Professional Documents
Culture Documents
Particulars S. No. Chapter 1 Research Study 1.1 Objectives of Study 1.2 ResearchMethodology 1.2.1 Research Design 1.2.2 Data collection
Chapter 2 Chapter 3
Industry analysis
Company Profile 3.1 Industry Profile 3.2 Company Profile (BSNL) 3.2.1 Board of Directors 3.2.2 Basic Service offered 3.2.3 Organisation Structure 3.2.4 Accounting Policies of 3.3 Competitors Profile 3.3.1 Bharti Airtel 3.3.2 Reliance Comm 3.3.3 Vodafone 3.3.4 Idea Cellular 3.3.5 Aircel 2.3.6 MTNL 3.3.7 BPL Mobile 3.3.8 HFCL Infotel
Chapter 4
Conceptual Framework 4.1 Essentials of Financial Statement 4.2 Parties Interested 4.3 Tools of Financial Analysis 4.3.1 Ratio Analysis 4.3.2 Cash Flow Statements Finding And Analysis 5.1 Current Ratio 5.2 Earning Per Share 5.3 Debtor Turnover Ratio
Chapter 5
Debt Equity Ratio Return on Capital Employed Price Earning Ratio Net Profit Margin Ratio Analysis of Cash Flows 5.8.1 Net Cash From operating Activities 5.8.2 Net Cash Used in Investing Activities 5.8.3 Net Cash Used in Financing Activities
Chapter 6
Conclusion 6.1 Conclusion 6.2 Suggestions Limitations Bibliography Annexure BSNL P&L (5 Years) BSNL Balance Sheet (5 Years) BSNL Cash Flows (5 Years) Bharti Airtel Balance Sheet (5 Years) Bharti Airtel P&L (5 Years) Bharti Airtel Cash Flows (5 Years) MTNL Balance Sheet (4 Years) MTNL P&L (4 Years) MTNL Cash Flows (4 Years) Idea Balance Sheet (4 Years) Idea P&L (4 Years) Idea Cash Flows (3 Years) Tata Comm P&L (5 Years) Tata Comm Balance Sheet (5 Years) Tata Comm Cash Flows (5 Years)
Chapter 1
RESEARCH STUDY
past 5 years.
Studying the relationship among the various financial factors as disclosed in the financial statements of various companies in
2. Help in planning: Financial Analysis helps in planning and forecasting. Over a period of time, a firm or industry develops certain norms that indicate future success & failure.
3. Inter- Intra firm Comparison: Ratio Analysis provides the data for inter-firm comparison as well as intra firm comparison. Ratios highlight the factors associated with successful and unsuccessful firms. They also reveal attractiveness and unattractiveness of the firm in the industry, over-valued and under-valued firms.
order to discover or revise facts, theories, applications etc. Methodology is system of methods followed by particular discipline. Thus, Research Methodology is the way how we conduct our research.
websites are considered which gives all the efficient and effective information. References for the project are from the websites and books and the companys annual reports. It is assured that the project has been completed with full dedication, sincerity and required intensity of hard work.
Exploratory research Descriptive and diagnostic research Experimental research In the present project report both primary and secondary data is taken so descriptive and
exploratory research is done. This research focuses on discovery of insights and relationships among various financial factors among various companies.Companies which are taken as a sample of Indian Telecom Industry is based on the market share.2 from the Top five companies and 2 from the Bottom five companies (Ratings have been provided to 10 companies in the telecom industry according to their respective market
Worldwide telecom industry: In the period 1950-1970 the developments in the telecom sector are best characterized by the terms: stable, steady and predictable. In terms of change this was truly evolutionary. However, a new period started in the 80-ties: a period of revolutionary change. Initiated by de-regulation in the 70-ties1, the introduction of new technologies, such as cellular and fiber optic communications, and fuelled by the widespread use of the Internet an e-world was emerging that seemed unprecedented in terms of growth. The growth attracted many and big money was flowing into the ICT sector. New e-world click & order- companies quickly surpassed the old-world bricks & mortar - companies in share value. Many new businesses were started through fresh inflow of venture capital. Wave after wave of new telecom operators emerged to challenge the status quo of the incumbents. Investments in the industry soured. Being a player in the future of the mobile eworld became a must. Auctions for 3G radio spectrum became huge cash generators for national governments. Until the wisdom behind these huge valuations became questioned; when Return on Investment was re-visited and Return on Vision became out of vogue, the boom period came to an end. In April 2000 the Internet bubble collapsed, having started in 1995.2 To adjust company operations to the new realities of the market over 485,000 jobs have been eliminated or announced to be eliminated in the telecommunications industry for the period July 2000 until February 2002 (Financial Times, 2002).3 Measured from 2000 until 2002, 94 telecommunications companies defaulted (OECD, 2003 p16), including big first-wave new entrants such as Global Crossing and established firms such as WorldCom, the single largest default at approx. US$ 31.8 billion. And the impact has not remained restricted to the telecom and internet sector. As major institutional investors, such as mutual funds and pension funds, have participated in the bubble, the fall-out is affecting the public at large.4 From the perspective of a free market economist, bubbles are to be considered as natural market phenomena, and the crash is expected to provide for the necessary correction on the excesses that were part of the boom period. Hence, the recovery should run its course without intervention. However, recognizing the special features of telecommunications as a network infrastructure, a laissez-faire attitude may not be the most desirable policy to be pursued. Consider in this respect the high expectations that surrounded the recent liberalization of the telecom sector. Politicians may perceive the current state of affairs in the sector as a market failure and may be inclined to intervene, as has been the case in other liberalized infrastructure industries.5 Furthermore, European government leaders agreed to a long-term goal of establishing the EU as a leading region in the global Information Society.6 The related Action Plan calls for the formulation and implementation of national policies that aim at the realization of an ubiquitous broadband infrastructure with access for all European citizens. The Telecom industry in India: Introduction The telecom network in India is the fifth largest network in the world meeting upwith global standards. Presently, the Indian telecom industry is currently slated to an estimated contribution of nearly 1% to Indias GDP. The Indian Telecommunications network with 110.01 million connections is the fifth largest in the world and the second largest among the emerging economies of Asia. Today, it is the fastest growing market in the world and represents unique opportunities for U.S. companies in the stagnant global scenario. The
total subscriber base, which has grown by 40% in 2005, is expected to reach 250 million in 2007. According to Broadband Policy 2004, Government of India aims at 9 million broadband connections and 18 million internet connections by 2007. The wireless subscriber base has jumped from 33.69 million in 2004 to 62.57 million in FY20042005. In the last 3 years, two out of every three new telephone subscribers were wireless subscribers. Consequently, wireless now accounts for 54.6% of the totaltelephone subscriber base, as compared to only 40% in 2003. Wireless subscribergrowth is expected to bypass 2.5 million new subscribers per month by 2007. Thewireless technologies currently in use are Global System for Mobile Communications(GSM) and Code Division Multiple Access (CDMA). There are primarily 9 GSM and 5CDMA operators providing mobile services in 19 telecom circles and 4 metro cities,covering 2000 towns across the country. Evolution of the industry-Important Milestones: History of Indian Telecommunications Year 1851 1881 1883 1923 1932 First operational land lines were laid by the government near Calcutta (seatof British power) Telephone service introduced in India Merger with the postal system Formation of Indian Radio Telegraph Company (IRT) Merger of ETC and IRT into the Indian Radio and Cable CommunicationCompany (IRCC)
1947 Nationalization of all foreign telecommunication companies to form thePosts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications 1985 Department of Telecommunications (DOT) established, an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system) 1986 Conversion of DOT into two wholly government-owned companies: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas. 1997 1999 2000 Telecom Regulatory Authority of India created. Cellular Services are launched in India. New National Telecom Policy is adopted. DoT becomes a corporation, BSNL
Scope Of Telecom Industry The telecom industry is growing at a great pace and the growth rate is expected to double with every passing year. There are many new developments in the telecomm sector, including the ingress of 3G technology that the Indian market is witnessing at present. Public and Private Players: MTNL, BSNL, VSNL are the major Public Players, whereas Airtel, Idea, Hutch, Tata, Reliance, BPL are the leading Private Players in the country. Some of them are entering foreign markets as well. The Bharti Telecom will be launching its services for the NRIs in the US with the help of Airtel CALLHOME service. The market shares of the leading public and Private Players INVESTMENT AND GROWTH: In 2005-2006, the telecom industry witnessed a growth of 21% with a total revenue of Rs. 86,720 crores, and the total investment rising to Rs. 2,00,660 crores. It is projected that the telecom industry will be enjoying over 150% growth in the next 4-6 years. The growth also requires a huge investment by the players in the sector. Bharti Airtel is planning to invest about $8 billion by the year 2010. Liberalization policy and some socio-economic factors are mainly responsible for the immense growth in the sales volumes. The lifestyle of the people has changed. They need to be connected to the other people all the time. With the lowering down of the tariffs the affordability of the mobile phones has increased. The finance sector has also come up with loans for handsets on 0% interest. Mobile services providers are also expanding their coverage area by installing more and more antennas and other equipments. The telecom sector in the country has already adopted the latest technological advancements to cater to the demands of the growing market. Telecom Expo India, Convergence India, VAS India and IPTV India being organized year to year are all efforts in this direction. Budget 2007 has brought disappointment to the telecom sector. Mobile service providers have been asked to cut down their roaming rentals as well as their long distance and international call tariffs. This has led to discontent on the part of the service providers. However, Telecom Regulatory Authority of India (TRAI) is of the opinion that this will lead to increased use of roaming, which will ultimately lead to more revenue generation. Moreover, with cheaper handsets and lesser tariffs, it is expected that by the year 2010 there will be over 500 million subscribers in the Indian telecom market. Also, the telecom industry this year will be focusing more on rural areas to connect them with the urban areas so that the farmers and the small-scale industries can have faster access to information related to weather and market conditions. EMPLOYMENT STATUS : With the coming of more and more projects, the telecom industry is going for high scale recruitments. There is a huge demand for software engineers, mobile analysts, and hardware engineers for mobile
