India is the second-largest telecommunications market, with over 1.

0 billion subscribers as of
May 2015. The wireless segment (97.36 per cent of subscription market) dominates the market.
It has also been growing at a very high rate. In FY07-15, wireless subscriptions witnessed a
CAGR of 24.78 per cent to 969.8 million. . It is the second largest country in terms of internet
users. India had 267.39 million internet subscriptions as of December 2014.

Key Players and their financial Analysis

Idea
In the recent spectrum auction, Idea successfully secured spectrum in nine service areas due
for license expiry in December 2015-April 2016, ensuring continuity of existing business for its
107.6 million subscribers (which forms 68% of customer base). Also, the license is going to
expire in 2021, reducing the effect of auction related overhang in medium term. The threat from
Reliance Jio and some price volatility in the market continues to linger on the sector. However, I
feel 4G is at a very nascent stage with very few 4G handsets currently and Jio as 4G as primary
offering may only be able to penetrate deeper at a gradual pace.
Year
D/E Ratio

Mar
15
1.21

Mar 14

Mar 13

Mar 12

Mar 11

1.09

0.93

0.9

0.72

D/E ratio
1.5
1

D/E ratio

0.5
0
2011

2012

2013

2014

2015

Ideas average long term debt to equity ratio over the last 5 financial years has been 0.91 which
shows that the Company operates with high level of debt and is not placed well for economic
slowdowns. Ideas average interest coverage ratio over the last 5 financial years has been 7.75
indicates that the Company can meet its debt obligations without any difficulty.

Idea Historical Share Price

250
200
150
100
50
0

Close
Max Close
Price

Min Close
170.1 Price
52 Week
202.75 Range

140
140202.75

In its latest stock exchange filing dated 31 March 2015, Idea reported a promoter holding of
42.27 %. This indicates conviction and sincerity of the promoters. We believe that a greater
than 35 % promoter holding offers safety to the retail investors.

Institutional holding in the Company is at 29.23 % (FII+DII). Large institutional holding indicates
the confidence of long term investors. Same time, it can also lead to high volatility in the stock
price as institutions buy and sell larger stakes than retail participants.

Bharti Airtel
Airtel acquired 111.6 MHz of prime spectrum across the bands for a amount of Rs.29,129
crores. Of this 57% of the payout was for additional growth spectrum. Airtel is only operator with
Pan India 3G and 4G capabilities. Such a national footprint would allow to fully participate in the
data story going forward, reduce dependency on ICR arrangements, and a more cost optimized
network. Bharti Airtel has also lead the march by picking up additional 900 spectrum. Airtels
spectrum market share is 20.4%.

Important points

a. For Airtel data revenues continue to march up with double-digit year on year growth
momentum
b. Despite the currency issues, they have maintained focus on growing customer base in
non Indian market and network. They have added over 2100 3G sites this year. They have
continued to grow customer base with 6 million net adds during the year and 10.3% growth in
minutes year on year.

Year
Total Income
Total Expenditure
EBITDA
PAT

2015
60753
36,129.10
24,624.10
13,200.50

2014
50790
33,845.10
16,945.10
6,600.20

2013
46814
31,880.20
14,933.80
5,096.30

2012
42228
27,960.10
14,268.40
5,730.00

2011
38338
24,677.40
13,661.50
7,716.90

PAT
15000
PAT

10000
5000
0
2011

2012

2013

2014

2015

Bottom line performance of airtel is increasing on yearly basis. In the year 2015 Net profit grows
by nearly 100 %.TRAI has also reduced the ceiling tariff for national roaming calls by average
30% and roaming SMS by average 75% . customer base grew by 8.8 million. The minutes of
usage increased by 10.4 billion minutes. On an underlying basis India mobile revenues have
increased by 3.2% after considering the impact of termination rate changes, the mobile revenue
growth finally reported was 1.9%.

D/E ratio
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2011

D/E ratio

2012

2013

2014

2015

Airtel has laid a great emphasis on maintaining superb D/E ratio in the range of 0.2-0.3. Industry
average is 1.17.There are planning to sell towers in Africa and they have spectrum licenses till
2017.So,D/E ratio will further decrease.

Close Price
500
400
300

Close Price

200
100
0

Close
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Price

Min Close
407.75 Price
52 Week
445.25 Range

339.2
339.2445.25

Moody's has retained stable rating outlook for the country's top telecom operator Bharti Airtel as
it expects the telco to continue to grow its core Indian and African wireless businesses which is
resulting in average increase of share price.

