This document discusses risks and opportunities in the Indian telecom sector. It analyzes risks at the macro, sector, and firm levels, including economic conditions, regulation, competition, and strategic partnerships. Key drivers of growth are identified as low prices, effective regulation, and changing customer behavior. Financial metrics are presented for major telecom companies. The document also covers capital investments, foreign investment, mergers and acquisitions, and capital structure issues in the Indian telecom industry.

1. ‘The Industry Level Analysis
of Telecom Sector’
BY
Mir Zeeshan Ali

2. Risks at different levels..
• Macro level
– Economical aspect of telecommunication industry
• Sector Level
– Competition: Entry of 4-5 players
– Regulation and compliance
– Market potentiality of world telecommunication industry
– Talent Poaching
– Strategic Partnership
• Firm level
– Capital for expansion
– Inappropriate processes and systems
– Concentration of equipment manufacturers

3. Top Telecom Sector Risks..

4. Influence of macroeconomic level risks
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5. The challenges and uncertainties around the policy
• Faced by new market structures include
shifting regulatory standpoints on wholesale
broadband access pricing
• Going forward, new spectrum releases will
shape 4G market structures
• Continued regulatory pressure
• Rich source of government taxation
5

6. Failure to capitalize on new forms of Connectivity
• New types of connectivity, notably M2M links
require new types of strategies
• From human- to machine-based:
3.“interconnectedness” of devices, through
technologies and links
4.For M2M and
5.NFC
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7. Privacy, security and resilience
• Array of threats faced by operators
• Mobile phones evolve into personal data hubs
• Threats are majorly coming from:
5.Cloud,
6.Web 2.0 and
7. Mobile apps
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8. Factors that influence competition
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9. Major policy drivers in the growth of the sector
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10. Major policy drivers in the growth of the sector
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11. Key drivers for growth
• Multiple factors including
• Low tariffs
• Low handset prices
• Effective government regulations
• Higher incomes
• Changes in customer behaviour

12. The Top & The Bottom
Telecomm-Service MTNL Airtel Idea RIL Tulip Nettlinx On mobile TATA Quadrant
Operating Profit Margin (%) -23.7 34.34 25.38 35.14 28.21 -6.18 24.84 11.83 -45.91
Return On Capital Employed (%) -19.65 12.66 7.34 2.92 19.15 -6.84 8.39 0 0
Return On Net Worth (%) -34.86 13.07 7.44 2.77 28.63 -12.85 8.07 0 0
Debt Equity Ratio 0.47 0.79 0.71 0.81 1.4 0.24 0.16 1.94 0
Long Term Debt Equity Ratio 0.28 0.78 0.71 0.57 1.44 0.18 0.16 1.94 0
Adjusted Net Profit Margin (%) -74.67 9.92 5.82 4.75 13.03 -22.15 11.81 -5.85 -94.93
Cash Profit Margin (%) -36.68 27.08 21.35 30.86 20.32 -13.78 22.35 7.13 -57.74
Current Ratio 0.64 0.52 0.5 0.55 4.58 2.42 2.51 0.83 0.13
Interest Cover -5.1 4.03 2.9 1.99 5.76 -1.82 39.57 -0.24 -7.04
Debotors Turnover Ratio 5.4 15.16 30.23 6.83 4.03 3.4 2.73 5.53 6.1
Fixed Assets Turnover Ratio 0.13 0.52 0.51 0.29 1.37 0.47 0.69 0.74 0.17
Inventory Turnover Ratio 21.73 453.45 258.25 46.92 27.98 1.47 424.67 377.24 85.24
Total Assets Turnover Ratio 0.32 0.74 0.75 0.32 0.92 0.47 0.59 1 1.18

16. Key capital investments
• Expanding networks and services of Transmission
system
• Wire line telecom
• Other costs like:
4. Copper Wires,
5. Coaxial Cable,
6. Fiber Optics,
7. 3G Connectivity and
8. Wi-Fi
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17. • FDI inflows into the telecom industry from April 2000 to April
2011 amounted to US$ 10.6 billion.

18. FDI Inflows

19. Investments M&A, 2010

20. Capital structure