Telecom Sector

Presenting by Group 10:

Finance ‘C’
Sneha Garg
Anandavalli.H
Mayuri Sood
Rohit Singh
Gagandeep Kaur
Introduction
Service Industry

 Lifeline of social economic growth

 Fastest growing sector employing more

people

 Contributing more to global output

 Overall average growth in GDP in the last

eight years is59.6%
History of Indian Telecom Industry

 1851 - First operational land lines were laid by the government near Calcutta

 1881 - Telephone service introduced in India

 1923 - Formation of Indian Radio Telegraph Company (IRT)

 1947 - Nationalization of all foreign telecommunication companies to form the Posts,

Telephone and Telegraph (PTT)

 1985 -Department of Telecommunications (DOT) established

 1986 - Conversion of DOT into two wholly government-owned companies: VSNL and
MTNL

 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

Role of Telecommunication in the Indian Economy

 The Indian telecom Industry is the second largest in the world

 According to TRAI, the number of telecom subscribers in the country increased to 562.21
million in December 2009

 The telecom industry notched up US$ 8.56 billion in revenues during the quarter ended
December 31, 2009

 According to the CII Ernst & Young report titled 'India 2012: Telecom growth continues',
revenue from India's telecom services industry is projected to reach US$ 54 billion in 2012

 Telecom industry is directly contributing more than 1.5 % of country’s GDP

 It is targeted to reach 771 million subscribers by 2013

 India has nearly 37.66 million landline subscribers

 India has one of the cheapest cell phone rates in the world
INDIAN TELECOMMUNICATIONS AT A
GLANCE
RANK IN WORLD IN NETWORK SIZE 3rd
TELE-DENSITY(PER 100 POPULATION) 36.98
TELEPHONE CONNECTION (IN
MILLION)
Fixed 37.96
Mobile 391.76
Total 429.72
VILLAGE PUBLIC TELEPHONES 57,167
COVERED(Out of 66,822 uncovered
villages)
FDI(in million) from Jan 2000 till Jan 2009 2,75,441

Source:www.trai.gov.in
OBJECTIVE OF THE STUDY

To know the Future outlook of the Indian

Telecom Industry.

How the Indian Telecom Industry has evolved

in the past decade.

Improvement in the quality of living of the

people

Impact on the Indian economy.

To understand how industry structure drives

competition and that determines the level of
industry profitability.
Industry Analysis
 SWOT ANALYSIS
STRENGTHS WEAKNESSES

With many players in the market, the

competition is immense, and each one is The lowest call tariffs of Indian telecom
trying to beat the other by proving better service providers.
schemes and services so as to increase the
subscriber base. Every other operator in the industry is
The telecommunication sector is one of the dependent upon BSNL.
fastest growing sectors in the country.
Congestion level.
The consumers are ready to pay extra for
cutting edge services Dependence of global telecom sector on
India.
The FDI limit has increased from 49% to
74%.

The unified license regime.

OPPORTUNITIES THREATS

With respect to the telecommunication industry,  Telecom Infrastructure

there are many growth opportunities available.
 Huge initial fixed cost
 Broadband Push
 Governmental and Regulatory interference
 The rural market in India .
 The low cost service providers.
 Tele density  
 
 Internet access.
PORTER’S FIVE FORCES MODEL OF INDIAN
TELECOM SECTOR

THREAT FROM NEW ENTRANTS

 Supply Side of Economies of Scale

 Demand Side Benefits
 Capital Requirement
 Incumbent Advantages
 Restrictive Government Policy

BARGAINING POWER OF THE BUYER

 Lack of differentiation among the service provider

 Cut throat competition because of the existence of numerous supplier
 Customer is price sensitive

 
RIVALRY AMONG EXISTING COMPETITORS

 High Exit Barriers

 High Fixed Cost
 6-7 players in each region
 3 out of 4 BIG-Four present in each region
 Price wars
 
BARGAINING POWER OF THE SELLERS

 Large number of suppliers.

 Shared tower infrastructure.
 Limited pool of skilled managers and engineers especially those well versed in the latest
technologies.

 
THREAT OF SUBSTITUTES

 Some Substitutes for telecommunication:

VOIP (Skype, Messenger etc.)
Online Chat
Email
Satellite phones
 Price-Performance trade-off very high.

