CHAPTER 1

INTRODUCTION
ABSTRACT

India's telecommunication network is the second largest in the world based on the
total number of telephone users (both fixed and mobile phone). It has one of the
lowest call tariffs in the world enabled by the mega telephone networks and hyper-
competition among them. It has the world's third-largest Internet user-base.
According to the Internet and Mobile Association of India (IAMAI), the Internet user
base in the country stood at 190 million at the end of June, 2013. Major sectors of the
Indian telecommunication industry are telephony, internet and television broadcast
Industry in the country which is in an on-going process of transforming into next
generation network, employs an extensive system of modern network elements such
as digital telephone exchanges, mobile switching centers, media gateways and
signaling gateways at the core, interconnected by a wide variety of transmission
systems using fibre-optics or Microwave radio relay networks. Being a fastest
growing sector, telecommunications in India is one of the sectors where innovation
and intense competition is a key to the progress of the industry. Therefore, long term
survival of the different players in the market is the toughest task. And this survival is
a complex matrix of different strategies and action plans laid out by the companies
from time to time. It is in this context this study titled “Financial Statements Analysis
of Selected Telecommunication Companies: A Comparative Study” is unique. In this
study a formal effort is made to assess and examine the competitive position of Idea
cellular, Airtel and Reliance Telecom Company on the basis of financial statements
analysis of thes companies. Financial statement analysis from the standpoint of
management relates to all of the questions raised by creditors and investors because
these user groups must be satisfied in order for the firm to obtain capital as needed.
In relation to the growth and prosperity of telecom sector the study being conducted to
analyze the financial soundness of the companies. A general belief is that a firm’s
operating performance depends on certain key financial factors viz., Liquidity,
turnover, profit, asset utilization etc and the variables which are found in profit and
loss account and balance sheet of a firm have a direct or indirect relation with each
other. In order to measure the performance, ratios, the indicators, are normally used
to identify the financial health of the firm. So the study concentrates on empirical
approach towards measuring financial soundness of the companies operating under
one of the most dynamic sector in Indian economy to identify key financial attributes
of telecom companies and their respective impact.

INTRODUCTION TO THE
INDIAN
TELECOM INDUSTRY
HISTORY

The history of telecommunication industry started with the first public demonstration
of Morse’s electric telegraph, Baltimore to Washington in 1844. In 1876 Alexander
Graham Bell filed his patent application and the first telephone patent was issued to
him on 7th of March. In 1913, telegraph was popular way of communication. AT&T
commits to dispose its telegraph stocks and agreed to provide long distance
connection to independence telephone system. In 1956, the final judgment limited the
Bell System to Common Carrier Communications and Government projects but
preserving the long-standing relationships between the manufacturing, researches and
operating arms of the Bell System. In this judgment AT&T retained bell laboratories
and Western Electric Company. This final judgment brought to a close the justice
departments seven –year-old antitrust suit against AT&T and Western Electric which
sought separation of the Bell Systems Manufacturing from its operating and research
functions. AT&T was still controlling the telecommunication industry.

In 1982 , AT&T was requested to divestiture its stock ownership in Western Electric;
termination of exclusive relationship between AT&T and Western Electric;
divestiture by Western Electric of its fifty percent interest in Bell Telephone
Laboratories, AT&T ‘s telecommunication research and development facility, is a
jointly owned subsidiary in which AT&T and Western Electric each own 50% of the
stock; separation of telephone manufacturing from provision of telephone service and
the compulsory licensing of patents owned by AT&T on a non-discriminatory basis. It
was telecommunication act of 1996 that true competition was allowed. The act of
1996 opened the market to all competitors. AT&T being the first telecommunication
company paved the road for the telecommunication industry as well as set the policy
and standards for others to follow.
Beginning of telecommunication in India

The era of telecommunication in India started from the year of 1851 with the initiative
from govt. of India near the city of Calcutta now known as Kolkatta. However the
rapid growth in telecom industry came into picture after the year of 2002-03 onwards
as the more number of service providers came into existence. Since 2002-03 there is
rapid change in the technology and increase in numbers of subscribers in the Indian
telecom industry till now. The following are the milestones in the Indian telecom
industry.

 1851 First operational land lines were laid by the government near Calcutta.
 1881 Telephone services introduced in India.
 1883 Merger with postal system.
 1923 Formation of Indian radio Telegraph Company.
 1932 Merger of ETC and IRT into Indian Radio and Cable Communication
Company.
 1947 Nationalization of all foreign telecommunication companies to form the
posts, telephone and telegraph, a monopoly run by the government’s ministry
of communications.
 1985 Department of telecommunication established , an exclusive provider of
domestic and long-distance services that would be its own regulator.
 1986 Conversion of dot into two wholly government – owned companies the
VSNL for international telecommunication and MTNL for services in
metropolitan areas.
 1997 Telecom regulatory authority created.

Telecommunication is important not only because of its role in bringing the benefits
of communication to every corner of India but also in serving the new policy
objectives of improving the global competitiveness of the Indian economy and
stimulating and attracting foreign direct investment. Indian Telecom industry is one of
the fastest growing telecom markets in the world. In telecom industry, service
providers are the main drivers; whereas equipment manufacturers are witnessing
growth and decline in successive quarters as sales is dependent on order undertaken
by the companies.

Today the Indian telecommunications network with over 375 Million subscribers is
second largest network in the world after China. India is also the fastest growing
telecom market in the world with an addition of 9- 10 million monthly subscribers.
The teledensity of the Country has increased from 18% in 2006 to 33% in December
2008, showing a stupendous annual growth of about 50%, one of the highest in any
sector of the Indian Economy. The Department of Telecommunications has been able
to provide state of the art world-class infrastructure at globally competitive tariffs and
reduce the digital divide by extending connectivity to the unconnected areas.

India has emerged as a major base for the telecom industry worldwide. Thus Indian
telecom sector has come a long way in achieving its dream of providing affordable
and effective communication facilities to Indian citizens. As a result common man
today has access to this most needed facility. The reform measures coupled with the
proactive policies of the Department of Telecommunications have resulted in an
unprecedented growth of the telecom sector.

There is a cut-throat competition in the Telecom industry as more and more advanced
technology is developed in very short time. Once the people get addicted to 2G
technology by the time new players come up with latest technology called 3G and
EDGE. The thrust areas presently are:

1. Building a modern and efficient infrastructure ensuring greater competitive

environment
2. With equal opportunities and level playing field for all stakeholders.
3. Strengthening research and development for manufacturing, value added services.
4. Efficient and transparent spectrum management
5. To accelerate broadband penetration
6. Universal service to all uncovered areas including rural areas.
7. Enabling Indian telecom companies to become global players.
Recent things to watch in Indian telecom sector are:

1. 3G and BWA auctions

2. MVNO
3. Mobile Number Portability
4. New Policy for Value Added Services
5. Market dynamics once the recently licensed new telecom operators start rolling out
6. Services.
7. Increased thrust on telecom equipment manufacturing and exports.
8. Reduction in Mobile Termination Charges as the cost per line has substantially
reduced
9. Due to technological advancement and increase in traffic.

India's telecom sector has shown massive upsurge in the recent years in all respects of
industrial growth. From the status of state monopoly with very limited growth, it has
grown in to the level of an industry. Telephone, whether fixed landline or mobile, is
an essential necessity for the people of India. This changing phase was possible with
the economic development that followed the process of structuring the economy in the
capitalistic pattern. Removal of restrictions on foreign capital investment and
industrial de-licensing resulted in fast growth of this sector. At present the country's
telecom industry has achieved a growth rate of 14 per cent. Till 2000, though cellular
phone companies were present, fixed landlines were popular in most parts of the
country, with government of India setting up the Telecom Regulatory Authority of
India, and measures to allow new players country, the featured products in the
segment came in to prominence.

Today the industry offers services such as fixed landlines, WLL, GSM mobiles,
CDMA and IP services to customers. Increasing competition among players allowed
the prices drastically down by making the mobile facility accessible to the urban
middle class population, and to a great extend in the rural areas. Even for small
shopkeepers and factory workers a phone connection is not an unreachable luxury.
Major players in the sector are BSNL, MTNL, Reliance, Bharti Teleservices,
Vodafone Essar, BPL, Tata, Idea, etc. With the growth of telecom services, telecom
equipment and accessories manufacturing has also grown in a big way.
Indian Telecom sector, like any other industrial sector in the country, has gone
through many phases of growth and diversification. Starting from telegraphic and
telephonic systems in the 19th century, the field of telephonic communication has
now expanded to make use of advanced technologies like GSM, CDMA, and WLL to
the great 3G Technology in mobile phones. Day by day, both the Public Players and
the Private Players are putting in their resources and efforts to improve the
telecommunication technology so as to give the maximum to their customers.

TELECOM SUBSCRIBER BASE IN INDIA

Indian telecommunication Industry is one of the

fastest growing telecom market in the world. The
mobile sector has grown from around 10 million
subscribers in 2002 to reach 150 million by early
2007 registering an average growth of over 90%.
The two major reasons that have fuelled this growth
are low tariffs coupled with falling handset prices.

Surprisingly, CDMA market has increased it market

share upto 30% thanks to Reliance Communication.
However, across the globe, CDMA has been loosing
out numbers to popular GSM technology, contrary to
the scenario in India.

