My Project.docx

CHAPTER 1 INTRODUCTION

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

one of the most dynamic sector in Indian economy to identify key financial attributes of telecom companies and their respective impact.

INTRODUCTION TO THE INDIAN TELECOM INDUSTRY

HISTORY The history of telecommunication industry started with the first public demonstration of Morse’s electric telegraph, Baltimore to Washington in 1844. In 1876 Alexander Graham Bell filed his patent application and the first telephone patent was issued to him on 7th of March. In 1913, telegraph was popular way of communication. AT&T commits to dispose its telegraph stocks and agreed to provide long distance connection to independence telephone system. In 1956, the final judgment limited the Bell System to Common Carrier Communications and Government projects but preserving the long-standing relationships between the manufacturing, researches and operating arms of the Bell System. In this judgment AT&T retained bell laboratories and Western Electric Company. This final judgment brought to a close the justice departments seven –year-old antitrust suit against AT&T and Western Electric which sought separation of the Bell Systems Manufacturing from its operating and research functions. AT&T was still controlling the telecommunication industry. In 1982 , AT&T was requested to divestiture its stock ownership in Western Electric; termination of exclusive relationship between AT&T and Western Electric; divestiture by Western Electric of its fifty percent interest in Bell Telephone Laboratories, AT&T ‘s telecommunication research and development facility, is a jointly owned subsidiary in which AT&T and Western Electric each own 50% of the stock; separation of telephone manufacturing from provision of telephone service and the compulsory licensing of patents owned by AT&T on a non-discriminatory basis. It was telecommunication act of 1996 that true competition was allowed. The act of 1996 opened the market to all competitors. AT&T being the first telecommunication company paved the road for the telecommunication industry as well as set the policy and standards for others to follow.

Beginning of telecommunication in India The era of telecommunication in India started from the year of 1851 with the initiative from govt. of India near the city of Calcutta now known as Kolkatta. However the rapid growth in telecom industry came into picture after the year of 2002-03 onwards as the more number of service providers came into existence. Since 2002-03 there is rapid change in the technology and increase in numbers of subscribers in the Indian telecom industry till now. The following are the milestones in the Indian telecom industry.  1851 First operational land lines were laid by the government near Calcutta.  1881 Telephone services introduced in India.  1883 Merger with postal system.  1923 Formation of Indian radio Telegraph Company.  1932 Merger of ETC and IRT into Indian Radio and Cable Communication Company.  1947 Nationalization of all foreign telecommunication companies to form the posts, telephone and telegraph, a monopoly run by the government’s ministry of communications.  1985 Department of telecommunication established , an exclusive provider of domestic and long-distance services that would be its own regulator.  1986 Conversion of dot into two wholly government – owned companies the VSNL for international telecommunication and MTNL for services in metropolitan areas.  1997 Telecom regulatory authority created. Telecommunication is important not only because of its role in bringing the benefits of communication to every corner of India but also in serving the new policy objectives of improving the global competitiveness of the Indian economy and stimulating and attracting foreign direct investment. Indian Telecom industry is one of the fastest growing telecom markets in the world. In telecom industry, service providers are the main drivers; whereas equipment manufacturers are witnessing

growth and decline in successive quarters as sales is dependent on order undertaken by the companies. Today the Indian telecommunications network with over 375 Million subscribers is second largest network in the world after China. India is also the fastest growing telecom market in the world with an addition of 9- 10 million monthly subscribers. The teledensity of the Country has increased from 18% in 2006 to 33% in December 2008, showing a stupendous annual growth of about 50%, one of the highest in any sector of the Indian Economy. The Department of Telecommunications has been able to provide state of the art world-class infrastructure at globally competitive tariffs and reduce the digital divide by extending connectivity to the unconnected areas. India has emerged as a major base for the telecom industry worldwide. Thus Indian telecom sector has come a long way in achieving its dream of providing affordable and effective communication facilities to Indian citizens. As a result common man today has access to this most needed facility. The reform measures coupled with the proactive policies of the Department of Telecommunications have resulted in an unprecedented growth of the telecom sector. There is a cut-throat competition in the Telecom industry as more and more advanced technology is developed in very short time. Once the people get addicted to 2G technology by the time new players come up with latest technology called 3G and EDGE. The thrust areas presently are:

1. Building a modern and efficient infrastructure ensuring greater competitive environment 2. With equal opportunities and level playing field for all stakeholders. 3. Strengthening research and development for manufacturing, value added services. 4. Efficient and transparent spectrum management 5. To accelerate broadband penetration 6. Universal service to all uncovered areas including rural areas. 7. Enabling Indian telecom companies to become global players.

Recent things to watch in Indian telecom sector are: 1. 3G and BWA auctions 2. MVNO 3. Mobile Number Portability 4. New Policy for Value Added Services 5. Market dynamics once the recently licensed new telecom operators start rolling out 6. Services. 7. Increased thrust on telecom equipment manufacturing and exports. 8. Reduction in Mobile Termination Charges as the cost per line has substantially reduced 9. Due to technological advancement and increase in traffic.

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

Today the industry offers services such as fixed landlines, WLL, GSM mobiles, CDMA and IP services to customers. Increasing competition among players allowed the prices drastically down by making the mobile facility accessible to the urban middle class population, and to a great extend in the rural areas. Even for small shopkeepers and factory workers a phone connection is not an unreachable luxury. Major players in the sector are BSNL, MTNL, Reliance, Bharti Teleservices, Vodafone Essar, BPL, Tata, Idea, etc. With the growth of telecom services, telecom equipment and accessories manufacturing has also grown in a big way.

Indian Telecom sector, like any other industrial sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to make use of advanced technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by day, both the Public Players and the Private Players are putting in their resources and efforts to improve the telecommunication technology so as to give the maximum to their customers.

TELECOM SUBSCRIBER BASE IN INDIA

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

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

The other reason that has tremendously helped the telecom Industry is the regulatory changes and reforms that have been pushed for last 10 years by successive

Indian

governments.

According

to

Telecom Regulatory Authority of India (TRAI) the rate of market expansion would increase with further

regulatory and structural reforms. Even though the fixed

line

consistently,

market the

share

overall

has (fixed

been and

dropping mobile)

subscribers have risen to more than 200 million by first quarter of 2007. The telecom reforms have allowed the foreign telecommunication companies to enter Indian market which has still got huge potential. International telecom companies like Vodafone have made entry into Indian market in a big way.

Currently the Indian Telecommunication market is valued at around $100 billion (Rupees 400,000 crore). Two telecom players dominate this market - Bharti Airtel

with

27%

market

share

and

Reliance

Communication with 20% along with other players like BSNL

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

70% of total population is rural, the scope for growth in this Industry is unprecedented.

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

The Telecommunications sector has been consistently adding more than 7 million subscribers for the last 6 months, a very healthy net addition rate infact. All the private operators GSM as well as the CDMA operators have been

very consistent

in

their

performance. The sector provides very strong revenue as well as earnings visibility over the next 12 months. However the recent regulatory developments are seem to be negative for the telecom companies as it will increase the number operators per circle which will intensify competition.