Reliance Communications
As at March 31, 2015, we had a customer base of over 118 million customers, including 109.5
million wireless customers (33.7 million data subscribers, of which 17.4 million were 3G
subscribers), 1.2 million wireline customers, 2.6 million overseas retail customers and 4.9 million
DTH customers. Our enterprise clientele includes nearly 39,000 Indian and multinational
corporations, including SMEs and over 290 global, regional and domestic carriers. Our
enterprise customers include 900 prominent enterprises in India

Year

Mar 14
Mar 13
Mar 12
23,301. 23,281. 20,382.
00
00
00
15,631.
16,122.
13,892.
00
00
00
7,670.0
7,159.0
6,490.0
0
0
0
1,137.0
0
744
988

Total Income
Total Expenditure
Operating Profit
Net Profit

Mar 11
23,174.
00
14,020.
00
9,154.0
0
1,505.0
0

Net Profit
1600
1400
1200
1000

Net Profit

800
600
400
200
0
2011

2012

2013

2014

RCOMs average current ratio over the last 5 financial years has been 0.97 which indicates that
the Company has been maintaining sufficient cash to meet its short term obligations. RCOM
interest coverage ratio over the last 5 financial years has been 1.45 times which indicates that
the Company has been generating cash for the shareholders after servicing its debt obligations

Close Price
140
120
100
80

Close Price

60
40
20
0

Close
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Price

Min Close
111.3 Price
52 Week
115.15 Range

50.5
50.5115.15

D/E ratio
1.2
1
0.8

D/E ratio

0.6
0.4
0.2
0
2011

2012

2013

2014

2015

RCom raised USD300 million by issued offshore bonds at 6.5% p.a. with a maturity of five-anda-half years. The bonds were rated at the same level as Issuer ratings given by Moodys and
Fitch.
In its latest stock exchange filing dated 31 March 2015, RCOM reported a promoter holding of
59.70 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe
that a greater than 35 % promoter holding offers safety to the retail investors. At the same time,
institutional holding in the Company stood at 34.98 % (FII+DII). Large institutional holding
indicates the confidence of seasoned investors. At the same time, it can also lead to high
volatility in the stock price as institutions buy and sell larger stakes than retail participants.

TATA Communications
The company commands 19% share in the global wholesale voice traffic with a total of 58.4
billion minutes on its network as on FY14. It has shifted its focus to high yielding and profitable
minutes, which has helped it expand its realisations per minute from | 1.23 in FY12 to | 1.63 in
FY14. Cutting back of low yielding minutes led to a decline from 62 billion minutes in FY13 to
58.4 billion minutes in FY14. At the same time, overall revenue from the segment grew to |
9539.5 crore in FY14 from | 6811.8 crore in FY12. Owing to this focus towards profitable
minutes and changing trend towards voice over internet protocol (VoIP), we expect
TCL to carry 53.9 and 53.5 billion minutes with revenues of 9826.4 crore and 10044.4 crore in
FY15E and FY16E, respectively.

Year
Total Income
Total Expenditure
Operating Profit

Mar 14
Mar 13
Mar 12
Mar 11
Mar 10
(12)
(12)
(12)
(12)
(12)
5,056.5 4,985.9 4,270.8 3,806.5 3,601.7
7
6
7
2
4
3,513.3
3,447.1
3,103.8
2,780.9
2,471.6
5
8
0
0
0
1,543.2
1,538.7
1,167.0
1,025.6
1,130.1

2
803.48
542.43

Profit Before Tax

Reported Net Profit

8
656.69
475.24

7
265.12
171.34

2
154.04
162.56

4
309.33
483.18

Net PAT
900
800
700
600
500
400
300
200
100
0
2010

2011

2012

2013

2014

Tata Communications with a revised target price of 500.0, implying an FY16 EV/EBITDA
multiple of 6.7x. Over the past five years, it has traded at average multiple of 8.0x. Owing to the
improving business performance led by the data segment and reducing leverage,the stock is
expected to see a further re-rating.

D/E Ratio
0.4
0.35
0.3
0.25

D/E Ratio

0.2
0.15
0.1
0.05
0
2010

2011

2012

2013

2014

600
500
400
300
200
100
0

Last Close
Price
Max Close
Price

Min Close
395.7 Price
52 Week
491.4 Range

349.75
349.75491.4