Fundamentals of Bharti d Final Projct

8/8/2019 Fundamentals of Bharti d Final Projct

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A PROJECT REPORT on

FUNDAMENTALS OF BHARTI AITREL

Submitted by

DHAVAL SHAH

in partial fulfillment for the award of the degree

of

POST GRADUATE DIPLOMA IN MANAGEMENT

Under the guidance of

PROF.ADITI MAHAJAN

THAKUR INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

KANDIVALI EAST

MUMBAI

Thakur Institute of Management Studies and Research Page 1


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ACKNOWLEDGEMENT

In this project I have made an honest and dedicated attempt to make the research material asauthentic as it could. And I earnestly hope that it provides useful and workable information andknowledge to any person reading it.

During this small time frame of two months in which the project reached its completion, there were afew people whom I would like to make a mention of and without whose help the project would havenever seen the light of the day..

I would like to thank my external guide Mr. Amit Kadam and Mr Chandrakant Purab who gave mea free hand as far as going about the project work was concerned.

Dhaval. B. Shah

PGDM (Finance)

2009 - 2011



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EXECUTIVE SUMMARY

I did my summer project form Sykes & Ray Equities (I) Ltd. An attempt was to study the telecom sector and select a company which was one of the best among the sector on the basis of subscribers base andrevenues and based on the fundamentals. In this two months summer training i got a lot of experienceabout the fundamental research of an equity and also as to how a script reacts to the news in the market.

After the summer project I feel very energetic and enthusiastic as every part of it is filled with experienceand learning. My summer internship project has increased my confidence level and made me understoodhow professional life has to be maintained. Punctuality, sincerity and commitment towards work can

bring u success is among the important aspects is what all I have learned in these two months about mywork.



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TABLE OF CONTENTS

TOPIC PAGE NO

Introduction about Sykes & Rays (I) Ltd 6

Indian telecom Sector 7

TRAI 11

Present scenario of telecom Operators 12

Financials and share price data of telecomcompanies

13

Future prospects of telecom industry inIndia

14

Graphical representation of share prices 15

Wide look on Indias 3G auctions 17

Telecom Sector and Union Budget 18

Porters five forces model on Indian TelecomSector

19

SWOT analysis of Telecom Sector 23

Introduction to Bharti Airtel 24

Telecom Statistics, April, 2010 26

Key positives and risk associated 28

Basic financials of Bharti Airtel 29



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Share price data of Bharti Airtel 31

Mobile Number Portability 32

Bharti Airtel as investment with MutualFunds

32

SWOT analysis of Bharti Airtel 33

Porters five forces model on Bharti Airtel 35

Future prospects/Strategies 37

Conclusion 38

References 39



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INTRODUCTION ABOUT SYKES & RAY EQUITIES (I) Ltd

Sykes & Ray Equities (I) Ltd

Sykes & Ray Equities promoted by Mr. Yogesh R Gupta and Mr. Anup R Gupta who are the currentChairman and Managing Director. Sykes and Ray Equities (I) Ltd. (SRE).

SRE has evolved over a period of time. Its emergence has happened due to the values of dedication,integrity, client commitment and the values which it uphold and a culture which has been inculcated intoit by the inspiring and dynamic leadership of Mr. Yogesh R Gupta and Mr. Anup R Gupta.

When the broking fraternity limited its retail activity, Sykes & Ray Equities (SRE) went all out reaching

out to people, to win their confidence, install hope in the market and expanded the company into asizeable retail network

Since 1990 SRE has undergone a metamorphosis from being a traditional proprietary concern to a professionally managed company hiring and retaining thorough professionals and market experienced personnel. So much so that the group has expanded from a handful of dedicated employees in the early90's to over 150 to date.

SRE today is one of the foremost retail stock broking service entities on the country's two major exchanges, with a combined turnover of more than Rs 45,000 crores. It has presence in over 100 major centers of India through a network of business associates and branches. In continuation to the companysendeavor to provide complete investment services, we have successfully launched an NRI Desk.

SRE has always maintained a Chinese wall between proprietary and client trading. Our endeavor has beento provide a transparent and systematic front office as well as back office operation

The SRE Research desk is one of the most talked about research. Investors are provided with extensiveinformation on markets and company through reviews, market commentary and recommendation. Thisenables the investor to make informed decisions on the market. The company firmly believes thesubstantial value addition can be made in its services by providing continuous and accurate decisionmaking tools to the investors.

The thrust towards Information Technology has made the company among the chosen few to haveacquired a trading software through its own network, which assists in clients gaining live access to thetwo popular exchanges of BSE & NSE and also allow Order/Trade execution.There has been an expansion, a widening of its scope, its branches. With Mutual Funds and derivativescoming of age, SRE has plans to provide retail investors an alternative investment opportunity throughour existing distribution network.



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INDIAN TELECOM SECTOR

The Indian telecommunication industry, with 621 million telephone(landline and mobile) subscribers and584 million mobile phone connections as of March 2010 is the second largest telecommunication network in the world and the second largest in terms of number of wireless connections in the world.

Telecommunication sector in India is primarily subdivided into two segments, which are :-Fixed Service Provider (FSPs)Cellular Services .Telecom industry in India constitutes some essential telecom services like telephone, radio, television andInternet. Telecom industry in India is specifically emphasizing on latest technologies like GSM (GlobalSystem for Mobile Communications), CDMA(Code Division Multiple Access), Fixed Line andWLL(Wireless Local Loop ). India has a prospering market specifically in GSM mobile service and thenumber of subscribers is growing very fast.