INTRODUCTION TO THE COMPANIES IN TELECOM INDUSTRIES

 BHARTI AIRTEL LIMITED

Bharti Airtel Limited, the company's existence was marked in the year 1995. It is a leading Indian telecommunication service provider through three strategic business units namely Mobile Services, Broadband & Telephone Services and Enterprise Services. The company has started with providing mobile service to single circle entity and now it grown to offer services to all 23 telecom circles of India. One of the largest integrated private telecom service providers with an all India mobile footprint, through a combination of organic and inorganic growth. During the year 1997-98 Bharti Airtel Ltd becomes the first private telecom operator to obtain a license to provide basic telephone services in the state of Madhya Pradesh and in the same period the company forms Bharti BT VSAT Ltd., focused on providing VAST solutions across India and Bharti BT Internet Ltd. The company acquired JT Mobiles, cellular services operator in Punjab, Karnataka and Andhra Pradesh and becomes the largest private telecom operator in India during the period of 1999-2000. Also expands its South Indian footprint by acquiring Skycell, Chennai. The company acquired a 30.20% equity interest of Telecom Italia in Bharti Telenet and 18.8% from Bharti Telecom thereby making Bharti Telenet a 100% subsidiary of Bharti Tele-Ventures. BTVL also holds an effective 74% equity in Bharti Mobile and 100% equity in Bharti Cellular. Bharti Telenet has entered into license agreements to provide fixed-line services in the Haryana, Delhi, Tamil Nadu and Karnataka Circles.

Airtel launched IndiaOne, India's first private sector national and international long distance service in the year of 2001-02. The company incorporated India's first private submarine cable landing station with joint venture from SingTel in the same year. In 2002-03 the company made a brief corporate restructuring by merging all the mobile operations into Bharti Cellular Limited and all fixed line, long distance and data services into Bharat Infotel Limited. Bharti Airtel made a historic strategic partnership with IBM and Ericsson for outsourcing the company's core IT and network activities and also launched Blackberry wireless solution India, as a result of an exclusive tie-up with Research in Motion (RIM). BTVL's two subsidiaries Bharti Cellular Ltd and Bharti Infotel Ltd have been merged with the company in the year of 2004. Subsequently Bharti Broadband Ltd and Satcom Broadband Equipment Ltd has become the subsidiaries of the company after the above said merger. During the year 2005 Bharti Airtel Ltd expand its wing to Rajasthan and North East Circles also by the acquisition of Bharti Hexacom, which owns Licenses to operate cellular services in the Rajasthan and North East Circles. Bharti Airtel Ltd noted as 'Indian Mobile Operator of the Year 2005' by Asian Mobile News, became the top-most Telecom Company and was featured amongst the top three companies across the sectors in the ET 500 published in June 2005 and the company Introduced Stock and Portfolio Tracker on the mobile in association with the Bombay Stock Exchange, it was the first of its kind. The agreement was emerged with Ericsson and the company in 2005-06 to provide managed services and expands its GSM/GPRS network into rural India in 15 circles under managed capacity expansion. During the year 2006-07 Bharti Airtel has entered into agreement with Microsoft to offer software and services for the Small and Medium business market in India. The company also has an agreement with Google to offer services on Airtel Mobile. Also an agreement with Adani Group to connect Mundra Port and special Economic Zone. A Three year contract with Nokia at an estimated value of US$400 million to expand its managed GSM/GPRS/EDGE networks in eight Airtel circles and deploy a pan India WAP solution across its networks. The company was conferred many awards during the year 2006-07, such as Best Indian Carrier Award in the Telecom Asia Awards 2006, Wireless Service Provider of

the year and the competitive Service Provider of the year award in the Telecom Asia Awards 2006, Most Preferred Cellular Service Provider Award in the telecom category for the year 2006 at the Awaaz Consumer Awards 2006, MIS Asia II Excellence Award 2006 for Best Knowledge Management, Most Customer Responsive Telecom Company in India by the Avaya-Economic Times Global Connect Awards and Nasscom IT Innovation Award for the Business Model Innovation for the year 2006. The company received a letter of offer from Telecommunications Regulatory Commission of Sri Lanka to provide 2G and 3G mobile services in Sri Lanka on January 2007. This was the first international operation of the company. Bharti Airtel introduced the Blackberry 8800 business phone in March 2007. Bharti Airtel and GSM Association launched the Global money transfer pilot project in India. This initiative enable 25 million of NRI's to remit their money to India through mobile phones. During the year 2007, the company also incorporated Bharti Airtel (USA) Ltd, Bharti Airtel (UK) Ltd, Bharti Airtel (Canada) Ltd, Bharti Airtel (Hongkong) Ltd as a wholly owned subsidiary of the company for providing international calling services and wholesale voice switching and data products in the respective countries. Bharti Infratel Ltd has been incorporated as a wholly owned subsidiary with an initial investment of Rs.500000 and also acquired the Submarine Network Cable System from Network i2i by way of purchase of all the assets or equity for an overall consideration of US$110 million. In August of the same year Wal-mart formally marked its entry into India by signing two agreements with Bharti Enterprises. During January 2008, the company has signed a MoU with VeriSign, Inc agreed to form a strategic market partnership for jointly launch best-in-class security services, to deliver VeriSign's identity protection, managed security and fraud detection services, and to support the development of the next-generation Internet infrastructure in the Indian market. The company has achieved the 60 million-customer marks on February 2008. This landmark has catapulted Bharti Airtel into the club of top mobile operators in the world in terms of subscriber base. The 60 million-customer base covers mobile as well as fixed line and broadband customers. Bharti Airtel has overtaken State-run Bharat Sanchar Nigam Ltd as the largest National Long Distance (NLD) service provider in terms of revenue, amount of Rs 709 crore. The company

has joined hands with five international companies including Internet giant Google, Global Transit, KDDI Corporation, Pacnet and SingTel have formed the Unity Bandwidth Consortium which will together invest about $300 million to construct the new high-bandwidth, sub-sea cable system linking the US and Japan. As on March 2008, Bharti Airtel and Micro Technologies India have tied up to offer micro lost mobile tracking system to secure the mobile handsets of Airtel subscribers. As on May 2008, in a bid to gain quicker foothold into the rural areas, Bharti Airtel has formed a joint venture with IFFCO, which will offer customized mobile services to a target base of 55 million farmers across the country. Bharti Airtel Ltd is amongst the fastest growing telecom companies in the world and its moving to attain the position of most admired brand in India with the three domains as loved by more customers, targeted by top talent and benchmarked by more business.

