Comparative Analysis Airtel and MTNL (Report)

Made By

Sonal Karray

BBS IIMaharaje AgrasenInstitute ofManagement Studies

Comparative Analysis of the two Players of the Indian Telecom

Industry

Bharti Airtel Pvt Limited&

Manahagar Telephone Nigam Limited

Index

Acknowledgment……………………………………………………………..………………………….…………………4

Bonafide Certificate………………………………………………………….………….………………………..………5

Objective of the Study……………………………………………………….……………………..………………..6-8

Company Profile……………………………………………………………….…………………..….………………9-22

Research Methodology………………………………………………………….………….…………………….23-24

Data Collection and Data Analysis……………………………………………..…………………………..25 -

Balance Sheet of Bharti Airtel……………………………………..………..…….……………………………….26

Profit and Loss Account of Bharti Airtel……………………….…………….……………...………………..27

Balance Sheet of MTNL…………………………………………………….……………………..…………………..28

Profit and Loss Account of MTNL……………………………..……………………….………………………….29

Ratio Analysis………………………………………………..…..….…………………………………………….………30

Profitability Ratios…………………………………………………………………………………....……….31-44

Operating Profit Margin…………………………...………………………………………………...33-34

Net Profit Margin……………………………………………….…………………………………….….35-36

Return on Net Worth……………………………………………………………………….…….……37-38

Expense to Sales Ratio……………………………………….………………………..………………39-40

Return on Equity……………………………………..…………………………………………………..41-42

Earning per Share……………………………………………………………………….……………….43-44

Investment Valuation Ratios…………………………..………………………………..…………………45-53

Operating Profit per Share………………………………………………………………………….46-47

Dividend per Share………………………………...…………………………………..……………….48-49

Book Value………………………………………………………………………………………..…………50-51

Free Reserve per Share………………………………………………………….…………………….52-53

Efficiency Ratios……………………………………..……………………………………………….…………54-58

Asset Turnover Ratio……………………………………….………………………………….……….55-56

Investment Turnover Ratio…………………………………………………………..………………57-58

Comparative Analysis of the two Players of the Indian Telecom Industry

Page 2

Made By

Sonal Karray

BBS IIMaharaje AgrasenInstitute ofManagement Studies

Leverage Ratios………………………………………………………………….………………………..………59-63

Debt Equity Ratio………………………………………………….……………………………………..60-61

Interest Coverage Ratio……………………………………………………………………..………..62-63

Liquidity Ratio……………………………………………………………………….………....………………..64-68

Current Ratio……………………………………...….………………………………….……………….65-66

Quick Ratio………………………………………...……………………………………………………….67-68

Conclusion and Recommendation…………………………………………………………………………..69-77

Bibliography………………………………………….…………………………………………………………………….78


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Acknowledgement

It is indeed a human element to thank those who have been a source of inspiration all this

while. As a researcher, I would like to acknowledge my profound gratitude to everyone who

has been a part of this project in any manner.

I would like to acknowledge the encouragement and assistance given by a number of people

from Maharaja Agrasen Institute of Management Studies, Guru Govind Singh Indrprastha

University. I want to express my deep gratitude to Ms. Supriya for giving me this opportunity

to work under her guidance. This was a very unique experience and a wonderful first step

towards a career goal.

Finally, I thank my family and friends for being pillars of strength all this while.


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Bonafide Certificate

This is to certify that as per best of my belief the project entitled is the bonafide research work

carried out by Sonal Karray student of BBA, Maharaja Agrasen Institute of Management

Studies, New Delhi, in partial fulfillment of the requirements for the Minor Project Report of the

Degree of Bachelor of Business Administration.

She has worked under my guidance.

--------------------

Name

Project Guide (Internal)

Date:

Counter signed by

-------------

Name

Director

Date:


Page 5

Objective of the Study


Page 6

Objective of the Study

Objective – To analyze a firm’s performance and financial heath using the Ratio Analysis.

Telecommunication industry is one of booming industries of the nation. With over 600.69

million customer base (according to Telecom Regulatory Authority of India), this industry is

surely going places. Indian Telecom Industry is the fifth largest and fastest growing in the world.

According to the Telecom Regulatory Authority of India (TRAI), the number of telephone

subscriber base in the country reached 653.92 million as on May 31, 2010, an increase of 2.49

per cent from 638.05 million in April 2010. With this the overall tele-density (telephones per

100 people) has touched 55.38. The wireless subscriber base has increased to 617.53 million at

the end of May 2010 from 601.22 million in April 2010, registering a growth of 2.71 per cent.

There are various players in the Indian telecom market right now – some are state owned and

some private. But amongst all, Bharti Airtel has made its mark. Airtel is the market leader in

India with a total of 33,619,705 out of 444,295,711 GSM mobile connections or 31.18% market

share as of July 2010.