The other reason that has tremendously helped the

telecom Industry is the regulatory changes and
reforms that have been pushed for last 10 years by
successive Indian governments. According to
Telecom Regulatory Authority of India (TRAI) the
rate of market expansion would increase with further
regulatory and structural reforms. Even though the
fixed line market share has been dropping
consistently, the overall (fixed and mobile)
subscribers have risen to more than 200 million by
first quarter of 2007. The telecom reforms have
allowed the foreign telecommunication companies to
enter Indian market which has still got huge potential.
International telecom companies like Vodafone have
made entry into Indian market in a big way.

Currently the Indian Telecommunication market is

valued at around $100 billion (Rupees 400,000 crore).
Two telecom players dominate this market - Bharti
Airtel with 27% market share and Reliance
Communication with 20% along with other players
like BSNL

(Bharat Sanchar Nigam Limited) and AT&T. One

segment of the market that has been puzzling is
broadband Internet. Despite the manner in which the
country’s Internet market has been booming, India’s
move into high-speed broadband Internet access has
been distinctly slow. And, while there appears to be
considerable enthusiasm amongst the population for
the Internet itself, this has not been reflected in
broadband subscription numbers. In 2006 India
witnessed a good surge in broadband users with the
total subscriber base in the country expanding by
almost 200% to just over 2 million by years end.
Despite this surge, broadband penetration in India
still remains around only 0.2%; broadband services
still account for only 25% of the total Internet
subscriber base, still in itself comparatively low. So, if
70% of total population is rural, the scope for growth
in this Industry is unprecedented.

The Ministry of Communications and Information

Technology (MCIT) is has very aggressive plans to
increase the pace of growth, targeting 250 million
telephone subscribers by end-2007 and 500 million by
2010. Most of the expansion in subscribers is set to
occur in rural India. India’s rural telephone density
has been languishing at around 1.9%. The subscriber
addition rate has been strong in the last 12 months but
the regulatory developments will increase competition
and thus curtail the long-term growth rates of
individual companies. The savings through the setting
of tower companies will partly go towards the higher
capex and opex costs from more stringent spectrum
allocation norms for the incumbents.

The Telecommunications sector has been consistently

adding more than 7 million subscribers for the last 6
months, a very healthy net addition rate infact. All the
private operators GSM as well as the CDMA
operators have been very consistent in their
performance. The sector provides very strong revenue
as well as earnings visibility over the next 12 months.
However the recent regulatory developments are seem
to be negative for the telecom companies as it will
increase the number operators per circle which will
intensify competition.
INTRODUCTION TO THE
COMPANIES IN
TELECOM INDUSTRIES
 BHARTI AIRTEL LIMITED

Bharti Airtel Limited, the company's existence was marked in the year 1995. It is a
leading Indian telecommunication service provider through three strategic business
units namely Mobile Services, Broadband & Telephone Services and Enterprise
Services. The company has started with providing mobile service to single circle
entity and now it grown to offer services to all 23 telecom circles of India. One of the
largest integrated private telecom service providers with an all India mobile footprint,
through a combination of organic and inorganic growth.

During the year 1997-98 Bharti Airtel Ltd becomes the first private telecom operator
to obtain a license to provide basic telephone services in the state of Madhya Pradesh
and in the same period the company forms Bharti BT VSAT Ltd., focused on
providing VAST solutions across India and Bharti BT Internet Ltd. The company
acquired JT Mobiles, cellular services operator in Punjab, Karnataka and Andhra
Pradesh and becomes the largest private telecom operator in India during the period of
1999-2000. Also expands its South Indian footprint by acquiring Skycell, Chennai.

The company acquired a 30.20% equity interest of Telecom Italia in Bharti Telenet
and 18.8% from Bharti Telecom thereby making Bharti Telenet a 100% subsidiary of
Bharti Tele-Ventures. BTVL also holds an effective 74% equity in Bharti Mobile and
100% equity in Bharti Cellular. Bharti Telenet has entered into license agreements to
provide fixed-line services in the Haryana, Delhi, Tamil Nadu and Karnataka Circles.
Airtel launched IndiaOne, India's first private sector national and international long
distance service in the year of 2001-02.

The company incorporated India's first private submarine cable landing station with
joint venture from SingTel in the same year. In 2002-03 the company made a brief
corporate restructuring by merging all the mobile operations into Bharti Cellular
Limited and all fixed line, long distance and data services into Bharat Infotel Limited.
Bharti Airtel made a historic strategic partnership with IBM and Ericsson for
outsourcing the company's core IT and network activities and also launched
Blackberry wireless solution India, as a result of an exclusive tie-up with Research in
Motion (RIM). BTVL's two subsidiaries Bharti Cellular Ltd and Bharti Infotel Ltd
have been merged with the company in the year of 2004. Subsequently Bharti
Broadband Ltd and Satcom Broadband Equipment Ltd has become the subsidiaries of
the company after the above said merger. During the year 2005 Bharti Airtel Ltd
expand its wing to Rajasthan and North East Circles also by the acquisition of Bharti
Hexacom, which owns Licenses to operate cellular services in the Rajasthan and
North East Circles.

Bharti Airtel Ltd noted as 'Indian Mobile Operator of the Year 2005' by Asian Mobile
News, became the top-most Telecom Company and was featured amongst the top
three companies across the sectors in the ET 500 published in June 2005 and the
company Introduced Stock and Portfolio Tracker on the mobile in association with the
Bombay Stock Exchange, it was the first of its kind. The agreement was emerged with
Ericsson and the company in 2005-06 to provide managed services and expands its
GSM/GPRS network into rural India in 15 circles under managed capacity expansion.
During the year 2006-07 Bharti Airtel has entered into agreement with Microsoft to
offer software and services for the Small and Medium business market in India. The
company also has an agreement with Google to offer services on Airtel Mobile. Also
an agreement with Adani Group to connect Mundra Port and special Economic Zone.
A Three year contract with Nokia at an estimated value of US$400 million to expand
its managed GSM/GPRS/EDGE networks in eight Airtel circles and deploy a pan
India WAP solution across its networks.

The company was conferred many awards during the year 2006-07, such as Best
Indian Carrier Award in the Telecom Asia Awards 2006, Wireless Service Provider of
the year and the competitive Service Provider of the year award in the Telecom Asia
Awards 2006, Most Preferred Cellular Service Provider Award in the telecom
category for the year 2006 at the Awaaz Consumer Awards 2006, MIS Asia II
Excellence Award 2006 for Best Knowledge Management, Most Customer
Responsive Telecom Company in India by the Avaya-Economic Times Global
Connect Awards and Nasscom IT Innovation Award for the Business Model
Innovation for the year 2006. The company received a letter of offer from
Telecommunications Regulatory Commission of Sri Lanka to provide 2G and 3G
mobile services in Sri Lanka on January 2007. This was the first international
operation of the company. Bharti Airtel introduced the Blackberry 8800 business
phone in March 2007. Bharti Airtel and GSM Association launched the Global money
transfer pilot project in India. This initiative enable 25 million of NRI's to remit their
money to India through mobile phones.

During the year 2007, the company also incorporated Bharti Airtel (USA) Ltd, Bharti
Airtel (UK) Ltd, Bharti Airtel (Canada) Ltd, Bharti Airtel (Hongkong) Ltd as a
wholly owned subsidiary of the company for providing international calling services
and wholesale voice switching and data products in the respective countries. Bharti
Infratel Ltd has been incorporated as a wholly owned subsidiary with an initial
investment of Rs.500000 and also acquired the Submarine Network Cable System
from Network i2i by way of purchase of all the assets or equity for an overall
consideration of US$110 million. In August of the same year Wal-mart formally
marked its entry into India by signing two agreements with Bharti Enterprises.

During January 2008, the company has signed a MoU with VeriSign, Inc agreed to
form a strategic market partnership for jointly launch best-in-class security services,
to deliver VeriSign's identity protection, managed security and fraud detection
services, and to support the development of the next-generation Internet infrastructure
in the Indian market. The company has achieved the 60 million-customer marks on
February 2008. This landmark has catapulted Bharti Airtel into the club of top mobile
operators in the world in terms of subscriber base. The 60 million-customer base
covers mobile as well as fixed line and broadband customers. Bharti Airtel has
overtaken State-run Bharat Sanchar Nigam Ltd as the largest National Long Distance
(NLD) service provider in terms of revenue, amount of Rs 709 crore. The company
has joined hands with five international companies including Internet giant Google,
Global Transit, KDDI Corporation, Pacnet and SingTel have formed the Unity
Bandwidth Consortium which will together invest about $300 million to construct the
new high-bandwidth, sub-sea cable system linking the US and Japan. As on March
2008, Bharti Airtel and Micro Technologies India have tied up to offer micro lost
mobile tracking system to secure the mobile handsets of Airtel subscribers. As on
May 2008, in a bid to gain quicker foothold into the rural areas, Bharti Airtel has
formed a joint venture with IFFCO, which will offer customized mobile services to a
target base of 55 million farmers across the country.

Bharti Airtel Ltd is amongst the fastest growing telecom companies in the world and
its moving to attain the position of most admired brand in India with the three
domains as loved by more customers, targeted by top talent and benchmarked by
more business.