 IDEA CELLULAR LIMITED

IDEA Cellular Limited, a part of the Aditya Birla Group and an India's leading Global System for Mobile communication (GSM) Mobile Services operator was began its journey in the year 1995 as in the name of Birla Communications Limited for providing GSM-based services in the Gujarat and Maharashtra Circles. Later the company has licenses to operate in all 22 Service Areas. Presently, operations exist in

11 Service Areas covering Delhi, Maharashtra, Goa, Gujarat, Andhra Pradesh, Madhya Pradesh, Chattisgarh, Uttaranchal, Haryana, UP-West, Himachal Pradesh, UP-East, Rajasthan and Kerala. With a customer base of over 24 million, IDEA Cellular's footprint currently covers approximately 60% of India's telecom population. The company's operational 11 Service Areas are broken up into Established and New Service Areas. The established service areas are Delhi, Andhra Pradesh, Gujarat and Maharashtra, Haryana, Kerala, Madhya Pradesh and Uttar Pradesh (West) and the New Service Areas are Uttar Pradesh (East), Rajasthan and Himachal Pradesh. Changed its name to Birla AT&T Communications Limited followed by joint venture between Grasim Industries and AT&T Corporation in the year 1996. After a year, in 1997, commenced its operations in the Gujarat and Maharashtra. Migrated to revenues share license fee regime under New Telecommunications Policy ('NTP') Circles in the year 1999. During the year 2000, the company merged with Tata Cellular Limited, thereby acquired original license for the Andhra Pradesh Circle. IDEA acquired RPG Cellular Limited and consequently the license for the Madhya Pradesh (including Chattisgarh) Circle in the year 2001, and in the same year changed its name from Birla AT&T Communications Limited to Birla Tata AT&T Limited. Obtained license for providing GSM-based services in the Delhi Circle. Again in year later, in 2002, the company altered its name to Idea Cellular Limited and launched 'Idea' brand name and commenced its commercial operations in Delhi Circle. During the year, the company reached one million subscriber mark consecutively in the year 2003, reached two million subscriber mark. During the year 2004, the company acquired Escotel Mobile Communications Limited (subsequently renamed as Idea Mobile Communications Limited), reached the four million subscriber mark and the first operator in India to commercially launched EDGE services 2005. Reached the five million subscriber mark in the year 2005 and IDEA won an Award for the 'Bill Flash' service at GSM Association Awards in Barcelona, Spain. The Company became a part of the Aditya Birla Group in the year 2006, subsequent to the TATA Group transferred its entire shareholding in the Company to the Aditya Birla Group. In the same year 2006, IDEA acquired Escorts

Telecommunications

Telecommunications Limited).

Limited

(subsequently

renamed

as

Idea

The Company reached the 10 million subscriber mark and also launched New Circles for obtain more and more customers. IDEA has extended its reach to 500 towns in Andhra Pradesh in August of the year 2006. Received Letter of Intent from the DoT for a new UAS License for both Mumbai and Bihar Circles. ABNL, the parent of Aditya Birla Telecom Limited, agreed to transfer its entire shareholding in Aditya Birla Telecom Limited to the Company for the consideration of Rs. 100 million. In 2007, the company won an award for the 'CARE' service in the 'Best Billing or Customer Care Solution' at the GSM Association Awards in Barcelona, Spain. The Initial Public Offering aggregating to Rs. 28,187 million and the company listed in both Bombay Stock Exchange and the National Stock Exchange during the year 2007. IDEA merged seven of its subsidiaries and reached the twenty million subscriber mark in the same year 2007. As on February 2008, IDEA Cellular Ltd tied up with Southern Biotechnologies Ltd to bio-diesel for operating IDEA's gensets at all towers in the Andhra Pradesh region. The Company with Geodesic, an innovator in communication, collaboration and entertainment applications on mobile and Internet platforms jointly announced the launch of 'Idea Radio', a truly differentiated mobile music service for IDEA customers in the same year 2008. Customer Service and Innovation are the drivers of this Cellular Brand. A brand known for their many firsts, IDEA is only the operator to launch General Packet Radio Service (GPRS) and EDGE in the country. IDEA has seen phenomenal growth since its inception, the company's footprint idea is to first achieve critical mass, then drill deep instead of spreading thin, however, does not increasing geographic footprint only, it also drills deep and successfully attempts to provide excellent network coverage in all its circles of operations.

 RELIANCE COMMUNICATIONS LIMITED

Reliance Communications Limited (RCL) is the flagship company of the Anil Dhirubhai Ambani Group (ADAG), is India's largest private sector information and communications company with over 48 million subscribers. It was established in the year 2004 as Reliance Infrastructure Developers Private Limited, Reliance Communications started laying 60,000 route kilometres of a pan-India fibre optic backbone with high capacity, integrated (wireless and wireline), convergent (voice, data and video) digital network and to offer services spanning the entire infocomm value chain. It is capable of delivering a range of services spanning the entire infocomm (information and communication) value chain, including infrastructure and services for enterprises as well as individuals, applications, and consulting. The Company's business encompasses a complete range of telecom services covering mobile and fixed line telephony. It includes broadband, national and international long distance services and data services along with an exhaustive range of valueadded services and applications. During the year 2004, International wholesale telecommunications service provider, FLAG Telecom amalgamates with Reliance Gateway, a wholly owned subsidiary of Reliance Infocomm, the company launched RIM Prepaid with attractive offer, Reliance Infocomm introduced World Card - a Prepaid International calling card for affordable and convenient ISD calls from India, the first regional Customer Contact Centre was launched in Chennai. In the same year the company made partnership with MCI to offer India's First MPLS Global VPN Solution. Introduced Railway Ticket booking from R World data applications suite of Reliance India Mobile.

In 2005, RCL only the company introduced, first e-recharge facility in CDMA in India, the company has had joins hands with Air Deccan to offer air ticket booking facility at Reliance WebWorld. Reliance Infocomm rolls out international roaming facility across several countries to become the first Indian CDMA operator to offer its customers such a service. The company tied-up with the Bombay Stock Exchange to make available livestock quotes on its mobile phones during the same year 2005. The status of the company was changed to Public Limited in July 2005. Name of the company was changed from Reliance Infrastructure Developers Private Limited to Reliance Communication Ventures Limited in August 2005. RCL, UK launched Reliance IndiaCall service in England and Wales enabling callers to make highquality calls to India from any landline or mobile phone at economical rates. Reliance Infocomm and China Telecom signed agreement for telecom services to provide direct telecommunication service, including a global hubbing service, to subscribers in the both two countries. India's first Talking Message Service (TMS) enabling the mobile users to send voice messages to not only other mobiles but also fixed wireless phones (FWP) and landlines in Reliance communications network were launched during the year 2006. In the same year 2006, RCL listed on the Bombay Stock Exchange and National Stock Exchange, the company ties up with Disney to offer on Reliance Mobile World India's first 3D animation on mobile, launched 'Hello Capital Plan' to enable its subscribers in 19 state capitals to call each other at the local call rate of 40 paise per minute, T-Com signs contract with FLAG Telecom for Europe-US bandwidth, Reliance Communications' FALCON Cable System was initiated in the same year. RCL launched Free Group Term Life Cover for its CDMA subscribers. RCL and Nokia have joined hands to market the Nokia 1255 mobile handset in India at a price of Rs 1,999 during the period of 2006. Reliance Infocomm Limited, Ambani Enterprises Private Limited, Reliance Business Management Private Limited, Formax Commercial Private Limited, Reliance Communications Technologies Limited, Reliance Software Solutions Private Limited, Reliance Communications Solutions Private Limited and Panther Consultants Private Limited was amalgamated and the Network division of the Reliance Communications Infrastructure Limited was demerged with the Company during the year 2006. The

name of the Company was changed from Reliance Communication Ventures Limited to Reliance Communications Limited with effect from 7th June 2006. The Company joined Lenovo and Intel for 'Internet on the Move' in the year 2007. Also in the same year, RCL ties up with Naukri.com for Search Jobs & Classified Ads from Reliance Mobile World. The demerger of Passive Infrastructure division Reliance Communications & Reliance was approved in March of the year 2007. Sunny Days And