Bharti Airtel is the leader in Indian telecom industry with robust financial health shown in its

financial accounts. Its balance sheet has been showing constant profits over the years. And the

same is being reflected in the ratio analysis. All the ratios show positive results and this has

been further explained in forthcoming pages.

Bharti Airtel stands true to its name and position in the market and continues to strengthen

investors’ faith in it. Even after the failure of the MTN deal and consequent stock split, Airtel

continues to rule the reign.

MTNL on the other hand is a state owned company and it was set up on 1st April, 1986 by the

Government of India to upgrade the quality of telecom services, expand the telecom network,

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 of India. In the past years,


Page 7

the company has taken rapid strides to emerge as India’s leading telecom operating companies.

As of now, MTNL has achieved a customer base of 5.92 million as on 31st March 2006. It also

enjoys the privilege of being one of the Navratnta Companies. The Govt. of India currently

holds 56.25% stake in the company.

Where Bharti Airtel is a top company of a booming industry, MTNL has started to lose its sheen

in the market. Here an attempt has been made to analyze both the company’s financial

statements with respect to ratio analysis.

For this purpose, a detailed study has been carried out with reference to five years balance

sheet and profit and loss accounts of Bharti Airtel and MTNL , i.e., from 2006 to 2010. All the

major ratios have been calculated from the balance sheet and profit and loss account and

certain conclusions have been drawn for each ratio. These ratios have been graphically

presented for easier comprehension.


Page 8

Company Profile


Page 9

Bharti Airtel

Pvt Limited


Page 10

Company Profile

Incorporated on July 7, 1995, Bharti Airtel Ltd is a division of Bharti Enterprises. The businesses

of Bharti Airtel are structured into two main strategic groups - Mobility and Infotel. The

Mobility business provides GSM mobile services in all 23 telecommunications circles in India,

while the Infotel business group provides telephone services and Internet access over DSL in 15

circles. The company complements its mobile, broadband, and telephone services with national

and international long-distance services. The company also has a submarine cable landing

station at Chennai, which connects the submarine cable connecting Chennai and Singapore.

Bharti Tele-Ventures provides end-to-end data and enterprise services to corporate customers

by leveraging its nationwide fibre-optic backbone, last mile connectivity in fixed-line and mobile

circles, VSATs, ISP and international bandwidth access through the gateways and landing

station. All of Bharti Tele-Ventures' services are provided under the Airtel brand.

As of September 2005, Bharti Tele-Ventures was the only company to provide mobile services

in all 23 telecom circles in India.

By the end of October 2005, Bharti Tele-Ventures was serving more than 14.74 million GSM

mobile subscribers and 1.10 million broadband and telephone (fixed line) customers.

The equity shares of Bharti Tele-Ventures are currently listed on the National Stock Exchange of

India Ltd (NSE) and the Stock Exchange, Mumbai (BSE). As of September 30, 2005, the main

shareholders of Bharti Tele-Ventures were: Bharti Telecom Ltd (45.65%), a subsidiary of Bharti

Enterprises; Singapore Telecom (15.69%), through its investment division Pastel Ltd; and,

Warburg Pincus (5.65%), through its investment company Brentwood Investment Holdings Ltd).

Other shareholders with more than a 1% stake were: Citi Group Global Markets Mauritius Pvt

Ltd (2.99%); Europacific Growth Fund (2.04%); Morgan Stanley & Co International Ltd (1.93%);

CLSA Merchant Bankers Ltd A/C Calyon (1.33%); Life Insurance Corporation of India (1.34%);

and, The Growth Fund of America Inc (1.11%).


Page 11

Sunil Bharti Mittal, the founder-chairman of Bharti Enterprises (which owns Airtel), is today, the

most celebrated face of the telecom sector in India. He symbolizes the adage that success

comes to those who dream big and then work assiduously to deliver it. Sunil Bharti Mittal

began his journey manufacturing spare parts for bicycles in the late 1970s. His strong

entrepreneurial instincts gave him a unique flair for sensing new business opportunities. In the

early years, Bharti established itself as a supplier of basic telecom equipment. His true calling

came in the mid-1990s when the government opened up the sector and allowed private

players to provide telecom services.

Bharti Enterprises accepted every opportunity provided by this new policy to evolve into India's

largest telecommunications company and one of India's most respected brands. Airtel was

launched in 1995 in Delhi. In the ensuing years, as the Airtel network expanded to several parts

of India, the brand came to symbolise the very essence of mobile services.

Product

Airtel provides a host of voice and data products and services, including high-speed GPRS

services. Airtel also offers a wide array of 'postpaid' and 'prepaid' mobile offers, with a range of

tariff plans that target different segments. A comprehensive range of value-added, customised

services are part of the unique package from Airtel. The company's products reflect a desire to

constantly innovate. Some of these are reflected in the fact that Airtel was the first to develop

a 'single integrated billing system'

Airtel comes to you from Bharti Airtel Limited - a part of the biggest private integrated telecom

conglomerate, Bharti Enterprises. Bharti is the leading cellular service provider, with an all India

footprint covering all 23 telecom circles of the country. It has over 21 million satisfied

customers. Bharti Enterprises has been at the forefront of technology and has revolutionized

telecommunications with its world class products and services. Established in 1976, Bharti has

been a pioneering force in the telecom sector with many firsts and innovations to its credit.


