Fundamental Analysis & Equity Research on Indian Telecom Sector Under the Guidance of: Dr.P.C.Sabharwal, Director, ASRM & Mr. Vikas Batra Organization Guide: Mr. Muneetpal Singh Presented By: Amit Kumar Bansal A4011309001 MBA(Rural Management) This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 1
29
Embed
Equity research & portfolio investment in indian financial market telecom sector
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Fundamental Analysis & Equity Research on Indian Telecom Sector
Under the Guidance of:
Dr.P.C.Sabharwal, Director, ASRM
&
Mr. Vikas Batra
Organization Guide: Mr. Muneetpal Singh
Presented By:
Amit Kumar Bansal
A4011309001
MBA(Rural Management)
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 1
(An Initiative by IIM and FMS alumni)
About UDAAAN Education Venture Ltd.
• UDAAAN Education Venture is a Private Limited Company registered in New Delhi, India in November 2009.
• It has been co-founded by Alumni from Indian Institute of Management Calcutta, Faculty of Management Studies and Netaji Subhas Institute of Technology (NSIT).
• UDAAAN aims to make Engineering/BCA/MCA & PGDM/MBA students an employable resource for the industry.
• Its vision is to deliver highest quality of education in all spheres, in order to increasing needs of the students as well the corporates.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 2
(An Initiative by IIM and FMS alumni)
General Introduction to the Study
•The study is about the introduction of Indian Telecom Sector, its history, market share of different companies & Merger & Acquisitions in Telecom Sector.
•The study also focused on marketing strategies adopted by various companies such as Tariff war, New handset players & Dual SIM Phone.
•The study analyzed the Technological Advancements in Telecom Sector such as 3rd Generation, 4th Generation, Mobile Number Portability(MNP), Value added Services(VAS).
•Equity Analysis of Reliance Communication, Bharti Airtel, OnMobile Global Ltd.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 3
(An Initiative by IIM and FMS alumni)
Objectives of the Study
•To study the evolution & current status of Indian Telecom sector.
•To study the market share, Mergers & Acquisitions of various Telecom companies.
•To study the marketing strategies & trends in Technological advancements in Telecom sector.
•To analyse the financial results of Reliance Communication, Bharti Airtel & OnMobile Global Ltd. based on Equity Analysis.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 4
(An Initiative by IIM and FMS alumni)
Research Methodology
• The study used Secondary data to accomplish these objectives. The secondary data has been collected from various published materials like Books, Brochures, Websites & Annual report of the Department/Companies.
• For the Equity Analysis the study used Free Cash Flow to the Firm (FCFF) and Relative Valuation methods.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 5
(An Initiative by IIM and FMS alumni)
Current Status of Indian Telecom Sector
• The Indian telecommunication industry is one of the world's fastest growing industry, with 671.69 million telephone (landlines and mobile) subscribers and 635.51 million mobile phone/wireless connections as on June 2010, is the second largest telecommunication network in the world after China.
• The overall Teledensity is 54.10 as on April 2010.The urban telecom market is almost mature with a Teledensity of 122.39 as on April 2010 whereas there is a strong growth potential in the rural market which has a Teledensity of just 24.97 as on April 2010.
• Telecommunications is the fourth highest recipient of foreign direct investment in India since April 2000 to May 2008, attracting Rs 17,687 crores, or 6.37%, of total FDI inflows.
(Source: Department of Telecom, CNBC AWAAZ)
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 6
(An Initiative by IIM and FMS alumni)
History of Indian Telecom Sector
• 1851 -First operational land line were laid by the British Govt. near Calcutta.
• 1881-Telephone services introduced in India
• 1883- Merger with the postal system.
• 1947- Nationalization of all foreign telecommunication companies to form the Posts,
Telephone and Telegraph(PTT).
• 1985-Department of Telecommunications(DOT) established.
• 1992-Private players allowed to enter value added services.
• 1994-National Telecom Policy was formulated.
• 1997-Independent regulator, Telecom Regulatory Authority of India(TRAI), established.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 7
(An Initiative by IIM and FMS alumni)
Market Share of Telecom Companies(as on March 2010)
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 8
(An Initiative by IIM and FMS alumni)
Market Share of Telecom Companies(as on March 2010)
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 9
(An Initiative by IIM and FMS alumni)
Mergers & Acquisitions (M&A)
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 10
Target Company Acquirer Sector Amount(US $ M)
Stake Date
Hutchisson Essar Vodafone Mobile Services 11100 67 Feb-07
Unitech Wireless Telenor Mobile Services 1430 67 Nov-08
Aircel Maxis Mobile Services 1080 100 Mar-06
BPL Communications Essar Group Mobile Services 1000 64 Jul-05
Idea Cellular Aditya Birla Group
Mobile Services 990 48 Apr-06
(An Initiative by IIM and FMS alumni)
Bharti Airtel & Zain Deal (Biggest Deal in Telecom)
• Bharti and Zain deal was of $10.7 billion dollars ,this deal made Bharti Airtel globally the fifth telecom company in whole world. This deal gave Bharti 42 million subscriber in 15 African countries.
• Reason for Choosing Zain.
– It gave Airtel to reach African market and giving Airtel a subscriber base of 42 million in 15 African countries.
– This deal made Airtel the fifth largest telecom operator of the world.
• Sources of Funds:– Took $7.5 billion loan from Standard Chartered bank
– Took another $ 1 billion from SBI bank which is also called rupee –loan.
– Rest of the loan was taken from eight other banks.
