INTRODUCTION

The India network in India is fifth largest network in the world meeting up

with global standards. Presently, the telecom industry is currently slates to

an estimated contribution of nearly 1% to India's GDP.

Introduction:-

The Indian Telecommunication network with 110.01 million connections is

the fifth largest in the world and second largest among the emerging

economics of Asia. Global in the stagnant global scenario. The total

subscriber base grown by 40% in 2005, is expected to reach 250 million in

2008. According to Broadband Policy 2004, Government of India aims at 9

million broadband connections and 18 million internet connections by 2008.

The wireless subscriber base has jumped from 33.69 million in 2004 to

62.57 million in Fiscal year 2004-2005. In the last 3 year, two out of every

three new telephone subscribers were wireless subscribers. Consequently,

wireless now accounts for 54.6% of the total telephone subscriber base, as

compared to only 40% 2003. Wireless subscriber growth is expected to

bypass 2.5 million new subscribers per month by 2008. The wireless

technologies currently in use are Global System for Mobile Communication

(GSM) and code Division Multiple Access (CDMA). There are primarily 9

GSM and 5 CDMA operators providing mobile services in 19 telecom

circles and 4 metro cities, covering 2000 towns across the country.

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Evolution of the industry- Important Milestones

1851 First operational lines were laid by the government near Calcutta.

1851 Telephone service introduction in India

1883 Merger with the postal system

1923 Formation o Indian Radio Telegraph Company (IRT)

1932 Merger of ETC and IRT in the Indian Radio and Cable

Communication Company

1947 Nationalization of all foreign telecommunication companies to form

the posts, Telephone and Telegraph (PTT), a monopoly run the government's

Ministry of Communication.

1985 Department of Telecommunication (DOT) established, an exclusive

provider of domestic and long-distance service that would be its own

regulator (separate from the postal system)

1986 Conversion of DOT into two government-owned companies the Vides

Samachar Nigam Limited (VSNL)for international telecommunication and

Manager Telephone Nigam Limited (MTNL) for service metropolitan areas.

1997 Telephone Regulatory Authority of India created.

1999 Cellular Services are launched in India. New National Telecom Policy

is adopted.

2000 DoT becomes a corporation, BSNL

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INDIAN TELECOM ENVIRONMENT- a step towards development

Indian Telephone today benefits from among the most enlightened

regulation in the region, and arguably in the world. The sector, sometimes

considered the "poster-boy for economic reforms," has been among the chief

beneficiaries of the post -1991 liberalization. Telecommunication has

generally been seen as removed from "mass concerns," and thus less subject

to electoral calculations.

Market oriented reforms have also been facilitates by lobbying from

India's booming technology sector, whose continued success of course

depends on the quality of communications infrastructure. Despite several

hiccups along the way, the Telecom Regulatory authority of India TRAI),

the independent regulator, has earned a reputation for transparency and

competence. With the recent resolution of a major dispute between cellular

and fixed operators (see below), Indian telecommunications, already among

the most competitive marks in the world, appears set to continue growing

rapidly. At that time, Rajiv Gandhi proclaimed his intention of "leading

India into the 21st century," and carved the Department of

Telecommunication (DOT) out of the Department of Posts and Telegraph.

For a time he also even considered corporatizing the DOT, before

succumbing to union pressure. In a compromise, Gandhi created two DOT-

owned corporations: Mahanagr Telephone Nigam Limited (MTNL), to serve

Delhi and Bombay, and Videsh Snachar Nigam Limited (VSNL), to operate

international telecom services. He also introduced private capital into the

manufacturing of telecommunication equipment, which had previously been

a DOT monopoly.

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INTRODUCTION OF PRIVATE PLAYERS:-

It was not until the early 1990s, when the political situation stabilized, and

with the general momentum for economic reforms, that telecommunication

liberalization really took off. In 1994, the government released its National

Telecommunication Policy (NTP- 94), which allowed private fixed operators

to take part in the Indian market for the first time (cellular operators had

been allowed into the four largest metropolitan centers in 1992). Under the

government's new policy, India was divided into 20 circles roughly

corresponding to state boundaries, each of which would contain two fixed

operators (Including the incumbent), and two mobile operators. As ground-

breaking as NTP-94 was, its implementation was unfortunately marred by

regulatory uncertainty and over- bidding.

A number of operators were unable to live up to their profligate and,

confronted with competition in India's telecom sector did not really become

a reality until 1999. At that time the revenue sharing regime of

approximately 15%. This has subsequently been lowered (to 10% - 12%),

and is expected to be reduced even further over the coming years. Still, India

continue to derive substantial revenue from license fees ($800 million 2001-

2002); leading some critics to suggest that the government has abrogated its

responsibilities as a regulator to those as a seller. Another, perhaps even

more significant, problem with Indices initial attempts to introduce

competition was lack of regulatory clarity. Private operators complained that

the licenser – the DOT- was also the incumbent operator. Them any

stringent condition attached to licenses were thus seen by many as the

DOT’s attempt to limit competition. It was in response to such concerns that

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the 9 government in 1997 set up the Telecom Regulatory Authority of India

(TRAI), The nation’s first independent telecom regulator.

POLICIES ADOPTED BY TRAI

Over the years, TRAI has earned a growing reputation for independence

transparency and an increasing level of competence. Early on, however, the

regulator was beleagured on all fronts, it had to contend with political

interference, the incumbent’s many challenges to its authority, and

accusations of ineptitude by private players. It was not until 2000, with the

passing of the TRAI Amendment Act, that the regulatory body really came

into its own. Coming just a year after NTP-99, the act marks something of a

watershed moment in the history of India telecom liberalization. It set the

stage for several key events that have the vigorous competitions witnessed

today, Some of these events include.

The corporatization of the DOT and the creation of a new state owned

telecom company, Bharat Sanchar Nigam Ltd (BSNL), in 2000:

The opening up of India’s internal long – distance market in 2000, and the

subsequent drop in long – distance rates as party of TRAI’s tariff

rebalancing exercise.

The termination of VSNL’s monopoly over international traffic in 2002 and

the partial privatization of the company that same year, with the Tata group

assuming a 25% stake and management control.

the gradual easing of the original duopoly licensing policy, allowing a

greater number of operators in each circle.

The legalization, in 2002, of IP telephony ( a move that many believe was

held up due to lobbying VSNL, which feared the consequences on its

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monopoly). The introduction in 2003 of a calling party (CPP) system for cell

phones, despite considerable opposition by fixed operators.

And, more generally, the commencement of more stringent interconnection

regulation by TRAI, which has moved from an inter operator negotiations

based, approach. All of these events have created an impressive forward –

momentum in Indian telecommunications, resulting in a vigorously

competitive and fast- growing sector.

In late 2002 for example, thousands of mobile users in New Delhi were for a

time cut off from the fixed – line network when MTNL shut down

interconnection for cellular companies. (MTNL Later attributed the incident

to a “technical sang”.) it was not until late 2003 that the issue was finally

resolved, under considerable government pressure, when cellular operators

agreed to withdraw their many cases against the fixed - line operators. fixed

operators would in effect be allowed to enter the mobile business, in return,

the government granted cellular players several concessions, including lower

revenue share arrangements estimated to total over $ 210 million. Perhaps

most notably, the government announced its intention to adopt a " unified

access licensing" regime, which would in the future provide a single,

technologies to enter the Indian market without requiring a wholesale

rewrite of licensing laws.

MAJOR MARKET TRENDS

The telecoms trends in India will have a great impact on everything from

the humble PC, internet, broadband ( both wireless and fixed), and cable,

handset features, talking SMS, IPTV, soft switches, and managed

services to the local manufacturing and supply chain. This report

discusses key trends in the Indian telecom industry, their drivers and the

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major impact of such trends affecting mobile operators, infrastructure and

handset vendors.

HIGHER ACCEPTANCE FOR WIRELESS SERVICES

Indian customers are embracing mobile technology in a big way (an

average of four million subscribers added every month for the past six

months itself). They prefer wireless services compared to wire line

service, which is evident from the fact that while the wireless subscriber

base has increased at 75 percent from 2001 to 20006, the wire line

subscriber base growth rate is negligible during the same period. In fact,

many customer are returning their wire-line phones o their service

provides as mobile provides a more attractive and competitive solution.

The main drivers for this trend are quick service delivery for mobile

connections, affordable pricing plans in the form of pre-paid cards and

increased purchasing power the 18 to 40 years age group as well as

sizeable middle class- a prime markets for this service. Some of the

positive impacts of this trend are as follows.

According to a study, 18 percent of mobile users are willing to change

their handsets every year to newer models with more features, which is

good news for the handset vendors. The other impact is that while the

operators have only limited options to generate additional revenues

through value-added services from wire-line services, the mobile

operators have numerous options to generate non-voice revenues from

their customers. Some examples of value-added services are ring tones

download, colored ring back tones, talking SMS, etc. Moreover, there

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exits opportunity content developers to developers to application side,

there is an increased threat of virus-spread through mobile data

connections and Bluetooth technology- in mobile phones, making them

unusable at times. This is good for anti-virus solution providers, who will

gain this trend.