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Bharti has many joint ventures with world leaders like Singtel (Singapore Telecom); Warburg

Pincus, USA; Telia, Sweden; Asian infrastructure find, Mauritius; International Finance

Corporation, USA and New York Life International, USA. Bharti provides a range of telecom

services, which include Cellular, Basic, Internet and recently introduced National Long Distance.

Bharti also manufactures and exports telephone terminals and cordless phones. Apart from

being the largest manufacturer of telephone instruments in India, it is also the first company to

export its products to the USA.

Airtel's journey to leadership began in Delhi in 1995. Since then, Airtel has established itself

across India in sixteen states covering a population of over 600 million people. Airtel will soon

cover the entire country through a process of acquisitions and green field projects. With a

presence in over 1,400 towns, Airtel today has the largest network capacity in the country.

In the last nine years Airtel has achieved many firsts and unique records: it was the first to

launch nationwide roaming operations, it was the first to cross the one million and the five

million customer marks. It was also the first to launch services overseas.

There are other 'firsts' credited to Airtel - many of them in the area of innovative products and

services. Today, Airtel innovates in almost everything that it presents to the market. An

excellent example is Easy Charge - India's first paperless electronic recharging facility for

prepaid customers. As evidence of its fine record, Airtel has also been conferred with

numerous awards. It won the prestigious Techies Award for 'being the best cellular services

provider' for four consecutive years between 1997 and 2000 - a record that is still unmatched.

And in 2003, it received the Voice & Data Award for being 'India's largest cellular service

provider', amongst others.

As part of its continuing expansion, Airtel has invested over Rs. 1,065 billion in creating a new

telecom infrastructure. In 2003/04, Bharti Tele-Ventures earned a gross profit of Rs. 16 billion

on revenues of Rs. 50 billion.


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Corporate Structure

Board of Directors

Sunil Bharti Mittal

Chairman and ManagingDirector

Manoj Kohli

CEO and Joint Managinf Director

Non Executive Members

Ajay Lal

Akhil Gupta

Arun Bharat Ram

Bashir

Abdulla Currmjee

Chua Sock Koong

Craig

Ehrlich

Nikesh Arora

Mauro Sentineli

N Kumar

Paul O’ Sullivan

Pulak Chandan Prasad

Quah Kung Yang


Page 14

Rajan Bharti Mittal

Rakesh Bharti Mittal

Group General Councl and Company Secretary

Vijaya Sampath

Statutory Auditors

SR Batliboi and Associates,

Chartered Accountants

Auditors – US GAAP

Ernst & Young

Internal Auditors

Price Waterhouse Coopers Private Limited

Registered & Corporate Office

Araval Crescent,

1, Nelson Mandela Road,

Vasant Kunj, Phase-II,

New Delhi – 110070


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SWOT Analysis

The following SWOT Analysis of Bharti Airtel takes into account all those factors which makes it a

leader and also those factors which might come in its way of maintaining its position in the

market.

Strengths

Bharti Airtel has more than 65 million customers (July 2008). It is the largest cellular

provider in India, and also supplies broadband and telephone services - as well as many

other telecommunications services to both domestic and corporate customers.

Other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel, with

whom they hold a strategic alliance. This means that the business has access to

knowledge and technology from other parts of the telecommunications world.

The company has covered the entire Indian nation with its network. This has

underpinned its large and rising customer base.

Weaknesses

An often cited original weakness is that when the business was started by Sunil Bharti

Mittal over 15 years ago, the business has little knowledge and experience of how a

cellular telephone system actually worked. So the start-up business had to outsource to

industry experts in the field.

Until recently Airtel did not own its own towers, which was a particular strength of

some of its competitors such as Hutchison Essar. Towers are important if your company

wishes to provide wide coverage nationally.


Page 16

The fact that the Airtel has not pulled off a deal with South Africa's MTN could signal the

lack of any real emerging market investment opportunity for the business once the

Indian market has become mature.

Opportunities

The company possesses a customized version of the Google search engine which will

enhance broadband services to customers. The tie-up with Google can only enhance the

Airtel brand, and also provides advertising opportunities in Indian for Google.

Global telecommunications and new technology brands see Airtel as a key strategic

player in the Indian market. The new iPhone will be launched in India via an Airtel

distributorship. Another strategic partnership is held with BlackBerry Wireless Solutions.

Despite being forced to outsource much of its technical operations in the early days,

this allowed Airtel to work from its own blank sheet of paper, and to question industry

approaches and practices - for example replacing the Revenue-Per-Customer model

with a Revenue-Per-Minute model which is better suited to India, as the company

moved into small and remote villages and towns.

