Group-4

Analysis of Telecom Sector

Section E
Jigar Rathod, Ridhima Bhanot, Sambedana
Samal, Sruti Ray, Snigdha Solanki, Vijay
Kumar Gupta
Industry Overview:
 Total Telephone subscriber base reaches 562.21 Million.
 19.10 million New additions in wireless segment.
 Year-on-Year increase in subscriber base of 50% witnessed in 2008
 Overall Tele-density reaches 47.89 %.
 Broadband subscription reaches 7.83 million.
 6 New Cellular operators/licensees in 2009.
 Government unsure of completing 3G auctions by 31 March, 2010 due to lack of
consensus between the Finance and the Telecom Ministries.

Key Developments
 3G Spectrum auction expected in August 2009 – reserve price of Rs.4,040 crores (USD
840 million)
 Time for implementation of MNP regulations extended to 31 March, 2010.
 TRAI inviting consultation around IMT-Advanced (4G) Mobile wireless broadband
services by 15 March, 2010.
 A sector wise analysis shows that the telecom space attracted 82 % of M&A deals.
 Marked shift in consumer behavior with the handset emerging much beyond a voice
device to become the consumers’ information / commerce / multimedia tool.
 IPTV guidelines introduced – convergence in the form of “triple play” now possible
 Super regulator for ‘Spectrum’ may be established.
Budget - Proposed Amendments for telecom sector
Income Tax – Industry Specific Provisions

 There are no income tax budget proposals specific to telecom sector

Income Tax – Other Important Provisions

 No change in corporate tax rate.

 Alternative dispute resolution mechanism introduced for Foreign companies & for
Transfer Pricing adjustments.
 Effective rate of MAT (minimum Alternate Tax) increased from 11.33% to 17%; carry
forward of MAT credit enhanced from 7 to 10 years.
 Introduction of tax regime for LLPs. Income taxable in LLP's hands; exempt in the hands
of Partners.
 Withholding tax on use of equipment reduced from 10% to 2% and on use of land &
building from 20%/15% to 10% (excluding surcharge & cess).
 Wealth tax exemption limit doubled to Rs. 30 lakhs. Indirect Tax – Industry Specific
Provisions
 Special additional duty (equivalent to sales tax) on import of parts used for manufacture
of mobile phone exempted up to July 6, 2010

Indirect Tax – Other Important Provisions

 Median rate of basic customs duty and excise duty maintained at 10% and 8.24% with
some exceptions.
 Median rate of service tax maintained at 10.30%.
 Aggregate rate of customs duty remained unchanged at 24.42%.
 Service providers providing taxable and exempt services, now have the option to pay at
reduced rate of 6 percent of the value of exempt service (earlier it was 8%).
NIFTY:
The Standard & Poor's CRISIL NSE Index 50 or S&P CNX Nifty nicknamed Nifty 50 or simply Nifty,
is the leading index for large companies on the National Stock Exchange of India. The Nifty is a
well diversified 50 stock index accounting for 21 sectors of the economy. It is used for a variety
of purposes such as benchmarking fund portfolios, index based derivatives and index funds.
Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint
venture between NSE and CRISIL. IISL is India's first specialized company focused upon the
index as a core product. IISL has a marketing and licensing agreement with Standard & Poor's.
 % Change

0.5
1.5
2.5
3.5

-1.5
-0.5
0
1
2
3

-1
2-Mar
3-Mar
4-Mar
5-Mar
6-Mar
7-Mar
8-Mar
9-Mar
10-Mar
11-Mar
12-Mar
13-Mar
14-Mar
15-Mar
16-Mar

Date
17-Mar
Nifty

18-Mar
19-Mar
20-Mar
21-Mar
22-Mar
23-Mar
24-Mar
25-Mar
26-Mar
27-Mar
28-Mar
29-Mar
30-Mar
31-Mar
Nifty
IDEA:
Month began with markets rather shaky note with markets reacting to global cues. Off share
market had tremendous effect with both, investor sentiment for and against the market.
Telecom sector saw quite fluctuations with 3g spectrum auction list being announced. IDEA
shares fluctuated with market. The fluctuations were intense during 17-22 march with both the
IDEA group and nifty moving opposite to each other. 23, 24, 25 March saw a sharp drop of
IDEA, market corrections which are inevitable.