1. Fixed Service Provider (FSPs)

Landline service in India is primarily run by BSNL /MTNL and Reliance Infocomm though there areseveral other private players too, such as Touchtel and Tata Teleservices . Landlines are facing stiff competition from mobile telephones. The competition has forced the landline services to become moreefficient. The landline network quality has improved and landline connections are now usually availableon demand, even in high density urban areas.

On landlines, intra circle calls are considered local calls while inter circle are considered longdistance calls. Currently Government is working to integrate the whole country in one telecom circle. For long distance calls, you dial the area code prefixed with a zero (e.g. For calling Delhi, you would dial011-XXXX XXXX). For international calls, you would dial "00" and the country code+areacode+number. The country code for India is 91.

2. Cellular services.

The Mobile telecommunications system in India is the second largest in the world and it was thrown opento private players in the 1990s. The country is divided into multiple zones, called circles (roughly along

state boundaries). Government and several private players run local and long distance telephone services.Competition has caused prices to drop and calls across India are one of the cheapest in the world. Therates are supposed to go down further with new measures to be taken by the Information Ministry. Themobile service has seen phenomenal growth since 2000. In September 2004, the number of mobile phoneconnections have crossed fixed-line connections. India primarily follows the GSM mobile system, in the900 MHz band. Recent operators also operate in the 1800 MHz band. The dominant playersare Airtel , Reliance Infocomm, Vodafone, Idea cellular and BSNL /MTNL. There are many smaller

http://www.economywatch.com/world-industries/telecommunications/telecom-industry-in-india.htmlhttp://www.economywatch.com/world-industries/telecommunications/telecom-industry-in-india.htmlhttp://en.wikipedia.org/wiki/BSNLhttp://en.wikipedia.org/wiki/BSNLhttp://en.wikipedia.org/wiki/MTNLhttp://en.wikipedia.org/wiki/MTNLhttp://en.wikipedia.org/wiki/Reliance_Infocommhttp://en.wikipedia.org/wiki/Touchtelhttp://en.wikipedia.org/wiki/Tata_Teleserviceshttp://en.wikipedia.org/wiki/GSMhttp://en.wikipedia.org/wiki/Airtelhttp://en.wikipedia.org/wiki/Reliance_Infocommhttp://en.wikipedia.org/wiki/Vodafonehttp://en.wikipedia.org/wiki/Idea_cellularhttp://en.wikipedia.org/wiki/BSNLhttp://en.wikipedia.org/wiki/MTNLhttp://www.economywatch.com/world-industries/telecommunications/telecom-industry-in-india.htmlhttp://en.wikipedia.org/wiki/BSNLhttp://en.wikipedia.org/wiki/MTNLhttp://en.wikipedia.org/wiki/Reliance_Infocommhttp://en.wikipedia.org/wiki/Touchtelhttp://en.wikipedia.org/wiki/Tata_Teleserviceshttp://en.wikipedia.org/wiki/GSMhttp://en.wikipedia.org/wiki/Airtelhttp://en.wikipedia.org/wiki/Reliance_Infocommhttp://en.wikipedia.org/wiki/Vodafonehttp://en.wikipedia.org/wiki/Idea_cellularhttp://en.wikipedia.org/wiki/BSNLhttp://en.wikipedia.org/wiki/MTNLhttp://www.economywatch.com/world-industries/telecommunications/telecom-industry-in-india.html


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players, with operations in only a few states. International roaming agreements exist between mostoperators and many foreign carriers.

The

breakup of wireline subscriber base in India as of September 2009 is given below .


Operator Subscriber base

BSNL 28,446,969

MTNL 3,514,454

Bharti Airtel 2,928,254(7.85%)

Reliance Communications 1,152,237

Tata Teleservices 1,003,261

HFCL Infotel 165,978

Teleservices Ltd 95,181

All India 37,306,334
http://en.wikipedia.org/wiki/Roaminghttp://en.wikipedia.org/wiki/BSNLhttp://en.wikipedia.org/wiki/MTNLhttp://en.wikipedia.org/wiki/Bharti_Airtelhttp://en.wikipedia.org/wiki/Reliance_Communicationshttp://en.wikipedia.org/wiki/Tata_Teleserviceshttp://en.wikipedia.org/w/index.php?title=HFCL_Infotel&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Teleservices_Ltd&action=edit&redlink=1http://en.wikipedia.org/wiki/Roaminghttp://en.wikipedia.org/wiki/BSNLhttp://en.wikipedia.org/wiki/MTNLhttp://en.wikipedia.org/wiki/Bharti_Airtelhttp://en.wikipedia.org/wiki/Reliance_Communicationshttp://en.wikipedia.org/wiki/Tata_Teleserviceshttp://en.wikipedia.org/w/index.php?title=HFCL_Infotel&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Teleservices_Ltd&action=edit&redlink=1