The company is investing in its operation in 120,000 to 160,000 small villages every

year. It sees that less well-off consumers may only be able to afford a few tens of

Rupees per call, and also so that the business benefits are scalable - using its 'Matchbox'

strategy.

Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea

Cellular to create a new independent tower company called Indus Towers. This new


Page 17

business will control more than 60% of India's network towers. IPTV is another potential

new service that could underpin the company's long-term strategy.

Threats

Airtel and Vodafone seem to be having an on/off relationship. Vodafone which owned a

5.6% stake in the Airtel business sold it back to Airtel, and instead invested in its rival

Hutchison Essar. Knowledge and technology previously available to Airtel now moves

into the hands of one of its competitors.

The quickly changing pace of the global telecommunications industry could tempt Airtel

to go along the acquisition trail which may make it vulnerable if the world goes into

recession. Perhaps this was an impact upon the decision not to proceed with talks about

the potential purchase of South Africa's MTN in May 2008. This opened the door for

talks between Reliance Communication's Anil Ambani and MTN, allowing a competing

Indian industrialist to invest in the new emerging African telecommunications market.

Bharti Airtel could also be the target for the takeover vision of other global

telecommunications players that wish to move into the Indian market.


Page 18

Mahanagar Telephone Nigam

Limited


Page 19

A Brief Introduction to MTNL

MTNL was set up on 1st April, 1986 by government of India to upgrade the quality of telecom

services, to expand the telecom network, introduce new services and to raise revenue of

telecom department needs of India’s key metros-Delhi, the political capital and Mumbai, the

business capital of India. In the past 17 year, the company has taken rapid strides to emerge as

India’s leading and Asia’s largest telecom operating companies. Besides having a strong

financial base, MTNL has achieved a market share of approximately 13% of Indian

telecommunication network with a customer base of over 4.98 million lines.

The company has been setup to provide basic, mobile, internet data, and value added services

1. Basic telephony

2. PSTN

3. ISDN

4. Garuda Mobile Service

5. Dolphin Cellular Mobil Service

6. Internet

7. Data Circuits

8. Value Added Services

The company has also been in the forefront of technology induction by converting 100% of its

telephone exchange network into the state-of-art digital mode.

The government of India currently holds 56.25% stake in the company. In the year 2003-04, the

company would not only consolidate the gains but would also focus on new areas of enterprise

viz. joint venture for project outside India, entering into national long distance operation,

widening the cellular and CDMA-based WLL customer based setting up internet and allied

services on all India basis.


Page 20

Corporate Structure

Board of Directors

Shri R.S.P. Sinha Chairman & Managing Director

Shri Kuldip Singh Director (Technical)

Smt. Anita Soni Director (Finance)

Shri S.P. Pachauri Director (HR)

Shri J.S. Deepak Director

Shri Manish Sinha Director

Smt. Usha Sahajpal Director

Shri Adit Jain Director

Shri V.S. Iyer Director

Audit Committee

Smt. Usha Sahajpal Chairperson

Shri J.S. Deepak Member

Shri Manish Sinha Member

Smt. Anita Soni, Director (Finance) Permanent Invitee

Company Secretary

Shri S.R. SAYAL

Investors/Shareholders Grievances Committee

Smt. Usha Sahajpal Chairperson

Shri Manish Sinha Member

Smt. Anita Soni, Director (Finance) Member


Page 21

Registered and Corporate Office

Jeevan Bharti Building,

Tower I, 12th floor,

124 Connaught Circus,

New Delhi - 110 001

Tel: 91 11 23742212

Fax: 91 11 23314243

Website: www.mtnl.net.in / www.bol.net.in


Page 22

Research Methodology


Page 23

Research Methodology

This research work has been a combination of primary as well secondary data. Some

information has already been taken in secondary form while some has been derived on its own.

PRIMARY DATA SOURCE

Observation method, and

Experiment

SECONDARY DATA SOURCE

Internet

Newspaper

Magazines

Others

Primary data has been obtained after working on certain secondary data. Secondary data

implies the data retrieved from the balance sheet and profit and loss account of the company,

which already have been worked out by the company’s auditors. Based on this information,

various ratios have been worked out to deeply analyze the Airtel’s financial numbers and

conclusions have been drawn accordingly.


