Technical Analysis

REPORT OF INVESTMENT MANAGEMENT ON TECHNICAL AND QUALITATIVE ANALYSIS

SUBMITTED TO:PROF. R. SRINIVASAN

SUBMITTED BY: NAVDEEP KHOKHAR 22/JKBS /AICTE/10 PRATEEK SONI

/JKBS/AICTE/10

Table Of Contents Serial No: 1

Contents Introduction

2 3 4

SWOT Analysis PEST Analysis BCG Analysis

5 6

Ansoff Model Porter‘s 5 Force Model

7

Ratio Analysis

8

Beta, Mean, Standard Deviation

9

Bibliography

Executive Summary

The report on Qualitative and Technical analysis of Power sector companies focuses on two selected companies Bharti Airtel and Idea Cellular. The prime focus of the report is to evaluate the trends in the recent share price movement of these two organizations by focusing on Qualitative and Quantitative analysis. This report focuses on SWOT analysis, Ansoff‘s analysis, Porter‘s Analysis, Pest Analysis, Graphical interpretations (SMA, EMA, MACD, Signal Line, Bollinger Bands, Beta,etc.) All of the analysis tends to provide an in-depth view of the movement of stocks of the respective companies and their comparisons with other existing players in the telecom industry by using ratio analysis which shows the complete financial position and comparison for the last two years. The only motive is to show the existing trends in the Indian Telecom Sector by evaluating two private sector companies and their respective contributions toward the nation and to their shareholders.

About Bharti Airtel Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti Group, has a diverse business portfolio and has created global brands in the telecommunication sector. Bharti has recently forayed into retail business as Bharti Retail Pvt. Ltd. under a MoU with WalMart for the cash & carry business. It has successfully launched an international venture with EL Rothschild Group to export fresh agri products exclusively to markets in Europe and USA and has launched Bharti AXA Life Insurance Company Ltd under a joint venture with AXA, world leader in financial protection and wealth management. Airtel comes to you from Bharti Airtel Limited, India‘s largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles. Bharti Airtel since its inception has been at the forefront of technology and has steered the course of the telecom sector in the country with its world class products and services. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU‘s) - Mobile Services, Airtel Telemedia Services & Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 95 cities. The Enterprise services provide end-to-end telecom solutions to corporate customers and national & international long distance services to carriers. All these services are provided under the Airtel brand. AIRTEL’s ENTERPRISE SERVICES The company is a part of Bharti Enterprises, and is India's leading provider of telecommunications services. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU‘s) - mobile services, broadband & telephone services (B&T) & enterprise services. The mobile services group provides GSM mobile services across India in 23 telecom circles, while the B&T business group provides broadband & telephone services in 90 cities. The Enterprise services group has two sub-units - carriers (long distance services) and services to corporate. All these services are provided under the Airtel brand. Services: ► ► ► ► ►

Voice Services Mobile Services Satellite Services Managed Data and Internet Services Managed e-Data Services

About Idea Cellular As India's leading GSM Mobile Services operator, IDEA Cellular has licenses to operate in 11 circles. With a customer base of over 17 million, IDEA Cellular has operations in Delhi, Maharashtra, Goa, Gujarat, Andhra Pradesh, Madhya Pradesh, Chhattisgarh, Uttaranchal, Haryana, UP-West, Himachal Pradesh and Kerala. IDEA Cellular's footprint currently covers approximately 45% of India's population and over 50% of the potential telecom-market. As a leader in Value Added Services, Innovation is central to IDEA's VAS Factory. It is the first cellular company to launch music messaging with 'Cellular Jockey', 'Background Tones', 'Group Talk', a voice portal with 'Say IDEA' and a complete suite of Mobile Email Services. Initially having a very limited footprint in the GSM arena, the acquisition of Escotel in 2004 gave Idea a truly pan-India presence covering Maharashtra (excluding Mumbai), Goa, Gujarat, Andhra Pradesh, Madhya Pradesh, Chhattisgarh, Uttar Pradesh (East and West), Haryana, Kerala, Rajasthan and Delhi (inclusive of NCR). A brand known for many firsts, IDEA was the first to launch GPRS and EDGE in India. IDEA has partnered with Research in Motion (RIM) to offer Blackberry services on its network. IDEA 'Net Setter'- Plug & Play, EDGE enabled USB Data Card offers affordable data connectivity with faster speed and consistency. IDEA has received several national and international recognitions for its path-breaking innovations in mobile telephony products & services. It won the GSM Association Award for "Best Billing and Customer Care Solution" for 2 consecutive years. It was awarded "Mobile Operator of the Year Award - India" for 2007 and 2008 at the Annual Asian Mobile News Awards.