 
 PEST ANALYSIS
POLITICAL
• Presence of huge number of players in the
market.
• DOT, TRAI, DTS who takes care of the rules
and regulation.
•Apart from them it keeps issuing policy and
act which checks the events happening in the
industry.
SOCIO- CULTURAL
•The main aim is to sustain the customer base.
• Provide the customers with the highest level
of satisfaction and delight.
• Diversification in other areas.
ECONOMIC
• The areas served by the telecom service
providers.
• Increased economic activity due to
liberalization.
• Opening of value added services.
TECHNOLOGICAL
•IT support is essential.
• A business has to co- ordinate on entire supply
chain process and corresponding information
flow.
• Convergence of technologies evolved by IT.
Criteria for the Selection
of Companies
Market Share
 $10.7 bln, No M&A, Jan. 2010
March 2010

M&As 2007

Nov, 2008
Is In Talk

To acquire 70% stake in

With African mobile WAIRD Telecom
phone operator MTN
Emerging Technologies

 IP Multimedia Subsystem (IMS)

 High Speed Download Packet Access
(HSDPA)
 Mobile TV
 Mobile Virtual Network TV (MVNO)
 Fourth Generation (4G)
Value Added Services (VAS)

 Growing 40% annually

 As market saturate, focus will be on
increased VAS and average revenue per user
(ARPU) Entertainment VAS

Information VAS

mCommerce
• GPRS Access
• Multimedia Message Service (MMS) mode
Platform
• Short Message Service (SMS) VAS
Platform
• Voice Platform
Marketing Strategies
Understanding, communicating, delivering and developing
existing customer relationships in addition to creating and
keeping new customers.
Marketing Strategies

 BSNL became most trusted company in 2003&04 and

awarded with Golden peacock award for CSR.
 Reliance Infocomm: Post card or phone call; making call
rates @40 paisa/min
 Tata Indicom: Non stop mobile
 Virgin mobile: Get paid for incoming
 Reliance Communication: Daily Telephone Allowance
 Tata Docomo: Marketing call rates @1paisa/sec
Company Profile
Reliance Communication
 Founded by Late DHIRUBAI AMBANI (1932-2002) is the
flagship company of the reliance Anil Dhirubhai Ambani
Group.
 It ranks among the Top 5 Telecom companies in the world.
NET WORTH 64,000 CRORES (US$ 13.6 billion)
NET PROFIT 8,400 CRORES (US$ 1.8 billion)
CUSTOMER BASE OVER 85 MILLION

 Differentiation Strategy-
RURAL INTIATIVE by introducing Grameen VAS and M2M
applications.
BSNL
 Bharat Sanchar Nigam Ltd (BSNL) incorporated in October, 2000.
 World's 7th largest Telecommunications Company. Presently it is
one of the largest & leading public sector unit in India.
NET WORTH 68,000 CRORES
NET PROFITS 99, 390 million (US $ 2.26 billion)
CUSTOMER BASE 55.23 MILLION (2G+3G)

 Differentiation Strategy
 Beat its reach with its wide network giving services in every
nook & corner of country
 Wide bouquet of telecom services and provides most
transparent tariff schemes designed to suite every customer.
 Tata Teleservices

 Incorporated in 1996.
 Teleservices Limited is the pioneer of the CDMA 1x
technology platform in India.
 The company's network has been rated as the 'Least
Congested' in India .
Net Worth 4,496.36 crores
Net Profit Negative
Customer Base 58 Million
 Differentiation strategy-
First to pioneer the per-second tariff option-part of its 'Pay
for What You Use' pricing paradigm.
Bharti Airtel

 Airtel brand is headed by Sunil Bharti Mittal

 Bharti Airtel is now INDIA’s largest and world's third-largest
cellular service provider
NET WORTH USD 7.8 billion
NET PROFITS 18,502.83 crores
CUSTOMER BASE 121 million

 Differentiation Strategy-
 Performance , dynamism and leadership
 Advertisement strategy-emotional and humorous
Vodafone Essar Ltd.