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Data Collection and Data Analysis


Page 25

Balance Sheet of Bharti Airtel

Sources Of Funds Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Total Share Capital 1,853.37 1,893.88 1,895.93 1,897.91 1,898.24Equity Share Capital 1,853.37 1,893.88 1,895.93 1,897.91 1,898.24Share Application Money 2.72 12.13 30 57.63 116.22Preference Share capital 0 0 0 0 0Reserves 2,675.38 5,437.42 9,515.21 18,283.82 25,627.38Revaluation Reserves 2.13 2.13 2.13 2.13 2.13Networth 4,533.60 7,345.56 11,443.27 20,241.49 27,643.97Secured Loans 3,959.88 2,863.37 266.45 52.42 51.73Unsecured Loans 1,034.41 1,932.92 5,044.36 6,517.92 7,661.92Total Debt 4,994.29 4,796.29 5,310.81 6,570.34 7,713.65Total Liabilities 9,527.89 12,141.85 16,754.08 26,811.83 35,357.62

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09Application Of FundsGross Block 13,240.63 17,951.74 26,509.93 28,115.65 37,266.70Less: Accum. Depreciation 3,475.64 4,944.86 7,204.30 9,085.00 12,253.34Net Block 9,764.99 13,006.88 19,305.63 19,030.65 25,013.36Capital Work in Progress 994.46 2,341.25 2,375.82 2,751.08 2,566.67Investments 931.9 719.7 705.82 10,952.85 11,777.76Inventories 31.58 17.74 47.81 56.86 62.15Sundry Debtors 715.74 1,076.17 1,418.52 2,776.46 2,550.05Cash and Bank Balance 174.96 201.81 239.11 200.86 153.44Total Current Assets 922.28 1,295.72 1,705.44 3,034.18 2,765.64Loans and Advances 1,354.85 1,937.54 3,160.02 5,103.13 5,602.83Fixed Deposits 209.17 105.61 541.35 302.08 2,098.16Total CA, Loans & Advances 2,486.30 3,338.87 5,406.81 8,439.39 10,466.63Current Liabilities 4,458.80 6,735.36 9,809.83 12,400.38 13,832.49Provisions 249.32 537.44 1,232.84 1,961.95 634.4Total CL & Provisions 4,708.12 7,272.80 11,042.67 14,362.33 14,466.89Net Current asset -2,221.82 -3,933.93 -5,635.86 -5,922.94 -4,000.26Miscellaneous Expenses 58.35 7.94 2.66 0.2 0.09Total 9,527.88 12,141.84 16,754.07 26,811.84 35,357.62


Page 26

Profit and Loss Account of Bharti Airtel

Heads Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Sales Turnover 8,142.44 11,259.12 17,851.61 25,761.11 34,048.32