MERGERS

Demand for new spectrum as the industry grows and the fact the

spectrum allocation done on the basis of numbers of subscribers will

companies to merge son as to claim large number of subscribers to gain

more spectrum as a precursor to the launch of larger and expended

services. However it must also be noted that this may very well never

happen on account of low telecom penetration.

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MAJOR PALYERS OF TELECOM INDUSTRY IN INDIA

There are three types of players in telecom services:

State owned companies types of players in telecom services:

Private Indian owned companies (Reliance Infocom, Tata Teleservices,)

Foreign investedcompanies (Vodafone-Essar, Bharti Tele- Ventures,

Escorate Idea Cellular, BPL Mobile, Spice Communication)

BHARAT SNACHAR NIGAM LIMITED

On October 1, 2000 the Department of Telecom Operation, Government of

India became a corporation and was renamed Bharat Snachar Nigam

Limited (BSNL). BSNL is now India's leading Telecommunications

Company and the largest public sector undertaking. It has a network of over

45 million lines covering 5000 towns with over 35 million telephone

connections. The state-controlled BSNL operates basic, cellular (GSM and

CDMA) mobile, Internet and long distance services throughout India (expect

Delhi and Mumbai). BSNL will be expanding the network in line with the

Tenth five- year plan (1992-97). The aim is to provide a telephone density

of 9.9 per hundred by march 2007. BSNL, which became the third the

largest GSM operator in country. BSNL is also the largest operator in the

Internet market, with a share of per cent of the entire subscriber beds.

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BHARTI AIRTEL

It was Established in 1985, Bharti has been pioneering force in the telecom

sector with many firsts and innovation to its credit, ranging from being the

first mobile service in Delhi, first private basic telephone service in the

country, first Indian company to provide comprehensive telecom services

outside India in Seychelle and first private sector service provider to launch

National long Distance Services in India. Bharti Tele-Ventures limited was

incorporated on July 7, 1995 for promoting investment in

telecommunications services. Its subsidiaries operate telecom services across

India. Bharti's operations are broadly handled by two companies:

The Mobility group:- Which handles the mobile services in 16 circles out

of a goal 23 circles across the country

Infotel group:- Which handles the fixed line, broadband, data and satellite-

based services. Together they have so far deploys around 23,000 km of opt

caliber cables across the country, coupled with approximately 1.500 nods

and presence in around 200 locations. the group has a total customer base of

6.45million, of which 5.85 million are mobile and 588.000 fixed line

customer, as of January 31, 2004. In mobile, Bharti's footprint extends

across 15 circles. Bharti Tele ventures' strategic objective is " to capitalize

on the growth opportunities the company believes are available in Indian

telecommunication market and consolidates its position to be the leading

Mobile services."

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MAHANAGAR TELECOM NIGAM LIMITED

MTNL was set up on Ist April 1986 by the Government of India to upgrade

the quality of telecom services, expand the telecom network, and introduce

new services and to raise revenue for telecom development needs of India's

key metros Delhi, the political capital, and Mumbai, the business capital. In

the past 17 years, the company has taken rapid strides to emerge as India's

leading and one of Asia's largest telecom operating companies. The

company has also been in the for front of technology induction by

converting 100% of its telephone exchange network into the state-of the art

digital mode. The Govt. of India currently holds 56.26% stake in the

company. In the year 2003-04, The company's focus would be not only

consolding the gains but also to focus on new areas of enterprise such as

joint ventures for projects outside India, entering into national long distance

operation, widening the cellular and CDMA- based WL customer base,

setting up internet and allied services on all basis.

MTNL has over 5 million subscribers and 329,374 mobile subscribers.

While the market for fixed wire line phones is stagnation, MTNL faces

intense completion from th private players-- Bharti, Vodafone and Idea

Cellular, Reliance Infocome -- in mobile services. MTNL recorded sales of

Rs. 60.2 billion ($1.38 billion) in the year 2005-06, a decline of 5.8 percent

over the pervious year's annual turnover of Rs. 63.92 billion.

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RELIANCE COMMUNICATION

Reliance is a $ 16 billion integrated oil exploration to refinery to power and

textiles conglomerate. It is also an integrated telecom services provide with

licenses for mobile, fixed, domestic long distance and international services.

Reliance Infocom offers a complete range of telecom services, covering

mobile and line telephony including broadband, national and international

long s\distances, data services and a wide rage of value added services and

applications. Reliance India Mobile, the fist infocom initiatives was

launched on December 28,2002. This marked the beginning of Reliance's

vision.

Reliance telecom plans to extend its efforts beyond the traditional value

chain to develop and deploy telecom solutions for India's farmers, business,

hospital, government and public sector organization. Until recently, Reliance

was permitted to provide only "limited mobility" services through its basic

services license. However, it has now acquired a unfired access license for

18 circles that permits it to provide the full range services. It has rolled out

its CDMS mobile network and enrolled more then 6 million subscribers in

one yea to become the country's largest mobile operator. It now wants to

increase share and has recently launched pre-paid services. Having captured

the voice market, it intends to attack to the broadband markets.

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COMPANY PROFILE

Bharat Sanchar Nigam Limited (known as BSNL) is a public sector

communications company in India. It is the largest telecommunication

Company in India and the sixth largest in the world. Its headquarters are at

Statesman House, Barakhamba Road, New Delhi. It has the status of Mini-

ratana- a status assigned to reputed Public Sector companies in India.

BSNL is India's oldest and largest Communication Service Provider (CSP).

Currently BSNL has a customer base of 64.8 million (Basic & Mobile

telephony). It has footprints throughout India except for the metropolitan

cities of Mumbai and New Delhi which are managed by MTNL. As on

March 31, 2007 BSNL commanded a customer base of 33.7 million

Wireline, 3.6 million CDMA-WLL and 27.5 million GSM Mobile

subscribers. BSNL's earnings for the Financial Year ending March 31, 2006

stood at INR 401.8b (US$ 9.09 b) with net profit of INR 89.4b (US$ 2.02

billion). Today, BSNL is India's largest Telco and one of the largest Public

Sector Undertaking of the country with authorized share capital of US$ 3.95

billion (INR 17,500 Crores) and networth of US$ 14.32 billion

HISTORY OF BSNL

The foundation of Telecom Network in India was laid by the British

sometime in 19th century. The history of BSNL is linked with the beginning

of Telecom in India. In 19th century and for almost entire 20th century, the

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Telecom in India was operated as a Government of India wing. Earlier it was

part of erstwhile Post & Telegraph Department (P&T). In 1975 the

Department of Telecom (DoT) was separated from P&T. DoT was

responsible for running of Telecom services in entire country until 1985

when Mahanagar Telephone Nigam Limited (MTNL) was carved out of

DoT to run the telecom services of Delhi and Mumbai. It is a well known

fact that BSNL was carved out of Department of Telecom to provide level

playing field to private telecoms.Subsequently in 1990s the telecom sector

was opened up by the Government for Private investment, therefore it

became necessary to separate the Government's policy wing from

Operations wing. The Government of India corporatised the operations wing

of DoT on October 01, 2000 and named it as Bharat Sanchar Nigam Limited

(BSNL). BSNL operates as a public sector.

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VISION & MISSION

VISION 

To become the largest telecom Service Provider in Asia.

 

MISSION

To provide world class State-of-art technology telecom services to its

customers on demand at competitive prices.

To provide world class telecom infrastructure in its area of operation and to

contribute to the growth of the country's economy.

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OBJECTIVES 

To be a Lead Telecom Services Provider.

To provide quality and reliable fixed telecom service to our customer

and there by increase customer's confidence.

To provide mobile telephone service of high quality and become no. 1

GSM operator in its area of operation.

To provide point of interconnection to other service provider as per

their requirement promptly.

To facilitate R & D activity in the country.

Contribute towards:

i. National Plan Target of 500 million subscriber base for the country By

December 2010.

Broadband customers base of 20 million in India by 2010 as per

Broadband Policy 2004.

Providing telephone connection in villages as per government proposition.

Implementation of Triple play as a regular commercial proposition.

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SERVICES PROVIDED

When it comes to connecting the four corners of the

nation, and much beyond, one solitary name lies embedded

at the pinnacle - BSNL.  A company that has gone past the

number games and the quest to attain the position of a

leader.  It is working round the clock to take India into the

future by providing world class telecom services for people of India.  BSNL

is India's no. 1 Telecom Service provider and most trusted Telecom brand of

the Nation.

Driven by the very best of telecom technology from chosen global leaders, it

connects each inch of the nation to the infinite corners of the globe, to enable

you to step into tomorrow.  

