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                                             4/12/2010




 INDIAN
TELECOM    INDUSTRY REVIEW




          LiveTips Market Resarch pvt ltd.


                                                     1
    `INDIAN TELECOM – A
   GROWING BEHEMOTH OR
       A SINKING SHIP?
The Indian telecommunications industry is one of the
fastest growing in the world and India is projected to
become the second largest telecom market globally.

According to the Telecom Regulatory Authority of India
(TRAI), the number of telecom subscribers in the country
increased to 562.21 million in December 2009, an
increase of 3.5 per cent from 543.20 million in November
2009. With this the overall teledensity (telephones per
100 people) has touched 47.89.The telecom industry
notched up US$ 8.56 billion in revenues during the
quarter ended December 31, 2009 helped by a recovery
in earnings from both mobile and landline services.

According to Business Monitor International, India is
currently adding 8-10 million mobile subscribers every
month. It is estimated that by mid 2012, around half the
Rural Telephony
country's population will own a mobile phone. This would
Rural India 612 million mobile subscribers, accounting
translate intohad 76.65 million fixed and Wireless in
                                                              Manufacturing
Localtele-density of around 51 per cent by 2012. Village
for a Loop (WLL) connections and 551,064
Public Telephones (VPT) as on September 2008.                 India's telecom equipment manufacturing sector is
Moreover, 92 per cent of the villages in India have been
Therefore, according to a study conducted by Nokia, the       set to become one of the largest globally.
covered by the VPTs. Universal to emerge as the
communications sector is expected Service Obligation
(USO) subsidy support of the is also GDP used for
single largest componentschemecountry'sbeing with 15.4        Mobile phone production is estimated to grow at a
per cent by 2014. infrastructure in rural areas with
sharing wireless                                              CAGR of 28.3 per cent from 2006 to 2011, totalling
around 18,000 towers by 2010.                                 107 million handsets by 2010. Revenues are
According to a Frost & Sullivan industry analyst, by 2012,    estimated to grow at a CAGR of 26.6 per cent from
fixed line revenues are expected to touch US$ 12.2 billion    2006 to 2011, touching US$ 13.6 billion.
while mobile revenues will reach US$ 39.8 billion in India.


                                               FIGURES TO WATCH

 Telephony Subscribers (Wireless and Landline):                     562.21 million (Dec 2009)
 Cellphones:                                                        525.15 million (Dec 2009)[
 Land Lines:                                                        37.06 million (Dec 2009)
 Broad Band Subscription:                                           7.83 million (Dec 2009)
 Monthly Cellphone Addition:                                        19.20 million (Dec 2009)
 Teledensity:                                                       47.89% (Dec 2009)
  LiveTips teledensity:
 Projected Market Research pvt ltd. – http://www.livetips.biz                                      Page 2012.
                                                                    893 million, 64.69% of population by 2
     Policy Initiatives

                                                                        GOVERNMENT INITIATIVES
               MAJOR INVESTMENTS
                                                             The government has taken many proactive
The booming domestic telecom market has been
                                                             initiatives to facilitate the rapid growth of the
attracting huge amounts of investment which is
                                                             Indian telecom industry.
likely to accelerate with the entry of new players
and launch of new services.                                       100 per cent foreign direct investment (FDI)
                                                                   is permitted through the automatic route in
   Norway-based telecom operator Telenor, has
                                                                   telecom equipment manufacturing.
    bought a further 7 per cent in Unitech Wireless
    for a little over US$ 430.70 million. Telenor now             FDI ceiling in telecom services has been
    holds 67.25 per cent. Last year, it had bought a               raised to 74 per cent which is again going to
    60 per cent stake for US$ 1.23 billion.                        provide a good base of growth to this vary
                                                                   sector.
   The government has approved the foreign
    direct investment proposal of the Federal                     Introduction of a unified access licensing
    Agency for State Property Management of the                    regime for telecom services on a pan-India
    Russian Federation to buy 20 per cent stake in                 basis.
    telecom service provider Sistema-Shyam for
    US$ 660.1 million.                                            Introduction of mobile number portability in
                                                                   a phased manner,is going to start in the
   Tata Teleservices is planning to invest an                     current financial year.
    additional US$ 1 billion in its recently-launched
    GSM service Tata DoCoMo. It had already                       The government is implementing a program
    committed an investment of US$ 2 billion for                   of connecting 66,822 uncovered villages
    the GSM services when it was launched in June                  under the Bharat Nirman programme.
    2009.
                                                                  The Department of Telecommunications
   Reliance Infratel, the tower subsidiary of                     (DoT) has stated that foreign telecom
    Reliance Communications (RCom), will build                     companies can bid for 3G spectrum without
    56,596 telecom towers by financial year 2010,                  partnering with Indian companies. Only after
    increasing the total number of towers to                       winning a bid, would they need to apply for
    100,000.                                                       unified access service licence (UASL) and
                                                                   partner with an Indian company in
   BSNL, India's leading telecom company in                       accordance with the FDI regulations.
    revenue terms, will put in about US$ 1.16
    billion in its WiMax project.