Net Sales 8,142.44 11,259.12 17,851.61 25,761.11 34,048.32

Other -1,707.95 26.94 105.62 104.04 -1,261.75

Stock Adjustments 11.57 -13.84 30.07 9.05 5.29

Total 6,446.06 11,272.22 17,987.30 25,874.20 32,791.86

Raw Materials 83.67 53.56 52.16 42.9 17.7

Power & Fuel Cost 0 0 0 0 0

Employee Cost 475.86 734.2 1,076.95 1,297.88 1,397.54

Other Manufacturing Expenses 2,365.51 3,299.73 5,017.27 7,339.01 8,627.13

Selling and Admin Expenses 1,951.25 2,804.85 4,030.48 5,892.50 9,385.68

Miscellaneous Expenses 280.05 314.37 444.28 535.46 1,409.89

Preoperative Exp Capitalised 0 0 0 0 0

Total Expenses 5,156.34 7,206.71 10,621.14 15,107.75 20,837.94

Operating Profit 2,997.67 4,038.57 7,260.54 10,662.41 13,215.67

PBDIT 1,289.72 4,065.51 7,366.16 10,766.45 11,953.92

Interest 317 236.81 282.07 393.43 434.16

PBDT 972.72 3,828.70 7,084.09 10,373.02 11,519.76

Depreciation 1,019.36 1,432.34 2,353.30 3,166.58 3,206.28

Other Written Off 161.34 127.39 137.8 266.07 178.82

Profit Before Tax -207.98 2,268.97 4,592.99 6,940.37 8,134.66

Extra-ordinary items 22.23 17.64 9.92 -60.67 -46.15

PBT (Post Extra-ord Items) -185.75 2,286.61 4,602.91 6,879.70 8,088.51

Tax 353.6 273.68 566.79 632.43 321.78

Reported Net Profit 1,210.67 2,012.08 4,033.23 6,244.19 7,743.84

Total Value Addition 5,072.66 7,153.15 10,568.98 15,064.84 20,820.24

Shares in issue (lakhs) 18,533.67 18,938.79 18,959.34 18,979.07 18,982.40

Earning Per Share (Rs) 6.53 10.62 21.27 32.9 40.79

Equity 0 0 0 0 20

Book Value (Rs) 24.44 38.71 60.19 106.34 145.01


Page 27

Balance Sheet of MTNL

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09Sources Of FundsTotal Share Capital 630 630 630 630 630Equity Share Capital 630 630 630 630 630Share Application Money 0 0 0 0 0Preference Share Capital 0 0 0 0 0Reserves 10,313.83 10,606.77 10,999.30 11,291.36 11,429.37Revaluation Reserves 0 0 0 0 0Networth 10,943.83 11,236.77 11,629.30 11,921.36 12,059.37Secured Loans 0 0 0 0 0Unsecured Loans 0 0 0 0 0Total Debt 0 0 0 0 0Total Liabilities 10,943.83 11,236.77 11,629.30 11,921.36 12,059.37Application Of FundsGross Block 14,252.25 14,854.15 15,291.35 15,842.58 16,293.28Less: Accum. Depreciation 7,783.62 8,285.40 8,887.68 9,522.78 10,009.44Net Block 6,468.63 6,568.75 6,403.67 6,319.80 6,283.84Capital Work in Progress 651.51 554.36 779.29 981.7 965.69Investments 397.47 418.72 441.4 557.39 465.09Inventories 186.6 137.82 221.28 160.71 191.27Sundry Debtors 1,761.15 1,415.10 965.2 941.8 782.47Cash and Bank Balance 180.11 159.35 161.8 130.73 129.9

Total Current Assets 2,127.86 1,712.27 1,348.28 1,233.24 1,103.64Loans and Advances 10,758.82 10,364.54 11,857.45 10,502.84 10,793.23Fixed Deposits 2,337.29 1,899.05 1,707.00 3,239.05 4,672.90Total CA, Loans & Advances 15,223.97 13,975.86 14,912.73 14,975.13 16,569.77Deffered Credit 0 0 0 0 0Current Liabilities 6,194.15 5,289.44 5,683.31 5,626.00 6,130.67Provisions 5,603.60 5,105.72 5,446.15 5,445.82 6,191.03Total CL & Provisions 11,797.75 10,395.16 11,129.46 11,071.82 12,321.70Net Current Assets 3,426.22 3,580.70 3,783.27 3,903.31 4,248.07Miscellaneous Expenses 0 114.25 221.65 159.17 96.69Total Assets 10,943.83 11,236.78 11,629.28 11,921.37 12,059.38Contingent Liabilities 6,742.15 7,650.00 4,267.27 3,369.72 2,973.92Book Value (Rs) 173.71 178.36 184.59 189.23 191.42Source : Asian CERC


Page 28

Profit and Loss Account of MTNL

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Sales Turnover 5,602.34 5,568.41 4,909.32 4,724.77 4,457.02

Excise Duty 0 0 0 0 0

Net Sales 5,602.34 5,568.41 4,909.32 4,724.77 4,457.02

Other Income 236 380.93 512.11 403.12 552.71

Stock Adjustments 0 0 0 0 0

Total Income 5,838.34 5,949.34 5,421.43 5,127.89 5,009.73

Raw Materials 0 0 0 0 0

Power & Fuel Cost 140.16 155.85 160.79 188.34 183.06

Employee Cost 1,932.20 1,941.13 1,750.99 1,580.95 2,064.89

Other Manufacturing Expenses 77.51 68.63 75.95 93.62 100.02

Selling and Admin Expenses 2,027.55 2,426.37 1,021.57 951.86 862.19

Miscellaneous Expenses 90.46 148.27 1,007.97 1,005.55 906.08

Preoperative Exp Capitalised -96.31 -64.38 0 -21.01 -30.95

Total Expenses 4,171.57 4,675.87 4,017.27 3,799.31 4,085.29

Operating Profit 1,430.77 892.54 892.05 925.46 371.73

PBDIT 1,666.77 1,273.47 1,404.16 1,328.58 924.44

Interest 35.81 24.44 11.78 12.09 10.96

PBDT 1,630.96 1,249.03 1,392.38 1,316.49 913.48

Depreciation 588.01 646.7 683.18 704.06 698.85

Other Written Off 0 0 0 0 0

Profit Before Tax 1,042.95 602.33 709.2 612.43 214.63

Extra-ordinary items 179.17 84.76 299.59 212.12 94.4

PBT (Post Extra-ord Items) 1,222.12 687.09 1,008.79 824.55 309.03

Tax 267.24 93.7 326.65 224.83 95.46

Reported Net Profit 948.43 580.29 466.03 406.82 168.33

Total Value Addition 4,171.57 4,675.86 4,017.27 3,799.31 4,085.27

Preference Dividend 0 0 0 0 0

Equity Dividend 283.5 252 252 252 63

Corporate Dividend Tax 39.28 35.34 37.21 42.83 10.71

Shares in issue (lakhs) 6,300.00 6,300.00 6,300.00 6,300.00 6,300.00

Earning Per Share (Rs) 15.05 9.21 7.4 6.46 2.67

Equity Dividend (%) 45 40 40 40 10

Book Value (Rs) 173.71 178.36 184.59 189.23 191.42


Page 29

Ratio Analysis

Financial ratio analysis is the calculation and comparison of ratios which are derived from the

information in a company's financial statements. The level and historical trends of these

ratios can be used to make inferences about a company's financial condition, its operations

and attractiveness as an investment.

Financial ratios are calculated from one or more pieces of information from a company's

financial statements. For example, the "gross margin" is the gross profit from operations

divided by the total sales or revenues of a company, expressed in percentage terms. In

isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio

can give a financial analyst an excellent picture of a company's situation and the trends that are

developing.

