PROJECT REPORT

ON

“AN INDUSTRY ANALYSIS OF TELECOMMUNICATION SECTOR”

UNDERTAKEN AT DEVASHISH SECURITY PVT LTD

Submitted By:AMIT.I.PANDEY

(08MBA41)

Guided By:DR.ANIL SARAOGI

MBA PROGRAMME(Year 2008-10)

SHRIMAD RAJCHANDRA INSTITUTE OF MANAGEMENT AND COMPUTER APPLICATION

COLLEGE CERTIFICATE

1

This is to certify that the Summer Project report

entitled “AN INDUSTRY ANALYSIS OF

TELECOMMUNICATION SECTOR” has been carried

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

Devashish security Pvt. Ltd, as a partial fulfillment

of the requirement for the degree of Master of Business

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

(Dr. Anil Saraogi) (Dr. Bankim

Patel)

FACULTY GUIDE DIRECTOR

Date:

Place: Gopal vidyanagar

2

DECLARATION

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

entitled “ AN INDUSTRY ANALYSIS OF

TELECOMMUNICATION SECTOR” is based on my own

work and my indebtedness to other work / publications,

if any have been duly acknowledged.

AMIT PANDEY

(08MBA41)

3

ACKNOELEDGEMENT

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

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

gratitude.

I express my heartfelt gratitude to eminent organization “DEVASHISH

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

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

my training.

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

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

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

project. Without their help these project impossible.

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

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

glorious opportunity for learning practicality of bookies concepts.

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

who has provided me with the valuable suggestions, support and

guidance during my training to successfully complete my project work.

AMIT PANDEY

(08 MBA 41)

4

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.

5

Table of content

Sr. No. Topic Page No.

1 ABOUT THE COMPANY

7

2 LITERATURE REVIEW & ABOUT THE TOPIC

2.1 Literature Review

2.2 About the topic

11

3 RESEARCH METHODOLOGY

3.1 Problem statement

3.2 Research objective

3.3 Research design

3.4 Data collection method

3.5 Method of analysis

37

4 DATA ANALYSIS & INTERPRETATION 39

5 FINDINGS 62

6 RECOMMENDATIONS 63

7 BIBLIOGRAPHY 64

6

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.

7

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.

8

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

9

Company offer wide range of investment products and services that

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

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

Collection center no matter what investment-related service or product

you need, you can get it at Devashish

Quality Policy and Mission

Quality Policy

Dedication: Company dedicates ourselves in consistently delivering

more than customer expectations and believes in customer delight. To

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

provide superior quality financial services.

Efficiency: We are efficient and committed to total quality by putting 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.

10

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.

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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

12

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

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

TELECOM INDUSTRY

The Indian telecommunications sector has

been zooming up the growth curve at a

feverish pace, emerging as one of the key

sectors responsible for India's resurgent

economic growth. It is the fastest growing

telecommunication market in the world, and

with 264.77 million telephone connections, is 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.

13

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

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

14

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.

Targets (by 2010):

500 million telephone connections

Broadband: 20 million subscribers

15

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.

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

16

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 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

17

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.

INVESTMENT AND GROWTH

18

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

19

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

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

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.

20

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,

21

telecommunications is the only one that has shown significant

improvements over the reform period. Consequently, it is generally

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

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

that merit our attention.

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

now heavily dominated by wireless technologies, which include cellular

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

in the availability of

telephones has been contributed by

wireless technologies. India has

one of the highest ratios of

wireless to wire-line services,

which is now almost five (Table 3, p

39). In fact what is interesting is

that since 2005, the wire-line

services have started falling. A

number of factors explain this decrease in the popularity of fixed

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

reliance of wireless technologies, while extremely positive from the

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

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

subsequent sections.

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

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

22

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 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

23

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 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

24

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

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

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

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

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

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

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

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

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

completely impervious to the demands of consumers.

(b) Competition in Mobile Services Industry:

Compared to the fixed services,

the mobile services industry has a

number of distinguishing features.

First, the industry started as one

dominated by private sector

enterprises and the government

religiously followed a policy of

“managed competition” by licensing

more than one service provider in a telecom circle. In fact majority of 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

25

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

attracted considerable FDI in the manufacture of handsets leading to the

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

sector providers have positioned themselves in the most revenue 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

26

variations (see Figure 3, p 41). Most Indian consumers are unaware of the

nitty-gritty of the two technologies. So the deciding factor between the

two technologies is often based on price and other conditions of offer such

as the coverage of the service ease of obtaining a new connection and

whether a handset is available at a reduced price as part of the deal.

