Docstoc

AN INDUSTRY ANALYSIS OF TELECOMMUNICATION SECTOR

Document Sample
AN INDUSTRY ANALYSIS OF TELECOMMUNICATION SECTOR Powered By Docstoc
					“AN INDUSTRY ANALYSIS OF TELECOMMUNICATION
                 SECTOR”




                                         1
                       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. The
research 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
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.


                                                                               2
                          Table of content
Sr. No.                            Topic            Page No.

  1       ABOUT THE COMPANY                     7



  2       LITERATURE REVIEW & ABOUT THE TOPIC   11

          2.1 Literature Review

          2.2 About the topic
  3       RESEARCH METHODOLOGY                  37

          3.1 Problem statement
          3.2 Research objective
          3.3 Research design
          3.4 Data collection method
          3.5 Method of analysis



  4       DATA ANALYSIS & INTERPRETATION        39


  5       FINDINGS                              62


  6       RECOMMENDATIONS                       63


  7       BIBLIOGRAPHY                          64




                                                          3
    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 Investment
counseling 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 India’s only Multi-commodities
Exchange(MCX), having rating of Asia’s third Commodity Exchange are
operating in Surat, Songadh, Unai, Palsana, Bharuch, Ankleshwar &
Kamrej.
Business

   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.




                                                                         4
      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 client’s growth 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.




                                                                           5
   Depository Service
      o 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 Relationship
At 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 wealth
for 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 before
self”. We believe to fulfill your need first & ultimately it’s the way to fulfill
the need of ours
          Comprehensive Research
Company 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, you’ll get investment guidance and
portfolio planning that’s 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 services
Company offer wide range of investment products and services that makes
your Portfolio sounds enough for saving and support. Equities, derivatives,


                                                                                6
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 our
best at our resources and services at optimum cost and strive continually to
improve ourselves, our team and our services to get total customer
satisfaction.


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.




                                                                                  7
  2. LITERATURE REVIEW & ABOUT THE TOPIC

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 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.




                                                                            8
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.

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 Latin word
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 to
characterize 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.
      The purpose 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.




                                                                                   9
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 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.




                                                                         10
HISTORY

       In 1880, two telephone companies namely “The Oriental Telephone
Company Limited” and “The Anglo-Indian
Telephone Company Limited” approached
the Government of India with the objective of
establishing Telephone Exchanges across
the    country.     Initially,   the   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 near
                 Calcutta (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 companies to
                 form the

                                                                                 11
       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-owned
       companies: the
       Videsh Sanchar Nigam Limited (VSNL) for international
       telecommunications and Mahanagar Telephone Nigam 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.




                                                                        12
Targets (by 2010):

      500 million telephone connections
      Broadband: 20 million subscribers
      Geographical coverage: 90%
      Rural Connections: 80 million




Scope

      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 annual growth, 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.


                                                                          13
      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 9.8
cent in 2005-06. Similarly, manufacturing grew by 9.1 per cent and 12.3
per cent in 2005-06 and 2006-07 and trade, hotel, transport and
communication recorded a growth of 10.4 per cent and 13 per cent,
respectively.

      Independent India’s economic development program has been based
on the key objectives of self-reliance and social equity. Till the eighties,
India’s industrial policy created India’s industrial base under a system of
licensing, strict foreign exchange controls and excessive protection from
imports,   which    protected   even   inefficient   and    internationally     non-
competitive enterprises.
      In 1991 the Central Government embarked on a program of economic
liberalization.    This included, among others removal of governmental
                                                 control,     rationalization     of
                                                 regulation, attracting Foreign
                                                 Investment.      The government
                                                 has       also   identified     the
                                                 infrastructure sector (Power,
                                                 Telecommunications,            and
                                                 Transportation)     as    a     key
                                                 target and is taking steps to
                                                 attract    investments    in    the
area. Encouraged by economic developments over the past decade, the


                                                                                  14
government is committed score a GDP growth rate 9% by the year 2005. The
fact is that the Indian economy is growing faster than ever before. Between
1992-93 and 1997-98, India's GDP at 1980-81 prices has recorded a trend
growth rate of 5.4 per cent. Never once has the growth rate fallen below 5
per cent since 1991-92 when it grew by only 1 per cent and when the
economic liberalization process started.

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.

                                                                           15
INVESTMENT AND GROWTH

      In 2005-2006, the telecom industry witnessed a growth of 21% with
total 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
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 is
estimated at $2.82 billion and the telecommunications market accounts for

                                                                                   16
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
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.