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The breakup of wireless subscriber

base in India as of

December 2009 isgiven below


Operator Subscriber base

Bharti Airtel 118,864,031

Reliance Communications 93,795,613

Vodafone Essar 91,401,959

BSNL 62,861,214

Idea Cellular 57,611,872

Tata Teleservices 57,329,449

Aircel 31,023,997

MTNL 4,875,913

MTS India 3,042,741

Loop Mobile India 2,649,730

Uninor 1,208,130

HFCL Infotel 341,862

Stel 141,411

All India 525,147,922
http://en.wikipedia.org/wiki/Bharti_Airtelhttp://en.wikipedia.org/wiki/Reliance_Communicationshttp://en.wikipedia.org/wiki/Vodafone_Essarhttp://en.wikipedia.org/wiki/BSNLhttp://en.wikipedia.org/wiki/Idea_Cellularhttp://en.wikipedia.org/wiki/Tata_Teleserviceshttp://en.wikipedia.org/wiki/Aircelhttp://en.wikipedia.org/wiki/MTNLhttp://en.wikipedia.org/wiki/MTS_Indiahttp://en.wikipedia.org/wiki/Loop_Mobile_Indiahttp://en.wikipedia.org/wiki/Uninorhttp://en.wikipedia.org/w/index.php?title=HFCL_Infotel&action=edit&redlink=1http://en.wikipedia.org/wiki/Stelhttp://en.wikipedia.org/wiki/Bharti_Airtelhttp://en.wikipedia.org/wiki/Reliance_Communicationshttp://en.wikipedia.org/wiki/Vodafone_Essarhttp://en.wikipedia.org/wiki/BSNLhttp://en.wikipedia.org/wiki/Idea_Cellularhttp://en.wikipedia.org/wiki/Tata_Teleserviceshttp://en.wikipedia.org/wiki/Aircelhttp://en.wikipedia.org/wiki/MTNLhttp://en.wikipedia.org/wiki/MTS_Indiahttp://en.wikipedia.org/wiki/Loop_Mobile_Indiahttp://en.wikipedia.org/wiki/Uninorhttp://en.wikipedia.org/w/index.php?title=HFCL_Infotel&action=edit&redlink=1http://en.wikipedia.org/wiki/Stel


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TRAI

The Telecom Regulatory Authority of India (Hindi: ) or TRAI (established 1997) is the independent regulator established by the Government of India to regulatethe telecommunications business in India.

The mission of Telecom Regulatory Authority of India (TRAI) is to ensure that the interests of consumers are protected and at the same time to nurture conditions for growth of telecommunications, broadcasting and cable services in a manner and at a pace which will enableIndia to play a leading role in the emerging global information society.

Notwithstanding anything contained in the Indian Telegraph Act, 1885 , few of the important functions of the Authority shall be to:

i. need and timing for introduction of new service provider ;ii. terms and conditions of license to a service provider;iii. revocation of license for non-compliance for terms and conditions of license:iv. measures to facilitate competition and promote efficiency in the operation of

telecommunication services so as to facilitate growth in such services.v. technological improvements in the services provided by the service providers.

vi. measures for the development of telecommunication technology and any other matter relatable to telecommunication industry in general;

vii. efficient management of available spectrum ;

viii. ensure compliance of terms and conditions of license;ix. ensure technical compatibility and effective inter-connection between different service

providers.x. regulate arrangement amongst service providers of sharing their revenue derived from

providing telecommunication services.xi. lay down the standards of quality of service to be provided by the service providers and

ensure the quality of service and conduct the periodical survey of such service provided by theservice providers so as to protect interest of the consumers of telecommunication services;

xii. levy fees and other charges at such rates and in respect of such services as may bedetermined by regulations.

xiii. Perform other such functions as may be entrusted by the Central Govt.

http://en.wikipedia.org/wiki/Hindi_languagehttp://en.wikipedia.org/wiki/Competition_regulatorhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Telecommunicationhttp://en.wikipedia.org/wiki/Indiahttp://www.dot.gov.in/Acts/telegraphact.htmhttp://en.wikipedia.org/wiki/Service_providerhttp://en.wikipedia.org/wiki/Licensehttp://en.wikipedia.org/wiki/Licensehttp://en.wikipedia.org/wiki/Competitionhttp://en.wikipedia.org/wiki/Frequency_allocationhttp://en.wikipedia.org/wiki/Computer_compatibilityhttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Feehttp://en.wikipedia.org/wiki/Hindi_languagehttp://en.wikipedia.org/wiki/Competition_regulatorhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Telecommunicationhttp://en.wikipedia.org/wiki/Indiahttp://www.dot.gov.in/Acts/telegraphact.htmhttp://en.wikipedia.org/wiki/Service_providerhttp://en.wikipedia.org/wiki/Licensehttp://en.wikipedia.org/wiki/Competitionhttp://en.wikipedia.org/wiki/Frequency_allocationhttp://en.wikipedia.org/wiki/Computer_compatibilityhttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Fee


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PRESENT SCENARIO OF CELLULAR OPERATORS

The major players in the market are :-

1. Bharti Airtel

2. AIRCEL

3. Vodafone Essar

4. BSNL

5. Idea Cellular

Let us have a look at the share of all the GSM operators wit compared to the total subscribers base of india.

Below are the major 10 market players which constitute the indian GSM cellular service market.

GSM Opertaor wise % market share April, 2010.

GSM Operator Total Subscriber base % Market Share % Growth Over previous month

Bharti Airtel 130619487 30.16% 2.35%

Vodafone 103755978 23.96% 2.87%

Idea Cellular 65288248 15.08% 2.29%

BSNL 64744985 14.94% 1.98%

Aircel 38469541 8.88% 4.36%

Reliance Telecom(RTL)*

16311206 3.77% NA

MTNL 4817670 1.11% 0.69%

Uninor 5021651 1.16% 17.77%

Loop Mobile 2894511 0.67% 1.76%

Stel 112391 0.26% 10.48%

All India 433040658 100% 2.65%

* Reliance Telecom Ltd (RTL) figures will not be included from the month of April2010 as the same isnot being reported



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Bharti Airtel leads the sector in terms of number of subscribers and also in market capitalization. Thecompany also has an average growth rate of 2.5% monthly increase in the subscribers base

FINANCIALS

Bharti Airtel Vodafone(2008)