Nights For Reliance Mobile Subscribers as Reliance

Communications ties up with SUN TV to offer video streaming of all SUN TV programs online 24x7. In May of the year 2007, the company bagged West Bengal EGovernance Project. RCL slashed its call rate to US and Canada. It's now just Rs 1.99 per minute and also launched Lifetime Validity Recharge @ Just Rs.499. The tie up was made with Cisco to launch Business Internet Services for SMEs in Pune in the year. After, in July of the same year 2007, the company and QUALCOMM was made collaboration on CDMA2000 Expansion. The biggest acquisition deal so far, the company bought US data Communication Company Yipes Holdings' in an all-cash deal for 4300 million (Rs 1200 crore) in July 2007. RCL came forwarded to sale of equity stake in its Tower Company-Reliance Telecom Infrastructure Limited in July of the year. For air and hotel bookings, the company has had joins hands with Yatra.com. The money transfer also available in the RCL, such facility was started in September of the year 2007. The company made strategic partnership with Vanco. As on April 2008, RCL launched Exam Guru, the educational portal, which provides information on exam result, college admissions, exam schedules, admission deadlines, mock tests and also tips for bettering performance. RCL made ties up with International Cricket Council for rankings in the next eight years. During the same month and same year, the company has acquired UK based eWave World, which offers wireless telephony services using WIMAX technology. In May 2008, Reliance Globalcom, a subsidiary of the company, has acquired London based managed network services provider, Vanco Group, for about $77 million (Rs 324 crore).

MAHANAGAR TELEPHONE NIGAM LTD. (MTNL)

Mahanagar Telephone Nigam (MTNL) was set up on April1, 1986 by the Government of India to upgrade the quality of telecom services, expand the telecom network, introduce new services and to raise revenue for telecom development needs of India's key metros –– Delhi and Mumbai. In the past 23 years, the company has taken rapid strides to emerge as India's leading and one of Asia's largest telecom operating companies. Besides having a strong financial base, MTNL has achieved a customer base of 8.06 million as on March 31, 2009. The company has also been in the forefront of technology induction by converting 100% of its telephone exchange network into the state–of–the–art digital mode. The Government of India currently holds 56.25% stake in the company. The authorized capital of the Company is Rs. 800 crores. The Paid up Share Capital is Rs. 630 crores divided into 63 crore share of Rs. 10 each. At present, 56.25% equity shares are held by President of India & her nominees and remaining 43.75% shares are held by FIIs, Financial Institutions, Banks, Mutual Funds and others including individual investors. MTNL has been given Navratna status in 1997 and was listed in New York Stock Exchange in 2001. In more than two decades of its operations, there has been all-round development & growth and improved operational efficiency. Presently, MTNL is providing a host of telecom services that include fixed telephone service, GSM (including 3G services) & CDMA based Mobile service, Internet, Broadband, ISDN and Leased Line services., MTNL has been in the forefront of offering state of the art technology based

telecommunications services to its customers at most affordable prices. MTNL has been the first to launch some of the latest telecom technologies in the country like ADSL2+ & VDSL2 in broadband, IPTV on MPEG4 technology, VOIP and 3G Mobile service. MTNL is proud to be associated with the Common Wealth Games (CWG)-2010 as its Official Telecom Partner to set up a world class communication infrastructure to meet out the broadcast and telecom requirement of the event. It's a matter of great prestige for MTNL to associate with a global sporting event of this magnitude and significance and to showcase the world, India's capability to setup best possible all round infrastructure. To meet the broadcast and other requirement such as carrying of High Definition TV stream, games data, security requirements etc the salient features of Telecom infrastructure were specially created by MTNL for CWG-2010 in less than a year time frame. After completion of the games the network elements are used to strengthen / augment the exiting IP / MPLS backbone networks of MTNL in Delhi & Mumbai enabling MTNL to meet all its current and future requirements as well as to facilitate it to provide wholesale bandwidth connectivity to other telecom operators, Banks, Corporate Houses and various other Govt Agencies on lease or rental basis support. MTNL is providing telecommunications beyond boundaries through its Joint Ventures and Subsidiaries. MTNL is present in Nepal through its Joint Venture United Telecom Limited (UTL) and in Mauritius through its 100% subsidiary Mahanagar Telephone Mauritius Limited (MTML).

Subsidiary Millennium Telecom (MTL), incorporated on February 17, 2000, is a wholly owned subsidiary of MTNL that has been formed to do practically any type of telecom business with a focus on value added services. It intends to roll out a router–based packetised telecom network and create facilities like Application Development

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



BSNL (BHARAT SANCHAR NIGAM LIMITED)

Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five years it has become one of the largest public sector unit in India.

It has about 47.3 million line basic telephone capacity, 4 million WLL capacity, 20.1 Million GSM Capacity, more than 37382 fixed exchanges, 18000 BTS, 287 Satellite Stations, 480196 Rkm of OFC Cable, 63730 Rkm of Microwave Network connecting 602 Districts, 7330 cities/towns and 5.5 Lakhs villages.

BSNL is the only service provider, making focused efforts and planned initiatives to bridge the RuralUrban Digital Divide ICT sector. In fact there is no telecom operator in the country to beat its reach with

its wide network giving services in every nook & corner of country and operates across India except Delhi & Mumbai.

BSNL is numero uno operator of India in all services in its license area. The company offers vide ranging & most transparent tariff schemes designed to suite every customer.

BSNL cellular service, CellOne, has more than 17.8 million cellular customers, garnering 24 percent of all mobile users as its subscribers. That means that almost every fourth mobile user in the country has a BSNL connection. In basic services, BSNL is miles ahead of its rivals, with 35.1 million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in revenue terms.