A ratio gains utility by comparison to other data and standards. Taking our example, a gross

profit margin for a company of 25% is meaningless by itself. If we know that this company's

competitors have profit margins of 10%, we know that it is more profitable than its industry

peers which are quite favorable. If we also know that the historical trend is upwards, for

example has been increasing steadily for the last few years, this would also be a favorable sign

that management is implementing effective business policies and strategies.

When it comes to investing, analyzing financial statement information (also known as

quantitative analysis), is one of, if not the most important element in the fundamental analysis

process. At the same time, the massive amount of numbers in a company's financial statements

can be bewildering and intimidating to many investors. However, through financial ratio

analysis, we will be able to work with these numbers in an organized fashion.


Page 30

Ratio analysis can be categorized as follows –

PROFITIBLITY RATIOS

A class of financial metrics that are used to assess a business's ability to generate earnings as

compared to its expenses and other relevant costs incurred during a specific period of time. For

most of these ratios, having a higher value relative to a competitor's ratio or the same ratio

from a previous period is indicative that the company is doing well.

The profitability ratios are the basic bank financial ratios. Profitability ratios are the financial

statement ratios which focus on how well a business is performing in terms of profit.

Every firm is most concerned with its profitability. One of the most frequently used tools of

financial ratio analysis is profitability ratios which are used to determine the company's bottom

line. Profitability measures are important to company managers and owners alike. If a small


Page 31

Financial Analysis

Profitability Ratios

1. OPM 2. NPM 3. RONW 4. ROE 5. ROA 6. EPS

Investment Valuation

1. Operating Profit per Share 2. Dividend per Share 3. Free Reserve per Share. 4. Book Value per Share

Efficiency Ratios

1. Total Asset Turnover Ratio 2. Investment Turnover Ratio

Capital Structure

1. Debt Equity Ratio 2. Interest Coverage Ratio

Leverage Ratios

1. Current Ratio 2. Quick Ratio

business has outside investors who have put their own money into the company, the primary

owner certainly has to show profitability to those equity investors.

Profitability ratios show a company's overall efficiency and performance. We can divide

profitability ratios into two types: margins and returns. Ratios that show margins represent the

firm's ability to translate sales dollars into profits at various stages of measurement. Ratios that

show returns represent the firm's ability to measure the overall efficiency of the firm in

generating returns for its shareholders.

Profitability ratios van be categorized as following-

Operating Profit Margin

Net Profit Margin

Return on Net Worth

Expense to Sales Ratio

Return on Equity

Earnings per Share


Page 32

1. Operating Profit Margin - Operating Profit Margin can be calculated by dividing

operating profit for a certain period by the revenues for that period. Operating profit margin

indicates how effective a company is at controlling the costs and expenses associated with their

normal business operations. The formula can be calculated as follows –

Operating Profit Margin ¿OperatingProfit

Net Sales∗¿100

2006 2007 2008 2009 2010

BHARTI AIRTEL

Operating Profit 4038.57 7260.54 10662.41 13215.68 13966.34

Sales 11259.12 17851.61 25761.11 34048.32 35609.54

OPM 35.68 40.65 41.37 38.74 39.08

MTNL

Operating Profit 892.54 892.05 925.46 371.73 -3059.87

Sales 5568.41 4909.32 4724.77 4457.02 3656.10

OPM 15.79 18.16 19.31 8.29 -83.69

2006 2007 2008 2009 2010

-4000

-2000

0

2000

4000

6000

8000

10000

12000

14000

16000

892.54892.05

925.46 371.73-3059.87

4,038.57

7,260.54

10,662.41

13,215.6813,966.34

Operating Profit

MTNL

Bharti Airtel


Page 33

2006 2007 2008 2009 2010

-100

-80

-60

-40

-20

0

20

40

60

15.79 18.16 19.318.29

-83.69

35.86 40.65 41.37 38.74 39.08


MTNL

Bharti Airtel

The higher the Operating Profit Margin, the better. This is because a higher Operating Profit

Margin shows the company can keep its costs under control (successful cost accounting). A

higher Operating Profit Margin can also mean sales are increasing faster than costs, and the

firm is in a relatively liquid position. The operating margin of Bharti Airtel has been constantly

high. It was 36.86 % in 2006. It kept on soaring until 2008 where it was 41.37 %. It decreased

slightly in 2009 to 38.74 and then increased to 39.08 % in 2010, but it really doesn’t affect

company’s performance at large. On the other hand, MTNL has had its share of bad

performance on this front. It had operating profit margin of 15.79% in the year 2006, where it

increased slightly to 18.16% in 2007 and to 19.31% in 2008. From 19.31% in 2008, Operating

Profit Margin has been taking a dip in the years to come. In 2009, it declined drastically by 8.6

just to reach at the lower level of 8.29%. The year 2010 spelled doom for the company as it

registered operating loss and consequently, operating profit margin fell to as drastically low as -

83.69%.