Idea Cellular BSNL Aircel

EPS 40.45 12.56 3.23 1.15 29.28RONW 32.35 3.22 11.36 0.71 44.87ROCE 33.17 4.23 12.64 1.89 43.69D: E 0.30 0.27 0.95 0.04 0.32subscribers addition inmarch 10

14.77% 17.87% 8.28% 13.26% 9.85%

Total market share 30.16% 23.96%(2009)

15.08% 14.94% 8.88%

SHARE PRICE DATA OF THE ABOVE COMPANIES

BHARTI AIRTEL RCOMM IDEA TATACOMM

CURRENTMKT PRICE

265(25/05/10)

147.70 52 241

52 WEEK HIGH

467(01/10/03)

359(11/06/09)

91.70(11/06/09)

602(25/05/09)

52 WEEK LOW

229.50(27/11/09)

131.80(21/05/10)

47.05(27/11/09)

237.60(21/05/10)

ALL TIMEHIGH

574.50(10/10/07)

844(10/01/08)

161(18/10/07)

1083.32(11/02/00)

ALL TIMELOW

10.33(10/01/03)

131.3509/03/09)

34.05(27/10/08)

NA17/02/97

BETA (last 1yr.)

0.6201 1.3041 1.0121 0.7051



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Future prospects of telecom industry in India :

1. Worlds largest democracy.

2. Independent judiciary.

3. Skilled and competitve labour force.

4. Second largest telecommunication network in the world and the second largest interms of number of wireless connections in the world.

5. On an average, about 5 6 million users added per month, making india the worlds fastestgrowing wireless service market.

6. FDI limit increased from 49% to 74%

7. The rural telecom equipment market is also open to large investments.

India among the countries offering highest return on investments.

8. Launch of 3G spectrum in india which filled in governments pockets by USD 3.6 billionwhich will help govt deal with the rising deficit

9. 3G to roll out the number of subscribers reaching around 850-900 millionby 2014 -2015increasing by around 12% to 14%

10. According to CRISIL Research head Manoj Mohta, the operators which have the existing2G spectrum, and also have won bid for 3G, would see a gradual improvement in their

profitability margin also.



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A graphical representation of Share Prices of few telecom companies in India

Share price of Bharti Airtel since 25/05/09 to 25/05/10

Share price of Idea Celular since 25/05/09 to 25/05/10



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Share price of Reliance Communications since 25/05/09 to 25/05/10

Share price of Tata Communications since 25/05/09 to 25/05/10



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A WIDE LOOK ON INDIAS 3G AUCTIONS :

Indias auction for 3G GSM Service licence ended today with bids for pan-India licence touching Rs16,751 crore which ensures the Government of India a revenue of Rs 67,719 crore.

The 3G auction had commenced on 9 April, 2010 and there were nine bidders in the fray for the slots of 3G spectrum on the block. The government auctioned three slots in 17 telecom service areas and four slots in the remaining five states of Punjab, Bihar, Orissa, Jammu and Kashmir and Himachal Pradesh.

No single bidder bid for a pan-India 3G license so state operator BSNL would be remain the biggest 3Goperator in India. Delhi circle emerged the most valuable circle at Rs.3317 crore, followed by Mumbai at

Rs.3247 crore. Among the major bidders, Idea cellular paid nearly Rs.5765 cr for 11 telecom circles,while Indias largest 2G Mobile service operator Bharti Airtel paid Rs.12290 cr for 13 telecom circles,Vodafone Essar will paid Rs. 11617 crore for 9 telecom circle while Reliance Commmunication paid Rs8583 crore for 13 telecom circles.

The List of 3G Winners (Private Operators ) :

Delhi & NCR: Vodafone, Bharti, Reliance Communications at Rs 3316.93 cr



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State telecom operator BSNL and MTNL already received 3G spectrum outside the auction process, andlaunched 3G mobile services in more than 430 cities across India,but the bidding price would bedetermined by the auction price.

Telecom Sector and Union Budget 2010:

The union Budget 2010-11 neglected the telecom industry's special demands. Telcos were looking at arationalisation of tax and levies, uniform license fee of one per cent of the AGR. Telcos wanted a re-look at direct tax, tax holidays and section 81 (A), a re-look at licenses and indirect taxes

As far as the telecom sector is concerned, Dua said that while the reduction in Corporate Surcharge would

provide a minor relief, but at the same time the increase in MAT from 15% to 18% is a major are of concern. He further added that the increase in Central excise duty from 8% to 10% is another area of concern and will lead to an increase in cost of service. The continuation of exemption from basic, CVDand special additional duties (SAD) granted to their parts, components and accessories of mobile phonesis a welcome step and would help towards penetration of affordable mobile service especially to ruralareas. COAI welcomed the impetus given by the Finance Minister to the use of clean/ alternate energy.

PORTERS FIVE FORCES MODEL ON TELECOM SECTOR IN INDIA



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Porters five forces model uses concepts developed by I ndustrial Organisation economics to derivefive forces that determine the competitive intensity and therefore attractiveness of a market.

1. COMPETITIVE RIVALRY WITHIN AN THE INDUSTRY

This describes the intensity of competition between existing firms in an industry. HighlycCOMompetitive industries generally earn low returns because the cost of competition is high. Ahighly competitive market might result from:

i) Many players of about the same size; there is no dominant firmii) Little differentiation between competitors products and servicesiii) A mature industry with very little growth; companies can only grow by stealing

customers away from competitors



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There are majorly 3 types of players in the industryi) State owned players. (BSNL and MTNL)ii) Private Indian players. (Reliance comm, Tata comm, Bharti Airtel)iii) Foreign invested companies. (vodafone, Idea cellular)

There has been a stiff competition in the telecom market market over a period of time. Let us talk about the current scenario.