– The loan has been given to Airtel at 1.9% interest.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 11
(An Initiative by IIM and FMS alumni)
Marketing Strategies: Tariff war in Telecom Sector
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 12
RELIANCE (2003) HUTCH TATA
VIRGINRELIANCETATA DOCOMO
UNINOR RELIANCE (SMS)
(An Initiative by IIM and FMS alumni)
Tariff War of Telecom Companies Contd…..
• Reliance: Reliance Infocomm launched mobile services in India at 40 Paisa per minute fulfilling Dhirubai Ambani’s dream to make a phone call cheaper than a post card in 2003.
• Hutch: Hutch (Vodafone now) launched the Chotta recharge voucher at Rs.10 when the lowest add-on recharge card available was about Rs 50.
• Tata: Tata Indicom launched Non-stop mobile, a scheme where you don’t need to recharge for 2 years but still get free incoming calls. Soon other players responded to Tata Indicom’s plan and then come in plan by all major telecom players in India.
• Virgin: Virgin Mobile jumped into the competitive Indian mobile telecom market with the breakthrough-marketing scheme, Get paid for incoming calls. 10 Paisa free for every minute of incoming call.
• Reliance GSM: Reliance Communication launched its GSM services in Mumbai offering subscribers Rs 10 talk-time every day for the first 90 days.
• Tata DoCoMo: Tata DoCoMo started the pay per-second tariff plan.
• Uninor: Uninor, the joint venture of realty major Unitech Ltd and Norway's telecom giant Telenor, fuelled a new tariff war by introducing rates as low as 20 paisa per minute.
• Reliance: Under the Simply Unlimited CDMA Offer, Rcom launched two calling packs - one local, and the another national. The unlimited local call pack will come at a monthly fixed charge of Rs 299, while the unlimited STD calls will come for a monthly tariff of Rs 599.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 13
(An Initiative by IIM and FMS alumni)
Marketing Strategies
• Entry of New Handset Players:
– The handset market growth rate is around 6% in India
– 48 handset manufacturers are there in India.– New handset players are offering different features at lower prices.
• Impact of Dual SIM Phone:
– Dual SIM phone market growth rate is around 47% in India.
– It gives the freedom of carrying two phone.
– Subscribers take dual SIM phone to take advantage of price arbitrage.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 14
(An Initiative by IIM and FMS alumni)
Business & Marketing strategies
Mobile Virtual Network Operator(MVNO)
•A mobile operator that does not have its own spectrum and usually does not have its own
network infrastructure. Usually they buy minutes of use from the licensed telecom operator
and then resell minutes of usage to their customers.
•An example for MVNO is Virgin Mobile. Virgin Mobile is a mobile phone service provider
operating in the UK, Australia and Canada, and the US. The company was the world's first
Mobile Virtual Network Operator, launched in the UK in 1999. It does not maintain its own
network, and instead has contracts to use the existing network(s) of other providers.
•Currently MVNOs are emerging in fast pace in European markets and beginning in USA
also. Slowly MVNO phenomenon is catching up in Asia and other parts of the world.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 15
(An Initiative by IIM and FMS alumni)
Technological Innovations: 3rd Generation Mobile Phone
• 3G is the third generation of mobile phone standards and technology. 3G supersedes 2G technology and precedes 4G technology. 3G technologies enabled faster data-transmission speeds, greater network capacity and more advanced network service
• Major sources of revenue –
– Data transfer,
– Value Added Services(VAS)
• Existing 3G markets:
– Japan, Korea, Germany, Italian
• 4th Generation (4G): 4G is the short name for fourth-generation wireless, the stage of broadband
mobile communications that will super cede the third generation (3G ). 4G is being developed the quality of service and rate requirements set by
further development of existing 3G applications like mobile broadband access, Multimedia Messaging Services (MMS), video chat, mobile TV etc.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 16
(An Initiative by IIM and FMS alumni)
Technological Innovations: Mobile Number Portability(MNP)
• Definition - A regulated facility which enables mobile subscribers to change their network service provider while keeping their existing mobile number.
• Evolution of MNP :
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 17
(An Initiative by IIM and FMS alumni)
Mobile Number Portability Contd…..
Costs Associated with MNP
•Direct costs:
•Fixed set-up costs
•Variable porting costs
•Indirect cost:
•Loss of tariff transparency.
•Benefits of MNP
– Consumer benefits
At the individual subscriber level, the biggest impact to changing phone numbers is not to the subscriber, All unnecessary burdens of updating written address books, changing programmed contacts lists, remembering the new number are removed.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 18
(An Initiative by IIM and FMS alumni)
Technological Innovations & Marketing Strategies: Value Added Services by Different Companies
• Services which are not part of voice data but are available separately, so that different operators can be differentiated on the base of these value added services.
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 19
The non- voice value added services: •SMS, •MMS, •E-MAIL,•Taking part in the contests in TV through SMS,•Cricket & games, •Opinion polls,•Quiz/ contests.
Pure voice based Value added services:(Available in both landline and mobile telecom system)•In a landline- voice based ringtone download facility,•Tele-horoscope/Tele- astrology,•Music -on- demand,•News -on –demand,•Subscribe Bollywood clips & ringtones.
(An Initiative by IIM and FMS alumni)
Equity Analysis of Reliance Communication
Revenue Mix Cost Factors
Source: Reliance Communication
This presentation is the property of UDAAAN Education Ventures Pvt. Ltd. and should not be copied, distributed or modified without prior permission 20