Here is an overview of the World Class services offered by the BSNL:

 

  BASIC TELEPHONE SERVICES

The plain old, countrywide telephone service through 32,000

electronic exchanges. Digitalized public switched telephone network

(PSTN) with a host of phone plus value additions.

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DATAONE BROADONE

BSNL launched Data One broadband service in January 2005 which shall be

extended to 198 cities very shortly. The service is being provided on existing

copper infrastructure on ADSL2 technology. The minimum speed offered to

the customer is  256 Kbps at Rs. 250/- per month only. Subsequently, other

services such as VPN, Multicasting, Video Conferencing, Video-on-

Demand, Broadcast application etc will be added

SANCHAR INTERNET

Keeping the global network of Networks networked, the countrywide

Internet Services of BSNL under the brand name SANCHAR NET includes

Internet dial up/ Leased line access, CLI based access (no account is

required) and DIAS service, for web browsing and E-mail applications. You

can use your dialup sancharnet account from any place in India using the

same access no ‘172233’, the facility which no other ISP has. BSNL has

customer base of more than 1.7 million for sancharnet service.

BSNL also offers Web hosting and co-location services at very cheap rates.  

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ISDN

Integrated Service Digital Network Service of BSNL utilizes a

unique digital network providing high speed and high quality

voice, data and image transfer over the same line. It can also facilitate both

desktop video and high quality video conferencing

INTELLIGENT NETWORK

Intelligent Network Service (In Service) offers value-added services, such

as:

Free Phone Service (FPH)

India Telephone Card (Prepaid card)

Account Card Calling (ACC)

Virtual Private Network (VPN)

Premium Rae Service (PRM)

Universal Access Number (UAN) and more

I-NET

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India s x.25 based packet Switched Public Data Network is operational

in 104 cities of the country. It offers x.25 x.28 leased, x.28 Dial up

(PSTN) Connection) and frame relay services.

LEASED LINES & DATACOM

BSNL provides leased lines for voice and data communication for various

application on point to point basis. It offers a choice of high, medium and

low speed leased data circuits as well as dial-up lines. Bandwidth is

available on demand in most cities. Managed Leased Line Network (MLLN)

offers flexibility of providing circuits with speeds of nx64 kbps upto 2mbps,

useful for Internet leased lines and International Principle Leased Circuits

(IPLCs).

Cellular Mobile Service

 BSNL?s GSM cellular mobile service Cellone has a customer base of over

5.2 million. CellOne provides all the services  like MMS, GPRS, Voice

Mail, E-mail, Short Message Service (SMS) both national and international,

unified messaging service (send and receive e-mails) etc. You can use

CellOne in over 160 countries worldwide and in 270 cellular networks and

over 1000 cities/towns across India. It has got coverage in all National and

State Highways and train routes. CellOne offers all India Roaming facility to

both pre-paid and post-paid customers (including Mumbai & Delhi).

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WIRELESS IN LOCAL LOOP

This is a communication system that connects customers to the Public

Switched Telephone Network (PSTN) using radio frequency signals as a

substitute for conventional wires for all or part of the connection between

the subscribers and the telephone exchange

Countrywide WLL is being offered in areas that are non-feasible for the

normal network.

Helping relieve congestion of connections in the normal cable/wire based

network in urban areas.

Connecting the remote and scattered rural areas.

Limited mobility without any air-time charge

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BSNL GROWTH PLAN

The National Internet Backbone of BSNL consists of 432 Point of Presence (

POP) that gives it the capability of transporting IP traffic from every hook

and corner of the country.    This network  provides internet services to more

than 1 million dial-up customers including about 3.5 lakh customers on CLI

basis.    

2nd in the line of IP network, BSNL commissioned a state-of-the-art Multi

Protocol Label Switching (MPLS) NETWORK TAKING India into the next

stage of the IP evolution.  This network has 10 physical nodes with all

district headquarters designated as virtual nodes.  This network has opened

up a new market segment of secure and reliable Virtual Private Networks

(VPNs) for corporate customers.   

The latest endeavor of BSNL is a world-class multi-gigabit multi-protocol,

convergent IP infrastructure which will provide voice, data and video

services through the same backbone.  In terms of infrastructure for

broadband services, this would put India at par with more advanced nations. 

Designated as NIB-II this will be implemented in the form of four projects. 

Project 1 involves building up of MPLS backbone  

Project 2.1 is for narrow band access  

Project 2.2 is for broadband access

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Project 3 is to put systems and processes in place to integrate network built

in the other projects and provide services like messaging, billing etc. 

All the above projects in form of NIB-II are at different stages of

implementation and as per schedule .They will be operational in the third

quarter of this year. The services that will be available to customers when

NIB-II is in place: 

Narrowband and broadband Internet access.

Virtual Private Network.

Managed OPE

Value Added Services like encryption, firewall and NAT

Messaging: Plain Vanilla and feature rich

Data Center Services: web hosting and web-collocation.

Content based Services: e.g. video multicast, video on demand, interactive

gaming

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CHALLENGES FACED BY BSNL

During Financial Year 2006-2007 (From April 01, 2006 to March 31, 2007)

BSNL has added 9.6 million new customers in various telephone services

taking its customer base to 64.8 million. BSNL's nearest competitor Bharti

Airtel is standing at a customer base of 39 million. However, despite

impressive growth shown by BSNL in recent times, the fixed line customer

base of BSNL is declining. In order to woo back its fixed-line customers

BSNL has brought down long distance calling rate under OneIndia plan,

however, the success of the scheme is not known. However, BSNL faces

bleak fiscal 2006-2007 as users flee, which has been accepted by the CMD

BSNL.

Presently there is an intense competition in IndianTelecom sector and

Various Telcos are rolling out attractive schemes and are providing good

customer services. However, BSNL being legacy operator and its conversion

from a Government Department earns lot of criticism for its poor customer

service. Although in recent past there have been tremendous improvement in

working of BSNL but still it is much below the Industry's Expectations. A

large aging (average age 49 years (appx)) workforce (300,000 strong), which

is mostly semi-illetrate or illeterate is the main reason for the poor customer

service. Further, the Top management of BSNL is still working in BSNL on

deputation basis holding Government employee status thus having little

commitment to the organisation. Although in coming years the retirement

profile of the workforce is very fast and around 25% of existing workforce

will retire by 2010, however, still the workforce will be quite large by the

industry standards. Quality of the workforce will also remain an issue.

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Access Deficit Charges (ADC, a levy being paid by the private operators

to BSNL for provide service in non-lucarative areas especially rural

areas) has been slashed by 37% by TRAI, w.e.f. April 01, 2007. The

reduction in ADC may hit the bottomlines of BSNL.

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SWOT ANALYSIS OF BSNL

STRENGTH

1 The turnover nationwide coverage nearer comprehensive range of

telecom services and the desire to excel has made BSNL the number

one telecom company in India.

2 Wide coverage first mover advantage launches new and attractive

scheme.

3 Last markets share around 25.1% good service provider.

4 Customer friendly services excess around all over India (Billing

transaction) Providers all services under one roof.

5 Largest revenue generating company. BSNL is miles ahead of its with

35.1 in vision basic phone subscriber that is 85% share of subscribe

base and 92% share in revenue terms.

6 BSNL is numeral operator of India in all services in its licenses area.

7 BSNL is only services provider making loused efforts and planned

initiative to bridge the rural and urban digital divide ICT sector.

8 BSNL serves its customer with its wide bouquet of telecom services.

9 The company has vast experience in planning.

10 The centralized structure.

11 Net profit - present turnover of BSNL is more than Rs.351820-00

million with net profit to the line of Rs. 99390 million for the last

financial year.

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WEAKNESS

1 BSNL is not so customer friendly .

2 Net work problems like congestion server down problem mainly in

the evening time.

3 Because of the large area and due to leased lines the company has

incurred high maintenance cost.

4 Lack of proper implementation of services.

5 Inconsistent in working practice.

6 Since the company launched so many brands so the company loosed

its special position in consumer minds.

7 Less coordination in working culture or working staff.

8 Brand dilution - Its occurs when consumer is no longer associate with

a product or even highly similar product as BSNL lose its luster.

9 Slow pace of the reform process.

OPPORTUNITIES

1 BSNL planned to expand its customer base from present 47 millions

line to 125 million lines by December 2008.

2 Infrastructure investment planned to the line of Rs. 733 crore in the

next three year.

3 Moves toward international market.

4 The company is not limited to basic phone services also capturing

other market segment like mobile internet i.e. broad band services.

5 Planning to merger with top MNC's .

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THREATS

1 Since the more telecom companies entered in and Indian market

therefore the company faces some threats because of foreign players

like Vodaphome, etc.

2 Competitors Strategies - Because of the high competition with the

other companies like Airtel Reliance communication, and Vodaphone.

The company adopts the law calls rates scheme as a result of which

the company may face some problems.

3 International competition - the other company provide more features

as well as additional services.