Major products and services Idea Cellular is a part of the Aditya Birla Group. The company provides Global System for Mobile (GSM) services. The company's key services and brands include the following:

Services •Postpaid services •Prepaid services •Roaming services

Value added services •GPRS •SMS •Voice services

Call management services •Call barring •Call conferencing •Call divert •Call waiting-call hold •CLIP •Caller line identity restriction

Business services •Fixed cellular terminals •GSM PRI (Primary Rate Interface) gateway services •Internet access services •Internet on mobile •Remote energy meter reading •Toll free number services •Vehicle tracking

Swot Analysis Of Bharti Airtel Strength ► Bharti Airtel has more than 65 million customers (July 2008). It is the largest cellular provider in India, and also supplies broadband and telephone services - as well as many other telecommunications services to both domestic and corporate customers. ► Any organization requires strong partners which would help and support in various activities. Similarly, Bharti Airtel has strong strategic alliance with Ericson, IBM and Cisco. This means that the business has access to knowledge and technology from other parts of the telecommunications world. ► Airtel‘s match box strategy in rural areas helped them to penetrate deep in the rural sectors. Bharti Airtel has its presence in more than 300000+ rural areas. ► Airtel has always taken an initiative in promoting the services. Various services like hello tunes, Electronic recharge and Airtel Live have provided a competitive edge. ► The company has covered the entire Indian nation with its network. This has underpinned its large and rising customer base. Weakness ►

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► ► ►

An often cited original weakness is that when the business was started by Sunil Bharti Mittal over 15 years ago, the business has little knowledge and experience of how a cellular telephone system actually worked. So the start-up business had to outsource to industry experts in the field. Until recently Airtel did not own its own towers, which was a particular strength of some of its competitors such as Hutchison Essar. Towers are important if your company wishes to provide wide coverage nationally. The fact that the Airtel has not pulled off a deal with South Africa's MTN could signal the lack of any real emerging market investment opportunity for the business once the Indian market has become mature. In spite of good operation and marketing strategy, the mobile connectivity is poor in rural India. Bharti Airtel hasn‘t taken enough measures in overcoming geological factors In India, the mobile towers of Bharti Airtel are controlled, monitored and maintained by Ericson; as a result it does not have a single mobile tower. Bharti Airtel does not have experience and exposure on 3G technology as compared to its counterpart Vodafone and Virgin media.

Opportunities ►

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►

►

►

►

The company possesses a customized version of the Google search engine which will enhance broadband services to customers. The tie-up with Google can only enhance the Airtel brand, and also provides advertising opportunities in Indian for Google. Global telecommunications and new technology brands see Airtel as a key strategic player in the Indian market. The new iPhone will be launched in India via an Airtel distributorship. Another strategic partnership is held with BlackBerry Wireless Solutions. Despite being forced to outsource much of its technical operations in the early days, this allowed Airtel to work from its own blank sheet of paper, and to question industry approaches and practices - for example replacing the Revenue-Per-Customer model with a Revenue-Per-Minute model which is better suited to India, as the company moved into small and remote villages and towns. The company is investing in its operation in 120,000 to 160,000 small villages every year. It sees that less well-off consumers may only be able to afford a few tens of Rupees per call, and also so that the business benefits are scalable - using its 'Matchbox' strategy. Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea Cellular to create a new independent tower company called Indus Towers. This new business will control more than 60% of India's network towers. IPTV is another potential new service that could underpin the company's long-term strategy. Current market trend indicates that there would be rapid increase in 3G and Wimax technology in country. Enterprise Telecom services includes services like voice over internet protocol (VoIP), telecom services providers are targeting these areas. Bharti Airtel has acquired stake in Zain group in Africa and has got an entry to explore African market. Bharti Airtel should enter the international market. It should grab all the possible opportunities to make a strong foothold in telecom sector all over the globe.

Threats ►

Airtel and Vodafone seem to be having an on/off relationship. Vodafone which owned a 5.6% stake in the Airtel business sold it back to Airtel, and instead invested in its rival Hutchison Essar. Knowledge and technology previously available to Airtel now moves into the hands of one of its competitors. ► The quickly changing pace of the global telecommunications industry could tempt Airtel to go along the acquisition trail which may make it vulnerable if the world goes into recession. Perhaps this was an impact upon the decision not to proceed with talks about the potential purchase of South Africa's MTN in May 2008. This opened the door for talks between Reliance Communication's Anil Ambani and MTN, allowing a competing Indian industrialist to invest in the new emerging African telecommunications market.