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

CHAPTER 2 RESEARCH METHODOLOGY

PROBLEM OT THE STUDY “COMPARATIVE FINANCIAL (FUNDAMENTAL) ANALYSIS OF MAJOR TELECOMMUNICATION COMPANIES IN INDIA”

OBJECTIVE OF THE STUDY An investor who would like to be rational and scientific in his investment activity has to evaluate a lot of information about past performance and the expected future performance of the companies, industries and the economy as a whole before taking the investment decision and hence, the present study attempts to analyse the profitability position of the sample companies. Some of the objectives of conduction the study are as follows:  To take investment decisions cautiously after studying risks involved in the same.  To gain knowledge of evaluating intrinsic value of a firm.  To acquire practical exposure of financial analysis of an enterprise.  To get familiarity of scheming comparative efficiency of different firms.  To analyse the profitability position of the sample telecom companies.

LIMITATIOINS OF THE STUDY The study has following limitations:  The study has lack of contact with company personnel acted as hindrance in the study.  The study is based on the limited knowledge & information provided by the websites and software available on internet.  The size of the sample is too small looking to the nature of the study and due to tome and money constraints relatively smaller sample was chosen.

 The basis of selection of sample for the study was vague. Randomly individuals were picked up to provide their responses .  There are only five parameters taken for study however there are certain other parameters on the basis of which accurate inference can be drawn.  The ratings given are on the basis of data available on internet however the future efficiency of the low performing company can be better. The data taken for the comparison of the sample companies are of last three years from 2016 – 2018. However the accurate result can be drawn if the data taken ranges from last ten years

RESEARCH DESIGN Universe of the Study The present study adopts an analytical and descriptive research design. The data of the sample companies (for a period of three years from 2016 to 2018) has been collected from the annual reports and the balance sheet published by the companies and the websites of the companies. A finite sample size of four companies listed on the National Stock Exchange (NSE) has been selected for the purpose of the study. They are IDEA CELLULAR, BHARTI AIRTEL and RELIANCE COMMUNICATIONS LIMITED. The variables used in the analysis of the data are Debt-Equity Ratio (DER), Current Ratio, Quick Ratio, Fixed Earning Per Share (EPS) and Dividend Payout Ratio ,etc

Sample of the Study  Sampling Technique: The study is done with special reference to private sector telecommunication companies. The reason being that the data or the financial statements are readily available for them. Apart from this, private sector companies have shown best performance in the previous year so it is interesting to know the best performing company out the selected sample companies. Thus, the technique of ‘Convenience Sampling’ is being adopted for the study. The election of sample companies is made on the basis of market capitalization.  Sample Size: Four Private Sector companies are chosen as sample size for the study on account of having the highest market capitalization. Data Collection Only secondary data has been used in this project for conducting analysis. Financial statements are the raw data collected from various websites such as www.moneycontrol.com , www.economistimes.com

and other company

websites.

Time Period of the Study The study has been conducted during October 2018 – November 2018. Tools used for Analysis  Ratio Analysis: Ratios have been calculated for the past three years for the purpose of analysis. Ratios being designed are named as: Debt-Equity Ratio (DER), Current Ratio, Quick Ratio, Earning Per Share (EPS) and Dividend Payout Ratio.

Financial Analysis The section of study embodies the calculation and analysis of selected variables taken into reflection for the study purpose. The ratios are being calculated by the aid of raw data available on the concerned website. The raw data encompasses Yearly Results and Balance Sheet of the sample companies. Analysis is performed by using software known as Microsoft Excel. The ratios being calculated for the purpose of analysis of financial performance are:  Debt-Equity Ratio (DER).  Current Ratio  Quick Ratio  Earnings Per Share (EPS).  Dividend Payout Ratio The analysis and interpretation of the study is carried out by following the chronological order of the parameters mentioned above.

CHAPTER 3 LITERATURE REVIEW

REVIEW OF LITERATURE

Girija (1998), in its article “Socioeconomic Implications of Telecommunications Liberalization: India in the International Context” says that Telecommunications restructuring have evolved differently in Asia and Latin America. While Asian governments have moved cautiously in bringing changes to the sector, Latin American nations have implemented radical ownership and market transformations. The Indian telecommunications reform falls in between these two general regional trends. The choice of a high component of competition, increased private participation, and no privatization of the national carrier set conditions that will trigger unique socioeconomic effects. This article identifies and highlights the likely implications of the Indian reform on key economic and social issues, such as the cost of services, cross-subsidies, network interconnection, private investments, universal services, employment, and the possible rise of an information-intensive economy. It does so by comparing and contrasting the Indian experience with dominant reform strategies elsewhere in the developing world.

T.H. Chowdary (1999) discusses how Telecom reform, or demonopolization, in India has been bungled. Shaped by legislation dating back to the colonial era and post Second World War socialist policies, by the mid-1980s India realized that its poor telecommunications infrastructure and service needed reform. At the heart of the problem lay the monopoly by the government’s Department of Telecommunications (DOT) in equipment, networks and services. The National Telecom Policy 1994 spelt out decent objectives for reform but tragically its implementation was entrusted to the DOT. This created an untenable situation in which the DOT became policymaker, licenser, regulator, operator and also arbitrator in disputes between itself and licensed competitors. He discusses the question: ‘Why did India get it so wrong? and What India should do now?

Anand (1999), in his article named “India's economic policy reforms” says that India was embarked on economic reforms in July 1991, in the wake of a balance of

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

Bhattacharya (2000) constructs a vision of the Indian telecommunication sector for the year 2020. The paper aims at isolating agents of change based on international experiences and situates India in the development continuum. The agents of change have been broadly categorized into economic structure, competition policy and technology. Das

(2000),

in

her

paper

described

the

Liberalisation

of

the

Indian

telecommunications services which started in mid nineties with no change in the existing public monopoly structure, entirely controlled by Department of Telecommunications (DoT). In order to evaluate any proposed industry structure, it is essential to analyse the production technology of DoT so as to determine the rationale of liberalisation and sustainability of competition. Accordingly, the researcher estimates a frontier multi-product cost function for DoT, where the cost function has been duly modified to account for the production technology of a public monopoly. The study finds that although DoT displays high allocation inefficiency, it is still a natural monopoly with very high degree of sub additively of cost of production. This study implies that the choice of any reform policy should consider the trade-off between the loss of scale and scope economies and cost saving from the reduction in inefficiency of the incumbent monopoly in the event of competition. Rao (2000), in her article named “Internet service providers in India”, provides a broad view of the role of an Internet service provider (ISP) and the factors to be considered before entering the ISP market. Describes the Internet/ISP scene within India and discusses the configuration of local, regional and national level ISPs, and

the supporting infrastructure. She also identifies the various success factors. The global Internet scenario is discussed regarding the phases of the Internet in India, i.e. pre and post commercialization. The main players are described: ERNET, NICNET, STPI, VSNL, MTNL, Satyam Infoway and Bharti-BT. The financial and legal implications are highlighted in the Indian context. Many companies entered the nascent ISP business in India due to deregulation. Building local content, foreknowledge of new Internet technologies, connecting issues, competitiveness, etc. would help in their sustainability. She concludes that though many companies entered the nascent ISP businesses in India due to deregulation, many of them are unlikely to survive in the longer term.