4 Financing these requirements require a little more liberal approach

from the policy side problem of limited spectrum availability and the

issue of interconnection charges between the private and state

operators.

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CASH MANAGEMENT

Cash management is a term for certain services offered primarily to larger

business customers. This is the procedures for Government agencies to

follow to ensure prudent cash management practices when developing and

implanting regulations, systems and instruction. These procedures include

billings, collections, deposits, disbursements, cash held outside the cash

account of the Department and financial data reporting . These procedures

also requires the use of timely methods, principally electronic Funds

Transfer (EFT) for the collection, deposit, and disbursements of funds. It

may be used to describe all bank account such as checking, collection,

operation account etc. provided to businesses of a certain size, but it is more

often used to describe specific services such as cash concentration, zero

balance accounting and auto matched clearing house facilities. Sometimes

even a private bank can be hire to provide a cash management service for a

company even Bharat Sanchar Nigam Limited also planning to out sources

its cash management service.

The following is a list of services generally offered by banks and utilized by

larger businesses and corporations like BSNL.

Account Reconcilement Services: Balancing a checkbook can be a

difficult process for a very large business, since it issues so many checks

it can take a lot of human monitoring to understand which checks have

not cleared and therefore what the company’s true balance is. To get

around this, banks have developed a system which allows companies to

upload a list of all the checks that they issue on a daily basis, so that at

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the end of the month the bank statement will show not only which checks

have cleared, but also which have not. More recentally, banks have used

this system to prevent checks from being fraudulently cashed if they are

not on the list, a process known as positive pay.

Advanced Web Services: - Most banks have an internet- based system

which is more advanced than the one available to consumers. This

enables managers to create and authorize special internal logon

credentials, allowing employees to send wires and access other cash

management features normally not found on the customer web site.

Armored Car Services: - Large retailers who collect a great deal of cash

may have the bank pick this cash up via an armored car company, instead

of employees depositing the cash.

Automated clearing House: - Services are usually offered by the cash

management division of a bank. The automated clearing house is an

electronic system used to transfer funds between banks. Companies use

this to pay others, especially employees (this is how direct works).

Certain companies also use it to collect funds from customers (this is

generally how automatic payment plans work). This system is the subject

of the ire of some consumer groups, because under this system all banks

assume that the company initiating the debit is correct until proven

otherwise.

Balance Reporting Services: - Cooperate clients who actively manage

their cash balances usually subscribe to secure web-based reporting of

30

their account and transaction information at their lead bank. These

sophisticated compilations of banking activity may include balances in

foreign currencies, as well as those at other banks. They include

information on cash position as well as ‘float’ (e.g. checks in the process

of collection). Finally they offer transaction - specific details on all forms

of payment activity, including deposits, checks, wire transfer, ACH

(automated clearing house debits and credits), investments, etc.

Cash concentration Services: - Large or national chain retailers often

are in areas where their primary bank does not have branches. Therefore,

they open bank accounts at various local banks in the area. To prevent

funds in these accounts from being idle and not earning sufficient

interests, many of these companies have an agreement set with their

primary bank, whereby their primary bank uses the Automate clearing

house to electronically “pull” the money from these banks into a single

interest - bearing bank account.

Lockbox service:- Often companies (such as utilities) which a large

number of payments via checks in the mail have the bank set up a post

office box for them, open their mail, and deposit any checks found. This

is referred to as a “lock box” services.

Positive Pay: - Positive pay is a service whereby the company

electronically shares its check register of all written checks with the bank.

The bank therefore will only pay checks listed in that register, with

exactly the same specifications as listed in the register (amount, payee,

serial number, etc.). This system dramatically reduces checks fraud.

31

Sweep Account: - are typically offered by the cash management

divisions for a bank. Under this system, excess funds from a company’s

bank account are automatically moved into money market mutual funds

overnight and then moved back the next morning. This allows them to

earn interest overnight. This is the primary use of money market mutual

funds.

Zero Balance Accounting: - Can be through of as somewhat of a hack.

Companies with large numbers of stores or locations can very often be

confused if all those stores are depositing into a single bank account.

Traditionally, it would be impossible to know which deposits where from

which stores, without seeking to view images of those deposits. To help

this problem, bank developed a system where each store is given their

own bank account, but all the company deposited into the store account is

automatically moved into the company’s main bank account. This allows

the company to look at individual statements for each store. US Banks at

the present time, however, are almost all converting their system so that

companies can tell which store made a particular deposit, even if these

deposits are all being done into one account. Therefore, zero balance

accounting is being used less frequently.

Wire Transfer: - A wire transfer is an electronic transfer of funds. Wire

transfers can be done by a simple bank account transfer, or by a transfer

of cash at a cash office. Banks wire transfer are often the most expedient

method for transferring funds between bank account. A bank wire

transfer is a message to the receiving bank requesting them to effect

32

payment in accordance with the instructions given. The message also

includes settlements instructions. The actual wire transfer itself is

virtually instantaneous, requiring no longer for transmission than a

telephone call.

Controlled Disbursement: - This is another product offered by banks

under cash management services. The bank providers a daily report,

typically only in the day. That provides the amount of disbursements that

would be charged to the customer’s account. This early knowledge of

daily funds requirements allows the customer to invest any surplus in

intraday investment opportunities, typically money market. This is

different from delayed disbursements, where payments are issued

through a remote branch of a bank and customer is able to delay the

payment due to increased float time.

Scope and Applicability

These procedures apply to all Government agencies, unless specifically

exempted by the structure, whose financial transact ration directly or

indirectly affect, the cash account of Treasury. The following regulations

establish the policy for cash management practices within the Government.

Cash management Practices and techniques designed to accelerate and

control collections, ensure prompt deposit of receipt, improve control over

distribution methods, and eliminate idle cash balance.

33

Cash Management Improvements fund- A revolving fund financed by

assessments against an agency for noncompliance with collection or deposit

improvements. Moneys from this fund will be made available, without fiscal

year limitation, for payment or expense increased in developing and

implementing selected project that provide for improved methods of

collection and deposit.

Cash Management Review- A comprehensive and ongoing study of an

agency’s cash-flows and corresponding cash management process or

mechanisms, conducted to identify opportunities for improvements in an

agency’s cash management practices. This review is a major part of the

current assets management review and analysis (CAMRA).

Current Assets Management Review and Analysis (CAMRA):- A

process to assess and improve the management of Federal agency finances

through electronic data collection. The cash management review is a major

part of CAMRA.

Billings and Collection: - Agencies responsible for the preparation of

invoices to individuals and organizations will adhere to the followings.

Ensure that and invoice, for either an actual or estimated amount, is prepared

and mailed within 5 business days after the day that goods have been

shipped or released, services have been rendered, or payment is otherwise

due. Agencies may prepare and mail an invoice later than the 5 day time

frame if they can demonstrate that it is cost effective to do so.

34

Include a payment due date on the invoice that will not be more than 30 days

from the date of the invoice, unless otherwise provided by law.

If the value of the goods or services cannot be specifically determined, a bill

equal to at least 75 percent of the estimated value will be prepared and

mailed within 5 business days. Identify the estimated invoice as being a

partial invoice and note that a final invoice will be completed when the value

is determined.

Prepare and mail a final invoice within 30 days of the submission of an

estimated partial invoice.

Collections normally are required to be made by EFT and must be

arrangement with FMS. When indicated by FMS, agencies will include a

statement on the invoice requiring payment by EFT and provide the

necessary information for EFT payment by the remitter.

Charges for late Payments: - Payment terms as a stated in a contract, debt

instrument, or notice of indebtedness (that is, demand latter) are expected to

be adhered to by the debtor. If payment is not received by the due date, than

agency is expected to purse collection of the debt using the appropriate

available methods, and to assess interest, administrative charges, penalties

on past due amounts.

Collection Mechanism:- All funds are to be collected by EFT when cost -

effective, practicable, and consistent with current statutory. FMS

acknowledges that agencies may find it desirable to utilize a menu

mechanisms, if the base remitters is diverse. The mechanisms used for

collecting funds for the credit to the account of U.S. Government will be

jointly determined by the responsible agency and FMS and must have as

35

their objective the mini nation of total cost to the Government as a whole,

including agency direct costs, the cost of purchased services, and the float

cost of the money involved in the collection system. Agencies will evaluate

new or modified collection flows using the following guidelines and provide

recommendations to FMS. When consistent with the above criteria, agencies

should generally consider mechanism in the following order of preference.

Automated clearing house (ACH) (the computerized facility for

member depositary instructions to process payment orders in machine

readable form).

Fed wire (for deposits requiring same day settlement)

Debit/ Credit card (when cost effective).

Lock box, and

Treasury’s General Account (TGA).

On - Line Payment and collection system (OPAC) or other mechanism for

which the agency has voucher and schedule of withdrawals and credit, will

be used for the transfer of funds between agencies.