►

Bharti Airtel could also be the target for the takeover vision of other global telecommunications players that wish to move into the Indian market. ► Failures of MTN deal damaged the reputation of company. Better network and coverage by CDMA operators (Reliance communication and TATA communications) can lead to switching of customers to some different network. Increase in number of both domestic and international mobile service providers (Domestic – Uninor, Videocon and International Virgin media). ► Implementation of Mobile number portability (MMP) may lead to switching of subscribers to different mobile service providers. As all the service providers are trying to find new ways to attract customers, cost per call is reducing. This may lead to decrease in Average revenue per user (ARPU). Now a day, due to increase in terrorist activity, service providers need to make sure that the network is secured and it is not used for illegal activates.

Swot Analysis Of Idea Cellular Strength ► Brand reputation: -Idea cellular is a part of Aditya Birla Group, a multinational having operations in 25 countries. The reputation of being the first Indian multinational and part of 100fortune companies carries a lot of strength which Idea cellular enjoys being the part of prestigious group. (Idea Cellular, 2008) ► Profit margin: - Profit margin has been increasing at high rate. The profit margin of Idea cellular in relation to its competitors like Bharti Airtel and Vodafone has grown relatively about 4% from 2006-07 which was 11% to 15% in 2007-08. It is strength for the organization as it is likely to give them a competitive edge. (Q3 result: Idea cellular, 2008) ► Financial strength:- The current ratio and the quick ratio of Idea Cellular (CurrentAssets/Current Liabilities) is 1.38:1 and 1.3:1 which show they can convert their assets in to cash easily and pay their current liabilities (Capitaline, 2009). In the same way their working capital is $1.5 billion which shows that they have huge cash for daily bases operation and financial works. If we talk about their shareholder funds which include general reserve and equity share capital is $ 23 billion and total long term debt is $6billion which is less than their capital, so it helps them to get loan easily (Capitaline, 2009). ► Market share:- The overall market share of Idea cellular is increasing at a healthy rate. It is currently operating in an industry which is expected to grow at a rate of 1.3 $ trillion in revenue according to a US based research agency (Insight research corporation New Jersey). Thus we can infer from this fact that Idea cellular has a huge target audience, as it has expanded its operations in almost all parts of India (The Money control, 2008). ► Technology innovation:- Being the first player in the telecom industry to start GPRS services in India, and even starting unique products, such as ‗My gang‘ and ‗Idea radio‘, the technological innovation of the organization can act as strength to the company in the long run (The Hindu, 2008). ► Strong advertising and promotion:- Idea cellular is known in the industry for its aggressive promotional and advertising techniques, such as having Abhishek Bachan, a famous Bollywood star as part of its advertising punch line ‗What an idea Sir Ji‘ proved effective in carrying out the promotional campaigns throughout the country (Money Outlook, 2001). ► Strategic alliance:- Idea cellular has strategic alliance with IBM and Oracle. Both have a unique brand image for providing best in class software solutions like CRM (Customer Relationship Management) and OLAP (Online Analytical Processing). It has also tie ups

with leading mobile producers like Nokia. This shows that the organization is dedicated towards providing superior services to its customers. (Idea Portal, 2009) Weakness:► No presence in Broadband or internet service: BSNL, Airtel, Reliance communications, Tata, all of them offer broadband services. Reliance communications as well as Tata are now offering high broadband access through Data cards. It thus adds value to their respective brands. Not being a broadband service provider is therefore a big weakness for them. ► Less PAN India presence: Idea cellular limited has a low PAN (Presence across nation) India presence as compared to its rivals Airtel and Reliance communications. Airtel and Reliance have always been the first ones in expanding their operation expeditiously as compared to other players in the industry. ► Target only North India: Idea Cellular is the market leader in North India, but they have a small market share in South India. Now recently it has made its presence in Tamilnadu. ► Not a player of ―Direct to Home Service‖: Idea cellular is not a player of DTH services. Players like Reliance and Bharti Airtel have a strong presence in DTH services. Looking at the future prospects of DTH services the giants like Tata, Airtel and Reliance who are the leading mobile service providers in the country have entered the arena of DTH. The DTH industry is expected to touch a base of 40-50 million subscribers by 2015. ► Not a big player in urban market: Idea Cellular is considered as rural market leader but they do not have good market share in urban area. They have 70 % market share in rural area and 32 % market share in urban area. Opportunity:► In India gross domestic product has improved .its mean people are spending money for consumption of product and services. ► The cellular market is fasted expanding market, so there is ample scope for idea to set their legs into the root of the market. ► Idea‘s innovation of promotion is effect the rural as well as the urban market and reflect the image of idea which full fill the brand name of perception in consumer mind. ► Idea always leads to introduce latest and low cost technology which attract customer to switch to idea. ► In India there are untapped rural markets which can be taken as opportunity to expand business. ► The regulatory environment in India is improving, which helps to idea to make better strategy.

