the industry

giving rise to more and more competition.

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6. RECOMMENDATION

The telecom sector is expected to grow up to 500 million subscribers

by 2010 so the investors have the largest opportunity in the service

sector.

Many of the multinational company in the telecom sector are investing

in the Indian market so it became an opportunity for new investors in

the telecom sector.

As my finding is about increasing demand of wireless internet and

broadband services. So the firms in this industry need to think about

this increasing demand and provide more innovative products in

wireless internet and broadband services. So that the

telecommunication industry will grow in future.To make competitive advantage the Indian players have to provide

free internet service to the students.

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7. BIBLIOGRAPHY

| Books:Donald R Cooper & Pamela S Schindler, Business Research

Methods, Eighth Edition, Tata McGraw-Hill, New York, 2003

Punithavathy Pandian, Security Analysis & Portfolio

Management Edition, Vikas Publishing Housing Pvt. Ltd,

2007.

S.Kevin, Portfolio Management Second Edition, PrenticeHall of India Pvt. Ltd.

| Websites:www.devashish.com

www.nseindia.com

www.moneycontrol.com

www.businesstoday.intoday.in

http://www.bharatbook.com/telecom and IT

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www.trai.gov.in
http://tmp/sv5hp.tmp/www.trai.gov.inhttp://tmp/sv5hp.tmp/www.trai.gov.in

an industry analysis of telecommunication sector focus on ratios

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