handsets. Besides, there are ample opportunities for marketing people whose services are required to capture more and more customer base. The new projects, setting up of new service bases, expansion of coverage areas, network installations, maintenance, etc are providing more and more employment opportunities in the telecom sector Origan: India is one of the fastest growing telecom networks in the world. This is due to its high population and fast rate of growth. Rural India is still inadequate in terms of connectivity for efficient telecommunication. BSNL is one of the main public sector telecommunication companies in India. It has been rated 7th largest in the world. Hutch,BPL,MTNL,BhartiTelecom,Reliance and Tata Indicom are the other active telecommunication operators in India. Indias mobile phone industry is one of the fastest growing industries in the world. Mobile phones in India were formally launched in august 1995. For the first few years after the advent of mobile phones, monthly subscriptions were added to the tune of 0.05 to 0.1 million in India. Subsequently the subscriber base stood at 10.5 million in December 2002. The Indian mobile phone industry has entered a phase of boom due to many proactive measures taken by various licensors and regulators. Two Million mobiles subscribers were added every month in India from 2003 to 2005. The two other countries with more mobile phones then India are USA and China. The main technologies followed by India for mobile communication are global GSM and CDMA.GSM is the global system for mobile communication and CDMA is based on code division multiple access. Mobile tariffs are very low in India. Thirty two million mobile handsets were sold in India in the year 2005. Indian ring tones primarily comprise of music of Indian origin like Indian film songs and bhajans. Total revenue generated by the telecom service sector in 2004-2005 was 86,720 crore in India. This meant an increase of revenue by 21% from the previous year. Airtel covers 21.45 of subscriber base in India. Reliance is the second largest with a subscription controlling a base of 20.3%. BSNL follows closely at 18.6% and Hutch was 14.7% according to a June 2005 survey. Growth: Yes, thats true. 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% yoy. 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 has 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 countrys Internet market has been booming, Indias 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. 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. Indias rural telephone density has been languishing at around 1.9%; GSM and CDMA subscription numbers: Year GSM GSM Annual CDMA CDMA Subscribers growth Subscribers Annual growth (millions) (millions) 3.1 5.05 10.5 94% 76% 91% 0.8 -
Achievements of National Telecom Policy 1994 Need for New Telecom Policy cropped up as a result of fast change in the overall Policy 1994 and Need for New Telecom Policy cropped up since the Indian telecommunication sector grew very rapidly over the last decade and half. The meteoritic rise of the Indian telecommunication industry enforced rapid amendment of the Indian telecommunication policy as drafted in the early 1990s. The 'Telecom Regulatory Authority of India' (TRAI) and 'Department of Telecommunication' (DOT), the two main governing bodies of the Indian telecommunication industry soon realized the need for an overall revamping of the Indian telecommunication policy to The highlights of the basic telecommunication policy of India are as follows - compliment the rapid growth of this industry
To facilitate telecommunication for all Ensuring quick availability of telephone connectivity Achieve universal service access at affordable price covering all Indian villages, as early as possible Providing world class telecommunication services Solving consumer complaints, resolve disputes, and special attention to be given to public interface To provide widest possible range of services at reasonable prices To emerges as a major manufacturing base and major exporter of telecommunication equipment To protect the defense and security interests of the country
The tenth plan meets the need for new telecom policy of the Indian communication industry, which are as follows
Creating world class telecommunication infrastructure to meet the communication requirements of IT, ITES, media and other IT based industry Easy and affordable access to basic telecommunication services across all the states of India Affordable and efficient basic telephony facility to each and every applicant Provision for world class service to all uncovered and rural areas of India Establishment of modern and efficient telecommunication infrastructure to meet the requirements of modern India Continual upgradation of the Indian telecommunication sector and provide an equal opportunity for all the telecommunication service providers doing business in India Strengthening R&D on telecommunication hardware and software Efficient and unbiased spectrum management Facilitating protection of the Indian defense and security systems Facilitating the Indian telecommunication companies to reach global standards
Facilitate world class products and services at affordable prices Institutionalize the Department Of Telecommunication (DOT), Government of India and help it function as a corporate body To make telephone available within 48 hours of such demand To reach tele-density of 9.91 by the end of 31st March 2007 (which has been achieved) Facilitate reliable communication relay media to all telephone exchanges Provide high-speed data and multimedia connections using technologies like ISDN across all towns, having population strength of two lakh or more
The Achievements of National Telecom Policy 1994 and Need for New Telecom Policy initiated the following developments
Friendly Government of India economic and telecommunication policies Low operational cost Availability of world class infrastructure at a much cheaper cost Availability of huge English speaking workforce Prevalence of strong technical education amongst the majority of educated Indians Large number of science and engineering graduates Assurance of high quality output Highly skilled workforce Usage of innovative technologies Effective and efficient entrepreneurship skills Good client and service provider's relationships Creation of global brands Huge scope of business across all industries especially, in IT and ITES industries Expansion of existing relationships Ever growing domestic market, especially the rural market Huge success in overseas markets Increased electronics and hardware manufacturing in India Aggressive promotion of R&D in telecommunication Increased penetration of computers Increased utilization of Internet Growth of domestic software market Development of local language software, especially for the use in rural- India Use of Information Technology to increase productivity Use of Information Technology as a means of generating employment Increased number and quality of training facilities across India
Vision:
NEW DELHI: In May 2008, Bharti Airtel had come very close to taking over Africas largest telecom provider MTN, but couldnt clinch a deal. Now, as the world battles a deep recession, the Bharti brass must be pleased that the talks with MTN broke down. The global markets have crashed and MTNs market value has fallen 28% since then. MTN, which was also in talks with Reliance Communications, has a history of being courted by suitors but shying away from a deal. Bharti has had lady luck smile on it before too, but its not by chance that Indias largest telecom operator has been coursing through the economic slowdown without showing any signs of strain, posting strong profits and expanding its user base rapidly.
Bharti did it the hard way, through far-sighted strategy and sound execution, backed by its unmatched ability to innovate constantly and set industry benchmarks, the same way Sunil Mittal, who started off making bicycle parts, built up the company from near-obscurity in 1995 when it had launched its mobile services in Delhi and then went on to become the countrys top telco, ahead of state-owned BSNL, Reliance Communications (RCOM) and Vodafone. The benefits of the business model that we have put in place over the last few years are kicking in. We are reaping the benefits now, says Bharti Airtel CEO and joint MD Manoj Kohli. True, the Indian telecom industry mostly shrugged off the global downturn. But Bharti did it better than its peers. During OctoberDecember, its net profit jumped 25% y-o-y, while rival RCOM managed only a 2.7% rise. And it increased its market share from 23.6% at the start of 2008 to 24.7% by year end. In the stock market also, Bharti outperformed industry peers. While its share price fell by about 28% during the market meltdown, its primary competitors fared worse Ideas shares have fallen 52% during the same period, while RCOMs fell by nearly 70% during the same period. According to Mr Kohli, Bhartis current business model has been in the making since 2004, when it stunned the telecom world by outsourcing network operations, IT and call centre functions. It was an audacious move then. Today, outsourcing is a standard practice in the industry, in India and elsewhere. Bharti adopted the reverse outsourcing model where it gave out contracts to global majors rather than go in for Indian companies to save on costs. Bharti believed that outsiders could manage its core functions better than they could ever do and outsourced its networks to Ericsson and Nokia Siemens, its IT functions to IBM and its call centre operations to six leading BPOs, each of which are long-term multi-million dollar deals. Only to be copied by fascinated industry peers. Mr Kohli said, Bharti succeeded in anticipating the changes in the market and preparing for them. Bhartis principle to proactively look at the future has helped the company improve on its productivity and efficiency quarter after quarter and year after year, Mr Kohli added. Its rural drive is an example. With urban markets showing signs of stagnation, experts predict that rural India will be the new battleground for mobile market share. Ready for the task, Bharti recently launched a project to set up Airtel service centres in 4,00,000 villages across the country. In the last three months, it has set up 20,000 such outlets. Mr Kohli said Bharti owes its success to its talent. The company is no longer dependent on a single person as we have built a leadership pipeline, he said. The recent elevation of Sanjay Kapoor as deputy CEO is a case in point. Bharti has also decided to restructure its businesses into several new divisions under different CEOs. The companys overall structure as such will not change as these new divisions will be under the existing three verticals mobility, telemedia (DTH, broadband & fixed lines) and enterprise which oversees the undersea cable business, national and international long-distance services and also services large companies. Bharti has identified mobile commerce, entertainment, media, internet, enterprise services and small and medium businesses, among others to boost its non-voice services, which account for just about 10% of its mobile revenues. It has also developed a $100-million service development platform in a tie-up with IBM for companies to develop and offer applications to Airtel customers across mobile, landline, broadband and DTH service. Bharti has also roped in global experts like Joachim Horn, who was the chief technology officer of German communications major T-Mobile. Just prior to that, the telco had recently roped in B Srikanth from Unilever UK as its CFO and Shireesh Joshi from beverages and chips maker PepsiCo China to be its chief marketing head.