Major NEWS in industry:

 On 17th march, at 13:30 hours IST - the Sensex was trading higher with more around 150
points gains while the Nifty around 50 points. The main trigger was the Asian markets,
which rallied further and were trading at 2-month high. idea was one of the positive
contributor.
 On 18th march, Idea Cellular continued its run up in today's trade as well, was the top
gainer on the Nifty. The stock rallied 4.66%.
 Telecom stocks remained buzzing on 19th march as well on the back of bidding for 3G
spectrum. Bharti rose 1.9%; Reliance Communications and Idea gained 0.7-0.9%.
 Market remained flat and uptrend during 26-29th march and on 30th march, the
benchmark Nifty slipped into red after four consecutive days of uptrend and closed
below the 5300 mark on back of profit booking. The Sensex also shed more than 120
points on selling in technology, pharma, telecom, banking & financial (except ICICI
Bank), auto (except Tata Motors) and select cement companies' shares.
 Prev. Close Average
Date Open Price High Price Low Price Last Price % Change
Close Price Price

2
61.1 61 62.2 60.5 61.85 61.9 61.47
-Mar-10

3
61.9 61.95 62.3 61 61.75 61.6 61.47 1.309329
-Mar-10

4
61.6 61.6 61.95 60.8 61.35 61.45 61.42 -0.484653
-Mar-10

5
61.45 61.95 62.8 61.3 62.05 61.95 62.01 -0.243506
-Mar-10

8
61.95 62.05 62.9 61.55 62.5 62.5 62.23 0.8136697
-Mar-10

9
62.5 62.6 63 61.45 61.75 61.8 62.24 0.8878128
-Mar-10

10
61.8 61.5 62.2 60.3 61.2 61.45 61.79 -1.12
-Mar-10

11
61.45 61.45 62.15 59.8 60.15 60.55 61.4 -0.566343
-Mar-10

12
60.55 60.3 60.7 59.8 60.4 60.3 60.16 -1.464605
-Mar-10

15
60.3 60.4 60.85 59.2 59.55 59.5 59.93 -0.412882
-Mar-10

16
59.5 59.9 63.4 59.9 62.9 62.35 61.59 -1.3267
-Mar-10

17
62.35 62.65 64.95 62.5 64.4 64.35 64.19 4.789916
-Mar-10

18
64.35 62 67.7 62 67.2 67.35 66.61 3.2076985
-Mar-10

19
67.35 67.5 69.1 67.2 68.9 68.85 68.4 4.6620047
-Mar-10

22
68.85 67.8 68.45 66.5 67.35 67.65 67.58 2.2271715
-Mar-10

23
67.65 69 69 64.9 65.15 65.05 66.11 -1.742919
-Mar-10

25
65.05 65 67.6 64.85 66.25 66.55 66.29 -3.843311
-Mar-10

26
66.55 66.6 67.15 66.1 66.8 66.7 66.68 2.3059185
-Mar-10

29
66.7 66.5 68.1 66.15 67.25 67.1 67.32 0.2253944
-Mar-10

30
67.1 67.5 67.65 65.85 66.45 66.6 66.65 0.5997001
-Mar-10

31
66.6 67.1 67.1 65.15 65.65 65.5 65.74 -0.745156
-Mar-10
 0
1
2
3
4
5
6

-5
-4
-3
-2
-1
2-Mar-10
3-Mar-10
4-Mar-10
5-Mar-10
6-Mar-10
7-Mar-10
8-Mar-10
9-Mar-10
10-Mar-10
11-Mar-10
12-Mar-10
13-Mar-10
14-Mar-10
15-Mar-10
16-Mar-10
17-Mar-10
18-Mar-10
19-Mar-10
20-Mar-10
21-Mar-10
22-Mar-10
23-Mar-10
24-Mar-10
25-Mar-10
26-Mar-10
27-Mar-10
28-Mar-10
29-Mar-10
30-Mar-10
31-Mar-10
nifty
% change
Reliance communications
Reliance communications also followed the same trend as the telecom industry. Fluctuations
followed reliance communication from a period of 16-24 march, a steep increase in share prices
followed by market correction. 3G spectrum auction list spiced up the share prices. This effect
lasted 2 days and followed by corrections.

Major News:

 RCOM crossed the 10-crore subscriber mark on 17th march.