At present has a subscribers base of above 6,47,44,985 with a market share of aprox. 15%. BSNL has anedge over private players as it has already started with 3G specturm services across India. BSNL is BSNLdedicatedly performing its work as it drives India into the next league of telecom supremacy by providingtechnologically advanced services to its discerning customers at an affordable cost

On the private side, there has been a tough competition between Bharti airtel and Vodafone each having amarket share of 30 % and 24% respectively.Even the growth rate of both the companies for the month of April when compared with March is around+/- 2.5% .

Both are again in the race to start with the 3G services and cater it all across India and give a toughcompetition to BSNL who is already in the market.Idea cellular, Reliance comm and Aircel are also in the race as they lack in the infrastructure whencompared with Vodafone and Bharti Airtel

1. BARGAINING POWER OF CUSTOMERS .

This is how much pressure customers can place on a business. If one customer has a large enough

impact to affect a company's margins and volumes, then the customer hold substantial power.Here are a few reasons that customers might have power:

i) Small number of buyersii) Purchases large volumesiii) Customers are price sensitive.



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Indian telecom industry is one of the fastest growing or second largest in the world. In this industry,service providers are the major drivers. The major booster is the wireless mobile subscribers which havecrossed 433 million. There has been a major increase in subscribers in the month of April,2010 by awhooping 11 mn. It is expected to grow more after the 3G sevices starting of from sep1,2010,

2. BARGAINING POWER OF SUPPLIERS

This is how much pressure suppliers can place on a business. If one supplier has a large enoughimpact to affect a company's margins and volumes, then it holds substantial power. Here are afew reasons that suppliers might have power:

i) There are very few suppliers of a particular producta. There are no substitutes

ii) Switching to another (competitive) product is very costlyiii) The product is extremely important to buyers - can't do without itiv) The supplying industry has a higher profitability than the buying industry

As far as telecom industry is concerned there are very few suppliers in the market. So the role of suppliers is almost negligible in the industry. We are trying to analyze that minor role.

1. Mobile handset suppliers : There are many handset suppliers in the market, some of themare Nokia, Samsung,Motorola, Sony Ericsson, Reliance Classic, Tata Indicom, etc. Few of thenew entrants are Spice, Micromax, Karbon, etc.2. Some other suppliers in the industry are the suppliers of Optical fibre and Aluminium.

Other important parameter in this can be the software assistance, where suppliers can have edge over. Themajor software providers are TCS, Infosys, Wipro, Satyam etc. Again one thing is noticable that biggiants like Reliance and Tata have their own software solution departments

3. THREAT TO NEW ENTRANTS .

The easier it is for new companies to enter the industry, the more cutthroat competition therewill be. Factors that can limit the threat of new entrants are known as barriers to entry. Someexamples include:

i) Existing loyalty to major brandsii) High fixed costsiii) Scarcity of resources

http://www.investopedia.com/terms/s/substitute.asphttp://www.investopedia.com/terms/b/barrierstoentry.asphttp://www.investopedia.com/terms/s/substitute.asphttp://www.investopedia.com/terms/b/barrierstoentry.asp


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iv) High costs of switching companiesv) Government restrictions or legislation

The Indian telecom sector offers unprecedented oppurtunities for foreign companies in various areas suchas 3G, Virtual Private Network, international long distance calls, value added services, etc. The market is

witnessing M&A like the Bharti Zain, which are leading to consolidations in the industry. This sector also attracts FDI which has made it the third largest sector attracting FDI in the post liberalization era .

4. SUBSTITUTE TO PRODUCT

What is the likelihood that someone will switch to a competitive product or service? If the cost of switching is low, then this poses a serious threat. Here are a few factors that can affect the threat of substitutes:

I) The main issue is the similarity of substitutes. For example, if the price of coffee risessubstantially, a coffee drinker may switch over to a beverage like tea.

II) If substitutes are similar, it can be viewed in the same light as a new entrant.

There is a cut throat competition and a price war for the tariffs of the service provider. Today thedifference in the price of the of two products is marginal. Also with the availaibility of additional serviceslike GPRS, internet, video conferencing etc, the option of substitutes for the consumer is never ending. Intodays scenario, there are consumers who are ready to change their service providers for a reduction in

the tariffs, which poses a major threat to the companies..

SWOT ANALSIS OF TELECOM SECTOR.STRENGTHS :

Strong mobile subscribers growth is continuing, with the market benefiting from healthy degree of competition.



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The mobile market plays host to a large number of strateic investors including Singapores SingTel,Vodafone from U.K, Telecom Malaysia, Etisalat from UAE, Japans NTT DoCoMo and RussiasSistema.

Demand for mobile Value Added Services is strong and expected to grow.

WEAKNESS :

Mobile market is stil inclined towards prepaid users.

The dominance of prepaid services has contributed to declining mobile average revenue per user (ARPU)levels.

Disagreement between the regulator TRAI and government ministries has led to delayed policyimplementation in a number of areas, most notably 3G licensing.

OPPURTUNITIES :

The government is currently considering recommendations made by TRAI to allow the operations of MVNOs (Mobile Vitual Network Operator) in the mobile market.

The government wil cut license fees upto 33% for those operators whose service covers 95% of theresidential area in a calling circle.

There is an oppurtunity to cover the vast untapped rural market.

THREATS :

Government plans to increase spectrum usage charges for telecom companies.

Network capacity, particularly in the mobile market, couldstruggle to keep up with demand.