Analysts believe this shows the company is aiming for a big-ticket acquisition in the global market. Bharti is looking for seasoned hands who can handle the complexity of business not just within India, where the companys achieved a near global scale, but also in the global market, said BK Syngal, former CMD of Videsh Sanchar Nigam and senior principal at Dua Consulting. Telecom Policy Environment: Indian telecommunications today benefits from among the most enlightened regulation in the region, and arguably in the world. The sector, sometimes considered the poster-boy for economic reforms, has been among the chief beneficiaries of the post-1991 liberalization. Unlike electricity, for example, where reforms have been stalled, telecommunications has generally been seen as removed from mass concerns, and thus less subject to electoral calculations. Marketoriented reforms have also been facilitated by lobbying from Indias booming technology sector, whose continued success of course depends on the quality of communications infrastructure. Despite several hiccups along the way, the Telecom Regulatory Authority of India (TRAI), the independent regulator, has earned a reputation for transparency and competence. With the recent resolution of a major dispute between cellular and fixed operators (see below), Indian telecommunications, already among the most competitive markets in the world, appears set to continue growing rapidly. While telecom liberalization is usually associated with the post-1991 era, the seeds of reform were actually planted in the 1980s. At that time, Rajiv Gandhi proclaimed his intention of leading India into the 21stcentury, and carved the Department of Telecommunications (DOT) out of the Department of Posts and Telegraph. For a time he also even considered corporatizing the DOT, before succumbing to union pressure. In a compromise, Gandhi created two DOT-owned corporations: Mahanagar Telephone Nigam Limited (MTNL), to serve Delhi and Bombay, and Videsh Sanchar Nigam Limited (VSNL), to operate international telecom services. He also introduced private capital into the manufacturing of telecommunications equipment, which had previously been a DOT monopoly. These and other reforms were limited by the unstable coalition politics of the late 1980s. It was not until the early 1990s, when the political situation stabilized, and with the general momentum for economic reforms, that telecommunications liberalization really took off. In 1994, the government released its National Telecommunications Policy (NTP-94), which allowed private fixed operators to take part in the Indian market for the first time (cellular operators had been allowed into the four largest metropolitan centers in 1992). Under the governments new policy, India was divided into 20 circles roughly corresponding to state boundaries, each of which would contain two fixed operators (including the incumbent), and two mobile operators: As ground-breaking as NTP-94 was, its implementation was unfortunately marred by regulatory uncertainty and over-bidding. A number of operators were unable to live up to their profligate bids and, confronted with far less lucrative networks than they had supposed, pulled out of the country. As a result, competition in Indias telecom sector did not really become a reality until 1999. At that time the governments New Telecommunications Policy (NTP-99) switched from a fixed fee license to a revenuesharing regime of approximately 15%. This figure has subsequently been lowered (to 10%-12%), and is expected to be reduced even further over the coming years. Still, India continues to derive substantial revenue from license fees ($800 million in 2001-2002), leading some critics to suggest that the government
has abrogated its responsibilities as a regulator to those as a seller. Another, perhaps even more significant, problem with Indias initial attempts to introduce competition was the lack of regulatory clarity. Private operators complained that the licensor the DOT was also the incumbent operator. The many stringent conditions attached to licenses were thus seen by many as the DOTs attempt to limit competition. It was in response to such concerns that the government in 1997 set up the Telecom Regulatory Authority of India (TRAI), the nations first independent telecom regulator. Over the years, TRAI has earned a growing reputation for independence, transparency and an increasing level of competence. Early on, however, the regulator was beleaguered on all fronts. It had to contend with political interference, the incumbents many challenges to its authority, and accusations of ineptitude by private players. Throughout the late 1990s, TRAIs authority was steadily whittled away in a number of cases, when the courts repeatedly held that regulatory power lay with the central government. It was not until 2000, with the passing of the TRAI Amendment Act, that the regulatory body really came into its own. Coming just a year after NTP-99, the act marks something of a watershed moment in the history of India telecom liberalization. It set the stage for several key events that have enabled the vigorous competition witnessed today. Some of these events include: The corporatization of the DOT and the creation of a new state-owned telecom company, Bharat Sanchar Nigam Ltd (BSNL), in 2000; The opening up of Indias internal long-distance market in 2000, and the subsequent drop in long-distance rates as part of TRAIs tariff rebalancing exercise; The termination of VSNLs monopoly over international traffic in 2002, and the partial privatization of the company that same year, with the Tata group assuming a 25% stake and management control; The gradual easing of the original duopoly licensing policy, allowing a greater number of operators in each circle; The legalization, in 2002, of IP telephony (a move that many believe was held up due to lobbying by VSNL, which feared the consequences on its international monopoly); The introduction in 2003 of a Calling Party Pays (CPP) system for cell phones, despite considerable opposition (including litigation) by fixed operators; And, more generally, the commencement of more stringent interconnection regulation by TRAI, which has moved from an interoperator negotiations-based approach (often used by the stronger operator to negotiate ad infinitum) to a more rules-based approach. All of these events have created an impressive forwardmomentum in Indian telecommunications, resulting in a vigorously competitive and fast-growing sector. India has also suffered from its fair share of regulatory hiccups. Many operators (mobile players in particular) still complain about the difficulties of gaining access to the incumbents (BSNL) network, and the governments insistence on capping FDI in the telecom sector to 49% (a move made in the name of national security) limits capital availability and thus network rollout. In addition, ISPs, who were allowed into the market under a liberal licensing regime in 1998, continue to hemorrhage money, and have been pleading with the government for various forms of relief, including.
the provision of unmetered phone numbers for Internet access. Despite initially impressive results, the growth of Internet in the country has recently stalled, with only 8 million users. Broadband penetration, too, remains tiny. Unified Licensing But perhaps the biggest and, until recently, most intractable regulatory problem has been the drawn-out battle over limited mobility telephony. This imbroglio began in 1999, when MTNL sought permission from TRAI to provide CDMA-based WLL services with limited mobility. GSM cellular operators were soon up in arms, arguing that limited mobility was simply a backdoor entry into their business. Moreover, fixed operators had paid lower license and spectrum fees than cellular ones; were not required to pay access charges for cell-to-fixed calls (unlike their cellular counterparts); and, amidst accusations of cross-subsidization, were charging considerably lower rates than the cellular operators. The resulting conflict dragged on in the courts and in the political arena for years. Fixed operators including new entrants Reliance and Tata Teleservices claimed that they were being prevented from providing a cheap service that would drive penetration and be of benefit to the common man; cellular players bitterly opposed what they perceived as unequal regulatory treatment for two kinds of operators who were in fact offering the same service. The real victim, of course, was the Indian telecommunications market, which suffered from investor perceptions of regulatory confusion and operator in-fighting. In late 2002, for example, thousands of mobile users in New Delhi were for a time cut off from the fixed-line network when MTNL shut down interconnection for cellular companies. (MTNL later attributed the incident to a technical snag.) It was not until late 2003 that the issue was finally resolved, under considerable government pressure, when cellular operators agreed to withdraw their many cases against the fixed-line operators. Fixed operators would in effect be allowed to enter the mobile business; in return, the government granted cellular players several concessions, including lower revenue-share arrangements estimated to total over $210 million. Perhaps most notably, the government announced its intention to adopt a unified access licensing regime, which would in the future provide a single, technology-neutral license for fixed and cellular operators. The hope is that this new license category will prevent a repeat of the recent controversy, and allow new technologies to enter the Indian market without requiring a wholesale rewrite of licensing laws. MAJOR MARKET TRENDS: The telecoms trends in India will have a great impact on everything from the humble PC, internet, broadband (both wireless and fixed), cable, handset features, talking SMS, IPTV, soft switches, and managed services to the local manufacturing and supply chain. This report discusses key trends in the Indian telecom industry, their drivers and the major impacts of such trends affecting mobile operators, infrastructure and handset vendors. Higher acceptance for wireless services: Indian customers are embracing mobile technology in a big way (an average of four million subscribers added every month for the past six months itself). They prefer wireless services compared to wire-line services, which is evident from the fact that while the wireless subscriber base has increased at 75 percent CAGR from 2001 to 2006, the wire-line subscriber base growth rate is negligible during the same period. In fact, many customers are returning their wire-line phones to their service providers as mobile
provides a more attractive and competitive solution. The main drivers for this trend are quick service delivery for mobile connections, affordable pricing plans in the form of pre-paid cards and increased purchasing power among the 18 to 40 years age group as well as sizeable middle class a prime market for this service. Some of the positive impacts of this trend are as follows. According to a study, 18 percent of mobile users are willing to change their handsets every year to newer models with more features, which is good news for the handset vendors. The other impact is that while the operators have only limited options to generate additional revenues through value-added services from wire-line services, the mobile operators have numerous options to generate non-voice revenues from their customers. Some examples of value-added services are ring tones download, coloured ring back tones, talking SMS, mobisodes (a brief video programme episode designed for mobile phone viewing) etc. Moreover, there exists great opportunity for content developers to develop applications suitable for mobile users like mobile gaming, location based services etc. On the negative side, there is an increased threat of virus spread through mobile data connections and Bluetooth technology in mobile phones, making them unusable at times. This is good news for anti-virus solution providers, who will gain from this trend.
MERGERS: Demand for new spectrum as the industry grows and the fact the spectrum allocation in done on the basis of number of subscribers will force companies to merge so as to claim large number of subscribers to gain more spectrum as a precursor to the launch of larger and expanded services. However it must also be noted that this may very well never happen on account of low telecom penetration.
NEW CIRCLES: As mentioned earlier there is a significant number of tier-2 and tier 3 cities that can accommodate more players we expect aggressive response by the companies to such opportunities as and when they are created. Constraints: * Slow pace of the reform process . * It would be difficult to make in-roads into the semi-rural and rural areas because of the lack of infrastructure. The service providers have to incur a huge initial fixed cost to make inroads into this market. Achieving break-even under these circumstances may prove to be difficult. * The sector requires players with huge financial resources due to the above mentioned constraint. Upfront entry fees and bank guarantees represent a sizeable share of initial investments. While the criteria are important, it tends to support the existing big and older players. Financing these requirements require a little more liberal approach from the policy side.
* Problem of limited spectrum availability and the issue of interconnection charges between the private and state operators. Major Players : There are three types of players in telecom services: -State owned companies (BSNL and MTNL) -Private Indian owned companies (Reliance Infocomm, Tata Teleservices,) -Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communications)
Chapter 3
COMPANY PROFILE
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.
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
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, Bharti Teleservices, Hutchison Essar, BPL, Tata, Idea, etc. With the growth of telecom services, telecom equipment and accessories
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
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 countrys Internet market has been booming, Indias 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. Indias 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.
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
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
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.
2. ISDN: Integrated Service Digital Network Service of BSNL utilizes a unique digital network providing high speed and high quality voice, data and image transfer over the same line. It can facilitate both desktop video
3. Intelligent Network Service: Intelligent Network Service (In service) offers various value-added services such as: - Free Phone Services (FPH) - India Telephone Card (Prepaid Card) - Account Card Calling (ACC) - Virtual Private Network (VPN) - Tele-voting - Premium Rate Service (PRM) - Universal Access Number (UAN)
4.