 IDEA CELLULAR LIMITED

IDEA Cellular Limited, a part of the Aditya Birla Group and an India's leading Global
System for Mobile communication (GSM) Mobile Services operator was began its
journey in the year 1995 as in the name of Birla Communications Limited for
providing GSM-based services in the Gujarat and Maharashtra Circles. Later the
company has licenses to operate in all 22 Service Areas. Presently, operations exist in
11 Service Areas covering Delhi, Maharashtra, Goa, Gujarat, Andhra Pradesh,
Madhya Pradesh, Chattisgarh, Uttaranchal, Haryana, UP-West, Himachal Pradesh,
UP-East, Rajasthan and Kerala. With a customer base of over 24 million, IDEA
Cellular's footprint currently covers approximately 60% of India's telecom population.
The company's operational 11 Service Areas are broken up into Established and New
Service Areas. The established service areas are Delhi, Andhra Pradesh, Gujarat and
Maharashtra, Haryana, Kerala, Madhya Pradesh and Uttar Pradesh (West) and the
New Service Areas are Uttar Pradesh (East), Rajasthan and Himachal Pradesh.

Changed its name to Birla AT&T Communications Limited followed by joint venture
between Grasim Industries and AT&T Corporation in the year 1996. After a year, in
1997, commenced its operations in the Gujarat and Maharashtra. Migrated to
revenues share license fee regime under New Telecommunications Policy ('NTP')
Circles in the year 1999. During the year 2000, the company merged with Tata
Cellular Limited, thereby acquired original license for the Andhra Pradesh Circle.
IDEA acquired RPG Cellular Limited and consequently the license for the Madhya
Pradesh (including Chattisgarh) Circle in the year 2001, and in the same year changed
its name from Birla AT&T Communications Limited to Birla Tata AT&T Limited.
Obtained license for providing GSM-based services in the Delhi Circle. Again in year
later, in 2002, the company altered its name to Idea Cellular Limited and launched
'Idea' brand name and commenced its commercial operations in Delhi Circle. During
the year, the company reached one million subscriber mark consecutively in the year
2003, reached two million subscriber mark.

During the year 2004, the company acquired Escotel Mobile Communications
Limited (subsequently renamed as Idea Mobile Communications Limited), reached
the four million subscriber mark and the first operator in India to commercially
launched EDGE services 2005. Reached the five million subscriber mark in the year
2005 and IDEA won an Award for the 'Bill Flash' service at GSM Association
Awards in Barcelona, Spain. The Company became a part of the Aditya Birla Group
in the year 2006, subsequent to the TATA Group transferred its entire shareholding in
the Company to the Aditya Birla Group. In the same year 2006, IDEA acquired
Escorts Telecommunications Limited (subsequently renamed as Idea
Telecommunications Limited).
The Company reached the 10 million subscriber mark and also launched New Circles
for obtain more and more customers. IDEA has extended its reach to 500 towns in
Andhra Pradesh in August of the year 2006. Received Letter of Intent from the DoT
for a new UAS License for both Mumbai and Bihar Circles. ABNL, the parent of
Aditya Birla Telecom Limited, agreed to transfer its entire shareholding in Aditya
Birla Telecom Limited to the Company for the consideration of Rs. 100 million. In
2007, the company won an award for the 'CARE' service in the 'Best Billing or
Customer Care Solution' at the GSM Association Awards in Barcelona, Spain.

The Initial Public Offering aggregating to Rs. 28,187 million and the company listed
in both Bombay Stock Exchange and the National Stock Exchange during the year
2007. IDEA merged seven of its subsidiaries and reached the twenty million
subscriber mark in the same year 2007. As on February 2008, IDEA Cellular Ltd tied
up with Southern Biotechnologies Ltd to bio-diesel for operating IDEA's gensets at all
towers in the Andhra Pradesh region. The Company with Geodesic, an innovator in
communication, collaboration and entertainment applications on mobile and Internet
platforms jointly announced the launch of 'Idea Radio', a truly differentiated mobile
music service for IDEA customers in the same year 2008.

Customer Service and Innovation are the drivers of this Cellular Brand. A brand
known for their many firsts, IDEA is only the operator to launch General Packet
Radio Service (GPRS) and EDGE in the country. IDEA has seen phenomenal growth
since its inception, the company's footprint idea is to first achieve critical mass, then
drill deep instead of spreading thin, however, does not increasing geographic footprint
only, it also drills deep and successfully attempts to provide excellent network
coverage in all its circles of operations.
 RELIANCE COMMUNICATIONS LIMITED

Reliance Communications Limited (RCL) is the flagship company of the Anil

Dhirubhai Ambani Group (ADAG), is India's largest private sector information and
communications company with over 48 million subscribers. It was established in the
year 2004 as Reliance Infrastructure Developers Private Limited, Reliance
Communications started laying 60,000 route kilometres of a pan-India fibre optic
backbone with high capacity, integrated (wireless and wireline), convergent (voice,
data and video) digital network and to offer services spanning the entire infocomm
value chain. It is capable of delivering a range of services spanning the entire
infocomm (information and communication) value chain, including infrastructure and
services for enterprises as well as individuals, applications, and consulting.

The Company's business encompasses a complete range of telecom services covering

mobile and fixed line telephony. It includes broadband, national and international
long distance services and data services along with an exhaustive range of value-
added services and applications. During the year 2004, International wholesale
telecommunications service provider, FLAG Telecom amalgamates with Reliance
Gateway, a wholly owned subsidiary of Reliance Infocomm, the company launched
RIM Prepaid with attractive offer, Reliance Infocomm introduced World Card - a
Prepaid International calling card for affordable and convenient ISD calls from India,
the first regional Customer Contact Centre was launched in Chennai. In the same year
the company made partnership with MCI to offer India's First MPLS Global VPN
Solution. Introduced Railway Ticket booking from R World data applications suite of
Reliance India Mobile.
In 2005, RCL only the company introduced, first e-recharge facility in CDMA in
India, the company has had joins hands with Air Deccan to offer air ticket booking
facility at Reliance WebWorld. Reliance Infocomm rolls out international roaming
facility across several countries to become the first Indian CDMA operator to offer its
customers such a service. The company tied-up with the Bombay Stock Exchange to
make available livestock quotes on its mobile phones during the same year 2005. The
status of the company was changed to Public Limited in July 2005. Name of the
company was changed from Reliance Infrastructure Developers Private Limited to
Reliance Communication Ventures Limited in August 2005. RCL, UK launched
Reliance IndiaCall service in England and Wales enabling callers to make high-
quality calls to India from any landline or mobile phone at economical rates. Reliance
Infocomm and China Telecom signed agreement for telecom services to provide
direct telecommunication service, including a global hubbing service, to subscribers
in the both two countries.

India's first Talking Message Service (TMS) enabling the mobile users to send voice
messages to not only other mobiles but also fixed wireless phones (FWP) and
landlines in Reliance communications network were launched during the year 2006.
In the same year 2006, RCL listed on the Bombay Stock Exchange and National
Stock Exchange, the company ties up with Disney to offer on Reliance Mobile World
India's first 3D animation on mobile, launched 'Hello Capital Plan' to enable its
subscribers in 19 state capitals to call each other at the local call rate of 40 paise per
minute, T-Com signs contract with FLAG Telecom for Europe-US bandwidth,
Reliance Communications' FALCON Cable System was initiated in the same year.
RCL launched Free Group Term Life Cover for its CDMA subscribers. RCL and
Nokia have joined hands to market the Nokia 1255 mobile handset in India at a price
of Rs 1,999 during the period of 2006.

Reliance Infocomm Limited, Ambani Enterprises Private Limited, Reliance Business

Management Private Limited, Formax Commercial Private Limited, Reliance
Communications Technologies Limited, Reliance Software Solutions Private Limited,
Reliance Communications Solutions Private Limited and Panther Consultants Private
Limited was amalgamated and the Network division of the Reliance Communications
Infrastructure Limited was demerged with the Company during the year 2006. The
name of the Company was changed from Reliance Communication Ventures Limited
to Reliance Communications Limited with effect from 7th June 2006. The Company
joined Lenovo and Intel for 'Internet on the Move' in the year 2007. Also in the same
year, RCL ties up with Naukri.com for Search Jobs & Classified Ads from Reliance
Mobile World. The demerger of Passive Infrastructure division Reliance
Communications & Reliance was approved in March of the year 2007.

Sunny Days And Nights For Reliance Mobile Subscribers as Reliance

Communications ties up with SUN TV to offer video streaming of all SUN TV
programs online 24x7. In May of the year 2007, the company bagged West Bengal E-
Governance Project. RCL slashed its call rate to US and Canada. It's now just Rs 1.99
per minute and also launched Lifetime Validity Recharge @ Just Rs.499. The tie up
was made with Cisco to launch Business Internet Services for SMEs in Pune in the
year. After, in July of the same year 2007, the company and QUALCOMM was made
collaboration on CDMA2000 Expansion. The biggest acquisition deal so far, the
company bought US data Communication Company Yipes Holdings' in an all-cash
deal for 4300 million (Rs 1200 crore) in July 2007. RCL came forwarded to sale of
equity stake in its Tower Company-Reliance Telecom Infrastructure Limited in July
of the year. For air and hotel bookings, the company has had joins hands with
Yatra.com. The money transfer also available in the RCL, such facility was started in
September of the year 2007. The company made strategic partnership with Vanco.