                                                                         17
Telecoms and India’s Growth

        Communications is the fastest growing sector in India’s economy. The
average compound rate of growth of the economy works out to 24.02 per
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,
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

                                                                                     18
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 the average 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 increased to
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 handsets are being sold every month. Consequently, a
huge domestic market for telecom equipment has suddenly emerged in the
                                                                                19
country spawning the creation of a significant manufacturing base. Chennai
has become a thriving cluster 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 in the
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 of the industry is that after a very long time, it has suddenly become
                                       very competitive. There             are three
                                       dimensions to this competition. First,
                                       it    is     competition     between       two
                                       standards or technologies, namely,
                                       the        Global   System        for    Mobile
                                       Communications            (GSM)    v/s    Code
                                       Division       Multiple    Access       (CDMA)
                                       standards. Second, it is competition
                                       between various service providers,
                                       although        this      competition      was
restricted to public policy designed spaces or markets known as telecom
circles. A yet another dimension is 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 national telecom
                                                                                    20
services; and (3) foreign or the overseas market. We focus here on all the
three dimensions of competition between the 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 lion’s
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 not competitive. 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 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
                                                                            21
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 the 28 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 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
India’s 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
                                                                                22
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 earning circles. 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.
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.
                                                                                   23
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 important institutional 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 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
                                                                            24
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 in the 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.
(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, TRAI’s 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. TRAI’s 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
                                                                             25
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 these conditions are actually met by the service providers and
ensuring the effective compliance of the Universal Service Obligation.
      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, TRAI’s 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.
      TRAI’s     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, TRAI’s
recommendations are not binding. In sum,
the TRAI has been reduced to a tariff setting
body empowered only to fix tariffs and inter-


                                                                           26
connection charges and to set norms on quality of service. And on these two
and especially on the tariff issue, TRAI’s role is generally considered to be
very satisfactory.


(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.




                                                                           27
(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 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
revenue earned by the service providers under various licenses. The
Universal Service Support Policy for Implementation of USO took effect from
                                                                               28
April 1, 2002. It is administered by the DoT and it has three major
components: (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 for development
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 fact, the four metros have
ceased to be the major force behind the growth of the mobile connections in
                                                                               29
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 equipment manufacturing 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 government’s policy of public technology procurement
practiced through its DoT, which 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

                                                                             30
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 India’s telecom
equipment industry during the period 1992-93 to 2004-05.




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


                                                                           31
(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 low internet diffusion in the country is a direct consequence of
the country becoming too reliant on mobile phones.




                                                                               32
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




                                                            33
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
      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 analysis

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

      2. Payout Ratio            5. Leverage Ratio


                                                                           34
              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.




                                                                  35
 4.    DATA ANALYSIS & INTERPRETATION

BHARAT SANCHAR NIGAM LIMITED (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 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.




                                                                        36
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 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).




                                                                             37
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     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 ultra‐ high 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.




                                                                                   38
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 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.




                                                                          39
Reliance Communication


                                                       RCom has an upper
                                               edge over all its rivals and is
                                               a step ahead than the major
                                               telecom players. 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.




                                                                            40
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 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.




                                                                            41
Idea Cellular
                                                          Aditya Birla group
                                                 firm Idea Cellular is a
                                                 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.




                                                                             42
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.
     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.




                                                                          43
MAHANAGAR TELEPHONE NIGAM LIMITED
Mahanagar Telephone Nigam Limited popularly known as MTNL is an
India-based telecommunication service providing company. MTNL 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.




                                                                           44
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
Objective.
Threats: external conditions that is harmful to achieving the objective.

                                                                           45
SWOT Analysis:


   Strength                            Weakness

     Third largest telecom market        Lowest call tariffs in the world.
     and the second largest among
     the emerging economy of Asia.       Domestic market saturation.

     Despite    global  economic         Market strongly regulated by
     recession, telecom is one           government body governing both
     sector which is still going         ISP and Telecom sector.
     strong.                             Huge potential for low end cheap
     Huge     wireless    subscriber     handsets.
     potential.                          Lack of infrastructure facility.
     Government proposes to hike         Language and literacy problem.
     FDI limit in telecom to 74%.

     Unified license regime.


   Opportunity                         Threat

     Joint venture, collaborations       The quickly changing pace of the
     and investment opportunities.       global    telecommunication   in
                                         industry.
     An    opportunity     for   new
     investor in the telecom sector.     Indian Telecom Company could
                                         also be the target for the
     To    supportive    government      takeover.
     policies    and      regulatory
     environment.                        To quick changing in technology.