Vrmani (2000) estimates the contribution of telecommunication (or telecom) services to aggregate economic growth in India. Estimated contribution is distinguished between public and private sectors to highlight the impact of telecom privatization on economic growth. Knowledge of policy determinants of demand of telecom services is shown to be essential to enhance growth contribution of telecom services. Using a recent sample survey data from Karnataka State in South India, price and income determinants of demand for telecom services are estimated by capacity of telephone exchanges Estimation results offer evidence for significant negative own price elasticity and positive income elasticity of demand for telecom services.

Narinder (2004), in his article “Enhancing Developmental Opportunities by Promoting ICT Use: Vision for Rural India” talks about the foremost benefits of Information and Communication Technologies (ICTs) in developing countries that can be helpful in improving governance including public safety and eradication of illiteracy. The benefits of ICTs have not reached the masses in India due to lack of ICT infrastructure, particularly in rural areas, where two-third of the population of the country lives. Even in cities and suburban areas, use of ICTs is not popular due to lack of awareness to its use, computer illiteracy, and absence of practical applications. India is the largest country in South Asia, with a population of over one billion people and its telecom sector is presently experiencing fast growth phases. However telephony penetration in villages is less than two percent of the rural population and

about 15 percent of the villages are still without any telephony service. Universal access to ICTs in rural areas has been planned and is being implemented through Public Tele Info Centers having voice data and video, as majority of villagers in India cannot afford a separate home connection. Illiteracy in rural areas is as high as 40 percent and in some tribal belts hardly about 20 percent people are literate. There are 35 million children in age group of 6–11 years, who are out of school and one out of four drops out during primary classes. Education and training, therefore, must be given the top priority if advantages of ICTs are to be harnessed. Indian economy is agriculture based and employs maximum workforce. Improvement in agriculture productivity can help in reducing rural poverty. Adoption of ICT in agriculture will play an increasingly important role in crop production and natural resource management. The other critical factor is technological challenges for universal access to ICTs to bring down the network access cost.

Nikam, Ganesh, Tamizhchelvan (2004), analyses that changing face of India in bridging the digital device. He reiterated - “India lives in villages” said the Father of the Nation, Mahatma Gandhi. With 1,000 million people and 180 million households, India is one of the biggest growing economies in the world. With the advent of the Information, Communication and Technology (ICT) revolution, India and its villages are slowly but steadily getting connected to the cities of the nation and the world beyond. Owing to the late Rajiv Gandhi, India is now a powerful knowledge economy, and though India may have been slow to start, it certainly has caught up with the West and is ahead in important respects. The Government, the corporate sector, NGOs and educational institutions have supported rural development by encouraging digital libraries, e-business, e-learning and e-governance. The aim of this paper is to touch upon and highlight some of the areas where, by using ICT, the masses have been reached in this way. A follow-up paper will outline collections of significant cultural material which, once national IT strategies are fully achieved, could form part of a digitally preserved national heritage collection.

Dey (2004), in her article talks about the discussions between the Federal Communications Commission (FCC) and communications policy makers and

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

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

those of developed and other emerging economies show that the country is still far behind its contemporaries.

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

Thomas (2007), in his article describes the contribution made by telecommunications in India by the state and civil society to public service, this article aims to identify the state’s initial reluctance to recognize telecommunications provision as a basic need as against the robust tradition of public service aligned to the postal services and finds hope in the renewal of public service telecommunications via the Right to Information movement. The article follows the methodology of studying the history of telecommunications approach that is conversant with the political economy tradition. It uses archival sources, personal correspondence, and published information as its research material. The findings of the paper suggests that public service in telecommunication is a relatively ‘‘new’’ concept in the annals of Indian telecommunications and that a de-regulated environment along with the Right to Information movement holds significant hope for making public service telecommunications a real alternative. The article provides a reflexive, critical account of public service telecommunications in India and suggests that it can be strengthened by learning gained from the continual renewal of public service ideals and action by the postal services and a people-based demand model linked to the Right to Information Movement. All studies done by the researcher suggests that the right to information movement has contributed to the revitalisation of participatory democracy in India and to a strengthening of public service telecommunications.

Cygnus Business Consulting & Research Pvt. Ltd. (2008), in its “Quarterly Performance Analysis of Companies (April-June 2008)” has analysed the Indian

telecom industry in the awake of recent global recession and its overall impact on the Indian economy. The analysis is done in the background of wake of global recession and rising inflation. Cygnus estimates, the Indian telecom industry is expected to maintain the growth trajectory in the next quarter as well. With almost 5-6m subscribers are being added every month, and the country is witnessing wild momentum in the telecom industry. Maheshwari (July-September 2008), in her report analysed the Indian telecom industry and ascertain that Indian telecommunications has been zooming up the growth curve at an mounting pace, and India is has surpassed US to become the second largest wireless network in the world. This growing subscriber base is basically created by tapping into rural India, which is an emerging market for the industry. The estimate for the next five to ten years is that the rural market will form 40 % of the subscriber base. The study has analysed the human resource management process of the industry, and specially the latest trends of recruitment of this massively growing industry.

Anderson (2008), in his single executive interview titled “Developing a route to market strategy for mobile communications in rural India An interview with Gurdeep Singh, Operations Director, Uttar Pradesh, Hutch India” suggests that managers need to go beyond traditional approaches to serving the poor, and innovate by taking into account the unique institutional context of developing markets. His practical implication says that the experience of Hutchison Essar in India provides some important lessons for mobile network operators (MNOs) and other firms in other developing markets who are hoping to serve the rural poor: Hutchison has recognized the value of corporate and non-corporate partners. The company has proactively established relationships with individual entrepreneurs, and has provided has provided development support to other partners such as distributors. The company has recognized the value of leveraging existing local institutions, and has seen gaps in local infrastructure or missing services as potential opportunities rather than barriers to growth. The company has seen the rural market as an opportunity – not just an obligation to be served because of universal service obligations. Also this article

demonstrates that MNOs can deliver availability and affordability to achieve increased individual or household penetration through business model innovation.

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

Narayana (2008) estimates the contribution of telecommunication (or telecom) services to aggregate economic growth in India. Estimated contribution is distinguished between public and private sectors to highlight the impact of telecom privatization on economic growth. Knowledge of policy determinants of demand of telecom services is shown to be essential to enhance growth contribution of telecom services. Using a recent sample survey data from Karnataka State in South India, price and income determinants of demand for telecom services are estimated by capacity of telephone exchanges. Estimation results offer evidence for significant negative own price elasticity and positive income elasticity of demand for telecom services.