Threats:► ► ► ► ► ►

In cellular market there are New entrant's which offer low price. The Saturation point in Basic telephony service is coming soon. Now there is new strategy comes as development of cellular service which is Mobile. Number Portability- In which there is a threat of customer switch to other brands. In cellular market there is a extensive competition. In this globalization era as company introduce new technology, after a few time, another company introduce more superior technology.

Pest Analysis Of Bharti Airtel Political ► In1985-Department of Telecommunications (DOT) was established to grow telecom industry. ► Earlier Tariff rates were high due to high taxes. Now it becomes lowest in the world. ► Government has replaced license fees with revenue sharing scheme and extended the license period from 10 to 20 years. ► In Telecom Sector of India, Foreign Direct Investment (FDI) is approximately 100%. FDI ceiling in the telecom sector has been raised to 74% which would help the Indian telecom sector immensely. ► Mobile number portability (MNP) implementation enabled subscribers to move to different service provider retaining the original number. ► In India legal obligations are defined regarding 3G auction and bidding, which proves to be in favour of Bharti Airtel as this auction is not available to the new entrants. This political factor forbids the entry of new companies in to 3G services. ►

Due to rising terrorist activities and hacking of confidential data on air, India‘s Department of Telecommunication (DOT) has made amendments related to security features which states that telecom companies should have good policies for security and they should be responsible for the security of the network.

Economical ► India‘s mobile subscriber base is growing. ► Indian telecom was growing approximately in a range of 20 to 30 % in year 2002 – 2003, but this figure has moved considerately to 40 – 45 % during the last couple of years. ► Telecom sector accounts for about 2 % of India‘s GDP and this figure is likely to increase in few years. ► Approximately 30% of the service tax revenue is contributed by telecom sector. ► It is also considered to be one of the major sectors which provide direct employment which indirectly helps in economic growth of India.

Social ► Perception ―as a brand of the successful people.‖ ► Now a day, customers have a notion regarding brand and status symbol. Customers have become cautious regarding choosing of telecom network. ► Cost factor is also major concern to customers for example calling rates, roaming facility, etc. Most of the customers are influenced by the latest fashion trend. ► A company needs to be updated with the latest technology and fashion trend. ► Demographic factor play an important role in selecting a product. Likes and dislikes of a teenager and adult might not be same, so the company will have to try its best to meet both the requirements. ► Advertisements plays very important role in selecting network. Airtel new advertisement ―HAR EK FRIEND JARURI HOTA HAI‖ is target to increase their customer to buy Airtel connection or to do Mobile Number Portability (MNP).

Technological ► Bharti Airtel is first wireless service provider which supplies roaming services, International and long distance communication services and Value Added Services. ► Bharti Airtel‘s has high-speed optic fiber network. This network presently spans 126,357 kms all over India. ► Bharti Airtel's international network infrastructure includes ownership of the i2i submarine cable system and consortium ownership in five global undersea cable system.

Pest Analysis Of Idea Cellular Political ► In1985-Department of Telecommunications (DOT) was established to grow telecom industry. ► Earlier Tariff rates were high due to high taxes. Now it becomes lowest in the world. ► Government has replaced license fees with revenue sharing scheme and extended the license period from 10 to 20 years. ► In Telecom Sector of India, Foreign Direct Investment (FDI) is approximately 100%. FDI ceiling in the telecom sector has been raised to 74% which would help the Indian telecom sector immensely. ► Mobile number portability (MNP) implementation enabled subscribers to move to different service provider retaining the original number. ► In India legal obligations are defined regarding 3G auction and bidding, which proves to be in favour of Bharti Airtel as this auction is not available to the new entrants. This political factor forbids the entry of new companies in to 3G services. ►

Due to rising terrorist activities and hacking of confidential data on air, India‘s Department of Telecommunication (DOT) has made amendments related to security features which states that telecom companies should have good policies for security and they should be responsible for the security of the network.

Economical ► India‘s mobile subscriber base is growing . ► Indian telecom was growing approximately in a range of 20 to 30 % in year 2002 – 2003, but this figure has moved considerately to 40 – 45 % during the last couple of years. ► Telecom sector accounts for about 2 % of India‘s GDP and this figure is likely to increase in few years. ► Approximately 30% of the service tax revenue is contributed by telecom sector. ► It is also considered to be one of the major sectors which provide direct employment which indirectly helps in economic growth of India.