Given this sort of a possibility of perfect substitution between the two

types of technologies, the existence of the two standards has made both

the markets for GSM and CDMA services very competitive. This is

especially so when the market for CDMA services is highly concentrated

with just two service providers accounting for almost the entire output.

This is further indicated by the higher Herfindhal Index for CDMA services.

What is being argued here is that despite being highly concentrated,

CDMA service providers have to compete with GSM service providers and

this has prevented the CDMA service providers from wielding any

excessive market power. One of the most 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

27

charge for each type of calls. For mobile communication consumers then

there is the additional cost of calls according to whether it is post or

prepaid. Based on estimates made by TRAI (2006), I have obtained the

minimum effective charge derived out of an outgoing usage of 250

minutes per month per quarter during 2003 through 2005. This is plotted

for both fixed and mobile services as well. Although charges for both the

calls have come down, a higher reduction is noticed in the case of mobile

services. In fact, India now has one of the cheapest mobile tariffs in the

world (Table 7) and this can give an additional fillip to the growth of ICT

industry in the country. If one were to plot the price of telecom services

and the number of subscribers, one can see an inverse relationship in the

case of mobile services although 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

28

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 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

29

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-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

30

In the previous section I have outlined several dimensions of the

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

growth of the industry, significant

reductions in the waiting time to get a

telephone connection and indeed in the

price of telecom services. However, this

growth has also been with some

disquieting features. Three such

disquieting features of the growth of the

industry have been identified. They are:

(1) the growing digital divide; (2)

increased dependence on imports as far

as the equipment is considered; and (3)

the relatively low penetration of the

internet in India.

(i) The Growing Digital Divide: Several commentators, notably Desai

(2006), had referred to the growing inequalities in the availability of

telephones especially between states and indeed between the rural and

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

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

31

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 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

32

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 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

33

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 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.

34

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

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

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

November 1998, the government recognized the need for encouraging

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

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

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

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

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

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

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

of end March 2007 and 2.34 million broadband subscribers.

Only about a quarter of the internet subscribers have changed over

to broadband access technologies. Majority of the subscribers use the

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

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

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

internet connections. This means that the two technical reasons militating

35

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.

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

36

Foreign invested companies

Vodafone-Essar

Bharti Tele-Ventures

Idea Cellular

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

37

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

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.

38

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.

39

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.

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.

40

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).

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

41

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.

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

42

providing Fixed Line Telephony services to wireless mobile telephony

services.

Reliance is the only telecom company that is providing mobile

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

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

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

country providing reliable wireless network.

Reliance Communication

RCom has an upper

edge over all its rivals and is

a step ahead than the major

telecom players. Department

of Telecom has awarded an

India GSM license to Reliance

Communications. The

43

company had already paid the requisite license fee of Rs 1,651 crore for

an India GSM license on October 19, 2007, after DOT, in its new telecom

policy, had said telcos could offer services using dual technology.

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

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

The development comes even as leading GSM players have challenged

the policy of allowing dual technology in the telecom tribunal.

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

spectrum in each of the circles to launch commercial operations.

IDEA CELLULAR

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

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

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

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

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

44

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

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

keeps on announcing attractive discount schemes for the value added

services.

Idea was the first cellular service provider to launch GPRS and EDGE

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

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

remained popular among the customers because of tariff plans such as

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

GPRS enabled services.

Idea Cellular

Aditya Birla group

firm Idea Cellular is a

wireless telecom

company, operating in

various states of India.

Idea Cellular was the first

45

to offer flexible tariff plans for prepaid customers. It also offers GPRS

services in urban areas.

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

Idea Cellular getting spectrum from the Government to commence

services in the Circle.

The company will also be responsible for network deployment and

integration, as well as managed services including network and field

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

rescheduled for May 2008.

TATA TELESERVICES:

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

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

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

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

1.07 crore subscribers.

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

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

46

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

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

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

Tata Teleservices has partnered with Motorola and Ericsson for

providing reliable services to its customer base. Tata Teleservices Limited

along with Tata Teleservices (Maharashtra) Limited serves over 15.9

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

covering over 3200 towns. Income from Telecommunication reached to

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

subscriber.

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

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

Group is the premier telecommunication service provider licensed to

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

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

Teleservices.