Disbursements Mechanisms: - All funds are to be disbursed by EFT when

cost effective, practicable, and consist with current statutory authority.

Agencies will evaluate new or modified cash flows using the following

guidelines and provide recommendations to company.

Salary Payment:- ACH will be adopted as the presumed method for paying

employees. Direct deposit enrollment forms for establishing regular payment

36

will be designed to use this approach. If required by law, the forms must

afford recipients the opportunity to reject EFT without justification.

Vendor and Miscellaneous payment:-Each department and agency will

authority to require that all contract are paid by EFT in accoourdance with

31 CFR 206, unless a determination is made that it is not in the best interest

of the federal Government to do so. EFT will be adopted as the standard

method of payment for all Federal program payments originated by agencies

or their agents. To maximum extent possible, agencies are required to use

vendor Express, which is the mechanisms supporting the movement of

Federal agencies vendor and miscellaneous payments from checks and Fed

wire to ACH processing. Agencies proposing to use any non- EFT is not

feasible or cost effective. FMS will work with each agency to develop and

execute individual conversion plans and coordinate agency conversion plans

with the Regional Financial centers and the Federal Reserve system.

Agency payment: - Agencies will ensure that payment terms, which specify

when payment with any organization. Invoices that are authorized for

payment by agency including progress and final payments, will be paid in

accordance with company rule and regulation or when otherwise due.

Accounting system will be designed to ensure that invoices are paid timely

and discount are taken when appropriate when agencies take discount after

the expiration of the discount period or fail to make timely payments,

interest penalties will be paid according to the company’s Act.

Cash Discount:- Agency payment systems will incorporate that take

advantage of cash discount as a matter of routine and eliminate any need for

37

special handling. Such discount will be taken when the discount terms

applied in the conversion formula results in an effective interest rate equal

to, or greater than, the current value of Funds Rate. The discount period is

calculated from the date placed on the proper invoice by the contractor to the

discount date. If the invoice is undated, the discount period will being on the

date or proper invoice is received by the designed billings office and the date

automated . all discount payments must be scheduled for issuances as close

as possible to, but no later than, the last day of the discount period the

formula, with example, to convert discount terms to an effective annual

discount rate to be compared against the current value of Funds Rate are in

the figure on this page.

Cash Advances

Cash held outside Treasury

Cash held at personal risk, including imrest funds by distributing officer and

cashiers Agencies will make unannounced verification of the cash balances

in impress funds at least once each quarter. At least every 6 months,

accountable officers shall ensure that such funds are commensurate with

actual needs and meet the requirement specified in manual of procedures and

instructions for cashiers. Cash on hand shall be maintained at the minimum

needed to meet normal requirements. In lieu of cash, agencies must use

ACH for small purchases, travel advances, and reimbursements to the

maximum extent possible. If using ACH is not cost - effective, practicable,

or consists with current statutory authority, agencies will use the

Government small purchase card or third party draft.

38

All other cash held outside Treasure:- All public moneys must be

deposited to the treasury’s general account such funds include those held in

escrow, sized in connection with law enforcement activities, deposited in

court, obtained as a result of an agency’s regulatory enforcement authority,

and the like.

Cash Management Performance: - To ensure effective cash management,

the job elements of agency personal responsible for receipts and

disbursements should include each management as critical performance

measurements.

Cash Management Reviews: - An agency is responsible for monitoring

efficiency, effectiveness, and profitability in its cash management practices.

The monitoring includes a methodology to ensure that an agency review is

completed for receipt and disbursements. The review will --

Determine if an agency is collecting and disbursing funds by EFT.

Determine if an agency is billing, collecting and depositing in a timely

manner.

Determine if an agency is disbursements according to the prompt payment.

Document agency cash flows to include all collections and disbursements.

Determine whether an opportunity exists to implement a better mechanism

on process, or upgrade an existing mechanism or process. Agencies

may be required to perform a comprehensive cash management

review every 5 years, the first of such reviews having been performed

in 1986. FMS will notify agencies when reviews are scheduled and

provide detailed information to the agencies on the process.

39

The Standard formula for measuring interest savings based on benefit

days is as follows:-

Cash follow Amount x Benefit x Current value = Interest 250

(Business Days) Days of Funds Rate savings.

Warning Letter: - When FMS has determined that an agency is at fault and

may not implement an initiate by the scheduled implementation date, a

warning letter will be sent to the designated cash management official. The

warning letter will indicate an FMS contact with whom to discuss possible

solutions or alternative courses of action. For collection initivatives, the

warning letter will also contain-

Identification of the initiative and scheduled implementation date.

A statement that the implementation scheduled of the initiative is in

jeopardy and the basis for this determination.

The amount that will be charged based on proposed savings associated

with the initiative, if final implementation date is missed and method

of calculating charges.

FMS’s authority to impose charges.

Agency’s appropriation to be charged.

Approval of Requests for Funds: - The project Selection and approval

committee will evaluate all requests and select appropriate projects for

funding. The disbursements of moneys from the CMIF to an agency will be

made under the authority of the Economy Act (31 U.S.C. 1535). Upon

approval, the committee will authorize the transfer of the total amount of

approved funds to the project agency or will arrange funding on

reimbursable basis. Money will be procedures.

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ADVANTAGES OF CASH MANAGEMENT

ADVANTAGES

Cash management service is a flexible, low risk cash product that will ensure

your peace of mind and ease of settlement. With real account balances and

transaction history, you will know your cash positions are at all time.

BENEFITS

Settlement of securities transactions.

Direct crediting of salary, dividends and other income.

ATM and EFTPOS access.

Electronic bill payment.

Funds transfers to other financial instruction.

Online access.

As the demand to move from a thick client to a thin client system increased

among corporate clients, and the advantages of doing so were somewhat

obvious 2, no corporate or small business wanted to lose functionality in the

bargain. Therefore, it was natural to expect that customer's would wanted to

have and retain every bit of functionality around the traditional services of

collection payment and reporting the main features typically through web -

based each management can be classified into.

Payment management, liquidity management, electronic collection and

information reporting, other features such as single sign on and billing

engine complete the offering. Interfaces with various payment systems,

different services associated with fund transfers (stop payment, cheques

41

imaging, positive pay, retail and corporate lockbox facility, etc.) are all

considered passé today by corporate clients. Increasingly, customer's are

demanding cross border settlements and integration with mainline treasury

functions.

Large multinational corporate need multi location collaborative

environments, given the globle nature of their operations. This is especially

true for companies with regional treasury centers or the ones operating out

of shared services centers, where transactions are initiated in one location

and exception approvals are done elsewhere. By web - enabling their cash

management services, banks are able to offer them operational flexibility.

An obvious advantage that corporate customers want to derive in their

adoption of internet based systems is the efficient management of funds and

risk management. Corporate treasury are highly conscious of carrying idle

cash and want to do everything possible too make judicious use of the funds

available. This necessitates the integration between the cash management

system deployed within the organization, and the general ledger, accounts

receivables and account payables system within the company. The more

seamless the integration between these systems, the more timely and

accurate will be the reporting function.

Benefits From a Bank's Point of view:

Just as in the cash of corporate clients, banks also want to move to web

based solutions but not at the expense of the functionality. Large corporate

usually concentrate their business with two banks and use a third alternate

bank for specially products. Creating customers "stickiness" through " one

42

stop- shop" features such as providing consolidated information, can be

very rewarding for banks.

As banks become more familiar with technological advantages, they too

have become more demanding of their vendors. the crux lies in leveraging

technologies without compromising on the functionality available . The

requirement is to make available tools and services that make the task of the

user much easier. There are several new technology features that are

demanded by the banks from a web - based cash management systems

vendor.

Single sign on - integrated information reporting from various back

end system such as treasury, cash management, commercial loans,

trade finance, etc.

Segmentation of customer- traditionally in the retail area, but now

increasingly being used to understand and cater to the needs of the

corporate and business banking segments.

Integration with multiple channels of delivery, as we move into an era

of possibly making all functions available to customers across all

touch - points and,

Real - time reporting and others.

Banks, to a certain extent, achieved the above benefits by moving their

system from PC banking thick - client solution to web - based business e -

banking solution. Banks everywhere have been criticized for only seeing a

part of the client relationship picture.

A fully fledged offering in the form of web based cash management

also helps banks to increase fee - based income through value added offering

43

and segment customers, through adjustment of the offering base. On the cost

side, automatic entry and STP reduce cost. Centralized handling and

consolidations help the banks to scale up without significantly increasing

headcount.

Web - based cash management, the direct channels for customers to

request payment and collection processing, forced the banks to decouple the

back - end payment system from their operational system and use web

service to connect to the central payment hub. Quickly, banks realized that

these web services, designed initially for their cash management system, can

be used for multiple operational front - end system such as customer

relationship and branch banking.