Stiff competition in the market will make service providers difficult to retain customers.

FUNDAMENTALS OF BHARTI AIRTEL

Introduction to Bharti Airtel

The name of the company is Bharti Airtel

It belongs to the Telecommunications industry



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The company was founded on July 07, 1995 by Sunil Bharti Mittal

The headquarters of the company are located in New Delhi, India

Key people of the company are : Sunil Mittal (Chairman & MD)

Sanjay Kapoor (CEO)

Vision of Bharti Airtel is : To be the most admired brand in india

Loved by more customers

Targeted by top talent

Benchmarked by more business

THE KEY PRODUCTS ARE :-

1. TELE SERVICES

2. WIRELESS INTERNET

3. DTH SERVICES

4. ENTERPRISE SERVICES

1. TELE SERVICES :



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Bharti Airtel provides Prepaid and postpaid services for both mobile phones and fixed land linesusers

The company charges Nominal tariff rates to its users in all the circles where it provides service

Bharti Airtel also provides gprs services to the gprs unabled handsets

Airtel also provides Wireless solution in blackberry and iphone

As far as advertising is concerned, the company has Shah rukh khan the brand ambassador

2. WIRELESS INTERNET :

Bharti Airtel has an easy to access Airtel usb modem for an instant internet connection

It provides with a wide range of prepaid and postpaid plans available as per customer needs

The company has most widespread network in the country

Data card is available from Rs.49 to Rs.999/month (installation cost Rs.2999)

3. DTH SERVICES :

Airtel digital TV is a satellite television service

It offers additional benefit like TV recorder

Tariffs from Rs.145 to Rs.345/month (Installation Rs.1490 Rs.4290)

Kareena Kapoor and Saif Ali Khan are the brand ambassadors which has helped a lot to thecompany to generate sales and have a competitive stand in the DTH market



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4. ENTERPRISE SERVICES :

1st ISP (Internet service provider) in India

It provides end to end telecom solutions to corporate customers

National and international long distance services to carriers

(A company authorized by regulatory agencies to operate a telecommunication system)

TELECOM STATISTICS APRIL, 2010

Indian Telecom Sector Statistics

Total telephone subscriber base 638.05

Tele-density 54.10%

Fixed-line user base 36.83 mn

Wireless User base (GSM+CDMA+WLL(F) 601.22 mn

Monthly additions (Wireline) 16.64

Monthly additions (Wireless) 9.00

The total density of Indian Telecom sector is still around 54%+ which is far below an averagedensity of a developed country which still gives a scope for many players to enter the market andalso gives a chance to all the existing players to expand their market share



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Bharti Airtel is worlds 3 rd largest , single country mobile operator and sixth largest integratedtelecom operator

The below data is as on April, 2010

GSM

Operator

Total Subscriber base % Market Share % Growth

Over previous month Bharti Airtel 130619487 30.16% 2.35%

Vodafone 103755978 23.96% 2.87%

Idea Cellular 65288248 15.08% 2.29%

BSNL 64744985 14.94% 1.98%

Aircel 38469541 8.88% 4.36%

RelianceTelecom(RTL)*

16311206 3.77% NA

MTNL 4817670 1.11% 0.69%

Uninor 5021651 1.16% 17.77%

Loop Mobile 2894511 0.67% 1.76%

Stel 112391 0.26% 10.48%

All India 433040658 100% 2.65%

Bharti Airtel has a market share of around 7.85% (29,28,254 subscribers) in wire line services

Bharti Airtel has a market share of around 30.16% (13,06,19,487 subscribers) in GSM cellular service market



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There has been a growth of 2.35% in the month of march 10 adding 3mn subscribers

KEY POSITIVES:

Bharti Airtel is presently the no.1 telecom operator in India

It holds the largest market share of 30%+ being a market leader

The network is spread across all 19 telecom circles and 4 metro cities which gives it a PAN(Presence Across Nation) India presence

Bharti Zain acquisition would add access to 15 more countries in Africa adding 40.1mnsubscribers to its present data base

Bharti has paid Rs. 12295 crore for the license of 3G spectrum which will help the company tocover Mumbai, Delhi, AP, Karnataka, Rajasthan, TN, UP, WB, HP, Bihar and Jammu & Kashmir

Acquiring 70% stake in Warid telecom of Bangladesh

RISK ASSOCIATED:



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There will be a significant deterioration in companys cash flow protection measure as due to ahigh amount of debt raised for obtaining 3G license and acquiring Zain Africa.

There is a high amount of business risk involved due to the macroeconomic and political risk associated as well as lower profitability of Zains Africa operations

Share price currently trading at 9 months low

Bharti Airtel is India centric. It has of lately started to spread its wings in thee internationalmarket

BASIC FINANCIALS OF BHARTI AIRTEL



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MAR 03 MAR 04 MAR 05 MAR 06 MAR 07 MAR 08 MAR09

DEBT :EQUITY

0.01 0.07 0.60 O.83 0.54 0.38 0.30

ROCE (%) 0.17 0.16 23.96 22.55 34.07 34.83 33.17

PAT(Rs. IN Cr) 0.22 0.37 1210.67 2012.08 4033.23 6244.19 7743.84

RONW (%) 0.47 0.27 23.88 31.82 43.04 39.46 32.35

MAR 09 MAR 10INCREASE INPERCENTAGE

(%)

SALES (Rs. IN Cr)

7744 9426 4.69%

NET PROFIT (Rs. IN Cr)

34014

35610

21.72%

AVERAGE REVENUE PER USER (ARPU)