Sulabh: It is the best available incoming-only plan. If anyone require the landline b-fone predominantly for receiving incoming calls only, BSNL brings you Sulabh Plan. The rentals in this plan are extremely low. If you desire to make outgoing calls, this facility can also be given separately (or one can also use ITC Cards with Sulabh Plan). These plans are now very popular.
5. WLL (Wireless Land Line): There are two versions of WLL. These are explained as follows:
WLL Fixed (FWT): It is the Fixed Wireless Transmission. In this case, there is a small box fitted with a small antenna at ones premises and a normal telephone instrument is connected to the box. There is no Telephone
WLL Mobile: In this case, Subscriber can carry a small handset of CDMA technology. There is no antenna or any other equipment at your premises. Branded as Tarang, this is the most reliable and affordable service giving
6. Mobile Services: BSNLs Cellular Service is the Indias growing Cellular Service. BSNLs Cellular Service has taken the cellular telephone to the masses through innovative technology and strategic pricing. This ambitious service uses state-of-the-art GSM technology to attain global excellence and leadership. BSNLs entry into this sector has brought GSM cellular service at an affordable cost to the common man. Customers have respond tremendous faith in BSNL and it has enrolled over 1.07 crores Cellular customers.
8. BSNL Broadband: The Broadband service from BSNL is widely used by almost all the companies of India.
2. REVENUE RECOGNITION
Income from services is accounted for on accrual basis and in conformity with
services provided by BSNL to DoT are neither being billed nor provided for.
d) Sale proceeds of scrap arising from maintenance and project works are taken into
ascertained.
collection basis.
3. FIXED ASSETS
3.1 Fixed assets are carried at cost less depreciation. Cost includes directly related establishment and other expenses including employee remuneration and benefits, directly
3.2 Expenditure on replacement of assets, equipments, instruments and rehabilitation works is capitalized if, in the opinion of the management, it results in enhancement of
wherever applicable. 3.4 The cost of stores and materials at the time of issue to a project is debited to CWIP. 3.5Cables are capitalized as and when ready for connection to the main system.
3.6Intangible assets are stated at cost of acquiring the same less accumulated depreciation
/amortization.
4. DEPRECIATION/AMORTIZATION
Depreciation is provided based on the Written Down Value Method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for Subscriber Installation. The Subscriber Installation is depreciated over the useful life of 5 years on Written Down Value method. Assets costing up to Rs. 5,000 are depreciated fully in the year of purchase. Similarly, partition works costing up to Rs. 2,00,000 are depreciated fully in the year of construction. The depreciation on machinery & tools used both for project and maintenance work is charged to profit and loss account instead of capitalization. All telephone exchange buildings, administrative offices and captive consumption assembling premises/workshops are considered as normal building and not as factory building. Accordingly depreciation is charged uniformly. Intangible assets such as Entry License Fee for Telecom Service operations are amortized over the license
period (i.e. 20 years) and standalone computer software applications are amortized over the license period subject to maximum of 10 years as per straight line method.
5. IMPAIRMENT OF ASSETS
Assets, which are impaired by disuse or obsolescence, are segregated from the concerned assets category and shown as Decommissioned Assets and provision made for the loss,
if any, due to the difference between their net carrying cost and the net realizable value.
6. INVESTMENTS
Long-term investments are carried at cost, after providing for any diminution in value, if
7. INVENTORIES
Inventories are valued at cost or net realizable value as the case may be - cost ascertained generally on weighted average method; obsolete/non moving inventories are valued at net
realizable value.
8. TAXES ON INCOME
Taxes on Income for the current period are determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961. In accordance with the AS-22, Deferred Tax Liability is recognized on the timing differences between accounting income and the taxable income for the period taking into consideration the contents of Accounting Standard Interpretations 3 and quantified using the tax rates in force or substantively enacted as on the Balance Sheet date. Deferred Tax Assets are recognized and carried forward to the extent there is a virtual certainty that
9. PROVISIONS
Provisions are recognized when the Company has a present obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the
10. CONTINGENT LIABILITIES Liabilities, though contingent, are provided for if there are reasonable chances of
maturing such liabilities as per management. Other contingent liabilities and claims, not
2.3
COMPETITOR PROFILE
Market Share of Telecom Companies as on 31 Jan09
st
2.3.1 BHARTI AIRTEL LTD. Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti
Group has a diverse business portfolio and has created global brands in the telecommunication sector. Airtel comes from Bharti Airtel Limited, Indias largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles. Bharti Airtel since its inception has been at the forefront of technology and has steered the course of the telecom sector in the country with its world class products and services. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBUs) - Mobile Services, Airtel Telemedia Services & Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 95 cities and has recently launched India's best Direct-to-Home (DTH) service, Airtel digital TV. The Enterprise services provide end-to-end telecom solutions to corporate customers and national & international
long distance services to carriers. All these services are provided under the Airtel brand.
The company served an aggregate of 88,270,194 customers as of December 31, 2008; of whom 85,650,733 subscribed to GSM services and 2,619,461 use the Telemedia Services either for voice and/or broadband access delivered through DSL. Bharti Airtel is the largest wireless service provider in the country, based on the number of subscribers as of December 31, 2008. They also offer an integrated suite of telecom solutions to their enterprise customers, in addition to providing long distance connectivity both nationally and internationally. They have recently forayed into media by launching their DTH and
IPTV Services. All these services are rendered under a unified brand "Airtel".
million customers.
Their 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. Our constant endeavour is to achieve customer delight by enhancing the
Reliance Mobile (formerly Reliance India Mobile), launched on 28 December 2002, coinciding with the joyous occasion of the late Dhirubhai Ambanis 70th birthday, was among the initial initiatives of Reliance Communications. It marked the auspicious beginning of Dhirubhais dream of ushering in a digital revolution in India. Today, the company can proudly claim that they were instrumental in harnessing the true power of information and communication, by bestowing it in the hands of the common man at
affordable rates.
They endeavour to further extend their efforts beyond the traditional value chain by
developing and deploying complete telecom solutions for the entire spectrum of society.
It was established in the year 2004 as Reliance Infrastructure Developers Private Limited, Reliance Communications started laying 60,000 route kilometers 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
the Essar Group as its principal joint venture partner for the Indian market.
Essar Global Limited (EGL) is a diversified business group spanning the manufacturing and services sectors of Steel, Energy, Power, Communications, Shipping & Logistics, and Projects. The group has operations and investments in India, Canada, USA, Africa, the Middle East, the Caribbean and South East Asia and employs 30,000 people
worldwide.
Vodafone Essar Ltd provides services like 2G, which are based on 1800 Mhz and 900Mhz GSM digital technology. They offers voice and data services. In addition, they offers postpaid connections activation, prepaid SIM cards and recharge coupons sale, service activation/deactivation, postpaid tariff plan change, customer query resolution, prepaid/postpaid SIM card replacement and upgradation, mobile number change, and
DEA Cellular is a publicly listed company, having listed on the Bombay Stock Exchange
(BSE and the National Stock Exchange (NSE) in March 2007. Idea Cellular Ltd. is India's leading GSM mobile services operator. It has licenses to operate in 11 circles. The company has a customer base of over 17 million. It is the first cellular company to launch music messaging with Cellular Jockey, Background Tones, Group Talk, a voice
portal with Say IDEA and a complete suite of mobile email Services.
A brand known for many firsts, Idea was the first to launch GPRS and EDGE in the country. Idea has received international recognition for its path-breaking innovations when it won the GSM Association Award for "Best Billing and Customer Care Solution"
IDEA Cellular is part of the Aditya Birla Group, India's first truly multinational corporation. The group operates in 25 countries, and is anchored by over 1,25,000
The Indian telecommunications market for mobile services is divided into 22 "Service Areas" classified into "Metro", Category "A", Category "B" and Category "C" service areas by the Government of India. These classifications are based principally on a Service
Customer Service and Innovation are the drivers of this Cellular Brand. A brand known for their many firsts, IDEA is the only 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.
Aircel commenced operations in 1999 and became the leading mobile operator in Tamil Nadu within 18 months. In December 2003, it launched commercially in Chennai and
Aircel began its outward expansion in 2005 and met with unprecedented success in the Eastern frontier circles. It emerged a market leader in Assam and in the North Eastern provinces within 18 months of operations. Till today, the company gained a foothold in 14 circles including Chennai, Tamil Nadu, Assam, North East, Orissa, Bihar, Jammu & Kashmir, Himachal Pradesh, West Bengal, Kolkata, Kerala, Andhra Pradesh, Karnataka
and Delhi.
The Company has currently gained a momentum in the space of telecom in India post the allocation of additional spectrum by the Department of Telecom, Govt. of India for 13 new circles across India. These include Delhi (Metro), Mumbai (Metro), Andhra Pradesh,
Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra & Goa, Rajasthan, Punjab, UP (West) and UP (East).
Aircel has won many awards and recognitions. Voice and Data gave Aircel the highest rating for overall customer satisfaction and network quality in 2006. Aircel emerged as the top mid-size utility company in Business worlds List of Best Mid-Size Companies
in 2007. Additionally, Tele.net recognized Aircel as the best regional operator in 2008.
With over 16 million customers in the country, Aircel, the fastest growing telecom company in India, has revved up plans to become a full-fledged national operator by end of 2009.
2.3.6 MTNL
Mahanagar Telephone Nigam Limited (MTNL) was set up in 1st April of the year 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 (the political capital) and Mumbai (the business capital of India). 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.
MTNL as a company, over last nineteen years, grew rapidly by modernizing the network, incorporating the State-of-the-art technologies and a customer friendly approach. The Company providing various types of telecommunication services including Telephone, telex, wireless, data communication, telematic and other like forms of communication (Internet).