44

OBJECTIVES OF STUDY

A comparative analysis of various cash related function (cash management)

in BHARAT SAnchar Nigam Limited. The larges telecom company in

India. The project also enlightmens the various day to day activities like

operations and collection o cash in the company. And proide budget for all

branches and maintain their cash as well as fund flows. Comparative study

of cash management service of various banks.

Focusing of cash management to know now BSNL meet the payments

schedule and to minimize funds committed to cash balance.

To study present system of the company and its operations

To understand their requirement in terms of functional & operation to

understand how decision are made budgeting and what kind o

decision problem can be face.

To understand the proper role of manager for decision making. The

specific objectives are a follows-

1 ) To analyze whether past transaction and budget has any association or

influence in future.

2) To idenify differences inthe comapny's cash book and bank statement find

out the error and rectifying it.

45

RESEARCH METHODOLOGY

Bharat Sanchar Nigam Ltd was incorporated in October, 2000, it is world's

7th largest Telecommunications company providing comprehensive range of

telecom services in India. BSNL has installed quality telecom network in the

country and now focusing on improving it, expanding the network,

introducing new telecom services and winning customer's confidence. BSNL

is the only services provider, making focused efforts and planned initiatives

to bridge the Rural Urban Digital ICT sector. In fact there is no telecom

operator in the country to beat its reach with its wide network giving

services in every nook and corner of the country and operators across India

except Delhi & Mumbai. BSNL serves its customers with its wide bouquet

of telecom services. BSNL is numerous operators of India in all services in

its licenses area. The company offers vide ranging and most transparent

tariff scheme designed to suite every customer. Scaling new highest of

success, the present turnover of BSNL is more than Rs. 3,51,820 million

with net profit to the tune of Rs. 99,390 million for last financial year.

My work is related towards the cash department under the heading

cash management in BSNL. I, being a finance student, find is a nice place to

start my work. I found the project is worth enough to enter in this sector. As

per I have learned that in today world it works in a very impulsive way

specially in the telecom industry is where you will find it everywhere. This

is what a finance student will dream to do. Every big or small firm is trying

to its level best to get as much it can get from the market. competition is

what brings the feel of work. the major competitors of BSNL in the market

are :

46

BHARTI'S AIRTEL

RELIANCE INFOCOMM

VODAFONE

ADITYA BIRLA'S IDEA

TATA TELERVICE (INDICOM)

MTNL

Some small players are also entering into the market. For continuous growth

new financial strategies are being formulated from time. I am trying my

level best to get into all activities that are possibly liked to the project to

increase my knowledge and experience. My project is basically deals with

the various cash and banking operation in BSNL. As BSNL is a very large

firm so I was to see and study the various financial techniques adopted by

the company epically in cash management field. The project deals with a

comparative analysis of various banking and cash related function (cash

management) in Bharat Sanchar Nigam Ltd, the largest telecom company in

India. The project also enlightens the various day to day activities like

operation and collection of cash in the company. And provide budget for all

branches and maintain their cash as well as fund flows.

Cash management is a term for certain services offered primarily to large

business customer. It may be used to discussed all banks accounts provide to

business of a certain size, but it is more often used to describe specific

services such as cash concentration, zero balance accounting and automated

clearing house facilities. This project deals with the comprehensive study of

different departments of BSNL basically focus on banking and cash. The

principal learning of the project is how the fund manager entire day task like

47

operation, collection and making budget for the company. the project also

give me opportunities to closely work with fund manager and handling some

challenging responsibilities and various banking operation, like

reconciliation, analysis of bank statement, departments cash book and

rectification of error, In this project, proper performance measurement will

be taken which will involve recognition of both, the banking and the cash

section. After gathered information about BSNL from various sources like

internet and intranet my study will proceed towards the survey to different

departments like banking, cash, account, marketing, and finance

departments.

(I) Period of study

(A) For analysis of bank company's transaction I use last three financial

year data.

(B) For comparison based - the report covers data for one financial year.

(II) Data collection and sampling

To conduct this project, the data for the report like bank statement cash

book, budgeting manual will be collected from secondary the data

relating schemes are collected from company's website and other search

engines such as Google and also from concerned bank.

(III) Data collection- The analysis of the survey is based on primary and

secondary sources of information as maintained above. The primary data is

used to draw some inferences regarding various sections is BSNL and then

respective work. The secondary data help to observe various function under

48

cash and banking in BSNL. Closely worked with fund manager and

analyzing challenging task like budgeting, various banking operations,

reconciliation etc.

The project is divided into various parts:

1 In the first part the concept of banking and related terms will be deal with.

2 In the secondary part the comparative analysis of cash management policy

of BSNL which consist of :

preparation of cash book and bank book.

Analysis of Trading account, profit and loss account and balance

sheet.

Analysis of Telecom revenue

How the collection and operation account manage

Making budget for the company

Account Reconcilement Services: Since balancing a checkbook can be a

difficult for a very large business like BSNL, since it issue so many cheques

it can take a lot of human monitoring to understand which cheques have not

cleared and what the company's true balances. To get around this, banks

have developed a system which allows BSNL to upload a list of all the

cheques that they issue on a daily basis, so that at the end of the month the

bank statement will slow not only which cheques have cleared, but also

which have not. and recently, banks have used this system to prevent

cheques from being gradually cashed if they are not on the list, this process

is also known as positive pay.

49

Balance Reporting Services Company manages their cash balances usually

subscribe to secure web - based reporting of their amount and transaction

information at their lead bank. They include information on cash position as

well as 'float' (e.g. cheques in the process of collection ). finally, they offer

transaction specific details on all forms of payment activity, including,

deposits, cheques.

Controlled Disbursement :- This is another activity perform by the

company offered by banks under cash management services. The providers a

daily report, typically early in the day, that providers the amount to

disbursements that would be charged to the company's account This early

knowledge of daily funds requirement allows the company to invest any

surplus in intraday investment opportunities, typically money market. This is

different from delayed disbursements, were payments are issues are remote

branch of a banks and customers is able to delay the payment due to

increased to float time. With the fast time changing time, organization to

contribute to the service industry need to be upgraded with the approach for

providing the best of the service. The primary object of the project is to the

study of banking and cash related studies in BSNL. To identify the cash

need for various departments of BSNL Study of cash management policy of

BSNL includes.

Comparative study of cash management services of various banks specially

Punjab National bank and State bank of India.

Focusing of cash management to know the how BSNL meet the payment

schedule and to minimize fund committed to cash balance.

To study present system of the company and its operation.

To understand their requirement in terms of functional and operational.

50

To understand how discuss are made during budgeting and what kind of

designs of problem can be face.

To understand the proper role of manager for decision making. The specific

objectives are as follows-

i) To analyze whether past transaction and budget has any association or

influence in future

ii) To identify different in the company's cash book and bank statement find

out the early and rectifying it;

iii) To compare the performance on early bases by introducing different

changes in budget.

iv) After gather information about BSNL from various sources like internet

and internet my study will processed towards the survey to different

departments like banking, cash, account, marketing and finance departments.

51

Limitations of the Study

While working on the project following limitations are experienced.

Obstacle in data collection

All the financial data pertaining to the organization can not be

disclosed to a summer trainee

Limited information may be provide

Lack of expertise being a trainee in analyzing data

Difficult of excess data of other companies and securities to conduct

comparative study

Though every care is taken to collect data, information were found

missing for one or two months

Since huge volume of data are to be analyzed only a few selected

scheme which ensured data availability for the period taken is used.

52

RESEARCH FINDINGS

The above ratio for the company is coming out 0.69 which is not so

high therefore the company is not used its fixed assets properly.

This is one of the most important profitability ratio is indicated how

effectively the capital employed in the business is used. In the case of

BSNL the ratio is 37.64% the shows the earning capacity of the net

assets of the business.

The shows the relationship between the internal and internal equity

that is both and short term funds. The ratio BSNL Is 5.67:1 It shows

that the external equity of the company is approx 5 times of internal

equity.

The ratio shows the relationship between long term funds that is share

holders funds plus long term loans and fixed assets. the ratio indicated

long term financial soundness of the business. As the ideal ratio

should be more than one for BSNL the fixed assets ratio is 1.46 the

shows that the company has more long term funds and financially

sounds.

This ratio shows short terms financial soundness of the company. The

ideal current ratio should be around 2:1 In the case of BSNL it is 3.15.

we shows that company is able to meet short term obligation.

53

ANALYSIS AND INTERPRETATION

Cash flows is a term that refers to the amount of cash being received and

spent by a business during a defined period of time, sometimes tied to a

specific project. Measurement of cash flows can be used:

To evaluate the statement of performance of a business or project.

To determine problems with liquidity. Being profitable does not

necessarily mean being liquid. A can fail because of a shortage of

cash, even while profitable.

To generate project rate of returns. The time of cash flows into and

out of projects are used as inputs to financial models such as internal

rate of return, and net present value.