Sharma (2009) deals with the major challenges faced by India’s telecom equipment manufacturing sector, which lags behind telecom services. Only 35% of the total

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

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

CHAPTER 4 DATA ANALYSIS, INTERPRETATION AND PRESENTATION

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

Debt-Equity Ratio = Total Debt Total Equity

Debt-Equity Ratio Company IDEA

AIRTEL

RELIANCE

2016

1.52

0.38

0.38

2017

2.18

0.59

0.35

2018

2.22

0.64

0.31

Average

1.97

0.54

0.35

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

2.5

2

1.5

2016 2017

1

2018

0.5

0 IDEA

AIRTEL

RELIANCE

The data in given Table reveals that IDEA has achieved the highest Debt-Equity Ratio every year for the data taken for the period of 2016 to 2018 and is followed by AIRTEL from 2016 to 2018 . RELIANCE alone has registered the lowest ratio. Even the three year average Debt-Equity Ratio of IDEA is significantly higher (1.97) than that of AIRTEL (0.54) and RELIANCE (0.35) . Thus, it is inferred that RELIANCE has the least proportion of debt fund in its total capital and hence is the most efficient telecommunication company among all other sample companies. RELIANCE has the highest portion of its self owned funds in the capital structure followed by AIRTEL and IDEA.

Current Ratio The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt as there are many ways to access financing but it is definitely not a good sign. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Because business operations differ in each industry, it is always more useful to compare companies within the same industry. This ratio is similar to the acid-test ratio except that the acid-test ratio does not include inventory and prepaid as assets that can be liquidated. The components of current ratio (current assets and current liabilities) can be used to derive working capital (difference between current assets and current liabilities). Working capital is frequently used to derive the working capital ratio, which is working capital as a ratio of sales. The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed as follows:

Current Ratio =

Current Assets Current Liabilities

Current Ratio Company IDEA

AIRTEL

RELIANCE

2016

0.30

0.41

0.72

2017

0.39

0.43

0.70

2018

0.80

0.49

0.65

Average

0.50

0.44

0.69

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

0.9 0.8 0.7 0.6 0.5

2016

0.4

2017

2018

0.3 0.2 0.1 0 IDEA

AIRTEL

RELIANCE

The data in Table reveals that RELIANCE has achieved the highest Current Ratio in 2016 and 2017 , however in 2018 IDEA has the highest current ratio . In the year 2016 and 2017 IDEA had the lowest current ratio . According to the three year average Current Ratio of RELIANCE is significantly higher (0.69) than that of IDEA (0.50) and AIRTEL (0.44). Hence we can say that RELIANCE has enough resources to pay its debts over the next 12 months as compared with the other sample companies.

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

The quick ratio measures the dollar amount of liquid assets available with the company against the dollar amount of its current liabilities. Liquid assets are the assets that can be quickly converted into cash with minimal impact to the price received in the open market, while current liabilities are a company's debts or obligations that are due to be paid to creditors within one year. Mathematically, quick ratio is calculated as follows: Quick Ratio = Liquid Assets / Current Liabilities, or Quick Ratio = (Cash and Equivalents + Marketable Securities + Accounts Receivable) / Current Liabilities While calculating the quick ratio, one should be careful about the constituents to be considered in the formula. The numerator that comprises of liquid assets should include the assets that can be easily converted to cash in the short-term (like, within 90 days) without compromising on their price. Similarly, only those accounts receivable should be considered which can be realized in the short term. Accounts receivable refers to the money that is owed to a company by its customers for goods

or services already delivered. Inventory is not included in the equation, because its liquidation or sale is uncertain and attempts to instantly liquidate it can lead to compromising on valuations and accept a lower price than the book value. Inventory includes raw materials, components and finished products. A figure of 1 is considered to be the normal quick ratio, as it indicates that the company is fully equipped with sufficient assets that can be instantly liquidated to pay off its current liabilities. A company that has a quick ratio of less than 1 may not be able to fully pay off its current liabilities in the short term, while a company having a quick ratio higher than 1 can instantly get rid of its current liabilities. For instance, a quick ratio of 1.5 indicates that the company has $1.50 of liquid assets available to cover each $1 of its current liabilities. While such numbers-based ratios offer insights into certain aspects and viability of businesses, they may not provide a complete picture of the overall health of the business. It is important to additionally look at other associated measures to assess the true picture.

Quick Ratio Company IDEA

AIRTEL

RELIANCE

2016

0.29

0.41

0.50

2017

0.39

0.43

0.47

2018

0.80

0.49

0.44

Average

0.49

0..44

0.47

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

0.9 0.8 0.7 0.6 0.5

2016

0.4

2017 2018

0.3 0.2 0.1

0 IDEA

AIRTEL

RELIANCE

The data in Table reveals that RELIANCE has achieved the highest Quick Ratio in 2016 and 2017 , however in 2018 IDEA has the highest current ratio . In the year 2016 and 2017 IDEA had the lowest quick ratio . According to the three year average Quick Ratio of IDEA is significantly higher (0.49) than that of AIRTEL (0.44) and RELIANCE (0.47). Hence we can say that IDEA has more liquid assets to pay its debts over the next 12 months as compared with the other sample companies.

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

The dividend payout ratio provides an indication of how much money a company is returning to shareholders versus how much it is keeping on hand to reinvest in

growth, pay off debt, or add to cash reserves (retained earnings). The dividend payout ratio can be calculated as the yearly dividend per share divided by the earnings per share, or equivalently, the dividends divided by net income (as shown below):

Alternatively, the Dividend Payout Ratio can also be calculated as 1 - Retention Ratio Several considerations go into interpreting the dividend payout ratio, most importantly the company's level of maturity. A new, growth-oriented company that aims to expand, develop new products, and move into new markets would be expected to reinvest most or all of its earnings and could be forgiven for having a low or even zero payout ratio.

Dividend Payout Ratio Company IDEA

AIRTEL

RELIANCE

2016

2.43

5.11

8.36

2017

0.00

17.54

0.00

2018

0.00

7.61

7.53

Average

0.81

30.26

5.30

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

20 18 16 14 12

2016

10

2017

8

2018

6 4 2

0 IDEA

AIRTEL

RELIANCE

The data in Table reveals that AIRTEL has achieved the highest Dividend Payout Ratio in 2017 and 2018 , however in 2016 RELIANCE has the highest Dividend Payout Ratio . In the year 2017 and 2018 IDEA had zero Dividend Payout Ratio . In the 2017 RELIANCE had zero Dividend Payout Ratio. According to the three year average ,Dividend Payout Ratio of AIRTEL is significantly higher (30.26) than that of IDEA (0.81) and RELIANCE (5.30). Hence we can say that AIRTEL pays more dividend to its shareholders than the other selected companies.

EPS (EARNINGS PER SHARE) Earnings Per Share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio. The EPS can be calculated as follows: Earnings Per Share =

_________Profit________ Weighted Average Shares

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

EPS Company IDEA

AIRTEL

RELIANCE

2016

24.63

43.42

114.15

2017

19.05

5.70

122.70

2018

8.11

32.84

68.18

Average

17.26

27.32

101.68

The above table shows Dividend Payout Ratio values of IDEA, AIRTEL and

RELIANCE from 2016 – 2018. The same data has been shown by using graph for better understanding. Investors can use the current ratio for their decision purpose.