As on April 2008, RCL launched Exam Guru, the educational portal, which provides
information on exam result, college admissions, exam schedules, admission deadlines,
mock tests and also tips for bettering performance. RCL made ties up with
International Cricket Council for rankings in the next eight years. During the same
month and same year, the company has acquired UK based eWave World, which
offers wireless telephony services using WIMAX technology. In May 2008, Reliance
Globalcom, a subsidiary of the company, has acquired London based managed
network services provider, Vanco Group, for about $77 million (Rs 324 crore).
MAHANAGAR TELEPHONE NIGAM LTD. (MTNL)

Mahanagar Telephone Nigam (MTNL) was set up on April1, 1986 by the

Government of India to upgrade the quality of telecom services, expand the telecom
network, introduce new services and to raise revenue for telecom development needs
of India's key metros –– Delhi and Mumbai.
In the past 23 years, the company has taken rapid strides to emerge as India's leading
and one of Asia's largest telecom operating companies. Besides having a strong
financial base, MTNL has achieved a customer base of 8.06 million as on March 31,
2009.
The company has also been in the forefront of technology induction by converting
100% of its telephone exchange network into the state–of–the–art digital mode.
The Government of India currently holds 56.25% stake in the company.
The authorized capital of the Company is Rs. 800 crores. The Paid up Share Capital
is Rs. 630 crores divided into 63 crore share of Rs. 10 each. At present, 56.25% equity
shares are held by President of India & her nominees and remaining 43.75% shares
are held by FIIs, Financial Institutions, Banks, Mutual Funds and others including
individual investors. MTNL has been given Navratna status in 1997 and was listed in
New York Stock Exchange in 2001.

In more than two decades of its operations, there has been all-round development &
growth and improved operational efficiency. Presently, MTNL is providing a host of
telecom services that include fixed telephone service, GSM (including 3G services) &
CDMA based Mobile service, Internet, Broadband, ISDN and Leased Line services.,
MTNL has been in the forefront of offering state of the art technology based
telecommunications services to its customers at most affordable prices. MTNL has
been the first to launch some of the latest telecom technologies in the country like
ADSL2+ & VDSL2 in broadband, IPTV on MPEG4 technology, VOIP and 3G
Mobile service.

MTNL is proud to be associated with the Common Wealth Games (CWG)-2010 as its
Official Telecom Partner to set up a world class communication infrastructure to meet
out the broadcast and telecom requirement of the event. It's a matter of great prestige
for MTNL to associate with a global sporting event of this magnitude and significance
and to showcase the world, India's capability to setup best possible all round
infrastructure.

To meet the broadcast and other requirement such as carrying of High Definition TV
stream, games data, security requirements etc the salient features of Telecom
infrastructure were specially created by MTNL for CWG-2010 in less than a year
time frame.

After completion of the games the network elements are used to strengthen / augment
the exiting IP / MPLS backbone networks of MTNL in Delhi & Mumbai enabling
MTNL to meet all its current and future requirements as well as to facilitate it to
provide wholesale bandwidth connectivity to other telecom operators, Banks,
Corporate Houses and various other Govt Agencies on lease or rental basis support.

MTNL is providing telecommunications beyond boundaries through its Joint

Ventures and Subsidiaries. MTNL is present in Nepal through its Joint Venture
United Telecom Limited (UTL) and in Mauritius through its 100% subsidiary
Mahanagar Telephone Mauritius Limited (MTML).

Subsidiary
Millennium Telecom (MTL), incorporated on February 17, 2000, is a wholly owned
subsidiary of MTNL that has been formed to do practically any type of telecom
business with a focus on value added services. It intends to roll out a router–based
packetised telecom network and create facilities like Application Development
Centre, Internet Data Centre, STP facilities and payment gateway. Presently, it has a
category ?óÔé¼?£A?óÔé¼Ôäó ISP licence and is in the process of application
development and rolling out the services.
Joint ventures
United Telecom Limited (UTL) MTNL has formed a joint venture company in Nepal
by the name of United Telecom (UTL) in collaboration with Telecom Consultants
India Limited (TCIL), Videsh Sanchar Nigam Limited (VSNL) and NVPL (Nepal
Ventures Private Limited, a Nepalese Company). The company is operational since
October 10, 2001 for providing WLL based basic services in Nepal. In Nepal against
the switching capacity of 50K, 21K telephone connections are working.
Mahanagar Telephone Mauritius Limited (MTML) MTNL has set up its 100%
subsidiary –– Mahanagar Telephone Mauritius Limited (MTML) in Mauritius, for
providing basic, mobile and international long distance services as 2nd operator in
Mauritius. Necessary licenses have been obtained in January 2004. MTML has
already started its ILD and CDMA based basic services in Mauritius. In Mauritius
against the switching capacity of 50K, 8K telephone connections are working.
MTNL–STPI IT Services Limited MTNL–STPI IT Services Ltd. is a 50:50 Joint
Venture between Software Technology Parks of India (STPI) and Mahanagar
Telephone Nigam Limited, (MTNL). The JV formed in 2006 combines the STPI.s
rich experience as an ISP and MTNL?óÔé¼Ôäós track record of being
India?óÔé¼Ôäós leading telecom operating company to offer niche portal services to
the Indian community. The JV was formed to realize one of the 10–point agenda of
MoC&IT, which are of extreme importance to India for bringing about an all round
economic development. The JV aims to provide exclusive data center services,
messaging services, business application services to the identified sectors of economic
activity and thereby also popularizing the .in domain in the networked community
across the world.
Millenium Telecom Limited (MTL) MTNL has restructured Millenium Telecom
Limited (MTL) as a joint venture company of MTNL and BSNL with 50% and 50%
equity participation respectively. The company will now be entering into new
business stream of international long distance operations and will be executing a
project of submarine cable system, both east and west from India.
 BSNL (BHARAT SANCHAR NIGAM LIMITED)

Bharat Sanchar Nigam Ltd. formed in October, 2000,

is World's 7th largest Telecommunications Company
providing comprehensive range of telecom services in
India: Wireline, CDMA mobile, GSM Mobile,
Internet, Broadband, Carrier service, MPLS-VPN,
VSAT, VoIP services, IN Services etc. Within a span
of five years it has become one of the largest public
sector unit in India.

It has about 47.3 million line basic telephone capacity,

4 million WLL capacity, 20.1 Million GSM Capacity,
more than 37382 fixed exchanges, 18000 BTS, 287
Satellite Stations, 480196 Rkm of OFC Cable, 63730
Rkm of Microwave Network connecting 602 Districts,
7330 cities/towns and 5.5 Lakhs villages.

BSNL is the only service provider, making focused

efforts and planned initiatives to bridge the Rural-
Urban Digital Divide ICT sector. In fact there is no
telecom operator in the country to beat its reach with
its wide network giving services in every nook &
corner of country and operates across India except
Delhi & Mumbai.

BSNL is numero uno operator of India in all services

in its license area. The company offers vide ranging
& most transparent tariff schemes designed to suite
every customer.

BSNL cellular service, CellOne, has more than 17.8

million cellular customers, garnering 24 percent of all
mobile users as its subscribers. That means that
almost every fourth mobile user in the country has a
BSNL connection. In basic services, BSNL is miles
ahead of its rivals, with 35.1 million Basic Phone
subscribers i.e. 85 per cent share of the subscriber
base and 92 percent share in revenue terms.

BSNL has more than 2.5 million WLL subscribers

and 2.5 million Internet Customers who access
Internet through various modes viz. Dial-up, Leased
Line, DIAS, Account Less Internet (CLI). BSNL has
been adjudged as the NUMBER ONE ISP in the
country. BSNL has set up a world class multi-gigabit,
multi-protocol convergent IP infrastructure that
provides convergent services like voice, data and
video through the same Backbone and Broadband
Access Network. At present there are 0.6 million
DataOne broadband customers.
CHAPTER 2
RESEARCH
METHODOLOGY
PROBLEM OT THE STUDY

“COMPARATIVE FINANCIAL (FUNDAMENTAL) ANALYSIS OF MAJOR

TELECOMMUNICATION COMPANIES IN INDIA”

OBJECTIVE OF THE STUDY

An investor who would like to be rational and scientific in his investment activity has
to evaluate a lot of information about past performance and the expected future
performance of the companies, industries and the economy as a whole before taking
the investment decision and hence, the present study attempts to analyse the
profitability position of the sample companies.

Some of the objectives of conduction the study are as follows:

 To take investment decisions cautiously after studying risks involved in the

same.
 To gain knowledge of evaluating intrinsic value of a firm.
 To acquire practical exposure of financial analysis of an enterprise.
 To get familiarity of scheming comparative efficiency of different firms.
 To analyse the profitability position of the sample telecom companies.

LIMITATIOINS OF THE STUDY

The study has following limitations:

 The study has lack of contact with company personnel acted as

hindrance in the study.
 The study is based on the limited knowledge & information
provided by the websites and software available on internet.
 The size of the sample is too small looking to the nature of the
study and due to tome and money constraints relatively smaller
sample was chosen.
  The basis of selection of sample for the study was vague.
Randomly individuals were picked up to provide their responses .
 There are only five parameters taken for study however there are
certain other parameters on the basis of which accurate inference
can be drawn.
 The ratings given are on the basis of data available on internet
however the future efficiency of the low performing company can
be better.