To examine income or growth of a business when it is believed that

accrual accounting concept do not represent economic realities.

Alternatively, cash flow can be used to ‘validate’ the net income

generated by accrual accounting.

Cash flows in BSNL can be classified into:

Operation cash flows: Cash received or expended as a result of the

company’s core business activities.

Investment cash flows: Cash received or expended through capital

expenditure, investments or acquisitions.

Financing cash flows: Cash received or expended as a result of

financial activities, such as interests and dividends.

54

All three together - the net cash flow - are necessary to reconcile the

beginning cash balance to the ending cash balance. Cash flows after

expenditures affecting payments. I can draw downs or equity injections, that

are just shifting of capital but no expenditure as such, are not considered in

the net cash flow.

55

Benefits reap by BSNL by using cash flow:

The cash flow statement is one of the four main financial statements of a

company. The cash flow statement can be examined to determine the short-

time sustainability of a company. If cash is increasing (and operational cash

flow is positive), then a company will often be deemed to be healthy in the

short - term. Increasing or stable cash balances suggest that a company is

able to meet its cash needs, and remain solvent. This information cannot

always be seen in the income statement or the balance sheet of a company.

For instance, a company may be generating profit, but still have difficulty in

remaining solvent.

The cash flow statement breaks the sources of cash generation into three

sections: Operational cash flows, investing, and financing. This breakdown

allows the user of financial statement to determine where the company is

deriving its cash for operations. For example, a company may be nationally

profitable but generating little operational cash (as may be the case for a

company that barters its product rather than selling for cash). In such a case,

the company may be deriving additional operating cash by issuing shares, or

raising additional debt finance.

Companies that have announced significant write downs of assets,

particularly goodwill, may have substantially higher cash flows than the

announced earning would indicate. “Strong cash flow is one of the most

attractive aspects of the cell phone business, allowing operators like BSNL

to return money to shareholders even as they rack up huge paper losses.

56

In certain cases, cash flows statement may allow careful analysts to detect

problems that would not be evident from the other financial statement alone.

For example, world com committed an accounting fraud that was discovered

in 2002; the fraud consisted primarily of treating ongoing expenses as capital

investments, thereby fraudulently boosting net income. Use of one measure

of cash flow would potentially have detected that there was no change in

overall cash flow.

Cash flow statements facilitate decision making by providing a basis for

judgments concerning the profitability, financial condition, and financial

management of a company.

The cash cycle (also known as the operating cycle or the earnings cycle ) in

BSNL is the series of transactions or economic events in a given company

by :

Cash is converted into goods and services.

Goods and services are sold to the customers like recharge coupons,

sim card.ITC card, etc.

Cash is collected from customers by means of telephone, mobile,

internet bills etc.

57

CASH FLOW ANALYSIS OF BSNL

The cash flow statement is useful to managers, lenders, and investors

because it translates the earning reported on the income statement-which are

subject to reporting regulations and accounting decisions - into a simple

summary of how much cash the company has generated during the period in

question.

Under the circle office of BSNL Dehradun the main sub units are

BSNL Dehradun

BSNL Rishikesh

BSNL Haridwar

BSNL Mussorie

The circle office made budget as well as cash flow statement for the whole

Uttaranchal circle. All the transaction as well as collection is done by Punjab

National Bank main branch.

58

TABLE - 3

CASH FLOW STATEMENT FOR THE MONT OF JANUARY 2008

PNB

Name of the he SSA/PAU

Sr. No.

Name of the station of bank where collection account is maintained

4/1/08 25/1/08 Last working day date 31/1/08

1 2 3 4 7 81 DDN 3713002100315541 OB Cash (at

the he beginning of day

99119 221478 725713

Collections of the day

1075304

6561233

3396058

Total 1174423

6782711

4121771

Cash remitted to bank

1113752

6056998

464925

Closing cash balance

60671 725713 56846

2 Rs 3714002100118468 OB Cash (at the beginning of day

0 0 0

Collections of the day

297389 1001969

388350

Total 297389 1001969

388350

Cash remitted to

297389 1001969

388350

59

bankClosing cash balance

0 0 0

3 VKS 08860021000000233

OB Cash (at the beginning of day

0 1141 946

Collections of the day

142356 268176 130551

Total 142356 269317 131497Cash remitted to bank

142356 268371 130868

Closing cash balance

0 946 629

4 ME 0331002100059796

OB Cash (at the beginning of day

0 0 0

Collections of the day

94293 219233 159574

Total 94293 219233 159574Cash remitted to bank

94293 219233 159574

Closing cash balance

0 0 0

Uttaranchal circle Dehradun

4/1/08 11/1/08 18/01/08

25/01/08 LAST WORKING DATE 11/1/08

1-A 2-A 3-A 4-A 5- A 6-ACr. Bal available at beginning of the day in bank

1327054 0 14545 592241 662757

Cash remittance/amount credited by clearing

3855846 7721841 6424200 9820786 17182833

60

TT sent by bank to circle focal point branch

5182375 7707106 5846009 9749925 141

Bank charges if any debited in collection a/c

525 190 495 345 1540

Excess credit (+) excess debit by bank (-)

0 0 0 0 0

Credit closing balance at the end of day.

0 14545 592241 662757 3660878

Cr . bal available at begging of day in bank

272299 57666 74792 101744 2400

Cash remitted /amount credited by clearing

298367 567126 361952 1130656 828762

TT sent by bank to circle focal point branch

513000 550000 335000 1230000 830000

Bank charges if any debited in collection a/c

0 0 0 0 0

Excess credit (+) excess debit by bank (-)

0 0 0 0 0

Credit closing balance at the end of day.

57666 74792 101744 2400 1162

Cr . bal available at begging of day in bank

0 0 0 0 0

Cash remitted /amount credited by clearing

142356 291691 157809 270348 130868

TT sent by bank to circle focal point branch

142356 291691 157809 270348 130868

Bank charges if any debited in collection a/c

0 390 135 0 0

Excess credit (+) excess debit by bank (-)

0 0 0 0 0

Credit closing balance at the end of day.

0 0 0 0 0

Cr . bal available at begging of day in bank

0 0 0 0 0

Cash remitted /amount credited by clearing

94631 125909 43129 219233 159574

TT sent by bank to circle focal point branch

94631 125909 43129 219233 159574

Bank charges if any debited in collection a/c

0 0 0 0 0

Excess credit (+) excess debit by bank (-)

0 0 0 0 0

Credit closing balance at the end of day.

0 0 0 0 0

61

FUND FLOW ANALYSIS

Fund flow statement depicts the sources where from funds during the current

year as compare to the previous year have been received and to allow uses

these funds have been applied. The terms funds as referred in the fund flow

statements means working capital which is the access of current assets over

the current liabilities. It also shows the inflow and outflow funds in BSNL.

It reveals the inflow of additional funds during the current year or

month as compare to the previous year of month and also utilization of fund.

Since BSNL deals with basic phone, mobile, internet etc. therefore the

main sources of funds for a company collection of cash from various sources

like billing, internet charges etc. which act as cash inflow for the company.

On the other hand the company also deals with operations we shows that

payment of current liabilities, managing of working capital, Loan or

mortgages, purchases of fixed assets, payment of interests, taxes etc.

The following data shows the Fund flow of BSNL circle for the month

of January, 2008.

62

Revenue generated telecom Rs.61433303.00Telegraph Rs. 25924.00Internet &ITC card Rs. 2115283.00Misc Rs. 819157.00TOTAL Rs. 64393667.00

Working Expenses Electric and water charges Rs. 385206.00Building Rents Rs. 475677.00Wages Rs. 1002358.00Marketing Exp. Rs. 1038462.00Incl. Advertisement& conference Rs. 860158.00Vehicle running charges Rs. 1160803.00Police Escort charges Rs. 4519434.00Security GuardsBank & legal charges Rs. 209294.00Traveling Exp. Rs. 4463913.00Admn. Charges Rs. 652464.00

TOTAL Rs. 14767769.00

Maintenance Expenses Repair of Macinary Rs. 49962.00Expenditure on service Rs. 164497.00Construction of Tower Rs. 5970458.00Repairing of Building RS. 1657894.00Maintenance of cables Rs. 1512144.00Interconnecting charges Rs. 885853.00General expenses Rs. 42685.00Reparing& maintance ofSub units ` Rs. 2746413.00

TOTAL Rs. 13030086.00

Therefore total working expenses and maintenance is = 167769 + 13030086 = 27797855.00

Therefore fund flow percentage ration = Total of working expenses and maintenance

Total revenue= 27797855.00 64393667.00= 43.16%

63

Standard ratio given by the BSNL head office is 30% but for Uttaranchal

circle the ratio is coming out 43.16% we shows that the cost incurred in

working expenses and maintenance a hire then the revenue received.