   Vodafone Essar will invest US$ 6 billion over
    the next three years in a bid to increase its
    mobile subscriber base from 40 million at
    present to over 100 million.




     LiveTips Market Research pvt ltd. – http://www.livetips.biz                                Page 3
                             TELECOM PLAYERS
The telecom scenario of our country is completely changed. Today it is not only state owned players
(like BSNL and MTNL) which are serving the market, in fact a large number of private and foreign
players emerged with the growing demand and good scope in this vary area. Past some years have
witnessed immense change in the government policies which enable the foreign market to
participate in this race of telecom development of India.

Ideally we can divide whole telecom market into three parts :

   1. Mobile operators and service providors
   2. Telecom infra
   3. Handset/accessories/ components market




           TELECOM INFRA                                                  HARDWARE

    Indus                                                         3S International
    Reliance Infratel                                             Actis Technologies Pvt.
    Bharti Infratel                                               Ltd.
    Quippo Telecom                       SERVICE PROVIDORS        Aksh Optifibre Limited
    Infrastructure (QTIL)                                         Cable Corporation of India
    GTL                                         Airtel            Limited
    Essar Telecom                               Aircel            Delton Cables
    American Tower Corp                          Idea             Electrocon Group of
    Tower Vision                               Reliance           Companies
    Aster Infrastructure                         Tata             Enkay Telecom
    India Telecom Infra Limited               Vodaphone           Finolex Cables Limited
    KEC International                                             Hindustan Cables Limited
    Independent Mobile
    Infrastructure



Telecom India is not just represented by the mobile operators and service providers. In fact it
include a big hardware market and infrastructure companies. However we limit our study to
major service providers market only.




LiveTips Market Research pvt ltd. – http://www.livetips.biz                                 Page 4
              Top brands in India telecom market




      Reliance communication
      BSNL
      MTNL
      Bharti Airtel
      Hutchison Esssar
      Idea




LiveTips Market Research pvt ltd. – http://www.livetips.biz   Page 5
            Three private giants in TELECOM

                         Reliance communication           Bharti Airtel            idea cellular
QUARTER 1, 2009
Net sales                                  550549                  1042994                   281794
PBT                                        194746                   316799                    32508
PAT                                        172073                   269509                    30921
EPS                                           7.9                     13.95                       1
QUARTER 2 , 2009
Net sales                                  535236                  1035516                   296824
PBT                                         64745                   260115                    25586
PAT                                         82138                   230507                    22015
EPS                                          3.59                      5.93                    0.71
QUARTER 3, 2009
Net sales                                  512897                    875545                  291157
PBT                                        136512                    255668                   25932
PAT                                        116482                    231210                   21838
EPS                                          5.37                      6.09                     0.7


The three private giants of the Indian telecom market are Reliance communication, Bharti Airtel,
Idea cellular. These three constitute to form a major part of the whole market. Lets look at each of
their performance in the last few quarters:

Price movement of major telecom players at BSE (1 year)




LiveTips Market Research pvt ltd. – http://www.livetips.biz                                  Page 6
                    Reliance communication




Reliance Communications, formerly known as Reliance Infocomm, along with Reliance Telecom
and Flag Telecom, is part of Reliance Communications Ventures (RCoVL). It is the second largest
mobile operator in India, based on number of subscribers. According to National Stock Exchange
data, Anil Dhirubhai Ambani controls 66.77 per cent of the company, which accounts for more than
1.36 billion shares. It is the flagship company of the Reliance-Anil Dhirubhai Ambani Group,
comprising of power (Reliance Energy), financial services (Reliance Capital) and telecom initiatives
of the Reliance ADAG. It uses CDMA2000 1x technology for its existing CDMA mobile services,
and GSM-900/GSM-1800 technology for its existing/newly launched GSM services.RelCom is also
into Wireline Business throughout India and has the largest optical fibercommunication (OFC)
backbone architecture [roughly 110,000 km] in the country.