The data taken for the comparison of the sample companies are of last three years
from 2016 – 2018. However the accurate result can be drawn if the data taken ranges
from last ten years

RESEARCH DESIGN

Universe of the Study

The present study adopts an analytical and descriptive research design. The data
of the sample companies (for a period of three years from 2016 to 2018) has been
collected from the annual reports and the balance sheet published by the
companies and the websites of the companies.

A finite sample size of four companies listed on the National Stock Exchange
(NSE) has been selected for the purpose of the study. They are IDEA
CELLULAR, BHARTI AIRTEL and RELIANCE COMMUNICATIONS
LIMITED.

The variables used in the analysis of the data are Debt-Equity Ratio (DER),
Current Ratio, Quick Ratio, Fixed Earning Per Share (EPS) and Dividend Payout
Ratio ,etc
Sample of the Study

 Sampling Technique: The study is done with special reference to private

sector telecommunication companies. The reason being that the data or the
financial statements are readily available for them. Apart from this, private
sector companies have shown best performance in the previous year so it is
interesting to know the best performing company out the selected sample
companies. Thus, the technique of ‘Convenience Sampling’ is being adopted
for the study. The election of sample companies is made on the basis of
market capitalization.
 Sample Size: Four Private Sector companies are chosen as sample size for the
study on account of having the highest market capitalization.

Data Collection

Only secondary data has been used in this project for conducting analysis.

Financial statements are the raw data collected from various websites such as
www.moneycontrol.com , www.economistimes.com and other company
websites.

Time Period of the Study

The study has been conducted during October 2018 – November 2018.

Tools used for Analysis

 Ratio Analysis: Ratios have been calculated for the past three years for the
purpose of analysis. Ratios being designed are named as: Debt-Equity Ratio
(DER), Current Ratio, Quick Ratio, Earning Per Share (EPS) and Dividend
Payout Ratio.
Financial Analysis

The section of study embodies the calculation and analysis of selected variables
taken into reflection for the study purpose. The ratios are being calculated by the
aid of raw data available on the concerned website. The raw data encompasses
Yearly Results and Balance Sheet of the sample companies.

Analysis is performed by using software known as Microsoft Excel.

The ratios being calculated for the purpose of analysis of financial performance
are:

 Debt-Equity Ratio (DER).

 Current Ratio
 Quick Ratio
 Earnings Per Share (EPS).
 Dividend Payout Ratio

The analysis and interpretation of the study is carried out by following the
chronological order of the parameters mentioned above.
CHAPTER 3
LITERATURE
REVIEW
REVIEW OF LITERATURE

Girija (1998), in its article “Socioeconomic Implications of Telecommunications

Liberalization: India in the International Context” says that Telecommunications
restructuring have evolved differently in Asia and Latin America. While Asian
governments have moved cautiously in bringing changes to the sector, Latin
American nations have implemented radical ownership and market transformations.
The Indian telecommunications reform falls in between these two general regional
trends. The choice of a high component of competition, increased private
participation, and no privatization of the national carrier set conditions that will
trigger unique socioeconomic effects. This article identifies and highlights the likely
implications of the Indian reform on key economic and social issues, such as the cost
of services, cross-subsidies, network interconnection, private investments, universal
services, employment, and the possible rise of an information-intensive economy. It
does so by comparing and contrasting the Indian experience with dominant reform
strategies elsewhere in the developing world.

T.H. Chowdary (1999) discusses how Telecom reform, or demonopolization, in

India has been bungled. Shaped by legislation dating back to the colonial era and post
Second World War socialist policies, by the mid-1980s India realized that its poor
telecommunications infrastructure and service needed reform. At the heart of the
problem lay the monopoly by the government’s Department of Telecommunications
(DOT) in equipment, networks and services. The National Telecom Policy 1994 spelt
out decent objectives for reform but tragically its implementation was entrusted to the
DOT. This created an untenable situation in which the DOT became policymaker,
licenser, regulator, operator and also arbitrator in disputes between itself and licensed
competitors. He discusses the question: ‘Why did India get it so wrong? and What
India should do now?

Anand (1999), in his article named “India's economic policy reforms” says that India
was embarked on economic reforms in July 1991, in the wake of a balance of
payments crisis. In this article, an attempt is made to review two books and a set of
World Bank reports concerning the progress of these reforms. Issues concerning
economic policy, impact of the reforms on poverty, sectoral issues relating to
agriculture, industry and infrastructure are briefly discussed. As reforms enter a more
difficult phase, several challenges remain. Some of this fall under the “economic
agenda'' of measures needed to maintain economic growth; others can be termed the
“development agenda'' - of improving human development. Progress with regard to
the former is not sufficient to produce results concerning the latter.

Bhattacharya (2000) constructs a vision of the Indian telecommunication sector for

the year 2020. The paper aims at isolating agents of change based on international
experiences and situates India in the development continuum. The agents of change
have been broadly categorized into economic structure, competition policy and
technology.

Das (2000), in her paper described the Liberalisation of the Indian

telecommunications services which started in mid nineties with no change in the
existing public monopoly structure, entirely controlled by Department of
Telecommunications (DoT). In order to evaluate any proposed industry structure, it is
essential to analyse the production technology of DoT so as to determine the rationale
of liberalisation and sustainability of competition. Accordingly, the researcher
estimates a frontier multi-product cost function for DoT, where the cost function has
been duly modified to account for the production technology of a public monopoly.
The study finds that although DoT displays high allocation inefficiency, it is still a
natural monopoly with very high degree of sub additively of cost of production. This
study implies that the choice of any reform policy should consider the trade-off
between the loss of scale and scope economies and cost saving from the reduction in
inefficiency of the incumbent monopoly in the event of competition.

Rao (2000), in her article named “Internet service providers in India”, provides a
broad view of the role of an Internet service provider (ISP) and the factors to be
considered before entering the ISP market. Describes the Internet/ISP scene within
India and discusses the configuration of local, regional and national level ISPs, and
the supporting infrastructure. She also identifies the various success factors. The
global Internet scenario is discussed regarding the phases of the Internet in India, i.e.
pre and post commercialization. The main players are described: ERNET, NICNET,
STPI, VSNL, MTNL, Satyam Infoway and Bharti-BT. The financial and legal
implications are highlighted in the Indian context. Many companies entered the
nascent ISP business in India due to deregulation. Building local content,
foreknowledge of new Internet technologies, connecting issues, competitiveness, etc.
would help in their sustainability. She concludes that though many companies entered
the nascent ISP businesses in India due to deregulation, many of them are unlikely to
survive in the longer term.

Vrmani (2000) estimates the contribution of telecommunication (or telecom) services

to aggregate economic growth in India. Estimated contribution is distinguished
between public and private sectors to highlight the impact of telecom privatization on
economic growth. Knowledge of policy determinants of demand of telecom services
is shown to be essential to enhance growth contribution of telecom services. Using a
recent sample survey data from Karnataka State in South India, price and income
determinants of demand for telecom services are estimated by capacity of telephone
exchanges Estimation results offer evidence for significant negative own price
elasticity and positive income elasticity of demand for telecom services.

Narinder (2004), in his article “Enhancing Developmental Opportunities by

Promoting ICT Use: Vision for Rural India” talks about the foremost benefits of
Information and Communication Technologies (ICTs) in developing countries that
can be helpful in improving governance including public safety and eradication of
illiteracy. The benefits of ICTs have not reached the masses in India due to lack of
ICT infrastructure, particularly in rural areas, where two-third of the population of the
country lives. Even in cities and suburban areas, use of ICTs is not popular due to lack
of awareness to its use, computer illiteracy, and absence of practical applications.
India is the largest country in South Asia, with a population of over one billion people
and its telecom sector is presently experiencing fast growth phases. However
telephony penetration in villages is less than two percent of the rural population and
about 15 percent of the villages are still without any telephony service. Universal
access to ICTs in rural areas has been planned and is being implemented through
Public Tele Info Centers having voice data and video, as majority of villagers in India
cannot afford a separate home connection. Illiteracy in rural areas is as high as 40
percent and in some tribal belts hardly about 20 percent people are literate. There are
35 million children in age group of 6–11 years, who are out of school and one out of
four drops out during primary classes. Education and training, therefore, must be
given the top priority if advantages of ICTs are to be harnessed. Indian economy is
agriculture based and employs maximum workforce. Improvement in agriculture
productivity can help in reducing rural poverty. Adoption of ICT in agriculture will
play an increasingly important role in crop production and natural resource
management. The other critical factor is technological challenges for universal access
to ICTs to bring down the network access cost.

Nikam, Ganesh, Tamizhchelvan (2004), analyses that changing face of India in

bridging the digital device. He reiterated - “India lives in villages” said the Father of
the Nation, Mahatma Gandhi. With 1,000 million people and 180 million households,
India is one of the biggest growing economies in the world. With the advent of the
Information, Communication and Technology (ICT) revolution, India and its villages
are slowly but steadily getting connected to the cities of the nation and the world
beyond. Owing to the late Rajiv Gandhi, India is now a powerful knowledge
economy, and though India may have been slow to start, it certainly has caught up
with the West and is ahead in important respects. The Government, the corporate
sector, NGOs and educational institutions have supported rural development by
encouraging digital libraries, e-business, e-learning and e-governance. The aim of this
paper is to touch upon and highlight some of the areas where, by using ICT, the
masses have been reached in this way. A follow-up paper will outline collections of
significant cultural material which, once national IT strategies are fully achieved,
could form part of a digitally preserved national heritage collection.

