Finance Balance Sheet

Analysis of Financial Statements

from the Annual Report 2010 - 2011 of

By XMBA.19 - Group: Yuvraj Tandon Sanjay D‟Souza Ganesh Pednekar Prasanjit Das

1. India’s Telecom Industry Overview

Indian telecom industry has been hailed as the proof of India‟s progress post liberalization. The country actually leapfrogged to the mobile platform bypassing the fixed line. The country was divided into 23 circles when the mobile phones were introduced in the country. Separate licenses were given out for each of the circles in 1994. The circles were classified as Metros, A, B or C depending upon the revenue potential for the circle with Metros & A circles expected to have the highest potential. The mobile operators brought in a lot of innovations like outsourcing of networks, focus on prepaid, etc. to make the mobile services affordable to the masses. As a result, the prices declined significantly over the years and the base continued to increase. The chart below gives a good overview of the various events in the industry over the years and the impact of the events on the adoption of the services.

Till 2009, the number of operators was around 5-6 per circle which meant that there was enough competition to keep the prices down but there still some sanity in terms of profitable growth. The EBITDA levels till 2009 were almost 40%. However, in 2008, the Government issued licenses to 8 new operators taking the number of operators to 14. The only way the new operators could have got subscribers was by indulging in tariff wars and hence the tariff wars lead to sharp decline in rate per minute. The minutes of usage per customer did not increase with the falling rates so the overall revenues stagnated despite significant increase in subscriber additions. The new subscribers were from lower income groups who used the phone more as an incoming device bringing down the ARPU levels

2. Indian Telecom Analysis (2008-2012)

Telecom industry in India has undergone a revolution...