 Chief Executive of Reliance Communications (RCom), Anil Ambani, has revealed on 18 th
of March that his company is open to acquisitions in India. He has also said that RCom is
now keeping an eye on the domestic market and is looking for proper opportunities to
improve its channel
 On 18th of march, Reliance Communications Ltd. (RCOM) has partnered with Polycom
Inc., a provider of tele-presence, video and voice solutions, to introduce a wireless, high-
resolution video conferencing service
 On 28th of March, RCOM offered free talk time for whole day to celebrate the 100
million subscriber base.
 Average
Date Prev Close Open Price High Price Low Price Last Price Close Price % change
Price

2-Mar-
157.55 158.35 160.9 157.85 159.65 159.65 159.22
10

3-Mar-
159.65 160 161.45 159.75 160.7 160.85 160.85 1.3329102
10

4-Mar-
160.85 160 164.85 160 164.4 164.25 163.35 0.7516442
10

5-Mar-
164.25 165.5 167.4 164.55 164.75 165 165.92 2.1137706
10

8-Mar-
165 166.2 167.3 163.1 163.95 163.9 165.17 0.456621
10

9-Mar-
163.9 164 164.7 162 162.25 162.8 163.26 -0.666667
10

10-Mar-
162.8 162 164.9 162 162.6 162.85 163.3 -0.671141
10

11-Mar-
162.85 163.2 163.35 159.2 161.1 160.5 161.22 0.0307125
10

12-Mar-
160.5 160.9 162.65 156.65 158.4 157.5 158.99 -1.443046
10

15-Mar-
157.5 159.7 160.55 157 158 158.2 159.02 -1.869159
10

16-Mar-
158.2 159 161.45 157.9 161.45 160.5 159.44 0.4444444
10

17-Mar-
160.5 164 164 159.7 160.95 161.1 161.97 1.4538559
10

18-Mar-
161.1 161.8 164.9 161 164.6 164.45 163.45 0.3738318
10

19-Mar-
164.45 165 168.45 164.9 167.4 167.95 167 2.0794538
10

22-Mar-
167.95 165 172.9 165 170.65 171.1 170.23 2.1283065
10

23-Mar-
171.1 171.5 173.8 167.4 170.7 170.55 170.03 1.8755582
10

25-Mar-
170.55 170 172 168.2 169.15 169.1 169.54 -0.321449
10

26-Mar-
169.1 169.9 170.5 167.3 167.6 167.9 168.38 -0.850191
10

29-Mar-
167.9 170.9 171.8 166.7 168.4 168.4 168.79 -0.709639
10

30-Mar-
168.4 168.5 169.9 166 166.3 166.55 167.88 0.2977963
10

31-Mar-
166.55 167 173.95 164.7 171.95 169.95 168.6 -1.098575
10
 1
2
3
4

-3
-2
-1
2-Mar-10
3-Mar-10
4-Mar-10
5-Mar-10
6-Mar-10
7-Mar-10
8-Mar-10
9-Mar-10
10-Mar-10
11-Mar-10
12-Mar-10
13-Mar-10
14-Mar-10
15-Mar-10
16-Mar-10
17-Mar-10
18-Mar-10
19-Mar-10
20-Mar-10
21-Mar-10
22-Mar-10
23-Mar-10
24-Mar-10
25-Mar-10
26-Mar-10
27-Mar-10
28-Mar-10
29-Mar-10
30-Mar-10
31-Mar-10
nifty
% change
Bharti Airtel
Bharti Airtel followed the same trend as the telecom industry. Fluctuations followed Bharti
Airtel, a steep increase in share prices followed by market correction. 3G spectrum auction list
spiked up the share prices on 18 – 21 march. On 22nd march, when Sensex went down by 100
points, it dipped telecom sector and Bharti Airtel as well followed by market corrections.

Major News:

 On 15th march, the Department of Telecom (DoT) ordered special audit on Bharti Airtel,
auditors - Contractor, Nayak & Kishnadwala, in a 306 page report have quantified the
license fee impact on distributor margins. The total impact for FY07 and FY08 has been
estimated at Rs.98 crore.
 Bharti Airtel will announce the completion of its Zain buyout deal on April 13, CNBC-
TV18 reported on 16th march, quoting NewsWire18 sources. Kuwaiti telecom Zain and
Bharti Airtel have faced no obstacles in due diligence and expect the USD 9 billion deal
to close on time, a Kuwaiti newspaper said on Tuesday.
 On 18th of March, Stocks might have reacted to news of 3G spectrum bids. Bharti has
applied to bid for 3G spectrum in All India Zones. Bharti Airtel was up by 0.7%
 On 19th of March, Bharti Airtel, India's leading mobile operator, said on Thursday its
mobile applications store had clocked more than 2.5 million downloads in its first month
of launch, with users in smaller cities leading.
 Date Prev. Open High Low Last Close Average % Change
Close Price Price Price Price Price price
2-Mar- 279.35 280 292.8 280 290.6 290.2 286.79
10
3-Mar- 290.2 293 294.9 290.3 291.65 291.95 292.13 3.884016467
10
4-Mar- 291.95 290 294.9 290 293.15 293.6 292.82 0.603032391
10
5-Mar- 293.6 294 303.75 293 298 298.45 300.22 0.565165268
10
8-Mar- 298.45 298.15 302.8 291 291.8 292.7 296.33 1.651907357
10
9-Mar- 292.7 292 294.15 287.05 291.6 291.3 290.34 -1.92662087
10
10- 291.3 292 294.5 284 289 288 289.35 -0.47830543
Mar-10
11- 288 288.9 295.55 288.35 294.9 293.95 292.87 -1.13285273
Mar-10
12- 293.95 293 300.35 293 299.75 299.1 297.74 2.065972222
Mar-10
15- 299.1 290 301.3 290 300 299.5 299.16 1.751998639
Mar-10
16- 299.5 298.5 299 292.55 295 294.8 295.2 0.133734537
Mar-10
17- 294.8 296 301.5 295.65 298.8 298.05 298.73 -1.56928214
Mar-10
18- 298.05 299.95 303.5 297.1 300 300.1 299.9 1.102442334
Mar-10
19- 300.1 300 312.85 300 312 311.9 308.61 0.68780406
Mar-10
22- 311.9 307.5 319.8 307 316 316.35 316.96 3.932022659
Mar-10
23- 316.35 317.2 321 305.55 307.35 307.65 310.01 1.42673934
Mar-10
25- 307.65 310 316 303 313 314.4 312.33 -2.75011854
Mar-10
26- 314.4 314.85 315.9 305 310.2 310.15 308.46 2.194051682
Mar-10
29- 310.15 311 314.9 310.2 313.95 312.2 312.62 -1.35178117
Mar-10
30- 312.2 311.5 316 309.75 310.75 310.85 313.41 0.660970498
Mar-10
31- 310.85 308.7 319.7 307 313.7 312.55 314.25 -0.43241512
Mar-10
 0
1
2
3
4
5

-4
-3
-1

-2
2-Mar-10
3-Mar-10
4-Mar-10
5-Mar-10
6-Mar-10
7-Mar-10
8-Mar-10
9-Mar-10
10-Mar-10
11-Mar-10
12-Mar-10
13-Mar-10
14-Mar-10
15-Mar-10
16-Mar-10
17-Mar-10
18-Mar-10
19-Mar-10
20-Mar-10
21-Mar-10
22-Mar-10
23-Mar-10
24-Mar-10
25-Mar-10
26-Mar-10
27-Mar-10
28-Mar-10
29-Mar-10
30-Mar-10
31-Mar-10
nifty
% Change
Conclusion
Telecom industry as a whole during the last one month has fluctuated in accordance with
nifty50. However, there was marked increase in share values of Idea and Airtel compared with
reliance communication. This change was attributed to the release of 3g auction list by the
government. Idea cellular saw a particular spike in its share prices due to the volume of shares
being traded increased considerably. This is a common phenomenon in share market when
investors are trying to make short term gains. Any such spike in share prices was immediately
followed by market corrections the next day. The fluctuations were also attributed to the
markets being choppy due to global cues and impact of Asian markets on the index. Inflow of
FIIs has pushed the sensex further up which tends to push the nifty50 index higher. Telecom
sector almost mirror other sectors such as banking in their overall performance at nifty50. The
share prices of all the three companies showed a considerable increase towards the end of the
month when compared with the start of the month prices. Furthermore this trend is expected
to continue with economy gathering pace and the markets reacting positively to the overall
economic position.
 0
1
2
3
4
5
6

-5
-4
-3
-2
-1
2-Mar-10
3-Mar-10
4-Mar-10
5-Mar-10
6-Mar-10
7-Mar-10
8-Mar-10
9-Mar-10
10-Mar-10
11-Mar-10
12-Mar-10
13-Mar-10
14-Mar-10
15-Mar-10
16-Mar-10
17-Mar-10
18-Mar-10
19-Mar-10
20-Mar-10
21-Mar-10
22-Mar-10
23-Mar-10
24-Mar-10
25-Mar-10
26-Mar-10
27-Mar-10
28-Mar-10
29-Mar-10
30-Mar-10
31-Mar-10
idea
nifty
airtel

Series5
reliance