                                                               Reliance communication
QUARTER 1, 2009
Net sales                                                                                        550549
PBT                                                                                              194746
PAT                                                                                              172073
EPS                                                                                                     7.9
QUARTER 2 , 2009
Net sales                                                                                        535236
PBT                                                                                               64745
PAT                                                                                               82138
EPS                                                                                                    3.59
QUARTER 3, 2009
Net sales                                                                                        512897
PBT                                                                                              136512
PAT                                                                                              116482
EPS                                                                                                    5.37




LiveTips Market Research pvt ltd. – http://www.livetips.biz                                  Page 7
Reliance communication witnessed the net sales of Rs. 550549 cr in the first quarter of the year
2009 but than in the following quarters it results in a declining sales which basically because of
price wars which is ongoing between all the telecom players. With th declining sales reliance has
resulted in a deep decline in profits too. EPS remain low, declined in Q2 but again raised in the
following quarter.



                                                                On the basis of annual result 2009

RATIOS (ANNUAL)                                                Reliance communication
PE ratio                                                                                       7.51
Net profit margin (%)                                                                         22.86
Current ratio                                                                                  0.73
Debt-Equity ratio (%)                                                                         92.63
ROI(%)                                                                                         9.15



The company in the year ended 2009, given good results with the PE ratio of 7.51 and the net profit
margin of 23%. While its debt equity ratio remains high which shows the company debt burden
remains high in the year 2009. ROI was calculated as 9.15%

Market sensitivity

                                                              Reliance communication
BETA                                                                                   0.93734948
CORRELATION                                                                        0.419550648


The shares of the company in the country’s secondary market was treaded on the average price if
Rs. 170 with the high risk factor of 0.93 which shows that a single point change in the stock market
has incurred around 0.9 point change in the prices of company shares. While on the other hand the
movement of company share prices are not highly correlated with the market changes.




LiveTips Market Research pvt ltd. – http://www.livetips.biz                                   Page 8
                                    Bharti Airtel




Airtel comes to you from Bharti Airtel Limited, one of Asia’s leading integrated telecom services
providers with operations in India, Sri Lanka and Bangladesh. Bharti Airtel since its inception, has
been at the forefront of technology and has pioneered several innovations in the telecom sector.The
company is structured into four strategic business units - Mobile, Telemedia, Enterprise and Digital
TV. The mobile business offers services in India, Sri Lanka and Bangladesh. The Telemedia business
provides broadband, IPTV and telephone services in 94 Indian cities. The Digital TV business
provides Direct-to-Home TV services across India. The Enterprise business provides end-to-end
telecom solutions to corporate customers and national and international long distance services to
telcos.

                                                                                   (in Rs. Crores)
                                                                   Bharti Airtel
QUARTER 1, 2009
Net sales                                                                               1042994
PBT                                                                                       316799
PAT                                                                                       269509
EPS                                                                                         13.95
QUARTER 2 , 2009
Net sales                                                                               1035516
PBT                                                                                       260115
PAT                                                                                       230507
EPS                                                                                          5.93
QUARTER 3, 2009
Net sales                                                                                 875545
PBT                                                                                       255668
PAT                                                                                       231210
EPS                                                                                          6.09

LiveTips Market Research pvt ltd. – http://www.livetips.biz                                    Page 9
Sharp competition also affected the scenario of India’s number one telecom Bharti Airtel which is
witnessing a sharp decline in its sales and profits. The company has also change its policy of high
dividend which was 13.95 in Q1 and which delined to 5.93 and 6.09 in the following quarters.



                                                              On the basis of annual result 2009

RATIOS (ANNUAL)                                                       Bharti Airtel
PE ratio                                                                                     12.59
Net profit margin(%)                                                                         24.06
Current ratio                                                                                 0.66
Debt-Equity ratio(%)                                                                         39.09
ROI(%)                                                                                       25.21



The scenario from the company annual repot 2009 shows that the company PE ratio witnessed as
12.59 while its capital structure is not largely dependent on debt which lead the company in a
better condition as compared to other players. ROI was 25.2 in the year 2009.




Market sensitivity
                                                                       Bharti Airtel
BETA                                                                                   0.606877805
CORRELATION                                                                            0.477881878


The company’s share traded at around Rs. 305/share at stock exchanges with a moderate risk
factor of 0.60. the movement of the prices of these shares are not highly related with movement of
index points.