Social ► Idea has gain maximum number Customer through MNP among which major part is of young generation. ► The company won prestigious Golden Peacock Award for its innovative product ―My gang‖ in 2008, for college students. ► Idea cellular limited is also an official sponsor of IIFA awards (Idea Cellular, 2008) for attaching its name with bollywood for atrracting customers. ► Their advertisement punch line ―An idea can change your life‖ created self image of the brand that other players were not able create in a short span of time. ► Idea has positioned themselves as young smart and innovative. ► Idea has taken some serious issues prevailing in the society like Tree saving and raising the issues of population through its advertisements for creating awareness among masses. ► Idea Cellular is the market leader in North India, but they have a small market share in South India.

Technological ► Idea Cellular invests huge amount in the innovation embedded solution to enhance its technology, network, wireless space and Customer Relationship Management. ► For this, they signed a deal of $19.2 million with IBM (USA base Software Production Company). ► Idea uses IBM web spare application server for data and financial transaction , Oracle Siebel customer data integration for Customer Relationship Management and Supply Chain Management. ► They use OLTP (Online Transaction Process),CICS (Customer Information Control System) software to optimize the data security, network and mobility management (Idea Portal,2009). ► Idea Cellular uses Vehicle Tracking System by GIS (Global Processing System).

BCG Analysis Of Bharti Airtel

Stars 

? Mobile services

Cows 



Fixed Line Services

Dogs Airtel internet services

Stars:Airtel mobile service market share is very high, in comparison with its competitors. And in India it is a leading telecommunication company. Now as trend indicated that technological development help to enhance services, same as in telecom industry. There are very new services which are introduce to boost this sector and enhance customer involvement. So the industry growth of this sector is high. This is the reason – mobile services provided by Airtel are come on star.

Question mark:Fixed landline services provided by Airtel come on question mark. Because people are demanding landline services .Every house there is a connection of landline. It indicates that industry growth of landline services is high but future is uncertain, so it comes on high risk to maintain or to stay in the market. And the share of airtel in this segment is low .so there is a probability to expand there services and put it under cash cow.

Cash cow:Airtel internet services are play role as cash cow in the BCG Matrix. Airtel has high market share .but the industry growth of this segment is low. So it comes on cash cow.

BCG Analysis Of Idea Cellular

Stars 

? Mobile services

Cows 

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3G

Dogs IDEA NET SETTER

Stars:Idea also takes place in stars in mobile services segments. In overall operation of idea, is well working in mobile services segments. Idea is emerging company which able to establish them in top position. In this idea‗s mobile services are come under high market share as well as high industry growth.

Question Mark:In question mark comes idea‘s 3G services. It shows that idea‘s technology is well established. And it is considered as high industry growth but low market share. In this the company can spend their money and make this position to cash cow.

Cash Cow:Idea net setter is cash cow. This is the strength of the company, where idea needs not to spend too much on this segment because there is low industry growth but high market share. In this less investment generate more return with respect to investment.

ANSOFF Matrix Of Bharti Airtel MARKET PENETRATION

PRODUCT DEVELOPMENT

ENTERED IN BROADBAND AND FIXED LINE MARKET

IPLC PRODUCTS

MARKET

DIVERSIFICATION

DEVELOPMENT LOOKING FOR OVERSEAS MARKET

OUTSOURCING

To portray alternative corporate growth strategies, Igor Ansoff conceptualized a matrix that focused on the firm‘s present and potential products and markets / customers. He called the four product-market strategic alternatives ► market penetration [existing market + existing product], ► market development [existing product + new market], ► product development [existing market + new product], and ► Diversification [new product + new market]. The company should follow all four strategies depending on the demand and product as indicated in the matrix. The company perhaps needs to focus more on the comparatively neglected area of diversification. ► Market penetration: Airtel entered in broadband and fixed phone line market. ► Product development: IPLC products ► Market development: Airtel is now looking for overseas market. Company has already make his presence in Nigeria and Seychelles ► Diversification : Airtel has now outsourcing sum of its services like customer services with IBM

ANSOFF Matrix Of Bharti Airtel

Market penetration ► Market penetration strategy because it is focusing on selling existing products into existing markets by increasing market share in those markets. This it is doing through a combination of competitive pricing strategies, advertising and sales promotion e.g. introducing loyalty schemes. ► Targeting the youth by making use of ―ZAC‖. ► Using ―walk when you talk ‖ campaign Market development strategies ► Its recent acquisition of Spice Communications indicates its market development strategy as through this acquisition, Idea Cellular has entered the new markets of Karnataka and Punjab where Spice is a leading player. ► Company rolled out its services in Mumbai & Bihar. ► Applied for licenses in remaining 10 circles. Product development ► Provide new value added services. eg – mobile banking , teleticketing. ► Improve the signal coverage to give better services. ► Improve upon customer care services. Diversification ► Arrival in internet market with new technologies like 3G. ► Mergers & acquisitions will provide idea diversified market and product.