Dey (2004), in her article talks about the discussions between the Federal
Communications Commission (FCC) and communications policy makers and
regulators in other countries and how they have gleaned several clusters of issues
where further research would directly benefit them. Recently, there have been two
notable shifts. First, as the acceptance of the competition model over the monopoly
model for telecommunications markets takes deep effect in regulators all over the
world, questions regarding process and procedure for regulation are becoming ever
more urgent. This paper discusses current questions regarding decision making,
enforcement, and understanding consumer issues that arise often in the FCC's
discussions with other regulators. Second, technological change is potentially shifting
market definitions. In the FCC's discussion with other regulators over the last two
years, the overlap of wireline telecom, wireless telecom and cable television has
become more pronounced.

Singh (2005), in his article “The role of technology in the emergence of the
information society in India” describes the role that information and communication
technologies are playing for Indian society to educate them formally or informally
which is ultimately helping India to emerge as an information society. Though India
has a huge population, the illiteracy rate is also huge in this country. The paper has
taken an approach to find the historical situation and present the prevailing scenario as
well as the change that are taking place with the application of ICT to the advantage
of the society in different areas including daily life. India is making all out efforts to
be counted among the developed nations of the world. The article also describes the
considerable attention India is taking for application of technology, development of
infrastructure and human resource for meeting national needs. Basically India is
building an information society. Technology has helped society to cut across the
traditional boundaries for getting converted into an emerging information society. The
study concludes that The Indian software and services industry has significantly
helped to boost the Indian economy. In IT-enabled services too, India has been clearly
perceived to be the dominant hub. The Indian software sector is being recognized as
the single largest contributor to incremental market capitalization in India but the
sector is still small in terms of contribution to GDP, especially when compared to
other large sectors in the economy like agriculture and manufacturing. Similarly, the
telecommunication sector has contributed a lot but still has a considerable way to go.
The paper also enforces that comparisons of India’s telecommunication statistics with
those of developed and other emerging economies show that the country is still far
behind its contemporaries.

Mr. Banka (2006) gives an overview of the mergers and acquisitions in the
telecommunication industry. According to him Governments decision to raise the
foreign investment limit to 74% is expected to spur fresh rounds of mergers and
takeovers in India. He foresees a sector that represents humongous opportunity
waiting to be tapped by Indian and foreign conglomerates.

Thomas (2007), in his article describes the contribution made by telecommunications

in India by the state and civil society to public service, this article aims to identify the
state’s initial reluctance to recognize telecommunications provision as a basic need as
against the robust tradition of public service aligned to the postal services and finds
hope in the renewal of public service telecommunications via the Right to Information
movement. The article follows the methodology of studying the history of
telecommunications approach that is conversant with the political economy tradition.
It uses archival sources, personal correspondence, and published information as its
research material. The findings of the paper suggests that public service in
telecommunication is a relatively ‘‘new’’ concept in the annals of Indian
telecommunications and that a de-regulated environment along with the Right to
Information movement holds significant hope for making public service
telecommunications a real alternative. The article provides a reflexive, critical account
of public service telecommunications in India and suggests that it can be strengthened
by learning gained from the continual renewal of public service ideals and action by
the postal services and a people-based demand model linked to the Right to
Information Movement. All studies done by the researcher suggests that the right to
information movement has contributed to the revitalisation of participatory
democracy in India and to a strengthening of public service telecommunications.

Cygnus Business Consulting & Research Pvt. Ltd. (2008), in its “Quarterly
Performance Analysis of Companies (April-June 2008)” has analysed the Indian
telecom industry in the awake of recent global recession and its overall impact on the
Indian economy. The analysis is done in the background of wake of global recession
and rising inflation. Cygnus estimates, the Indian telecom industry is expected to
maintain the growth trajectory in the next quarter as well. With almost 5-6m
subscribers are being added every month, and the country is witnessing wild
momentum in the telecom industry.

Maheshwari (July-September 2008), in her report analysed the Indian telecom

industry and ascertain that Indian telecommunications has been zooming up the
growth curve at an mounting pace, and India is has surpassed US to become the
second largest wireless network in the world. This growing subscriber base is
basically created by tapping into rural India, which is an emerging market for the
industry. The estimate for the next five to ten years is that the rural market will form
40 % of the subscriber base. The study has analysed the human resource management
process of the industry, and specially the latest trends of recruitment of this massively
growing industry.

Anderson (2008), in his single executive interview titled “Developing a route to

market strategy for mobile communications in rural India An interview with Gurdeep
Singh, Operations Director, Uttar Pradesh, Hutch India” suggests that managers need
to go beyond traditional approaches to serving the poor, and innovate by taking into
account the unique institutional context of developing markets. His practical
implication says that the experience of Hutchison Essar in India provides some
important lessons for mobile network operators (MNOs) and other firms in other
developing markets who are hoping to serve the rural poor: Hutchison has recognized
the value of corporate and non-corporate partners. The company has proactively
established relationships with individual entrepreneurs, and has provided has provided
development support to other partners such as distributors. The company has
recognized the value of leveraging existing local institutions, and has seen gaps in
local infrastructure or missing services as potential opportunities rather than barriers
to growth. The company has seen the rural market as an opportunity – not just an
obligation to be served because of universal service obligations. Also this article
demonstrates that MNOs can deliver availability and affordability to achieve
increased individual or household penetration through business model innovation.

Mani (2008) addresses a number of issues arising from the growth of telecom
services in India since the mid-1990s. It also discusses a number of spillover effects
for the rest of the economy and one of the more important effects is the potential to
develop a major manufacturing hub in the country for telecom equipment and for
downstream industries such as semiconductor devices. The telecom industry in India
could slowly become an example of the service sector acting as a fillip to the growth
of the manufacturing sector. A beginning towards this has been made. The formation
of a Telecom Equipment Export Forum and the announcement of the Indian
Semiconductor Policy 2007 are steps in this direction. Success crucially depends on
the response of the private sector to these incentives. Given the importance that a
regulatory agency can play in this crafting, no effort should be lost in strengthening
the powers of the TRAI. The benefits to the Indian economy from having both a
strong services and manufacturing segments in the telecom sector cannot be
undermined.

Narayana (2008) estimates the contribution of telecommunication (or telecom)

services to aggregate economic growth in India. Estimated contribution is
distinguished between public and private sectors to highlight the impact of telecom
privatization on economic growth. Knowledge of policy determinants of demand of
telecom services is shown to be essential to enhance growth contribution of telecom
services. Using a recent sample survey data from Karnataka State in South India,
price and income determinants of demand for telecom services are estimated by
capacity of telephone exchanges. Estimation results offer evidence for significant
negative own price elasticity and positive income elasticity of demand for telecom
services.

Sharma (2009) deals with the major challenges faced by India’s telecom equipment
manufacturing sector, which lags behind telecom services. Only 35% of the total
demand for telecom equipment in the country is met by domestic production. This is
not favourable to long-term sustained growth of the telecom sector. The country is
also far behind in R&D spending when compared to other leading countries. India
needs to see an increase in R&D investment, industry-academia-government
partnership, better quality doctoral education and incentives to entrepreneurs for start-
ups in telecom equipment manufacturing. In 2006-07, 65% of the total consumption
of equipment was met through imports. This trend has far-reaching implications for
the economy and should not be allowed to continue for long. In a country like India
which has a problem of massive unemployment, the manufacturing sector should be
promoted to create more employment opportunities.

Shah (February, 2009), has analysed Indian telecom industry and studied the sector
keeping in mind three companies; namely Bharti, R.Comm and idea in the
background of recent global meltdown. The study suggests that though there is no
sign of slowdown in this sector, but surely a strong turmoil is going on in the industry.
The study states that the sector is fairly immune from the current economic downturn
& does provide a good defensive bet in medium term. With the help of newer
technologies, wireless penetration is expected to increase in the near future, which is
basically fuelling the growth of the sector. While the 3G / Broadband adoption would
ensure long term growth momentum, the article has thoroughly investigated about the
intense competitive scenario, pricing pressure, high capital intensity & substantial
regulatory uncertainties currently faced by the industry. The article has also described
the cause of being relatively safe of this industry. The causes described by Shah are
increasing rural coverage, rising affordability, declining handset/subscription costs,
substantially low tariffs & established brand/distribution. However, the study also
cautions the telecom industry that a steeper economic slowdown could start impacting
the subscriber usage patterns as well as operator capital investments & thereby could
substantially restrict revenue growth rates going forward.
CHAPTER 4
DATA ANALYSIS,
INTERPRETATION
AND
PRESENTATION
 1 Debt-Equity Ratio

This ratio is only another form of proprietary ratio and establishes relationship
between the outside long-term liabilities and owners funds. It shows the
proportion of long term external equities and internal equities. Debt-Equity Ratio
(DER) compares the Creditor’s funds with owner’s funds. It indicates how much
money is being placed by the creditors as that of equity holders. It represents the
proportion of borrowed funds in the total capital of the company. This ratio is
calculated by using the following formula and expressed in terms of times.