LiveTips Market Research pvt ltd. – http://www.livetips.biz                                Page 10
                                      Idea cellular




Idea Cellular is a wireless telephony company operating in all the 22 telecom circles in India based
in Mumbai. It is the 3rd largest GSM company in India behind Airtel and Vodafone and ahead of
state run player BSNL.IDEA enjoys a market leadership position in many of its operational areas. It
offers GPRS on all its operating networks for all categories of subscribers, and was the first
company in India to commercially launch the next generation EDGE technology in Delhi in 2003. As
a pioneer in technology deployment, it has been in the forefront through the adoption of bio fuels to
power its base stations, and by employing satellite connectivity to reach inaccessible rural areas in
Madhya Pradesh.

                                                                                     (in Rs. Crores)
                                                                    idea cellular
QUARTER 1, 2009
Net sales                                                                                   281794
PBT                                                                                          32508
PAT                                                                                          30921
EPS                                                                                               1
QUARTER 2 , 2009
Net sales                                                                                   296824
PBT                                                                                          25586
PAT                                                                                          22015
EPS                                                                                            0.71
QUARTER 3, 2009
Net sales                                                                                   291157
PBT                                                                                          25932
PAT                                                                                          21838
EPS                                                                                             0.7




LiveTips Market Research pvt ltd. – http://www.livetips.biz                                  Page 11
Surprising but interesting to know that when market leader was loosing its sales, idea has achieved
a good growth where its net sales increased to Rs. 296824 cr in Q2 from Rs. 281794 in Q1. And the
company has maintained its sales in the following quarter. While it is seen here that the earning per
share is continuously declining.

                                                                On the basis of annual report 2009

RATIOS (ANNUAL)                                                        idea cellular
PE ratio                                                                                      22.11
Net profit margin(%)                                                                           7.81

Current ratio                                                                                  1.33
Debt-Equity ratio(%)                                                                          65.54

ROI(%)                                                                                         5.13


The company in the year 2009 shows its PE ratio as 22.11 with relatively low NP margin of 7.81%.
the company is following high leverage on is capital structure as its capital structure includes a
major portion as debt. ROI is low at 5.13.

Market sensitivity

                                                                      idea cellular

BETA                                                                                   0.965874038

CORRELATION                                                                            0.612510094


The company shares was traded on the average price of Rs.60/share on the exchanges . the risk
factor in short term is relatively high with the factor of 0.96 while the price movement of shares
shows a good correlation with the market movement.




LiveTips Market Research pvt ltd. – http://www.livetips.biz                                   Page 12
                             News(TELECOM)
          Bharti to partner Ericsson and Nokia Siemens on 3G
          Bharti's success may open floodgates for M&A in Africa
          India 3G Auction Price Hits $925 Million
           Vodafone Essar crosses 100m users in India
          3G bidders secure Rs 43000 cr loans
           Indian telecom firms may get DoT boost
           Ericsson Delivers HD IPL Coverage To India
          Qualcomm dials GTL for broadband push
          Videocon Telecom hopes to make profit in two years
          ZTE plans to invest over Rs.88 cr in India for VAS.
          3G boost telecom consulting business




                               CONCLUSION
The financial position of the big telecom players shows the moderate results. The
performance of these companies in the last year was not satisfactory partly due to on going
price wars and partly due to high leverage which they have taken on their capital structure.
While the 3G raise many hopes from these companies to grow , the companies has taken a
huge loans for their bidding requirement which again lead a burden on their financial
structure. For the long run it is suggested to keep a proper watch on company
fundamentals while it is expected from company shares to perform better in short run.




LiveTips Market Research pvt ltd. – http://www.livetips.biz                         Page 13
                     ANALYST NAME:                                EMAIL ID:                                              EXTN


                     Shine Pkurian                                shine@livetips.biz                                      124
                     Dhritiman Das                                dhritiman @livetips.biz                                 124
                     Sharath Natesh                               sharath@livetips.biz
                     Prakash Ramani                               prakash @livetips.biz
                     Deepak Jodhani                               deepak@livetips.biz
                     Md. Muzaffar D J                             muzaffar.dj@livetips.biz




                                                                 DISCLAIMER:

This Document has been prepared by LiveTips Research. The information, analysis& estimates contained herein are based on LiveTips Research
assessment & have been obtained from sources believed to be reliable. This document is meant to be used by the intended recipient only. This
document, at best represents, LiveTips Research opinion & is meant for general information only. LiveTips Research Desk, its directors, officers or
employees shall not in anyway be responsible for the contents stated herein. Livetips Research expressly disclaims any and all Liabilities that may
arise from any information, errors or omissions in this connection. This document is not to be considered as an offer to sell, or a solicitation to
buy any securities. LiveTips Research & their employees may from time to time hold positions in securities referred to herein.




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     LiveTips Market Research pvt ltd. – http://www.livetips.biz                                                                          Page 14

								
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