First digital exchange world technology brought to India by the company during the year
1986. Phone Plus services was offered by the company in the year 1988, it gives
multiplied benefits to telephone users. During the year 1992, the company introduced Voice Mail Service. MTNL had introduced the Integrated Services Digital Network (ISDN) services in the period of 1996. Apart from this IVRS (Interactive Voice Response System) like local assistance changed number information, and fault booking system ensuring round the clock service, a CD-ROM version of the telephone directory and an on-line directory enquiry through PC was introduced during the year 1997. To facilitate the clientele, MTNL launched the country's first toll-free service in Delhi in the period of 1998. During the year 1999, MTNL brought in the most widely using service called
During the year 2001, the company launched GSM Cellular Mobile service under the brand name Dolphin and in the same year MTNL also launched Wireless in Local Loop
The Company established Wi-Fi & digital certification services in the identical year. MTNL bagged the award for excellence in cost reduction in the year 2004. State of the art training centre of the company 'CETTM' was commissioned in the year of 2004. The Company introduced the broadband services under the brand name of 'TRI BAND' during the year 2005. MTNL-STPI IT Services Ltd is a 50:50 Joint Venture between Software Technology Parks of India (STPI) and the company. The Company has restructured Millennium Telecom Ltd (MTL) as a Joint Venture company of MTNL and
To remain market leader in providing world class Telecom and IT related services at affordable prices, the company partaking its all efforts in the same business area and MTNL wants to become a global player, also find a place in the Fortune 500' companies.
The products and services offered by BPL Mobile Communications Limited are as
Postpaid Connections Prepaid Recharge Coupons Bill Payments Value Added Services (VAS) Service Inquiries SIM Replacements Handset Sales
Other group companies are Kothari Sugars and Chemicals and Madras Safe Deposit. In Sep.'94, it came out with a rights issue of 21.79 lac shares (premium: Rs 30) aggregating Rs 8.72 cr, to augment long-term working capital. The company is mainly engaged in hire purchase, lease financing and investments. Its clients include individuals, firms as
ITI's business activities include sugar, petrochemicals, industrial alcohol, etc. It has two subsidiaries -- ITI Pioneer AMC and ITI Capital Markets. ITI Pioneer AMC has promoted Kothari Pioneer Mutual Fund. ITI has invested 55% of its capital in ITI Pioneer
AMC and the remaining 45% has been subscribed to by Pioneering Management
Corporation, US. During 1995-96, ITI Pioneer AMC Limited ceased to be a subsidiary of the company. During 1997-98, The Companys holding in ITI Capital Market Ltd was
During 2003-04, The Company launched its Prepaid Mobile product and a complete range of innovative value Added Services and Data products were launched in May 2004, by the introduction of DSL-high speed Internet product. The company became the first service provider to have launched DSL services in the state of Punjab and Chandigarh. During 2004-05, The Company expanded its services to 125 cities/towns with 2.47 lacs
subscribers in Punjab.
The company is planning a venture into Video and Cable TV Services and making triple play services by an expansion into the neighbouring states of Punjab. A wholly owned subsidiary, Connect Broadband Services Limited was formed on July 2004, for the above
purpose.
The Company's services namely, Fixed Line Telephoney, Mobile Telephoney, Broadband Internet Access and Data Networking Access are offered under the brand
name 'CONNECT'.
Chapter 4
CONCEPTUAL FRAMEWORK
Financial Statements are the summarized statements of accounting data produced at the
end of the accounting process by an enterprise through which it communicates accounting information to the external users. The external users can be investors, lenders, suppliers and trade creditors, customers, government and their agencies, public at large and employees. Analysis of Financial Statements is a systematic process of the critical examination of the financial information contained in the financial statements in order to
Customarily, a set of financial statements include: (i) (ii) (iii) Balance Sheet Profit and Loss Account Schedules and notes forming part of the Balance Sheet and Profit & Loss Account
4.1
Essentials of Financial Statements 1. Accurate information 2. Understandability 3. Comparable 4. Verifiable 5. Relevant 6. Timeliness
4.2
1. Liquidity Ratios Liquidity implies firms ability to pay its debts in short run. This ability can be
measured by Liquidity Ratios. Current Ratio and Quick Ratio are the two ratios which directly measure Liquidity. Receivables turnover Ratio and Inventory Turnover Ratio
A. Current ratio =
Current assets which are converted into cash within one year. Current liabilities are liabilities which are to be repaid within a period of 1 year.
B. Quick ratio or Liquid ratio or Acid Test ratio = Quick Assets/Liquid Assets Current Liabilities Quick Assets = Current Assets Inventories- Prepaid expenses Ratio of quick assets to quick liabilities. Quick assets which can be converted into cash very quickly. Quick liabilities are liabilities which have to be necessarily paid with in 1 year. IDEAL RATIO = 1:1
A. Accounts Receivable Turnover ratio or Debtors Turnover Ratio = Net Credit Sales Average Accounts Receivables Average Accounts Receivables = Opening receivables + Closing receivables 2 It shows the Relationship between debtors and sales
It indicates no. of times stock has been turned into sales in a year Ideal Ratio = 8 Cost of goods sold = Sales gross profit Average Inventory Opening Stock + Closing Stock 2 Stock Conversion Period = Cost of goods Sold * No of days in a year/Average Inventory =
Average Creditors = Opening Creditors + Closing Creditors 2 Relationship between Creditors and Purchases 3. Profitability or Efficiency Ratios These Ratios measure the efficiency of forms activities and its ability to generate profits. (i) (ii) (iii) Gross Profit Margin Ratio Net Profit Margin Ratio Return On Equity
(i)
Gross Profit = Sales Cost of goods sold Net Sales = Sales Sales Return - Excise Duty There is no Ideal Ratio. Higher the ratio better will be the performance of the business.
(ii)
It measures the overall efficiency of production, administration, selling, financing, pricing and tax management. It shows the result of overall operation of the firm.
4. Ownership Ratios Capital Structure Ratios a) Debt Equity Ratio = Debt Equity Long Term Liabilities + Current Liabilities Share Holders Funds
Ratio 2 or Less Exposes Its Creditors Lesser Risk Ratio >2 Exposes Its Creditors Higher Risk
reflects the earning capacity of the company and cash reflects its liquidity position.
CASH FLOW is the movement of cash and its equivalents. It includes the inflow and the outflow of cash during a particular period. All transactions which lead to increase in cash and cash equivalents are classified as inflows of cash and all those transactions which
lead to decrease in cash and cash equivalents are classified as outflows of cash. Cash Flow Statement is prepared with an objective to highlight the sources and uses of cash and cash equivalents for a period. Cash Flow Statement is classified under operating activities, investing activities and financing activities.
Chapter 5
RATIO ANALYSIS
S. No. 1
2
2008-09
2009-10
3
4
Figure 5.1
payable, etc.
A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties. An increase in the current ratio represents improvement in the liquidity position of the firm while a decrease in the current ratio represents that there has been a deterioration in the liquidity position of the firm. A ratio equal to or near 2 : 1 is considered as a standard or normal or satisfactory. The idea of having double the current assets as compared to current liabilities is to provide for the delays and losses in the realization of current assets. However, the rule of 2 :1 should not be blindly used while making interpretation of the ratio. Firms having less than 2 : 1 ratio may be having a better liquidity than even firms having more than 2 : 1 ratio. This is because of the reason that current ratio measures the quantity of the current assets and not the quality of the current assets. If a firm's current assets include debtors which are not recoverable or stocks which are slow-moving or obsolete, the current ratio may be high but it does not
Current Ratio of BSNL is increasing for each subsequent year i.e. from 1.75 in year
2004-05 to 2.25 in 2008-09. Forecast on the basis of regression analysis for the year 2009-10 current ratio is 2.63. This indicates that the company can successfully pay off its debt while at the same time still have cash left over to continue operating. This is also because of slow nature of Debt collection which makes company less liquid than what it
The Current Ratio of MTNL and Tata Telecom is flatter over the subsequent year which means company is maintaining significant liquidity over the period of time. Their projected current ratio of the year 2009-10 is somewhat similar to the 2008-2009 i.e. 1.37
is projected for 2009-10 and 1.35 is the actual of 2008-09 for the MTNL.
Current Ratio of Bharti Airtel Ltd. is 0.69 for the year 2008-2009. This means that the company is having fewer assets to cover the liability and also the investors should be
weary of the fact that the company cannot pay off its short-term debt if necessary
Current Ratio of IDEA is declining over the period of time i.e. 2.45in the year 2004-05 to .36 for the year 2008-2009 and projected to be reduced till 0.21 for the year 2009-10. This means that the company is having fewer assets to cover the liability and also the investors should be weary of the fact that the company cannot pay off its short-term debt if necessary and hence companys liquidity position is very bad as compared to any other
telecom operator.
Conclusion From the above figure we can easily state that among all the telecom operator BSNL is having highest current ratio and it represent that BSNL is having very good liquidity and can pay off their short term liability very easily as they are marinating huge cash reserves.
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
15.65
15.05 26.54 6.53 0.1
15.28
9.21 16.83 10.62 0.56
14.03
7.4 16.44 21.27 1.94
4.44
6.46 10.68
32.9
1.15
5.45 18.1 40.79 3.96
1.08
2.129 10.809 49.662 5.44
3
4
3.96
Figure 5.2
market with improved technology and made tariff wars to attract the customers.
EPS of Bharti Airtel have been increased significantly over the years i.e. 6.53 (200405) to 40.79 (2008-09) and projected to be 49.662(2009-10).This is because of
improvement of technology by the company over the years as compared to other players like BSNL which made the company to capture the market share of these companies who
Conclusion
From Earning per Share perspective Bharti Airtel is considered to be most attractive company as the companys earning potential have been increased irrespective of the
S. No. 1
2
3
4
Figure 5.3
to firm. Debtor Turnover Ratio of BSNL is 6.41 for the year 2008-2009. So the debtor velocity is 365/6.41 which comes out as 56.94 days i.e. BSNL takes on an average 57 days to collect its money back from the debtors, which is again higher than the industry standards. Projected Debtor turnover for 2009-10 to improve and reach to 6.74 which mean on average 54 days to convert the debtors into cash.