QUARTER ended 2009 ARPU

Q1 278

Q2 252

Q3 230

Q4 220



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ARPU facts of Bharti Airtel

Average APRU for FY 2010 is Rs.245

ARPU of Bharti Airtel for Mar 2010 was Rs.220

ARPU of Telecom Sector for Mar 2010 was Rs. 124

The ARPU of Zain in Africa is Rs. 360 to Rs.450

The estimated ARPU after the launch of 3G is to be estimated at Rs.350

ARPU = Average minutes of use per user * Average rate per minute

Average minute of use per user of Bharti Airtel grew from 446 minutes to 468 minutes as compared withlast Quarter

Average rate per minute declined from Rs.0.52 to Rs.0.47 as compared with last Quarter

The below table shows the ARPU per subscriber and the number of 3G subscribers required to have aBEP

The above table states that if Bharti Airtel wants an ARPU of Rs. 200 per subscriber, than they will haveto add on 90mn 3G subscribers to Break Even the cost incurred for the licensing of 3G spectrum.



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SHARE PRICE DATA

BHARTI AIRTEL RELIANCE COMM IDEA TATA COMM

CURRENTMARKET PRICE

265(25/05/10)

147.70(25/05/10)

52(25/05/10)

241(25/05/10)

52 WEEK HIGH 467(01/10/03)

359(11/06/09)

91.70(11/06/09)

602(25/05/09)

52 WEEK LOW 229.50(27/11/09)

131.80(21/05/10)

47.05(27/11/09)

237.60(21/05/10)

ALL TIME HIGH 574.50(10/10/07) 844(10/01/08) 161(18/10/07) 1083.32(11/02/00)

ALL TIME LOW 10.33(10/01/03)

131.3509/03/09)

34.05(27/10/08)

NA17/02/97

BETA 0.6201 1.3041 1.0121 0.7051

The share price of Bharti Airtel from 21/05/09 to 21/05/10

MOBILE NUMBER PORTABILITY



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It is a service that allows customers to change their service providers without changing their mobilenumbers

MNP has been delayed till 30 th June, 2010

Telecos has predicted that around 0.5% 20% of mobile subscribers will use MNP service

Initial expenditure for the companies would be Rs.1065 crores and annual operational expenditure would be Rs.184.75 crores

CHARGES OF MNP

Per Port Transaction Charge :

It is a processing charge paid by the recipient operator (the operator to which subscriber shifts loyalty) toMNP service provided.

Charges shall be Rs. 19

Porting Charges :

It is a charge paid by the subscriber for porting his number to the recipient operator

Charges shall be Rs.20

Bharti Airtel as investments with Mutual Funds

JM Telecom Sector Fund as on 30/04/10

EQUITY VALUE(IN Cr.)

QUANTITY %

Bharti Airtel 4.50 150727 55.32

Idea Cellular 0.77 125448 9.44

Tulip Telecom 068 8121 8.40

Reliance Comm. 1.17 7152 14.40

The highest holdings of Bharti Airtel in MFs (%)



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JM Telecom Sector Fund = 55.32%,

Franklin (I) Flexi Cap = 9%

Franklin (I) Flexi Cap (G) = 10%

The highest holdings of Bharti Airtel in terms of Asset Value

HDFC Equity Fund (G) = 6187 crores

HDFC MIP - LTP (G) = 5925 crores

SBI Magnum Tax Gain (G)= 5525 crores

SWOT ANALYSIS OF BHARTI AIRTEL

STRENGTHS

More than 130mn customers base

Business has access to knowledge and technology as it holds strategic alliance with Sony-Ericsson, Nokia and Sing Tel

Pan India presence

Strong financials with increase in NP by 22%+ and Sales by 4.5%+ for FY Mar, 2010

WEAKNESSOutsourcing of telecom and IT networks, IT infrastructure, lastmile connectivity of broadband operations,BPO services, Inter city optic fibre cables

Risk associated with Zain acquisition like lower profitability, political and regulatory risks

OPPURTUNITIES

Bharti infratel can cut down cost in vast untapped rural and semi urban areas

Current tele - density is 52%, still low as compared to developed economies

Increase in subscribers base and global wide spread with Bharti Zain acquisition



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THREATS

Bharti Airtel is India centric

Intense competition among Indian markets

Changing pace of global telecommunication industry which impacted the decision of purchase of MTNindirectly opening doors for the rivals (Reliance comm.)



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PORTERS FIVE FORCES MODEL

COMPETITIVE RIVALRY WITHIN THE INDUSTRY

Many players of the same size

Little differentiation between competitors products and services

Company can only grow by diminishing cut throat competition and stealing away the customers



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Result : High

BARGAINING POWER OF SUPPLIER

Improved competitive scenario and commoditisation of telecom services has led to reduced bargaining power for services providers.

There are very less substitutes

Large number of equipment makers(fibre optic cables, billing software) to dilute bargaining power

Result : Low

BARGAINING POWER OF CUSTOMERS

A wide variety of choices available to customers both in fixed as well as mobile telephony hasresulted in increased bargaining power for the customers.

Buyers power varies between market segments

Customers are price sensitive



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Result : High

THREAT TO NEW ENTRANTS

High fixed costs and difficult access to finance

Scarcity of resources

Switching costs is relatively low

Government restrictions or legislation

Result : High

FUTURE PROSPECTS/STRATEGIES

To translate its expertise of Indian market to other emerging economies (Zain acq.)