     To offer value added services       Changing consumer preferences.
     on GSM, CDMA and IP.
                                         Political instability.
     Foreign investor in form of
     equity or technology.               Regulatory interference




                                                                        46
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 make proper analysis
about the strengths and weakness of the firm’s 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
company’s financial picture.
     For the ratio analysis purpose we have taken five major companies
which are represent the entire industry such company’s are given below.
1. BHARTI AIRTEL LIMITED
2. RELIANCE COMMUNICATION LIMITED
3. IDEA CELLULAR LIMITED
4. TATA COMMUNICATION LIMITED
5. MAHANAGAR TELEPHONE NIGAM LIMITED




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




                                                                          47
                            FOUR MAJOR TYPES OF
                                  RATIOS




 LEVERAGE              PROFITABILITY       LIQUIDITY         ACTIVITY
  RATIOS                  RATIOS            RATIOS            RATIOS




PROFITABILITY RATIO:
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 company’s
revenues is left over after paying for variable cost of production such a
wages, raw material etc.
                             EBIT
Operating margin= ______________________
                            Sales




                                                                        48
 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
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




                                                                            49
Profitability ratio:

                                                          YEAR

RATIO                                2006                2007           2008                2009

OPERATING MARGIN                    22.342           32.756            31.738            26.33

GROSS PROFIT MARGIN                 12.652           19.906            19.388          14.232

NET PROFIT MARGIN                   16.766           13.414            13.888          16.762




                      TELECOM SECTOR MARGINS
   35

   30

   25

   20
                                                                                OPERATING
                                                                                MARGIN
   15                                                                           GROSS PROFIT
                                                                                MARGIN
                                                                                NET PROFIT
   10
                                                                                MARGIN

    5

    0
           2006           2007               2008               2009




Interpretation:
The above graph represents averages of operating margin, gross profit
margin, 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.

                                                                                               50
LEVERAGE RATIO:

Leverage ratios are also known as capital structure ratio. They measure the
company’s 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 owner’s contribution is called debt equity ratio. This
ratio is calculated by dividing by total debt by net worth.
                           Total debt
Total 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 that company can expand its
activity level without additional capital investment.


                              Sales
Fixed asset turnover ratio=________________
                             Fixed asset




                                                                               51
Leverage ratio:

                                                 YEAR
RATIO                           2006           2007            2008             2009

TOTAL DEBT-EQUITY                0.61          0.638           1.368           0.648

FIXED ASSET TURN OVER           0.652           0.69           0.656           0.526




                                LEVERAGE RATIO
  1.6

  1.4

  1.2

   1                                                                   TOTAL DEBT-
                                                                       EQUITY
  0.8
                                                                       FIXED ASSET
  0.6                                                                  TURN OVER

  0.4

  0.2

   0
            2006         2007           2008            2009




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.



                                                                                     52
LIQUIDITY RATIO:

Liquidity ratios measure the company’s 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 asset
Current 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)




                                                                             53
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




                                  LIQUIDITY RATIO
  2.5



    2



  1.5                                                                   CURRENT
                                                                        RATIO

                                                                        QUICK
    1
                                                                        RATIO


  0.5



    0
              2006        2007            2008           2009




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.




                                                                                54
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)


 Retention Ratio :
The retention ratio is the opposite of the dividend payout ratio. It represents
the percent of earnings credited to retained earnings . In other words, the
proportion of net income that is not paid out as dividends.

                          Net incom - Dividend
Earning retention ratio= _________________________
                              Net incom




                                                                             55
Payout ratio:

                                                   YEAR

RATIO                          2006              2007              2008          2009

DIVIDEND PAYOUT                    16       19.806                 25.75        16.522

EARNING RETENTION             83.58          78.85                 76.87        74.208




                                   PAYOUT RATIO
   90

   80

   70

   60
                                                                            DIVIDEND
   50
                                                                            PAYOUT
   40                                                                       EARNING
                                                                            RETENTION
   30

   20

   10

    0
            2006            2007          2008              2009




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.




                                                                                         56
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 company’s cash EPS can be used to
draw comparison to other companies or to the company’s own past results.

                          Operating cash flow
Cash earning per share=__________________________
                         Diluted cash outstanding

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


                       Dividend paid to equity shareholder
Dividend per share=________________________________________
                           Weighted average share




                                                                             57
Per share ratio:

                                                 YEAR

RATIO                           2006           2007            2008          2009

ADJUSTED EPS                12.396         10.968              12.94       14.186

ADJUSTED CASH EPS           18.612         20.614          22.322          25.292

DIVIDEND PER SHARE               1.7            1.8             1.85         1.66




                                 PER SHARE RATIOS
  30


  25


  20
                                                                       ADJUSTED
                                                                       EPS
  15                                                                   ADJUSTED
                                                                       CASH EPS
                                                                       DIVIDEND
  10                                                                   PER SHARE


   5


   0
           2006          2007           2008            2009



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




                                                                                   58
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 slightly
decrease 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.




                                                                       59
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.




                                                                            60

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:61
posted:4/20/2012
language:English
pages:60