Debt-Equity Ratio = Total Debt

Total Equity

Debt-Equity Ratio

Company IDEA AIRTEL RELIANCE

2016 1.52 0.38 0.38

2017 2.18 0.59 0.35

2018 2.22 0.64 0.31

Average 1.97 0.54 0.35

The above table shows the debt – equity ratio values of IDEA, AIRTEL and
RELIANCE from 2016 – 2018. The same data has been shown by using graph for
better understanding. Investors can use the debt – equity ratio for their decision
purpose.
 2.5

1.5
2016
2017
1 2018

0.5

0
IDEA AIRTEL RELIANCE

The data in given Table reveals that IDEA has achieved the highest Debt-Equity
Ratio every year for the data taken for the period of 2016 to 2018 and is followed by
AIRTEL from 2016 to 2018 . RELIANCE alone has registered the lowest ratio.
Even the three year average Debt-Equity Ratio of IDEA is significantly higher (1.97)
than that of AIRTEL (0.54) and RELIANCE (0.35) .

Thus, it is inferred that RELIANCE has the least proportion of debt fund in its total
capital and hence is the most efficient telecommunication company among all other
sample companies.

RELIANCE has the highest portion of its self owned funds in the capital structure
followed by AIRTEL and IDEA.
Current Ratio

The ratio is mainly used to give an idea of the company's ability to pay back its
short-term liabilities (debt and payables) with its short-term assets (cash,
inventory, receivables). The higher the current ratio, the more capable the
company is of paying its obligations. A ratio under 1 suggests that the
company would be unable to pay off its obligations if they came due at that
point. While this shows the company is not in good financial health, it does not
necessarily mean that it will go bankrupt as there are many ways to access
financing but it is definitely not a good sign.

The current ratio can give a sense of the efficiency of a company's operating cycle
or its ability to turn its product into cash. Companies that have trouble getting paid
on their receivables or have long inventory turnover can run into liquidity
problems because they are unable to alleviate their obligations. Because business
operations differ in each industry, it is always more useful to compare companies
within the same industry.

This ratio is similar to the acid-test ratio except that the acid-test ratio does not
include inventory and prepaid as assets that can be liquidated. The components of
current ratio (current assets and current liabilities) can be used to derive working
capital (difference between current assets and current liabilities). Working capital
is frequently used to derive the working capital ratio, which is working capital as a
ratio of sales.

The current ratio is a financial ratio that measures whether or not a firm has
enough resources to pay its debts over the next 12 months. It compares a firm's
current assets to its current liabilities. It is expressed as follows:

Current Ratio = Current Assets

Current Liabilities
 Current Ratio

Company IDEA AIRTEL RELIANCE

2016 0.30 0.41 0.72

2017 0.39 0.43 0.70

2018 0.80 0.49 0.65

Average 0.50 0.44 0.69

The above table shows current ratio values of IDEA, AIRTEL and RELIANCE
from 2016 – 2018. The same data has been shown by using graph for better
understanding. Investors can use the current ratio for their decision purpose.

0.9

0.8

0.7

0.6

0.5 2016

0.4 2017
2018
0.3

0.2

0.1

0
IDEA AIRTEL RELIANCE
The data in Table reveals that RELIANCE has achieved the highest Current Ratio in
2016 and 2017 , however in 2018 IDEA has the highest current ratio .

In the year 2016 and 2017 IDEA had the lowest current ratio .

According to the three year average Current Ratio of RELIANCE is significantly

higher (0.69) than that of IDEA (0.50) and AIRTEL (0.44).

Hence we can say that RELIANCE has enough resources to pay its debts over the
next 12 months as compared with the other sample companies.

QUICK RATIO

The quick ratio is an indicator of a company’s short-term liquidity position, and

measures a company’s ability to meet its short-term obligations with its most liquid
assets. Since it indicates the company’s financial position to instantly use its near cash
assets (that is, liquid assets) to get rid of its current liabilities, it is also called as the
acid test ratio. An acid test is a quick test designed to produce instant results, hence
the name.

The quick ratio measures the dollar amount of liquid assets available with the
company against the dollar amount of its current liabilities. Liquid assets are the
assets that can be quickly converted into cash with minimal impact to the price
received in the open market, while current liabilities are a company's debts or
obligations that are due to be paid to creditors within one year.

Mathematically, quick ratio is calculated as follows:

Quick Ratio = Liquid Assets / Current Liabilities, or

Quick Ratio = (Cash and Equivalents + Marketable Securities + Accounts

Receivable) / Current Liabilities

While calculating the quick ratio, one should be careful about the constituents to be
considered in the formula. The numerator that comprises of liquid assets should
include the assets that can be easily converted to cash in the short-term (like, within
90 days) without compromising on their price. Similarly, only those accounts
receivable should be considered which can be realized in the short term. Accounts
receivable refers to the money that is owed to a company by its customers for goods
or services already delivered. Inventory is not included in the equation, because its
liquidation or sale is uncertain and attempts to instantly liquidate it can lead to
compromising on valuations and accept a lower price than the book
value. Inventory includes raw materials, components and finished products.

A figure of 1 is considered to be the normal quick ratio, as it indicates that the

company is fully equipped with sufficient assets that can be instantly liquidated to pay
off its current liabilities. A company that has a quick ratio of less than 1 may not be
able to fully pay off its current liabilities in the short term, while a company having a
quick ratio higher than 1 can instantly get rid of its current liabilities. For instance, a
quick ratio of 1.5 indicates that the company has $1.50 of liquid assets available to
cover each $1 of its current liabilities.

While such numbers-based ratios offer insights into certain aspects and viability of
businesses, they may not provide a complete picture of the overall health of the
business. It is important to additionally look at other associated measures to assess the
true picture.

Quick Ratio

Company IDEA AIRTEL RELIANCE

2016 0.29 0.41 0.50

2017 0.39 0.43 0.47

2018 0.80 0.49 0.44

Average 0.49 0..44 0.47

The above table shows Quick ratio values of IDEA, AIRTEL and RELIANCE from
2016 – 2018. The same data has been shown by using graph for better understanding.
Investors can use the current ratio for their decision purpose
 0.9

0.8

0.7

0.6

0.5 2016

0.4 2017
2018
0.3

0.2

0.1

0
IDEA AIRTEL RELIANCE

The data in Table reveals that RELIANCE has achieved the highest Quick Ratio in
2016 and 2017 , however in 2018 IDEA has the highest current ratio .

In the year 2016 and 2017 IDEA had the lowest quick ratio .

According to the three year average Quick Ratio of IDEA is significantly higher
(0.49) than that of AIRTEL (0.44) and RELIANCE (0.47).

Hence we can say that IDEA has more liquid assets to pay its debts over the next 12
months as compared with the other sample companies.

DIVIDEND PAYOUT RATIO

The dividend payout ratio is the ratio of the total amount of dividends paid out to
shareholders relative to the net income of the company. It is the percentage of
earnings paid to shareholders in dividends. The amount that is not paid to
shareholders is retained by the company to pay off debt or to reinvest in core
operations.

The dividend payout ratio provides an indication of how much money a company is
returning to shareholders versus how much it is keeping on hand to reinvest in
growth, pay off debt, or add to cash reserves (retained earnings). The dividend payout
ratio can be calculated as the yearly dividend per share divided by the earnings per
share, or equivalently, the dividends divided by net income (as shown below):

Alternatively, the Dividend Payout Ratio can also be calculated as 1 - Retention Ratio

Several considerations go into interpreting the dividend payout ratio, most

importantly the company's level of maturity. A new, growth-oriented company that
aims to expand, develop new products, and move into new markets would be
expected to reinvest most or all of its earnings and could be forgiven for having a low
or even zero payout ratio.

Dividend Payout Ratio

Company IDEA AIRTEL RELIANCE

2016 2.43 5.11 8.36

2017 0.00 17.54 0.00

2018 0.00 7.61 7.53

Average 0.81 30.26 5.30

The above table shows Dividend Payout Ratio values of IDEA, AIRTEL and
RELIANCE from 2016 – 2018. The same data has been shown by using graph for
better understanding. Investors can use the current ratio for their decision purpose
 20

18

16

14

12
2016
10
2017
8 2018
6

0
IDEA AIRTEL RELIANCE

The data in Table reveals that AIRTEL has achieved the highest Dividend Payout
Ratio in 2017 and 2018 , however in 2016 RELIANCE has the highest Dividend
Payout Ratio .

In the year 2017 and 2018 IDEA had zero Dividend Payout Ratio . In the 2017
RELIANCE had zero Dividend Payout Ratio.

According to the three year average ,Dividend Payout Ratio of AIRTEL is

significantly higher (30.26) than that of IDEA (0.81) and RELIANCE (5.30).

Hence we can say that AIRTEL pays more dividend to its shareholders than the other
selected companies.