Purchase of Zain for $10.7bn which will increase its network to 15 more countries resulting in anincrease in 40.1mn subscribers



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To continue and upgrade the unmatched service provided to the customers

Also to acquire 70% stake in Warid telecom, Bangladesh

To increase customer base by the support of 3G spectrum as it is not feasible for new entrants to take partat such high bid price

Future roadmap

3G WiMax VPN & VOIP

CONCLUSION :

All the above factors including the highest subscribers base and largest market capitalizationalong with the EPS of Rs.40.45, share price data trading at 52 weeks low and the Bhartiacquiring 3G license with the highest fee payment along with the Bharti- Zain acquisition



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allowing Bharti to add 40 mn subscribers and access to more than 14 countries adds up to aconclusion for Bharti Airtel as VALUE BUY investment.

REFERENCES:

Capitaline software



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http://trak.in/tags/business/2010/04/27/telecom-subscriber-growth-vodafone-top/

http://www.moneycontrol.com/news/result-analysis/bharti-airtel-q4-net-falls-8_454275.html

http://www.coai.co.in

http://trak.in/tags/business/2010/05/21/airtel-mobile-subscriber-addition-april/

en.wikipedia.org/wiki/ TRAI

http://www.articlesbase.com/business-opportunities-articles/the-indian-telecom-sector-moving-into-2010-1819701.html

http://en.wikipedia.org/wiki/Communications_in_India

http://indiafocus.indiainfo.com/industryandbusiness/telecom/mobile/

http://www.nseindia.com/http://telecomtalk.info/indias-3g-auction-ends-no-single-bidder-bid-for-a-pan-india-3g-license/28033/

http://www.topnews.in/coai-report-gsm-operators-sign-1118-mln-users-april-2262392

http://economictimes.indiatimes.com/Telecom/Telecom-sector-may-see-salary-hikes-of-up-to-30/articleshow/5496113.cms

http://voicendata.ciol.com/content/news1/110022607.asp

http://www.investopedia.com/features/industryhandbook/porter.asp

http://www.indiabroadband.net/airtel-broadband/2511-airtel-enterprise-internet.html

http://www.moneylife.in/article/8/3782.html

http://www.slideshare.net/amit_kumar1/airtel-ppt-presentation

http://trak.in/tags/business/2010/04/27/telecom-subscriber-growth-vodafone-top/http://www.moneycontrol.com/news/result-analysis/bharti-airtel-q4-net-falls-8_454275.htmlhttp://trak.in/tags/business/2010/05/21/airtel-mobile-subscriber-addition-april/http://www.articlesbase.com/business-opportunities-articles/the-indian-telecom-sector-moving-into-2010-1819701.htmlhttp://www.articlesbase.com/business-opportunities-articles/the-indian-telecom-sector-moving-into-2010-1819701.htmlhttp://en.wikipedia.org/wiki/Communications_in_Indiahttp://indiafocus.indiainfo.com/industryandbusiness/telecom/mobile/http://www.nseindia.com/http://telecomtalk.info/indias-3g-auction-ends-no-single-bidder-bid-for-a-pan-india-3g-license/28033/http://telecomtalk.info/indias-3g-auction-ends-no-single-bidder-bid-for-a-pan-india-3g-license/28033/http://www.topnews.in/coai-report-gsm-operators-sign-1118-mln-users-april-2262392http://economictimes.indiatimes.com/Telecom/Telecom-sector-may-see-salary-hikes-of-up-to-30/articleshow/5496113.cmshttp://economictimes.indiatimes.com/Telecom/Telecom-sector-may-see-salary-hikes-of-up-to-30/articleshow/5496113.cmshttp://voicendata.ciol.com/content/news1/110022607.asphttp://www.investopedia.com/features/industryhandbook/porter.asphttp://www.indiabroadband.net/airtel-broadband/2511-airtel-enterprise-internet.htmlhttp://www.moneylife.in/article/8/3782.htmlhttp://www.slideshare.net/amit_kumar1/airtel-ppt-presentationhttp://trak.in/tags/business/2010/04/27/telecom-subscriber-growth-vodafone-top/http://www.moneycontrol.com/news/result-analysis/bharti-airtel-q4-net-falls-8_454275.htmlhttp://trak.in/tags/business/2010/05/21/airtel-mobile-subscriber-addition-april/http://www.articlesbase.com/business-opportunities-articles/the-indian-telecom-sector-moving-into-2010-1819701.htmlhttp://www.articlesbase.com/business-opportunities-articles/the-indian-telecom-sector-moving-into-2010-1819701.htmlhttp://en.wikipedia.org/wiki/Communications_in_Indiahttp://indiafocus.indiainfo.com/industryandbusiness/telecom/mobile/http://www.nseindia.com/http://telecomtalk.info/indias-3g-auction-ends-no-single-bidder-bid-for-a-pan-india-3g-license/28033/http://telecomtalk.info/indias-3g-auction-ends-no-single-bidder-bid-for-a-pan-india-3g-license/28033/http://www.topnews.in/coai-report-gsm-operators-sign-1118-mln-users-april-2262392http://economictimes.indiatimes.com/Telecom/Telecom-sector-may-see-salary-hikes-of-up-to-30/articleshow/5496113.cmshttp://economictimes.indiatimes.com/Telecom/Telecom-sector-may-see-salary-hikes-of-up-to-30/articleshow/5496113.cmshttp://voicendata.ciol.com/content/news1/110022607.asphttp://www.investopedia.com/features/industryhandbook/porter.asphttp://www.indiabroadband.net/airtel-broadband/2511-airtel-enterprise-internet.htmlhttp://www.moneylife.in/article/8/3782.htmlhttp://www.slideshare.net/amit_kumar1/airtel-ppt-presentation


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Documents

Fundamentals of Bharti d Final Projct