MAHANAGAR TELEPHONE NIGAM 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

47

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.

LIFE CYCLE CLASSIFICATION OF THE INDUSTRIES

AND/OR MAJOR PRODUCT GROUPS OF THE SECTOR.

48

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.

SWOT Analysis:

49

| Strength

Third largest telecom market and the second largest among the emerging economy of Asia.

Despite global economic recession, telecom is one sector which is still going strong.

Huge wireless subscriber potential.

Government proposes to hike FDI limit in telecom to 74%.

Unified license regime.

| Weakness

Lowest call tariffs in the world.

Domestic market saturation.

Market strongly regulated by government body governing both ISP and Telecom sector.

Huge potential for low end cheap handsets.

Lack of infrastructure facility.

Language and literacy problem.

| Opportunity

Joint venture, collaborations and investment opportunities.

An opportunity for new investor in the telecom sector.

To supportive government policies and regulatory environment.

To offer value added services on GSM, CDMA and IP.

Foreign investor in form of equity or technology.

| Threat

The quickly changing pace of the global telecommunication in industry.

Indian Telecom Company could also be the target for the takeover.

To quick changing in technology.

Changing consumer preferences.

Political instability.

Regulatory interference

RATIO ANALYSIS:

50

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

51

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

Gross Profit Margin:

52

FOUR MAJOR TYPES OFRATIOS

LEVERAGERATIOS

PROFITABILITYRATIOS

LIQUIDITYRATIOS

ACTIVITYRATIOS

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

Profitability ratio:

53

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

2006 2007 2008 20090

5

10

15

20

25

30

35

TELECOM SECTOR MARGINS

OPERATING MARGINGROSS PROFIT MARGINNET PROFIT MARGIN

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.

LEVERAGE RATIO:

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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 debtTotal debt equity ratio=_______________ Total asset

Assets turnover ratio:

The assets turnover ratio measures the efficiency of a firm in

managing and utilizing its assets. Higher ratio indicates the more

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

that company can expand its activity level without additional capital

investment.

Sales Fixed asset turnover ratio=________________

Fixed asset

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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

2006 2007 2008 20090

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

LEVERAGE RATIO

TOTAL DEBT-EQUITY

FIXED ASSET TURN OVER

Interpretation:

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

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

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

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

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

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

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LIQUIDITY RATIO:

Liquidity ratios measure the 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 assetCurrent ratio= ________________________

Current liabilities

Quick Ratios

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

best measures of liquidity. Other means it establishes a relationship

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

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

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

convertible to cash e.g. inventories.

Quick asset (current asset – inventory)Quick ratio = _____________________________________________ Quick liabilities (current liabilities – bank overdraft)

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Liquidity ratio:

YEAR

RATIO 2006 2007 2008 2009

CURRENT RATIO 2.35 1.4 1.282 1.388

QUICK RATIO 2.306 1.362 1.236 1.33

2006 2007 2008 20090

0.5

1

1.5

2

2.5

LIQUIDITY RATIO

CURRENT RATIO

QUICK RATIO

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.

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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 - DividendEarning retention ratio= _________________________

Net incom

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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

2006 2007 2008 20090

10

20

30

40

50

60

70

80

90PAYOUT RATIO

DIVIDEND PAYOUT

EARNING RETENTION

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.

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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.

ProfitEarning 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 shareholderDividend per share=________________________________________

Weighted average share

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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

2006 2007 2008 20090

5

10

15

20

25

30PER SHARE RATIOS

ADJUSTED EPSADJUSTED CASH EPSDIVIDEND PER SHARE

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.

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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.

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6. RECOMMENDATION

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

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

sector.

Many of the multinational company in the telecom sector are investing

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

the telecom sector.

As my finding is about increasing demand of wireless internet and

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

this increasing demand and provide more innovative products in

wireless internet and broadband services. So that the

telecommunication industry will grow in future.

To make competitive advantage the Indian players have to provide

free internet service to the students.

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7. BIBLIOGRAPHY

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

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

Punithavathy Pandian, “Security Analysis & Portfolio

Management” Edition, Vikas Publishing Housing Pvt. Ltd,

2007.

S.Kevin, “Portfolio Management” Second Edition, Prentice

Hall of India Pvt. Ltd.

| Websites: www.devashish.com

www.nseindia.com

www.moneycontrol.com

www.businesstoday.intoday.in

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

www.trai.gov.in

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