EPS (EARNINGS PER SHARE)

Earnings Per Share is generally considered to be the single most important

variable in determining a share’s price. It is also a major component used to
calculate the price-to-earnings valuation ratio. The EPS can be calculated as
follows:

Earnings Per Share = _________Profit________

Weighted Average Shares
An important aspect of EPS that's often ignored is the capital that is required to
generate the earnings (net income) in the calculation. Two companies could generate
the same EPS number, but one could do so with less equity (investment) - that
company would be more efficient at using its capital to generate income and, all other
things being equal, would be a "better" company. Investors also need to be aware of
earnings manipulation that will affect the quality of the earnings number. It is
important not to rely on any one financial measure, but to use it in conjunction with
statement analysis and other measures

EPS

Company IDEA AIRTEL RELIANCE

2016 24.63 43.42 114.15

2017 19.05 5.70 122.70

2018 8.11 32.84 68.18

Average 17.26 27.32 101.68

The above table shows Dividend Payout Ratio values of IDEA, AIRTEL and
RELIANCE from 2016 – 2018. The same data has been shown by using graph for
better understanding. Investors can use the current ratio for their decision purpose.
 140

120

100

80 2016
2017
60
2018
40

20

0
IDEA AIRTEL RELIANCE

The data in Table reveals that RELIANCE has achieved the highest Average
EPS for the data taken for the period of 2016 to 2018 and is followed by AIRTEL
and IDEA. The three year average EPS of RELIANCE is significantly higher
(101.68) than that of AIRTEL (27.32) and IDEA (17.26). However IDEA has
shown constant fall in EPS respectively between years 2016 to 2018 which is
shown in above Fig .. The higher the ratio means the better is the share price of
the company and the shareholders can earn more from their shares. Hence the
RELIANCE is more efficient than other sample companies.

RETURN ON ASSETS

Return on assets (ROA) is an indicator of how profitable a company is relative to its

total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a
company's management is at using its assets to generate earnings. Return on assets is
displayed as a percentage and its calculated as:

ROA = Net Income / Total Assets

Note: Some investors add interest expense back into net income when performing this
calculation because they'd like to use operating returns before cost of borrowing.

Sometimes, the ROA is referred to as "return on investment".

In basic terms, ROA tells you what earnings were generated from invested
capital (assets). ROA for public companies can vary substantially and will be highly
dependent on the industry. This is why when using ROA as a comparative measure, it
is best to compare it against a company's previous ROA numbers or against a similar
company's ROA.

Remember that a company's total assets is the sum of its total

liabilities and shareholder's equity. Both of these types of financing are used to fund
the operations of the company. Since a company's assets are either funded by debt or
equity, some analysts and investors disregard the cost of acquiring the asset by adding
back interest expense in the formula for ROA. In other words, the impact of taking
more debt is negated by adding back the cost of borrowing to the net income, and
using the average assets in a given period as the denominator. Interest expense is
added because the net income amount on the income statement excludes interest
expense. An analyst that chooses to ignore the cost of debt will use this formula:

ROA = (Net Income + Interest Expense) / Average Total Assets

The ROA figure gives investors an idea of how effective the company is in converting
the money it invests into net income. The higher the ROA number, the better, because
the company is earning more money on less investment.

RETURN ON ASSETS

Company IDEA AIRTEL RELIANCE

2016 3.36 4.20 5.98

2017 -0.86 -5.17 5.74

2018 -4.94 0.03 5.44

Average -0.81 -0.31 5.72

The above table shows Return on Assets values of IDEA, AIRTEL and RELIANCE
from 2016 – 2018. The same data has been shown by using graph for better
understanding. Investors can use the current ratio for their decision purpose.
 8

2 2016
2017
0 2018
IDEA AIRTEL RELIANCE
-2

-4

-6

The data in Table reveals that RELIANCE has achieved the highest Average
Return on Assets for the data taken for the period of 2016 to 2018. The three year
average Return on Assets of RELIANCE is significantly higher (5.72) than that
of AIRTEL (-0.31) and IDEA (-0.81). Higher the Return on Assets higher the
returns of the firm and the company with higher ROA will be more profitable in
respect of its assets . Hence the RELIANCE is more efficient than other sample
companies since its ROA is higher than the other selected companies.

Return on net worth:

It means determination of the ratio of a individual or business taxpayer’s income to

their overall net worth .In the business context, net worth is also known as book value
or shareholders’ equity.

Return on equity (ROE) is a measure of financial performance calculated by

dividing net income by shareholders' equity. Because shareholders' equity is equal to a
company’s assets minus its debt, ROE could be thought of as the return on net assets.

ROE is expressed as a percentage and can be calculated for any company if net
income and equity are both positive numbers. Net income is calculated before
dividends paid to common shareholders and after dividends to preferred shareholders
and interest to lenders.

Relatively high or low ROE ratios will vary significantly from one industry group or
sector to another. When used to evaluate one company to another similar company the
comparison will be more meaningful. Even within the same industry group,
comparing the ROE of a company that pays a large dividend with a firm that doesn’t
can also be misleading.

Net income over the last full fiscal year, or trailing twelve months, is found on
the income statement: a sum of financial activity over that period. Shareholders'
equity comes from the balance sheet: a running balance of a company’s entire history
of changes in assets and liabilities. It is considered best practice to calculate ROE
based on average equity over the period because of this mismatch between the two
financial statements.

Average shareholder equity is calculated by adding equity at the beginning of the

period to equity at the end of the period and dividing by two. Investors can use
quarterly balance sheets to calculate an even more accurate equity average.

Although there may be some challenges, ROE can be a good starting place for
developing future estimates of a stock’s growth rate and the growth rate of
its dividends. These two calculations are functions of each other and can be used to
make an easier comparison between similar companies.

To estimate a company’s future growth rate, multiply ROE by the

company’s retention ratio. The retention ratio is the percentage of net income that is
“retained” or reinvested by the company to fund future growth.
 RETURN ON EQUITY

Company IDEA AIRTEL RELIANCE

2016 10.68 6.96 11.41

2017 -3.50 -9.80 10.89

2018 -18.62 0.07 10.68

Average -3.81 -0.92 10.10

The above table shows Return on Equity values of IDEA, AIRTEL and RELIANCE
from 2016 – 2018. The same data has been shown by using graph for better
understanding. Investors can use the current ratio for their decision purpose.

15

10

0
IDEA AIRTEL RELIANCE 2016
-5 2017
2018
-10

-15

-20

-25

The data in Table reveals that RELIANCE has achieved the highest Average
Return on Equity for the data taken for the period of 2016 to 2018. The three year
average Return on Equity of RELIANCE is significantly higher (10.10) than that
of AIRTEL (-0.92) and IDEA (-3.81). If Return on Equity is negative then the
issue can be that the company may have used more debts or may have excessive
borrowings. In IDEA and AIRTEL it can be seen that Return on Equity is
 negative in the year 2017 which means that both the company are bearing loss on
the amount which the investors have invested. In the above graph it can be seen
that RELIANCE has the highest Return on Equity, hence RELIANCE is the most
efficient company which earns highest profit on the amount which equity
shareholders have invested.

EARNINGS BEFORE INTEREST AND TAX (EBIT)

Earnings before interest and taxes is an indicator of a company's profitability. One can
calculate it as revenue minus expenses, excluding tax and interest. EBIT is calculated
as:

EBIT = Revenue - Operating Expenses

or

EBIT = Net Income + Interest + Taxes

EBIT is also referred to as operating earnings, operating profit, and profit before
interest and taxes.

Earnings before and taxes measures the profit a company generates from its
operations, making it synonymous with operating profit. By ignoring tax and interest
expenses, it focuses solely on a company's ability to generate earnings from
operations, ignoring variables such as the tax burden and capital structure.

This focus makes EBIT an especially useful metric for certain applications. For
example, if an investor is thinking of buying a firm out, the existing capital structure
is less important than the company's earning potential. Similarly, if an investor is
comparing companies in an industry that operate in different tax environments and
have different strategies for financing themselves, tax and interest expenses would
distract from the core question: How effectively do these companies generate profits
from their operations?

There are different ways to go about calculating EBIT, which is not a GAAP metric
and therefore not usually included in financial statements. Always begin with total
revenue or total sales and subtract operating expenses, including the cost of goods
sold. You may take out one-time or extraordinary items, such as the revenue from the
sale of an asset or the cost of a lawsuit, as these do not relate to the business' core
operations, but these may also be included. If a company has non-operating income,
such as income from investments, this may be—but does not have to be—included; in
that case, EBIT is distinct from operating income, which, as the name implies, does
not include non-operating income.

Often, companies include interest income in EBIT, but some may exclude
it depending on its source. If the company extends credit to its customers as an
integral part of its business, then this interest income is a component of operating
income and a company will always include it. If, on the other hand, the interest
income derives from bond investments, or charging fees to customers that pay their
bills late, it may be excluded. As with the other adjustments mentioned, this one is up
to the investor's discretion, and should be applied consistently to all companies being
compared.

In the simplest terms, one can calculate EBIT by taking the net income figure from
the income statement and adding the income tax expense and interest expense back in.
Put a different way, operating expenses are subtracted from total revenue.

EARNINGS BEFORE INTEREST AND TAX

Company IDEA AIRTEL RELIANCE

2016 16.33 21.40 16.36

2017 7.34 18.74 17.97

2018 -8.52 9.30 17.37

Average 5.05 16.48 17.23

The above table shows Earnings before Interest and Tax values of IDEA, AIRTEL and
RELIANCE from 2016 – 2018. The same data has been shown by using graph for
better understanding. Investors can use the current ratio for their decision purpose.