 In 1992 Hutchison Whampoa and its Indian business partner

established a company launched commercial service as
Hutchison Max in November 1995.
 In February 2007, Hutchison Telecom announced that it had
entered into a binding agreement with a subsidiary of
Vodafone Group
Net Worth 0.00
Net Profit 356.19 crores
Customer Base 18.7 million
 Differentiation Strategy-
Hutch was often praised for its award winning
advertisements which all follow a clean, minimalist look.
Ratio Analysis
 Current Ratio
Current Ratio

2.5
 YEAR /COMPANIES 2008 2009
2
VODAFONE 1.4 1.69
1.5
AIRTEL 0.49 0.61
1
BSNL 1.92 2.04
2008
0.5
2009
TATA TELESERVICES 0.28 0.31
0
RELIANCE 1.25 0.34 Vodafone Airtel BSNL Tata teleservices Reliance Industry

INDUSTRY 1.33 1.22

Source: www.capitaline.com
Fixed Assets Turnover Ratio

1.6
1.4
Year/Company 2008 2009
1.2
Tata Teleservices 0.4 0.43 1
Airtel 0.94 1.04 0.8

Vodafone 1.52 1.11 0.6

2008
Reliance 0.7 0.86 0.4 2009
0.2
BSNL 0.27 0.24
0
Industry 0.4 0.43 Tata Teleservices Airtel Vodafone Reliance BSNL Industry

Source: www.capitaline.com
Debtor Turnover Ratio

35

Year/Company 2008 2009 30

Tata Teleservices 9.18 8.78

25
Airtel 11.06 12.77

Vodafone 15.2 22.41 20

2008
Reliance 15.61 30.67 2009
15
BSNL 5.86 5.94

Industry 5.98 6.44 10

0
Tata Teleservices Airtel Vodafone Reliance BSNL Industry

Source: www.capitaline.com
Debt-Equity Ratio

2.5

Year/Company 2008 2009

2
Tata Teleservices 0 -0.3

Airtel 0.38 0.3 1.5

Vodafone 0.27 0.13

2008
1
Reliance 0.77 2.23 2009

BSNL 0.05 0.04 0.5

Industry 0.21 0.35

0
Tata Teleservices Airtel Vodafone Reliance BSNL Industry

-0.5

Source: www.capitaline.com
Interest Coverage Ratio

45

40
Year/Company 2008 2009

Tata Teleservices 0.28 0.48 35

Airtel 12.47 4.8 30

Vodafone 2.44 42.29 25

2008
Reliance 3.99 2.86 20 2009

BSNL 6.1 3.82 15

Industry 7.04 4.52 10

0
Tata Teleservices Airtel Vodafone Reliance BSNL Industry

Source: www.capitaline.com
APATM
30

25
Year/Company 2008 2009
20
Tata Teleservices -7.37 -8.22
15
Airtel 24.29 22.77
2008
Vodafone 13.36 26.13 10
2009

Reliance 17.49 5.47 5

BSNL 9.3 1.9

0
Tata Teleservices Airtel Vodafone Reliance BSNL Industry
Industry 18.55 15.41
-5

-10

Source: www.capitaline.com
Return on Capital Employed
(ROCE)
40

35
Year/Company 2008 2009

30
Tata Teleservices 0 0

Airtel 34.38 33.17 25

Vodafone 4.23 27.15 20 2008

2009
Reliance 8.66 22.72
15

BSNL 5.84 1.89

10
Industry 10.28 9.72
5

0
Tata Teleservices Airtel Vodafone Reliance BSNL Industry

Source: www.capitaline.com
Return on Net Worth (RONW)
100

90

Year/Company 2008 2009 80

Tata Teleservices 0 0 70

Airtel 39.46 32.35 60

Vodafone 3.25 30.25 50 2008

2009
Reliance 11.4 87.56 40

30
BSNL 2.92 0.71
20
Industry 10.62 10.11
10

Source: www.capitaline.com
Inter-Company Analysis

Tata Teleservices Bharti Vodafone Reliance BSNL

Parameters Airtel Essar communication
Market 4,429.96 156785.52 0.00 32,497.99 0
Capitalization

Enterprise 4567 7679 0.00 4346 0

Value/
subscribers

Sales 1,941.68 34,014 2,733.76 15,086.66 32359.5

Other Income 112.31 367.14 115.68 520.58 5878.1
EPS 0.00 32.9 7.06 12.4 4.16
Credit Rating A AAA AA LAAA+

www.capitaline.com and nseindia.com

Telecom Regulatory Act of
India (TRAI)
Laws Governing the Indian
Telecom Sector
TRAI ACT ( 1997 )
 Lay-down the standards of quality
of service to be provided by the
service providers.
 Ensure the quality of service and
conduct the periodical survey of
each service provided by the service
providers.
 Suggest measures for the development
of telecommunication technology.
 Establishment of ‘Telecom Disputes

Settlement & Appellate Tribunal (TDSAT)’ .