PORTER 5 Force Model For Bharti Airtel

Customer Bargaining Power

Threat of New Entrants

Threat from Competition

Threat of Substitutes

Supplier Bargaining Power

Threat of Competition: Wireless Market – Top 4 garnering 75% market share

As the graph shows that the market share of airtel is high , but technology development is the base of this service ,if the technology is more develop from its competitors, its mean that the cost occurring in the production of services is less in comparison to other and more advanced features ,which lead to market attractiveness . so overall, the threat of competition is very high. ► Bargaining Power of Customer: As it is offering services at cheaper rate, bargaining power of its customers is very low. But due to the launching of mobile services at cheaper rate by Airtel. So it could be bargaining power from the customer‘s point of view.

► Bargaining Power of Suppliers:

These are the supplier partner of airtel. It purchases these raw materials in bulk quantities that every supplier wants to sell their product. Thus the bargaining power of suppliers is very less. ► Threat of substitute product and service: ► Landline ► CDMA

DIMINISHING MARKET

► Video Conferencing ► VOIP - Skype, Gtalk, Yahoo Messenger ► e-Mail & Social Networking Websites

BROADBAND SERVICES

Above there are substitute of wireless market- the first one is diminishing market and another ones is the broadband services which cost is very less in comparison with wireless market. Threat to new entrants:► ► ► ► ► ►

Huge License Fees to be paid upfront & High gestation period Entry of MVNOs & WiMAX operators Spectrum Availability & Regulatory Issues Infrastructure Setup Cost – High Rapidly changing technology So the threat of new entrants is low.

PORTER 5 Force Model For Idea Cellular ► Threat of rivalry: Today there is lots of competition between telecom companies to be ahead of each other. There are government companies like BSNL and MTNL. Some private Indian companies like Tata, Reliance and some are foreign companies like Vodafone, spice. ► Threat to new entrants: Indian telecom companies facilitates opportunities to foreign companies in different fields like; VPN, satellite phone calls, 3G, international calls and value added services. ► Threat of substitute product and service: The services like; GSM, internet, VOIP, CDMA mobile, Wire line, broadband, carriers, VSAT, MPLS-VPN, etc. are provided by telecom industry. While talking about internet telephony, it is increasing as a good alternative. With cheaper rate it offers video conferencing just like Skype. ISP

MARKET SHARE (%)

BSNL

45.2

MTNL

19

SIFY

8.9

BHARTI AIRTEL

6.8

RELIANCE

6.1

TATA PHOTON

4

► Bargaining Power of Customer: As it is offering services at cheaper rate, bargaining power of its customers is very low. But due to the launching of mobile services at cheaper rate by Airtel and other telecom companies, customers acquired many options. So it could be bargaining power from the customer‘s point of view. ► Bargaining Power of Suppliers: Idea cellular consumes iron, aluminum, electric wires for tower making. It purchases these raw materials in bulk quantities that every supplier wants to sell their product. Thus the bargaining power of suppliers is very less.

Ratio Analysis IDEA CELLULAR

RATIO

2009-10

Net Profit Margin Return on Assets Assets Turnover Ratio Return on equity Operating Profit Margin Current Rtaio Quick Ratio Debt Equity Ratio Interest Coverage Ratio Price-Earning Ratio

2010-11

8.89% 5.72% 64.30% 9.20% 27.38% 0.96 0.95 0.57 1.96 20.61

5.51% 4.13% 75.03% 6.85% 23.59% 0.62 0.61 0.86 1.92 26.25

BHARTI AIRTEL

RATIO Net Profit Margin Return on Assets Assets Turnover Ratio Return on equity Operating Profit Margin Current Rtaio Quick Ratio Debt Equity Ratio Interest Coverage Ratio Price-Earning Ratio

2009-10

2010-11

26.47% 24.44% 92.33% 25.66% 39.08% 0.73 0.73 0.14 35.18 12.66

20.30% 15.78% 77.75% 17.00% 35.26% 0.82 0.82 0.27 30.27 13.51

1. Net Profit Margin Ratio-Net profit ratio of Bharti Airtel has decreased from the last year.Net profit of the company has decreased as compared to last year, but the sale has increased. The net profit ratio for the year 2010-11 was 20.30%.From the other companies like idea cellular, reliance communication, Tata communication and MTNL the net profit ratio is much higher of Bharti Airtel. The Sales turnover of the company has increased with increase in the expenditure. The main reason fr the decrease in the et profit ratio was due to greater increase of manufacturing expenditure, which cause the decrease in the net profit. 2. Return On Assets –The return of assets for Airtel in the year 2009-10 was 24.44% but in the next year 2010-11 it was decreased to 15.78%, the major reason was the decrease in the PAT.