140 120 100 80

2016 2017

60

2018 40 20 0 IDEA

AIRTEL

RELIANCE

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

RETURN ON ASSETS Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's management is at using its assets to generate earnings. Return on assets is displayed as a percentage and its calculated as: ROA = Net Income / Total Assets Note: Some investors add interest expense back into net income when performing this calculation because they'd like to use operating returns before cost of borrowing. Sometimes, the ROA is referred to as "return on investment".

In basic terms, ROA tells you what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. This is why when using ROA as a comparative measure, it is best to compare it against a company's previous ROA numbers or against a similar company's ROA. Remember that a company's total assets is the sum of its total liabilities and shareholder's equity. Both of these types of financing are used to fund the operations of the company. Since a company's assets are either funded by debt or equity, some analysts and investors disregard the cost of acquiring the asset by adding back interest expense in the formula for ROA. In other words, the impact of taking more debt is negated by adding back the cost of borrowing to the net income, and using the average assets in a given period as the denominator. Interest expense is added because the net income amount on the income statement excludes interest expense. An analyst that chooses to ignore the cost of debt will use this formula: ROA = (Net Income + Interest Expense) / Average Total Assets The ROA figure gives investors an idea of how effective the company is in converting the money it invests into net income. The higher the ROA number, the better, because the company is earning more money on less investment.

RETURN ON ASSETS Company IDEA

AIRTEL

RELIANCE

2016

3.36

4.20

5.98

2017

-0.86

-5.17

5.74

2018

-4.94

0.03

5.44

Average

-0.81

-0.31

5.72

The above table shows Return on Assets values of IDEA, AIRTEL and RELIANCE

from 2016 – 2018. The same data has been shown by using graph for better understanding. Investors can use the current ratio for their decision purpose.

8 6 4 2016

2

2017 0

2018 IDEA

AIRTEL

RELIANCE

-2 -4 -6

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

Return on net worth: It means determination of the ratio of a individual or business taxpayer’s income to their overall net worth .In the business context, net worth is also known as book value or shareholders’ equity. Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. Because shareholders' equity is equal to a company’s assets minus its debt, ROE could be thought of as the return on net assets. ROE is expressed as a percentage and can be calculated for any company if net income and equity are both positive numbers. Net income is calculated before

dividends paid to common shareholders and after dividends to preferred shareholders and interest to lenders. Relatively high or low ROE ratios will vary significantly from one industry group or sector to another. When used to evaluate one company to another similar company the comparison will be more meaningful. Even within the same industry group, comparing the ROE of a company that pays a large dividend with a firm that doesn’t can also be misleading. Net income over the last full fiscal year, or trailing twelve months, is found on the income statement: a sum of financial activity over that period. Shareholders' equity comes from the balance sheet: a running balance of a company’s entire history of changes in assets and liabilities. It is considered best practice to calculate ROE based on average equity over the period because of this mismatch between the two financial statements.

Average shareholder equity is calculated by adding equity at the beginning of the period to equity at the end of the period and dividing by two. Investors can use quarterly balance sheets to calculate an even more accurate equity average. Although there may be some challenges, ROE can be a good starting place for developing future estimates of a stock’s growth rate and the growth rate of its dividends. These two calculations are functions of each other and can be used to make an easier comparison between similar companies. To estimate a company’s future growth rate, multiply ROE by the company’s retention ratio. The retention ratio is the percentage of net income that is “retained” or reinvested by the company to fund future growth.

RETURN ON EQUITY Company IDEA

AIRTEL

RELIANCE

2016

10.68

6.96

11.41

2017

-3.50

-9.80

10.89

2018

-18.62

0.07

10.68

Average

-3.81

-0.92

10.10

The above table shows Return on Equity values of IDEA, AIRTEL and RELIANCE

from 2016 – 2018. The same data has been shown by using graph for better understanding. Investors can use the current ratio for their decision purpose. 15 10 5 0 IDEA -5 -10

AIRTEL

RELIANCE

2016 2017 2018

-15 -20 -25

The data in Table reveals that RELIANCE has achieved the highest Average Return on Equity for the data taken for the period of 2016 to 2018. The three year average Return on Equity of RELIANCE is significantly higher (10.10) than that of AIRTEL (-0.92) and IDEA (-3.81). If Return on Equity is negative then the issue can be that the company may have used more debts or may have excessive borrowings. In IDEA and AIRTEL it can be seen that Return on Equity is

negative in the year 2017 which means that both the company are bearing loss on the amount which the investors have invested. In the above graph it can be seen that RELIANCE has the highest Return on Equity, hence RELIANCE is the most efficient company which earns highest profit on the amount which equity shareholders have invested.

EARNINGS BEFORE INTEREST AND TAX (EBIT) Earnings before interest and taxes is an indicator of a company's profitability. One can calculate it as revenue minus expenses, excluding tax and interest. EBIT is calculated as: EBIT = Revenue - Operating Expenses or EBIT = Net Income + Interest + Taxes EBIT is also referred to as operating earnings, operating profit, and profit before interest and taxes. Earnings before and taxes measures the profit a company generates from its operations, making it synonymous with operating profit. By ignoring tax and interest expenses, it focuses solely on a company's ability to generate earnings from operations, ignoring variables such as the tax burden and capital structure. This focus makes EBIT an especially useful metric for certain applications. For example, if an investor is thinking of buying a firm out, the existing capital structure is less important than the company's earning potential. Similarly, if an investor is comparing companies in an industry that operate in different tax environments and have different strategies for financing themselves, tax and interest expenses would distract from the core question: How effectively do these companies generate profits from their operations? There are different ways to go about calculating EBIT, which is not a GAAP metric and therefore not usually included in financial statements. Always begin with total

revenue or total sales and subtract operating expenses, including the cost of goods sold. You may take out one-time or extraordinary items, such as the revenue from the sale of an asset or the cost of a lawsuit, as these do not relate to the business' core operations, but these may also be included. If a company has non-operating income, such as income from investments, this may be—but does not have to be—included; in that case, EBIT is distinct from operating income, which, as the name implies, does not include non-operating income. Often, companies include interest income in EBIT, but some may exclude it depending on its source. If the company extends credit to its customers as an integral part of its business, then this interest income is a component of operating income and a company will always include it. If, on the other hand, the interest income derives from bond investments, or charging fees to customers that pay their bills late, it may be excluded. As with the other adjustments mentioned, this one is up to the investor's discretion, and should be applied consistently to all companies being compared. In the simplest terms, one can calculate EBIT by taking the net income figure from the income statement and adding the income tax expense and interest expense back in. Put a different way, operating expenses are subtracted from total revenue.

EARNINGS BEFORE INTEREST AND TAX Company IDEA

AIRTEL

RELIANCE

2016

16.33

21.40

16.36

2017

7.34

18.74

17.97

2018

-8.52

9.30

17.37

Average

5.05

16.48

17.23

The above table shows Earnings before Interest and Tax values of IDEA, AIRTEL and

RELIANCE from 2016 – 2018. The same data has been shown by using graph for better understanding. Investors can use the current ratio for their decision purpose.