Debtor Turnover Ratio of Bharti Airtel Ltd. is 12.78 for the year 2008-2009. So the
debtor velocity is 365/12.78 which comes out as 28.56 days i.e. Bharti takes on an average 28 days to collect its money back from the debtors, which is again lower than as compared to the industry. Projected Debtor turnover ratio to improve and reach to 13.41 which mean 27 days to convert debtor into cash.
Debtor Turnover Ratio of IDEA is 47.33 for the year 2008-2009. So the debtor velocity is 365/47.33 which comes out as 7.71 days i.e. IDEA takes on an average 8 days to collect its money back from the debtors, which is a good sign for the company and highest amongst the industry. Projection for 2009-10 is 55.10 which means only 6 days are taken to convert debtors into cash.
Debtor Turnover Ratio for Tata Telecom is worse amongst the industry and its position to convert debtors into cash has been deteriorating over the years ie from 6.3 in 2004-05 to 3.12 in 2008-09 which means now they take 117 days to convert debtors into cash. So it is the sign of unattractiveness of the company.
velocity is 365/5.36 which comes out as 68 days i.e. MTNL takes on an average 68 days to collect its money back from the debtors, which is again higher when compared to the industry standards of 57 days (BSNL).
Conclusion Among all the players of telecom industry Idea and Bharti both have good liquidity position because their ability to convert debtors into cash is better from any other player in the industry which also signifies that their risk of loss due to bad debt will becomes low. BSNL is maintaining very low debtor turnover ratio which can be because of liberal credit which they offer to their customers.
2008-09
0.27
0.34 0.28
1.525
Figure 5.4
position.
Debt-to-Equity Ratio of BSNL is 0.27 for the year 2008-09 which means that company is using very less debt instruments while it is relying more on the shareholders capital.
This also indicates the companys assets are primarily supplied with equity. Debt-to-Equity Ratio of Tata telecom is 0.34 for the year 2008-2009 which means that company is using its debt instruments in very less quantity while it is relying more on the shareholders capital. There is the continuous trend in the use of debt instrument by the company ie. Company was not using debt in 2004-05 and .02 in 2005-06 and expected to be .39 till 2009-10. Debt-to-Equity Ratio of Bharti Airtel Ltd. is 0.28 for the year 2008-2009 which means that company is not using its debt instruments while it is relying more on the shareholders capital. This also indicates the companys assets are primarily supplied with equity.
Debt-to-Equity Ratio of Idea cellular is 1.52 for the year 2008-2009, which means that
company using more of debt instruments. This also indicates the companys assets are
Debt-to-Equity Ratio for MTNL is 0 for the year 2009-2010, which means the company is totally dependent on Equity.
Conclusion It can be concluded that all the major telecom companies are relying more on the equity capital and not using debt instrument as the major source for financing the assets. Public players like MTNL are not using at all and other companies like BSNL are using them in very low quantity because of risky nature of return of telecom sector over the period of time.
2004-05 10.09
2005-06 9.94
2006-07 9.05
2007-08 4.97
2008-09 1.46
3
4
10.16 11.41
19.27
5.95 11.52
20.74
6.77 10.28
29.06
6.48 6.53
27.95
4.785
6.23
28.4
7.52
10.44
14.96
16.92
20.64
Figure 5.5
says the Return on capital will fall in the coming years and will be around .433 percent.
Return on Capital Employed Ratio of MTNL is 4.785 for the year 2008-2009, which indicate that the company is earning 4.8 percent return on the total capital employed that consists of fixed assets , investments and net working capital. Projected return on capital
Return on Capital Employed Ratio of Tata telecom is 6.23 for the year 2008-2009, which indicate that the company is earning 6.2 percent return on the total capital
employed that consists of fixed assets, investments and net working capital. Projected return on capital is even worse ie. 4.58 For 2009-10.
Return on Capital Employed Ratio of Bharti is 28.4 for the year 2008-2009, which indicate that the company is earning 28.4 percent return on the total capital employed that consists of fixed assets , investments and net working capital. Projected return on capital is even better i.e. 32.76 For 2009-10. Company is having positive trend of return on capital employed.
Return on Capital Employed Ratio of Idea is 20.64 for the year 2008-2009, which indicate that the company is earning 28.4 percent return on the total capital employed that consists of fixed assets , investments and net working capital. Projected return on capital
is even better ie. 23.91 for 2009-10.It is the one of the few company in telecom sector
Conclusion
Return on capital employed is one of the key ratios that determine the fate of the company in the future. Through the graphs we can easily see that most of the companies
are having negative trend in the past years due to their inability to meet the competition
and rapid changes in technological environment. Only few of the private players like Bharti and Idea have improved their return on capital and have positive trend in the returns over the past 5 years. So it is obvious that for the survival of the major public players like BSNL and MTNL rapid changes in strategies need to be adopted and structure and polices adopted by Bharti and IDEA needs to be considered and reviewed by them.
2005-06 59%
5% 7%
200607 34%
4% 7%
2008-09 2009-10 2%
1%
7%
3
4
27% 18%
35% 23%
28%
39%
Figure 5.6
In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a
utility company (low P/E) as each industry has much different growth prospects.
Conclusion From the figure 4.6 we can easily state that only expectation of investors of Bharti and Idea is growing i.e. the P/E ratio of Bharti Airtel and Idea is growing with each successive year but expectation from Idea is growing at increasing rate which means idea is one of the emerging leader in the industry and its expectations have been outperformed from the entire industry i.e. According to the projection of 2009-10 P/E of Bharti is 31% whereas Idea is 48%. P/E of BSNL was the highest in 2005-06 when it was the leader of the industry but as the time passes expectation of the investors have been declined and now it is only 8 % and projected to be only 5%.
S. No. 1
2
2005-06 24.7
9.7
2006-07 22.5
8.5
2008-09
2009-10
3
4
12.1 17.8
6.2
-3.88
1.26 7.2
26.864
24.83
Figure 5.7
projection company would be in net loss in 2009-10 and the ratio would be around -3.88.
Net Profit Ratio of Bharti Airtel Ltd. is 22.58% for the year 2008-2009 which is higher in comparison with the industry ratio, so this goes to show the efficiency of the operation of the company. Companys trend line shows that company is earning greater profits in each successive year which makes company attractive in the industry. If the trend continues than projected ratio for 2009-10 will be 26.86 % .
Net Profit Ratio of IDEA is 20.2 for the year 2008-2009 which is higher in comparison
with the industry ratio. According to the previous five year trends this company is one of the fastest growing company and its profits are increasing at increasing rate as compared to Bharti Airtel. So projection for 2009-10 will be 24.83 through regression analysis.
Net Profit Ratio of MTNL is 3.9 for the year 2008-2009, which is lower in comparison
with the industry ratio. It shows the inefficiency amongst the public sector undertaking. Profits of the company are decreasing at an increasing rate which shows that highly negative trend for the company and if it continues than projected ratio for 2009-10 will be 1.26.
Net Profit Ratio of TATA Telecom is 13.25 for the year 2008-2009, which is lower in comparison with the industry ratio. Profits of the company is rebounded the year 2008-09 but on the whole company is providing negative trend line of its net profits and if it continues than projected ratio for 2009-10 will be 7.2 . Conclusion: Net profit ratio shows that Bharti Airtel and Idea cellular are having positive trend in past five years. Companys like BSNL and MTNL have to work hard to break out their negative trend. Completely new attitude and professional management have to be adopted by these public sector undertakings to compete with the private players like Bharti & Idea.
2004-05
2005-06
2006-07
2007-08
3
4
17469.6 18709.05 14139.96 10981.84 6843.81 4935.215 1212.71 213.31 357.64 2487.81 2060.275 2457.238 323.24 1013.78 559.2 303.08 1086.67 902.042 3005.89 4547.2 8107.95 10459.85 11853.15 14676.96
---822.15 1605.11 2502.22 3170.496
4010.531
Interpretation Cash from operations represents the inflow of cash from primary activities of business.
From the above figure it is clearly stated that Cash from operations is highest of BSNL 17496.6 cr in 2004-05 but gradually it have been decreased to 6843.81cr which represents the loss of revenue by the company in its primary activities. On the other hand Companies like Bharti and Idea have increased their cash from operations in each subsequent year and gained majority of revenue of telecom sector. In 2004-05 Bharti Airtel is having 3005.89 cr as cash from operations which have increased to 11853.15 cr
So, Public sector companies like BSNL and MTNL have to take cost cutting measures as
adopted by Bharti and Idea to gain the revenues from its business.
S. No. 1
2
2004-05
2005-06
2006-07
2007-08
2008-09
3
4
6,478.17 6,500.83 3,266.88 3,724.85 7,438.14 785.01 277.08 259.74 692.32 429.69 716.69 2,005.71 (76.44) 894.19 647.83 2,330.30 5,000.30 7,975.10 11,648.00 10,894.00 ---286.94 2,275.09 5,956.18 7,993.26
Interpretation Cash used in investing activities represents cash outflow in procurement of Long term
assets which will yield return in the future. From the above figure it is clearly stated that Cash used in investing activities is highest of BSNL 6478 cr in 2004-05 but gradually it have been decreased which represents the lack of investments in long term assets by the company as compared to other players in the industry. On the other hand Companies like Bharti and Idea have increased their investments in assets in each subsequent year and due to which they have enjoyed better returns in telecom sector. In 2004-05 Bharti Airtel
is having 2330.30 cr as cash from operations which have increased to 10894 cr in 2008-
S. No. 1
2
2009-10
3
4
Interpretation Cash used in financing activities represents the outflow of cash for the purpose of
procurement of funds for business. From the above figure it is clearly stated that Cash used by the BSNL in financing activities is highest in 2004-05 and it have been increasing in each subsequent years which represent that BSNL is continuously engaged in payment of dividends and interest for the borrowed funds and they are not raising funds from market. On the other hand Companies like Bharti and Idea have decreased their cash used in financing activities in each subsequent year which means that they have raised equity and debt in the subsequent years to fund their assets due to which cash from financing activities is increased in each year , which is good indicator for these
companies
Chapter 6
CONCLUSION
Conclusion
From the above finding and analysis various inferences can be drawn out which are as follows : BSNL is having highest current ratio which represents that BSNL is having very
good liquidity position and can pay off their short term liability very easily as they
P/E of BSNL was the highest in 2005-06 when it was the leader of the industry
but as the time passes expectation of the investors have been declined and now it
in telecom sector.