While comparing Airtel with other companies like, Idea cellular, reliance communication, Tata communication and MTNL the ratio is much higher of Bharti Airtel. In case of Idea cellular it was 5.72% in the year 2009-10 was reduced to 4.13% in the year 2010-11.The assets of the company has increased over the year but the company was not able to generate as much as revenue which was expected to increase with increase in the assets. 3. Assets Turnover Ratio-The assets turnover ratio of Bharti Airtel has decreased from the last year. In the year 2009-10 it was 92.33% which reduced to 77.75 %The reason for this was that the company was not able to utilize it full assets to increase the sales or we can say that it failed to generate sales in the ratio in which it increased its assets. But the company is having the ratio highest in the industry as compared to other companies The assets turnover ratio of idea cellular has increased from the last year. In the year 2009-10 it was 64.30% which increased to 75 % due to increase in sales. The company has generate good amount of sales by effectively utilizing its assets. Idea cellular is just behind Airtel with respect to assets turnover ratio. 4. Return on Equity-The return on equity for the Bharti Airtel in the year 2009-10 was 25.66% which got reduced in the next year to 17% in the year 2010-11.The reason for this was the decrease in the PAT from the year 2009-10 to 2010-11.But as compared to other companies like Idea cellular, reliance communication, Tata communication and MTNL it has the highest return on equity. In case of idea cellular it was 9.20% in the year 2009-10 and got reduced to6.85% in the next year 2010-11.It has good return on equity in the 2009-10 & 2010-11 as compared to other player in the market except Bharti Airtel. The reason for the decrease is reduction in the profit as compared to previous year. 5. Operating Profit Margin Ratio-The operating margin ratio of Bharti Airtel was 39.08% in the year 2009-10, which got reduced to 35.06% in the year 2010-11.The reason for this decrease was the increase of manufacturing and administrative expenditure in spite the increase in the net sales. But the company‗s operating profit margin ratio is highest in the whole industry. The operating margin ratio of idea cellular was 27.38% in the year 2009-10, which got reduced to 23.59% in the year 2010-11.The reason for this decrease was the increase of manufacturing and administrative expenditure in spite the increase in the net sales. It is just behind Bharti Airtel. 6. Current Ratio-The current ratio of the Bharti Airtel increase from 0.73 to 0.82 from the year 2009-10 to 2010-11.The ideal current ratio is 2:1.The current assets of the company have

increased and also the current liabilities. As compared to other players in the Airtel is behind Tata Communication, Reliance Communication and also MTNL.These companies are maintain good current ratio which is ear to ideal. The current ratio of idea cellular from 0.95 to 0.61 due to excessive increase in the current liabilities in the year 2010-11.the company is the last in the industry when it was compared to other players. 7.Debt Equity Ratio – Debt equity ratio of Airtel increased from 0.14 to 0.27 from the year 2009-10 to 2010-11.The increase in the debt ratio was due to increase in both debt which include secured and unsecured loans and the equity. Among the other player in the industry MTNL has the highest debt equity ratio of 1.12 The debt equity ratio of idea cellular for the year 2010-11 was 0.86.In the year 2009-10 it was 0.57,so the ratio has increased over the year. The reason for the increase was due to increase in the unsecured and secured loans in 2010-11. 8. Price to Earning Ratio- The P/E ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. The P/E ratio can therefore alternatively be calculated by dividing the company's market capitalization by its total annual earnings. The P/E ratio of Bharti Airtel was 12.66 in the year 200-10 but in the year 2010-11 it increased to 17.51.In the year 2009-10 the market price was314.27 and the EPS was 24.32.In the next year its market price has increased but the EPS has reduced. As compared to other players in the industry Tata Communications has highest P/E Ratio. Idea Cellular has P/e ratio of 26.55 in the year 2010-11 which is higher than the previous year.in the previous year 2009-10 idea‘s P/e ratio was 20.61.It has a higher P/E ratio than Airtel.

Technical Analysis: BHARTI AIRTEL Simple Moving Average Graph: 390 370 350 330 310 290 270 1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97 103 109 115 121 127 133

250

10 days sma

20 days sma

50 days sma

100 days sma

200 days sma

Close Price

10 day SMA and the 20 day SMA has crossed the close price and the higher SMA‘s at very frequent moments where the upward trend is observed, the other crossovers are more by the higher SMA‘s to the lower SMA‘s which shows a negative trend in the market thus making the purchase of the shares very doubtful.