 TRANSPARENCY

ACCESS TO
ADEQUATE
WORLD CLASS
CHOICE &
QUALITY
AFFORDABLE
TELECOM
TARIFFS
SERVICES

TRAI AIMS &

OBJECTIVES

EFFECTIVE
PROMOTING FAIR
INTERCONNEC-
COMPETITION
TION

ACCESS TO
WORLD CLASS
QUALITY
BROADCASTING
Achievements of TRAI

 Exponential growth of Telecom Sector.

 Tele-density increased by 18% in just 10 years
of TRAI’s existence.
 Subscriber Base is growing by over 8 million
every month.
 India has 3rd largest telecom network after
China & USA with lowest tariff.
New Telecom Policy 1999

 Strengthening of Regulator.
 National long distance services opened to private operators.
 International Long Distance Services opened to private
sectors.
 Direct interconnectivity and sharing of network with other
telecom operators within the service area was permitted.
 Department of Telecommunication Services (DTS)
corporatized in 2000.
 Spectrum Management made transparent and more
efficient.
Updates
Telecom Sector Defies Recession

 Fastest growing
telecom sector
 2nd largest wireless
network after China
 Basic need for citizens
 Connecting Rural India
(Rural-Urban Imbalance)
 Allotment of Licenses to
more operators
Provisions in Budget 2010-11

 Central Excise duties

increased from 8% to 10%

 Rate of Minimum Alternate Tax MAT

increased from the current rate of
15% to 18% of book profits.

 Exemptions from basic, CVD and

special additional duties are now
being extended to parts of battery
chargers and hands-free headphones
(earlier only applicable for parts of mobile phones).
Future Outlook

 The Telecom sector revenues would touch $30 billion by 2013 registering a
compound annual growth rate (CAGR) of 12.5 percent between 2009-2013.

 The Telecom subscriber base is also expected to grow at a CAGR of 12.5

percent and would cross 770 million by 2013.

 Mobile market penetration is projected to increase to 63.5 percent in 2013

 The churn rate – the rate at which a subscriber switches their operator –
would cross 59 percent in 2013 from 53 percent currently.

 The number of people with prepaid connections, accounting for 93 percent

of the subscriber base in 2008, will continue to swell to exceed 96 percent by
2013, surpassing 740 million
Recommendations & Suggestions

 Process of getting a prepaid connection to become stringent

 Keep track of the prepaid mobile users

 There is a need to market the available services better and work towards decreasing
the rate of these services.

 Telecom companies should try to build effective network reach and come up with some
value added services which could benefit the rural people

 High effective promotional strategies to be adopted to position the brand in market

 The new technologies should be brought in soon so that India keeps pace with the
other developed countries

 There is a need to market the available services better and work towards decreasing the
rate of these services.
Conclusion

 With the government increasing the FDI gap to 74%, more foreign
companies would be entering the Indian Market and there will be stiff
competition among the Indian players and the international players and
hence the Indian players have to sustain growth and make profits.

 As the growth of telecom industry is being enormous, we can expect

more and more of new technologies that we keep this industry growing
and this industry can become the largest service sector in the world.
References
 www.capitaline.com
 www.nseindia.com
 www.bsnl.co.in
 www.telecomspace.com
 www.slideshare.net/.../marketing-strategy-comparison-of-airtel-and-hutch
 http://www.naukrihub.com/india/telecom/top-companies/
 www.marketics.com
 http://www.financialexpress.com/news/valueadded-services-seen-driving-teleco
m-revenue/280674/
 http://us.asiancorrespondent.com/Indianomics/2009/03/28/10-risks-for-
indian-telecom-sector-in-2009-ey-report
 http://www.alacrastore.com/research/fitch-ratings-
India_Telecom_Sector_Outlook_2009-424738_report_frame
 http://www.researchandmarkets.com/reportinfo.asp?
report_id=1191830
 http://www.theindusview.com/vol4Issue1/specialreport.html