Cash used in financing activities is highest in 2004-05 and it have been increasing in each subsequent years which represent that BSNL is continuously engaged in payment of dividends and interest for the borrowed funds and they are not raising funds from market. On the other hand Companies like Bharti and Idea have decreased their cash used in financing activities in each subsequent year which means that they have raised equity and debt in the subsequent years to fund their assets due to which cash from financing activities is increased in each year ,
which is good indicator for these companies So from the above inferences it can be concluded that BSNL is having very weak financial position as compared to Bharti Airtel and Idea Cellular. Trends of previous 5 years have shown that company has slowly deteriorated his position ie. From the leader to loser.If the same trend continues in the next few years than we can see death of this giant company.
6.2 SUGGESTIONS
From the personal observations and the above analysis various subjective recommendations which can be given to the company as follows: It is the right time to cut down the employees force, by giving them voluntary retirement or by any other method and give chance to new guns. Use better & high tech methods of advertising, so that more & more subscriber attract towards BSNL Should try to decrease expenditure especially in the employees remuneration & benefit area. Should increase the service quality as well as better customer care service. Should work towards 3 G phones, means high speed streaming video, gaming, video messaging, and even mobile TV. There are several global players keen to enter India. Like Telenor, China mobile, Telephonic, SK telecom, NTT DoComo, Orson. Their entry will make the market even more competitive. So, should be ready for new competition. Provide better customer care service and provide them maximum satisfaction.
the airtel company current assets are increased . the airtel company fixed assets are increased because the company the company fixed assets
are increased yearly and the company working in progrease is decreased comparing between 2010&2011. The airtel company current liabilities are increased because the company short term liabilities and provisions are increased comparing between 2010&2011.
Suggestions of the BSNL company: The BSNL company current assets are increased comparing between 2010&2011 its good so the company try to increase the current assets. The BSNL company fixed assets are decrease because the company fixed assets are have the high depreciation so the company try to decrease the depreciation of fixed assets. The BSNL company current liabilities are increased because the company current liabilities&provisions are increased thetsfy the company decreased the provisions and short term liabilities. The BSNL company loan funds are decreased but the company try to decreased the loan funds. And the company source of funds are also decreased and try to follow this decrease. The company capital does not chaig so the company try to increase the capital of the company.
Suggestions of the airtel company: The airtel company current assets are increased but the company miscellaneous expenses are very decreased so the company try to increase the company miscellaneous expenses. The company fixed assets are increased but the company try to increase the company fixed assets of the company. The company current liabilities are increased because the company try to decrease the company short term liabilities and provisions also. The airtel company loan funds are increased but the secured loans are decreased but the company try to decrease the un secured loans. The company source of funds are increased so the company try to decrease the source of funds.
Chapter 7
LIMITATIONS
LIMITATIONS
Though the project is completed with proper planning and guidance with full dedication but still various limitations that have to be faced in the process of research are as follows: Limited Time:- Although the staff at BSNL was highly cooperative and devoted their valuable time but because of time constraint they were not able to devote much time with us.
Lack of experience: There was no prior experience in the field of study , so it became difficult to analyze and interpret the financial statements of the companies.
Difficult to obtain the data of 2004-05 and 2005-06 as companies only maintains data of 3 years in their operating systems and rest at some other place.
Uniformity of Content and Mode of preparation of financial statements was not there among the various companies. So it became difficult to compare among each other.
Chapter 8
BIBLIOGRAPHY
BIBLIOGRAPHY Information has been sourced from namely, books, newspapers, journals, industry portals, government agencies, industry news and developments and through access to database. http://www.BSNL.co.in http://www.Google.com http://www.traigov.in http://www.Airtel.co.in http://www.Vodafone.co.in http://www.Reliance.co.in http://www.Idea.co.in http://www.capitaline.com/ http://www.wikipedia.org/ http://www.oecd.org/ http://www.legalserviceindia.com/ http://www.dot.gov.in/ http://www.economictimes.indiatimes.com/ http://www.ibef.org/ http://www.domain-b.com/ http://www.trai.gov.in/ http://www.perry4law.wordpress.com/ http://www.indianembassy.org/ http://www.financialexpress.com http://www.pib.nic.in/ Annual Reports of BSNL of the years: 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09.
Sharma Seema and Lokesh Singla (2009), Telecom equipment Industry:
Challenges and Prospects R.P. Rustagi, Financial Management, Edition 2007-08 S.N. Maheshwari, Financial Management, Edition 2006-07 T.S Grewal, Analysis of Financial Statements, Edition 2007-08
Chapter 9
ANNEXURE
ANNEXURE
BSNL CONSOLIDATED PROFIT AND LOSS ACCOUNT
31st March 2005 Particulars (Rs. in Lakh) (Rs. in Lakh) (Rs. in Lakh) (Rs. in Lakh) (Rs. in Lakh) INCOME Income from Services Other Income EXPENDITURE Employees' Remuneration and Benefits Licence fee and Spectrum fee Administrative, Operating and Other Expenses Financial Expenses Depreciation Profit before Prior period items Prior period items (Net) Profit before Extraordinary items Extraordinary items Profit before taxation Current Tax MAT Credit Deferred Tax Fringe Benefit Tax Wealth Tax Profit for the year after taxation Appropriation : Interim Dividends on Equity Share Capital Proposed Dividends: On Equity & Preference 31st March 2006 31st March 2007 31st March 2008 31st March 2009
3,345,004
264,001
3,609,005
839,302 330,236 805,196 2,929 962,486
3,026,857
554,335
3,581,192 1,136,323
264,635
1,049,689
108,980 937,669
1,091,628
77,941 914,931
1,111,675
86,254 969,610
1,137,797
44,325 852,341
2,940,149
668,856 -40,550 615,418 176,590 792,008 78,816 -175,933 992 -130,196
3,190,706
826,952 -40,550 786,402 58,296 844,698 80,130
3,146,566
824,945 -9,564 815,381
3,363,643
441,697 3,458 445,155
3,435,421
145,771 -18,608 127,163 127,163 132,322 0 -66,569 3,800 125 57,485
--134,002 4,100
501
893,969
3700 130
780,587
145
300,939
1,018,329
20,000
37,500
50,000
30,000
97,500
80,000
67,500
120,00
Share Capital Tax on Dividends Transfer to General Reserve Surplus carried to Balance Sheet Net Profit Earnings Per Share (In Rs.) Basic earnings per equity share 16,288 203,666 680,875 1,018,329 16,479 178,794 581,196 893,969 18,484 156,117 488,486 780,587 25,493 60,188 65,258 300,939 0 0 57,485 57,485
15.65
15.28
14.03
4.44
1.15
Shareholders Funds Capital Reserves And Surplus Loan Funds Unsecured Loans Deferred Tax LiabilityNet APPLICATIONS OF FUNDS Fixed Assets Gross Block Less:-Depreciation Net Block Capital Work-InProgress Decommissioned Assets INVESTMENTS Current Assets, Loan and Advances Inventories Sundry Debtors Cash and Bank Balances Other Current Asset Accrued interest Loans and Advances Less : Current
Liabilities and Provisions
405,868
6,642,178 20,000
6,408,243 20,000
6,056,694 20,000
5,929,596 20,000
Current Liabilities
1,461,541
1,612,324
1,667,919
1,739,788
2,072,702
738,616 2,200,157
1,647,722
888,223 2,500,547
2,453,362
94,502 8,404,402
92,839 8,974,444
Total
2009
(Rs. in Lakh)
(Rs. in Lakh)
792,008
844,698
815,381
445,155
127,163
962,486
Prior period depreciation Interest/Finance charges Interest Income
937,669 21,231 108,980 -173,340 -851 47,059 159,518 -19,133 19,320 -58,296 181,942 1,224,099
2,068,797
914,931 8,288 77,941 -281,123 -800 35,340 127,875 -21,676 1,276 102,518
964,570
852,341 4,189 44,325 -388,504 -2,165 91,453 85,640 -117,014 14,419 3,865
off
Provision for Bad and Doubtful Debts Excess provision written
back
Prior Period item other than depreciation Extraordinary Items Other Provision
147,595
832,670
176,091
764,640
891,803
Operating profit before working capital changes Adjustments for changes in working capital - Inter Circle Remittance
1,872,852
