analysis of telecom sector - indian capital market

8/9/2019 Analysis of telecom sector - Indian Capital Market

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Group-4

Analysis of Telecom Sector


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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 (USD840 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.


3/16

Budget - Proposed Amendments for telecom sector

Income Tax Industry Specific Provisions

There are no income tax budget proposals specific to telecom sectorIncome 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%; carryforward of MAT credit enhanced from 7 to 10 years.

Introduction of tax regime for LLPs. Income taxable in LLP's hands; exempt in the handsof 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 SpecificProvisions

Special additional duty (equivalent to sales tax) on import of parts used for manufacture


4/16

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.


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Nifty

Nifty


6/16

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 150points 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 topgainer on the Nifty. The stock rallied 4.66%.

Telecom stocks remained buzzing on 19th march as well on the back of bidding for 3Gspectrum. Bharti rose 1.9%; Reliance Communications and Idea gained 0.7-0.9%.


7/16

DatePrev.Close

Open Price High Price Low Price Last PriceClosePrice

AveragePrice

% Change

2

-Mar-1061.1 61 62.2 60.5 61.85 61.9 61.47

3

-Mar-1061.9 61.95 62.3 61 61.75 61.6 61.47 1.309329

4

-Mar-1061.6 61.6 61.95 60.8 61.35 61.45 61.42 -0.484653

5

-Mar-1061.45 61.95 62.8 61.3 62.05 61.95 62.01 -0.243506

8

-Mar-1061.95 62.05 62.9 61.55 62.5 62.5 62.23 0.8136697

9

-Mar-1062.5 62.6 63 61.45 61.75 61.8 62.24 0.8878128

10

-Mar-1061.8 61.5 62.2 60.3 61.2 61.45 61.79 -1.12

11

-Mar-1061.45 61.45 62.15 59.8 60.15 60.55 61.4 -0.566343

12

-Mar-1060.55 60.3 60.7 59.8 60.4 60.3 60.16 -1.464605

15

-Mar-1060.3 60.4 60.85 59.2 59.55 59.5 59.93 -0.412882

16

-Mar-1059.5 59.9 63.4 59.9 62.9 62.35 61.59 -1.3267

17-Mar-10

62.35 62.65 64.95 62.5 64.4 64.35 64.19 4.789916

18

-Mar-1064.35 62 67.7 62 67.2 67.35 66.61 3.2076985


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nifty

% change


9/16

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 18th

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 PolycomInc., 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 100million subscriber base.


10/16

Date Prev Close Open Price High Price Low Price Last Price Close PriceAverage

Price% change

2-Mar-

10157.55 158.35 160.9 157.85 159.65 159.65 159.22

3-Mar-

10159.65 160 161.45 159.75 160.7 160.85 160.85 1.3329102

4-Mar-

10160.85 160 164.85 160 164.4 164.25 163.35 0.7516442

5-Mar-

10164.25 165.5 167.4 164.55 164.75 165 165.92 2.1137706

8-Mar-

10165 166.2 167.3 163.1 163.95 163.9 165.17 0.456621

9-Mar-

10163.9 164 164.7 162 162.25 162.8 163.26 -0.666667

10-Mar-

10162.8 162 164.9 162 162.6 162.85 163.3 -0.671141

11-Mar-

10162.85 163.2 163.35 159.2 161.1 160.5 161.22 0.0307125

12-Mar-

10160.5 160.9 162.65 156.65 158.4 157.5 158.99 -1.443046

15-Mar-

10157.5 159.7 160.55 157 158 158.2 159.02 -1.869159

16-Mar-

10158.2 159 161.45 157.9 161.45 160.5 159.44 0.4444444

17-Mar-

10160.5 164 164 159.7 160.95 161.1 161.97 1.4538559

18-Mar-

10161.1 161.8 164.9 161 164.6 164.45 163.45 0.3738318

19-Mar-164 45 165 168 45 164 9 167 4 167 95 167 2 0794538


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% change

nifty


12/16

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 16

thmarch, 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 hasapplied to bid for 3G spectrum in All India Zones. Bharti Airtel was up by 0.7%


13/16

Date Prev.

Close

Open

Price

High

Price

Low

Price

Last

Price

Close

Price

Average

price

% Change

2-Mar-10

279.35 280 292.8 280 290.6 290.2 286.79

3-Mar-

10

290.2 293 294.9 290.3 291.65 291.95 292.13 3.884016467

4-Mar-

10

291.95 290 294.9 290 293.15 293.6 292.82 0.603032391

5-Mar-

10

293.6 294 303.75 293 298 298.45 300.22 0.565165268

8-Mar-

10298.45 298.15 302.8 291 291.8 292.7 296.33 1.651907357

9-Mar-

10

292.7 292 294.15 287.05 291.6 291.3 290.34 -1.92662087

10-

Mar-10

291.3 292 294.5 284 289 288 289.35 -0.47830543

11-

Mar-10

288 288.9 295.55 288.35 294.9 293.95 292.87 -1.13285273

12-

Mar-10

293.95 293 300.35 293 299.75 299.1 297.74 2.065972222

15-

Mar-10

299.1 290 301.3 290 300 299.5 299.16 1.751998639

16-

Mar-10

299.5 298.5 299 292.55 295 294.8 295.2 0.133734537

17-

Mar-10

294.8 296 301.5 295.65 298.8 298.05 298.73 -1.56928214

18-

Mar-10

298.05 299.95 303.5 297.1 300 300.1 299.9 1.102442334

19- 300.1 300 312.85 300 312 311.9 308.61 0.68780406


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% Change

nifty


15/16

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.


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nifty

airtel

idea

reliance

Series5

analysis of telecom sector - indian capital market

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