Exponential Moving Averages: 380 360 340 320 300 280 260 240

10 days ema

20 days ema

200 days ema

Close Price

100days ema

The problem with simple moving averages is that the earliest day of the time period has the same weight in the average as the most recent day. If the earliest day was volatile, but the market has recently calmed, then the volatile day will have a large influence on the average—known as a drop-off effect—which would not best represent the current market. To correct this anomaly, exponential moving averages (EMA) are used, where greater weight is given to more recent prices. This greater weight causes the EMA to follow the underlying prices more closely most of the time than the SMA of the same duration.

MACD and Signal Line 20000 15000 10000 5000

1 28 55 82 109 136 163 190 217 244 271 298 325 352 379 406 433 460 487 514 541 568 595 622 649 676 703 730 757 784 811 838

0 -5000 -10000

MACD

9-day ema

The MACD line crossovers the signal line at 37 point which indicates the selling point and covered back at 41 points which showed a positive buying position but later on the fluctuation in the MACD points was negligible which shows that the condition of the stock is ambiguous. RATE OF CHANGE

12 days roc 110 105 100 95 90 85

12 days roc

The overbought positions were maintained at average 100 points and the oversold positions were maintained at average 80 points thus indicating that the best buy position is at 95 points.

RELATIVE STRENGH INDEX

rsi(relative strength index) 90 80 70 60 50 40 30 20 10 0

rsi(relative strength index)

Average buying position is maintained at low 30 points and the average selling position is maintained at High 70 points though the standard points are maintained at high 70, low 30. Bolinger Bands: 500 450 400 350 300 250

Close Price

20-day sma

Upper band 20 day sma

Lower band 20 day sma

The trading pattern in the Bharti Airtel shares shows a declining pattern as the trading was much high before 22th Mar 2011 as the there is a wider gap between the upper and lower bands. But

after 22th Mar 2011 the investors have shown less interest in shares which is depicted by the declining gap between the gaps after 14th April 2011.

IDEA CELLULAR Simple Moving Average Graph: 105 100 95 90 85 80 75 70 65 60

Close Price

10 days sma

20 days sma

50 days sma

100 days sma

200 days sma

Exponential Moving Averages: 105 100 95 90 85 80 75 70 65 60

10 days ema

20 days ema

50 days ema

100 days ema

200 days ema

Close Price

MACD and Signal Line 700 500 300

-100

1 13 25 37 49 61 73 85 97 109 121 133 145 157 169 181 193 205 217 229 241 253 265 277 289 301 313 325 337 349 361 373

100

-300 -500 -700 MACD

9-Day EMA

The MACD line cuts the Signal Line from bottom at average 1.6 points indicating the buy position and cut the signal at average 2.67 points from above indicating sell positions in the above graph. Signal line shows a great variation as compared to the MACD line which indicated the volatility in the Share prices in the current fiscal year. Rate of Change:

12 days roc 109 107 105 103 101 99 97 95 93

12 days roc

The Rate of change chart shows the overbought position at average 105 points and the oversold position at 90 points thus indicating the best price for the fiscal year at 90 points.

Relative Strength Index:

rsi (relative strength index 90 80 70 60 50 40 30 20 10 0

rsi (relative strength index

The average sell price according to the RSI chart is at 70 points and the average buy position is at 35 points which is above than the standard 30 points. Bollinger’s Band: 110 100 90 80 70 60 50 40

Close Price

20 day sma

upper band 20 days sma

lower band 20 days sma

Bollinger‘s band show that the interest of the investors in the trading of Idea cellular has declined after 07th November 2010 as the gap between the Upper and lower bands have reduced this shows that the bearish sentiments in the market have prompted less investments.

Mean, Standard Deviation and Beta of Idea cellular Ltd: Mean 73.12229

Standard Deviation 10.7004

Beta -0.01588

7000 6000 5000 4000 3000 2000 1000 0

Close Price

nifty

Mean, Standard Deviation and Beta of Bharti Airtel Ltd: Mean 360.6939

Standard Deviation 30.03553

Beta -0.04862

7000 6000 5000 4000 3000 2000 1000 0

Close Price

Nifty

STOCK MARKET GAME Cash in hand – 1442976.50 Current value of Portfolio-2313510.30

Price-Sales Ratio (Airtel) = (Market Price/Sales) *100 = (357.4/38015.8)*100 =9.40

Price-Sales Ratio (Idea Cellular) = (Market Price/Sales) *100 = (67.45/15332.8)*100 =4.39