64

BANK RECONCILITION

Account Reconciliation Service:- Since balancing a checkbook can be a difficult

process for a very large business like BSNL, since it issues so many cheques it can take a

lot of human monitoring to understand which cheques have not cleared and what the

company's true balance is. to get around this, banks have developed a system which

allows BSNL to upload a list of all the cheques that they issue on a daily basis, so that at

the end of the month the bank statement will show not only which checques have cleared,

but also which have not. And recently, banks have used this system to prevent cheques

from fraudulently cashed if they are not on the list, this process is also known as positive

pay.

TABLE- 5Review of Bank Reconciliation for the month of January 2008

COLLECTION ACCOUNTName of circle SSA GMTD DEHRADUN

PUNJAB NATIONAL BANKName of the SSA/PAU

Total balance as per all bank book

Add bank charges not included in CBBS

Add others (specify)

Total col.(3+4+5)

Deduct cheques deposited but not cleared by bank

Deductother's

balance as per all statement col 6 - (7+8)

2 3 4 5 6 7 8 9DEHRADUN 31072845 0 0 31072845 2944108

8.770 150607.00

RISHIKESH 0 0 0 0 30205.00 0 100945.00VIKAS NAGAR

0 0 0 0 0.00 0 0.00

MUSSOORIE 0 0 0 0 0 0 0TOTAL 31072845 31072845 2947129

3.770 1601552.0

0

65

FINANCIAL ANALYSIS OF BSNL

On October 1st , 2000, BSNL was formed by converting service providing

functions of erstwhile DOT to provide level playing field to private

Telecoms. Since then BSNL has emerged as the 7 the largest Telecom

Operating company in the world. BSNL has played major role in spreading

telephones to rural areas of the country at affordable rates. as per TRAL

reports " 5.3 lakh villages have been provided access to telecom network

through VPTS covering 87% of the villages. Most of the VPTs have been

provided by BSNL. BSNL has provided 13.59 million (July 2007) rural

DELs in the country". By this statement we can judge the important role

played by BSNL right from its inception.

Income, Expenditure and Profit:

Following Tables shows Income, Expenditure and profit figures of BSNL

for the 5 years period since its inception.

S. NO

year Income(Rs.in crores)

Expenditure(Rs.in crores)

Profit before Tax(Rs.in crores)

Profit after Tax(Rs.in crores)

1 1.10.2000 TO 31.3.2001

11699 10669 1030 747

2 2002 24681 20461 4220 63123 2003 25892 25078 8136 14444 2004 33918 27163 6755 59765 2005 36090 29401 6689 101836 2006 41142 35251 6968 129027 2007 47683 34731 6851 16432

66

Government has set ambitious targets for Telecom PSUs (MTNL & BSNL)

For providing a total of 12.50 crore telephones by December 2008 with a

targeted market share of 50%.However overall market share of both PSUs,

which, was more than 85% at the time BSNL formation, has declined to less

than 37% as on date.

BSNL has received 100% reimbursement of license fee from 2001-02 to

2003-04, from 2004 - 05, the reimbursement of license fee is restricted to

2/3rd of license fee paid which will be further restricted to 1/3rd in 2005 -

06. Therefore, reimbursement will be nil. In the last 4 yrs BSNL Has

received total license fee refund of Rs. 8,665 crore (BSNL paid Rs 15,498

crore as license fees) as compensation for providing telecom services in rural

areas.

BSNL will have to pay income tax on 70% of its profits and only 30%

would be exempted. In the absence of such exemption from this year, BSNL

will have to resort to borrowing resulting in substantial interest burden.

BSNL's expenses on staff shot up by 218.75% in the last four years from Rs.

3,848 crore in 2001-02 to Rs. 8,418 crore in 2006 - 07. For the financial

year 2006 - 07, expenses on staff are 28.63% of the total expenses.

Similarly, the Administration and operational costs have also increased by

199% from Rs 3,995 crore in 2001 - 02 to Rs. 7,951 crore. For the financial

year 2006 - 07, expenses on Administration and operation are 27.05% of the

total expenses.

67

ANALYSIS OF FINANCIAL STATEMENT (Ratio Analysis)

Current Assets = Rs. 35.92 Million

Fixed Assets = Rs. 697388 Million

Net current Assets = Rs. 207629 Million

Profit = Rs. 55497 Libarty = Rs. 1463 Million

Net fixed assets = Rs. 57934 crore in the form of land &

building and cables.

Companies net worth = Rs. 84948 crore

Authorized equity capital of Rs. 10000 corers

Paid up equity capital Rs. 5000 crores

Revenue = Rs. 39715.00

Profit = Rs. 39715.00

Net Profit before Interest & taxNet Profit to Fixed assets ratio =

Net fixed Assets= 39715 = 0.69 57934

Since the ratio shows relationship of net profit to fixed assets that is whether

the fixed assets are being properly used or not. The above ratio for the

company is coming out 0.69 which is not so high therefore the company is

not used its fixed assets properly.

Return on Investment = Net Profit X 100

Capital employed

68

= 39715000X100

105125

= 37.64%

This is one of the most important profitability ratio is indicated how

effectively the capital employed in the business is used. In the case of BSNL

the ratio is 37.64% the shows the earning capacity of the net assets of the

business.

Total debt ratio = external equity

Internal equity= 84948 = 5.671

15000The shows the relationship between the internal and internal equity that is

both and short term funds. The ratio BSNL Is 5.67:1 It shows that the

external equity of the company is approx 5 times of internal equity.

Fixed Assets Ratio = 84948= - 1.46%

57934

The ratio shows the relationship between long term funds that is share

holders funds plus long term loans and fixed assets. the ratio indicated long

term financial soundness of the business. As the ideal ratio should be more

than one for BSNL the fixed assets ratio is 1.46 the shows that the company

has more long term funds and financially sounds.

Current Assets ratio = 207629 = 3.58

69

57394

This ratio shows short terms financial soundness of the company. The ideal

current ratio should be around 2:1 In the case of BSNL it is 3.15. we shows

that company is able to meet short term obligation.

70

SUGGESTIONS

The organization should try to minimize the expenditure and maximize

the recovery of the bad bebts from the defaulters.

The company should make such policies which help the organization to

increase the no. of subscriber but also help organization in reducing the

no. of defaulters.

The organizations should build the proper communication 0network

which makes the subscriber feel satisfied.

71

CONCLUSION

There has been much progress made in India, but there is still much more

ground to cover. The cash management market in India is at an important

threshold, juxtaposing both traditional paper-based medium the preferred

choice for the bulk of the small and medium enterprises segment. Significant

investment and effort will also be required by large agencies such as the

DOT to improve connectivity and network bandwidth, as well as from

industry leaders like SBI to transform and revolutionize the paper clearing.

The prospect of moving to substantially more electronic cash

management services is clearly possible and imminent. This will herald a

new era of significantly more cost-effective and streamlined cash

management services-well integrated with operational workflows of

corporate. Corporate are increasingly demanding more efficient and cost-

effective services from their banks are responding to these demands more

and more comprehensively, which testifies of the considerable importance of

cash management revenues to them

BSNL as a business entity has performed well so far even though there are

some disturbing trends also like big increase on staff cost and administrative

expenditure. BSNL's Staff cost is highest among industry barring only to

MTNL. While industry average of staff cost is about 4-6 % of AGR same

figure for BSNL is more then 25%. Deposit all constrains of the legacy

network and large staff overall performance of BSNL is satisfactory. BSNL

does not have substantial debt so out go on part of interest payment is small.

BSNL's performance in Mobile business is average. BSNL started getting

72

more then 10% of its revenue from this segment at the end of year 2005.

More efforts are required on this front. Broadband is other promising area

where lot of efforts is required. Marketing of services is not up to the mark

and so serious step needs to be taken in this area because customer

acquisition and retention is of prime importance in the highly volatile

telecom market place where high churning and low customer loyally are the

characteristics. Despite all this growth in the Telecom m sector the digital

divide is continuously increasing. Gap between urban Tale-density and rural

Tele-density is widening. Private players are less interested in high

investment oriented and low return paying rural India but for BSNL there is

a big opportunity here because BSNL already has a large network of more

than 36000 Digital Exchanges connected by OFC backbone. BSNL can harp

on its existing infrastructure to position itself as formidable player.

73

BIBLIOGRAPHY

Online Resources

www.bsnl.com (initial information)

www.google.com

www.hindu.com

www.economicstimes.indatimes.com

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

Categories: Telecommunication.companies of India

Department Resource

Quality procedure manual of payment department of BSNL company

Quality procedure manual of collection department of BSNL company

Manual of operation department of company

Cash manual of BSNL

Manual of Budgeting Fund flow & cash Flow

Budgeting statement of previous financial year.

Document Use

BSNL Annual Account

Companies Cash Book as well as Bank Book

Books

Financial Management by Khan & Jain for Capital Budgeting.

Financial Management by I.M Pandey for Cash Management.

Company's Guideline book in which various rules & regulations are mention.

74