1,779,951
1,277,825
-4,202
- Sundry Debtors
-12,229 -131,465
-67,776 -117,897
1,950,900
-77,517
- Other Receivables - Trade and Other Payables Cash generated from
-59,867 -44,175
145,474
-685
65,923
326,506
44,805 936,608
operations
-Taxes paid
- Extraordinary Items - Prior Period item other than depreciation Net cash from operating
-152,524 -1,276
-153,800 1,413,996
-175,793
-237,808
8,565
-167,228 1,098,184
-14,419
-252,227 684,381
activities
-572
Purchase of fixed assets Capital Work in Progress
-54,539 -882,441
78,066 84,750 124,081 -647,817 -650,083
24,723 -815,313
125,505 107,795 230,602 -326,688
-76,049 -717,309
-9,231 50,319 379,785 -372,485
-976,301 125,689
133,273
70,094
-743,814
-174,027
-77,700 -50,000 -80,000 -18,233 -355,986 -399,960
-300,000
-1,767 -30,000 -67,500 -16,570 -415,837 -41,901
-108,358
-42,759
-120,000 -20,394
-111,174
Paid
Net cash used in financing
activities
Net Increase/(Decrease) in
-182,295
864,835
687,348
309,862
equivalents
Cash and cash equivalent
2,193,113 3,057,948
3,057,948 3,745,296
3,745,296 4,055,158
179,993
3,094
2,704
2,569
2,415
(in hand)
Balances with banks
2,013,120 2,193,113
3,054,854 3,057,948
3,742,592
3,745,296
4,052,589
4,055,158
3,811,015 3,813,430
Sources Of Funds
Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 1,853.37
1,853.37
1,893.88
1,893.88
1,895.93
1,895.93 30 0 9,515.21
1,897.91
1,897.91
1,898.24
1,898.24 116.22 0
Application Of Funds
Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions
994.46
931.9
1,295.72 1,937.54
105.61
1,705.44 3,160.02
541.35
3,034.18 5,103.13
302.08
Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
-4,000.26
0.09
35,357.62 4,104.25
145.01
PARTICULARS
Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses
Operating Profit
8,142.44
11,259.12
17,851.61
25,761.11
34,048.32
0 34,048.32 -1,261.75 5.29 32,791.86 17.7 0 1,397.54 8,627.13 9,385.68 1,409.89 0 20,837.94 13,215.67 11,953.92 434.16 11,519.76 3,206.28 178.82 8,134.66
-46.15
PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend
2,268.97
17.64
2,286.61
273.68
4,602.91
566.79
6,879.70
632.43
8,088.51
321.78
1,210.67 5,072.66 0
2,012.08 7,153.15 0
4,033.23 10,568.98 0
6,244.19 15,064.84 0
7,743.84 20,820.24 0
Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)
0 0 18,533.67 6.53
0
0 0 18,938.79 10.62
0
379.65
64.52
24.44
38.71
Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities
Net Cash (used in)/from
4547.2 -5000.3
8107.95 -7975.1
10459.9 -11648
11853.2 -10894
Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents
-423.09
252.5
131.63 384.14
Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Aplication of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
630
630 0 0
630
630 0 0
630
630 0 0
630
630 0 0
0 0 0 0
651.51 554.36 779.29 981.7 397.47 418.72 441.4 557.39 186.6 137.82 221.28 160.71 1,761.15 1,415.10 965.2 941.8 180.11 159.35 161.8 130.73 2,127.86 1,712.27 1,348.28 1,233.24 10,758.82 10,364.54 11,857.45 10,502.84
2,337.29 1,899.05 1,707.00 3,239.05
15,223.97 13,975.86 14,912.73 14,975.13 0 0 0 0 6,194.15 5,289.44 5,683.31 5,626.00 5,603.60 5,105.72 5,446.15 5,445.82 11,797.75 10,395.16 11,129.46 11,071.82
3,426.22 3,580.70 3,783.27 3,903.31
173.71
178.36
184.59
189.23
(Rs. in Crore)
5,602.34
0 5,602.34 236 0 5,838.34 0 140.16 1,932.20 77.51 2,027.55 90.46 -96.31 4,171.57 1,430.77 1,666.77 35.81 1,630.96 588.01 0 1,042.95 179.17 1,222.12 267.24 948.43 4,171.57 0 283.5 39.28
512.11 0 5,421.43 0
160.79
405.38 0 5,127.90 0
188.34
Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)
1,750.99
75.95
1,580.95
93.62 951.86
1,404.16
11.78
1,328.59
12.09
1,392.38
683.18
1,316.50
704.06
0
709.2 299.59
0
612.44 212.12 824.56 224.83 406.82
1,008.79
326.65 466.03
4,017.27 0
252 37.21
3,799.31 0
252 42.83
6,300.00
7.4 40 184.59
6,300.00 6.46
40 189.23
Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents
1212.71
-785.01
213.31
-277.08
357.64
-259.74
2487.81
-692.32
-463.4
-395.24
-287.49
-294.83
-35.71
-459
-189.59
1500.66
2553.1
2517.4
2058.4
1868.7
2517.4
2058.4
1868.81
3369.36
------------------- in Rs. Cr. ------------------Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 2,742.53 2,742.53 0 0 1,695.74 0 1,046.79 1,692.75 1,005.28 2,698.03 3,744.82
Mar '05
2,742.53 2,592.86 2,635.36 2,259.53 2,592.86 2,635.36 0 0 3.76 483 0 0 1,574.00 -413.71 906.91 0 0 0 1,168.53 2,179.15 3,546.03 1,470.75 3,539.77 5,454.43 1,444.85 710.74 1,060.33 2,915.60 4,250.51 6,514.76 4,084.13 6,429.66 10,060.79
Mar '06 Mar '07 Mar '08
2,677.50 2,817.48 5,592.43 64.62 95.91 506.52 307.03 307.03 13.83 13.47 8.81 17.91 109.8 90.82 152.48 151.89 40.12 122.76 275.16 139.75 293.15
899.3 1,408.64 560.82
0 88.97 1,696.97 1,174.46 1,637.36 2,550.94 0 0 0 478.76 762.24 2,180.21 0 11.39 53.84 478.76 773.63 2,234.05
695.7 863.73 316.89
9,667.39 941.13 569.93 27.62 198.59 147.67 373.88 950.88 349.38 1,674.14 0 2,709.98 81.82 2,791.80
-1,117.66
2,308.87
3.82
3.03
8.4
13.44
------------------- in Rs. Cr. ------------------Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 1,625.42 0 1,625.42 9.67
0
1,635.09 0.03
0
1,031.09
594.33 604
308.25 467.42 262.88 84.66 119.88 8.61 128.49 2.9 125.6 1,236.54 0 0 0
478.26 1,163.35 563.67 108.14 491.54 5.23 496.77 6.99 502.06 2,747.16 0 0 0
695.85 1,979.64 756.85 119.91 1,102.88 13.97 1,116.85 72.5 1,044.36 4,228.66 0 0 0
27,425.27 0.1
0
3.82
3.03
0 8.4
13.44
Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents
------------------- in Rs. Cr. -----------------125.6 502.06 1044.36 822.15 1605.11 2502.22 286.94 2275.09 5956.18 558.01 2340.07 2131.29
151.89
129.09 1819.73
3,303.04 0 3,303.04
512.39
3,749.43 0
0 3,815.43
0 3,905.57
0 4,147.66
3,456.55 4,223.01
11.2
0
340.07 1,943.03
16.74 1,042.82
391.33
773.98 1,128.16
301.31 425.27
3,086.49 0 128.25 e
2,627.12 0 128.25 r
(annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)
21.8
21.8
18.1 45 238.53
200.98
212.67
223.14
229.73
------------------- in Rs. Cr. ------------------Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
285 285
0 0
285 285
0 0
5,443.05
0
6,513.05
0
5,728.05
0 0 0
5,728.05 3,182.68
835.65
2,347.03
513.17
1,200.58
1.97 608.95 22.26 633.18
2,499.34
3.8 737.57 245.66 987.03
2,673.58
4.72 955.19 79.31
2,103.77
5.45
2,723.67
1.56
1,063.13
79.63
1,342.22
109.21
1,511.19
11.22
1,039.22 1,383.20
25
1,452.99 3,209.51
263.16
1,713.70
265.17
2,509.44 0 1,740.40
265.32
2,447.42 0 1,779.37
279.13
4,925.66
0
2,869.12
288.61
1,978.87 1,667.28
0
2,005.72
503.72
2,058.50
388.92
3,157.73 1,767.93
0
Mar '06 Mar '07 Mar '08 Mar '09 ------------------- in Rs. Cr. ------------------754.35 744.54 461.18 462.44
323.24
76.44
1013.78
559.2
303.08
1086.67
-208.09
-97.23
-52.79
389.14
1204.38
Comparative balance sheets of BSNL company: particulars 2010 Previous year Assets Current assets Inventories Sundry debtors Cash &bank balance Other current assets Loans advances Total current assets Fixed assets Gross block (-)depreciation Net block Capital 11864901 6071511 5793390 working 256860 12457823 6987974 5469849 266562 592922 916463 -323541 9702 4.9972 15.0944 -5.5846 3.7771 242847 558066 3745279 114148 714431 5374788 322006 546551 4055158 137687 744441 5805843 79159 -11515 309862 23539 30010 431055 32.5962 -2.0633 8.2733 20.6214 4.2005 8.0199 2011 Current year absolnt %of different
progress Decommissioned assets Invest ments Total fixed assets Liabilities&capital Current liabilities&provisions Current liabilities provisions Total liabilities 1667919 514858 current 2346109 1739788 606321 2182777 71869 91463 -163332 4.3089 17.7647 -6.9618 64443 389 -6055 -93.9633
20000 6076694
20000 5756800
-319894
-5.2816
Long term liabilities Un secured loans Deffered tax liabilities Total long liabilities 554366 124605 338887 131053 469940 -215479 6448 209031 -38.8694 5.1747 -33.6947
term 678971
Capital &reserves Capital Reserve&sur plus Total capital&reserve 1250000 7444802 8694802 1250000 7562825 8812825 118023 118023 1.5853 1.5853
Particulars
Absolute
%of different
Assets
Current assets Current Assets, loans 8439.38 advances Miscellanea expenecess Total Fixed assets Gross block 28115.65 37266.70 2.13 12253.34 9151.05 _ 3168.34 32.5478 _ 34.8744 0.20 10466.63 2027.25 24.0213
0.09
-0.11
-55
8439.58
10466.63
2027.14
30.9787
(-)revaluation reserve 2.13 (-)accumulated depreciation Net block Capital progress Invest ments Total Liabilities&capital Current 14362.33 liabilities&provisions Long term libilities Secured loans Un secured loans total Source of funds Owners funds Equity capital Share money 1897.91 52.42 6517.92 6570.34 9085.00
25011.23 2566.67
5982.71 -184.41
31.4407 -6.7031
10952.85 699935.23
11777.76 88877.83
824.91 18942.6
7.5314 2.7063
14466.89
104.56
0.7280
1898.24 116.22
0.33 58.59
0.0173 101.66
application 57.63
_ 18283.82
_ 28627.38
_ 7343.56
_ 40.1642
20239.36
30641.84
10402.48
51.3981
of 379.62
9898.56
518.94
5.532
1887.76
313.47
19.91
18982.40
-3036.34
-42.5222