Page 34

2. Net Profit Margin – Net profit margin is a ratio of profitability calculated as net income

divided by revenues, or net profits divided by sales. It measures how much out of every rupee

of sales a company actually keeps in earnings. The higher the net profit margin is, the more

effective the company is at converting revenue into actual profit.

Profit margin is very useful when comparing companies in similar industries. A higher profit

margin indicates a more profitable company that has better control over its costs compared to

its competitors. Profit margin is displayed as a percentage; a 20% profit margin, for example,

means the company has a net income of Rs 0.20 for each rupee of sales.

Formula - Net Profit

Sales∗100

2006 2007 2008 2009 2010

BHARTI AIRTEL

Net Profit 2012.08 4033.23 6244.19 7743.84 9426.15

Sales 11259.12 17851.61 25671.11 34048.32 35609.54

NPM 17.8 22.46 23.99 22.58 26.36

MTNL

Net Profit 580.29 466.03 406.82 168.33 -3063.79

Sales 5568.41 4909.32 4724.77 4457.02 3656.10

NPM 9.66 8.49 7.69 3.23 -60.57


Page 35

2006 2007 2008 2009 2010

-4000

-2000

0

2000

4000

6000

8000

10000

12000

580.29466.03 406.82 168.33

-3063.79

2,012.08

4,033.23

6,244.19

7,743.84

9,426.15

Net Profit

MTNL

Bharti Airtel

2006 2007 2008 2009 2010

-80

-60

-40

-20

0

20

40

9.16 8.18 7.693.23

-60.57

17.822.46 23.99 22.58 26.36

Net Profit Margin

MTNL

Bharti Air-tel

Bharti Airtel has been performing constantly well on this front. Beginning from 17.8% Net Profit

Margin in 2006, it has risen to 26.36 % in 2010, registering 22.46% net profit margin in 2007

and 23.99% in 2008. That’s a considerable increase over a short span of 5 years. The Company

has been very effective at converting revenue into actual profit. As far as MTNL is concerned, it

registered Net Profit Margin of 9.16% in the year 2005. Since then, company has always been

witnessing negative results. Net Profit Margin plunged to 8.18% in 2007 and further 3.23% in

2009. Net Profit Margin took the lowest plunge in the year 2010 when it reported net loss and

NPM reached as low as -60.57%. Therefore, in a span of just five years, a company’s most

important financial indicator has been rendering negative results.


Page 36

3. Return On Net Worth - For a company, net worth can be defined as total assets minus

total liabilities. Net worth is an important determinant of the value of a company, considering it

is composed primarily of all the money that has been invested since its inception, as well as the

retained earnings for the duration of its operation. Net worth can be used to determine

creditworthiness because it gives a snapshot of the company's investment history. It is also

called owner's equity, shareholders' equity, or net assets.

Formula - Net Profit

NetWorth∨Owne r ' s Equity∗100

2006 2007 2008 2009 2010

-40

-30

-20

-10

0

10

20

30

40

5.16 4.01 3.45 1.4

-32.42

27.47

35.3530.94

28.13 25.79

Return on Net Worth

MTNL

Bharti Air-tel

2006 2007 2008 2009 20100

5000

10000

15000

20000

25000

30000

35000

40000

11236.77

11629.3 11921.36 12059.379448.4

7345.56

11443.27

20241.49

27643.97

36737.18Net Worth

MTNL

Bharti Air-tel


Page 37

The Return on Equity of a company measures the ability of the management of the company to

generate adequate returns for the capital invested by the owners of a company. Generally a

return of 10% would be desirable to provide dividends to owners and have funds for future

growth of the company. Here, Bharti Airtel has exceptionally high Return on Net Worth and it

goes on to prove that Bharti Airtel has good capacity to generate returns in the shareholders’

fund. It reported 27.475 return on net worth in 2006 which increased by a huge margin to

reach at 35.35% in the next year (2007). It went on to decrease by a slight margin to settle at

30.94% in 2008 and 25.79% in 2010. But overall, Airtel has been performing exceptionally well

on this parameter. As for MTNL, It had Return on Net Worth ad 5.16% in 2006. From then,

RONW did change, but not for any good. It declined to 4.01% in the year 2008, 3.45% in 2008

and to 1.4% in 2009. The year 2010 proved to be an utter disaster for the firm because the

company reported negative RONW of the value -32.42%. This implies that instead of generating

any sort of funds from the owner’s equity, MTNL is generating negative figures.


Page 38

4. Expenses to Sales Ratio - Expense ratios indicate the relationship of various expenses to

net sales. Expense ratios are calculated by dividing each item of expenses or group of expense

with the net sales to analyze the cause of variation of the operating ratio. The ratio can be

calculated for individual items of expense or a group of items of a particular type of expense

like cost of sales ratio, administrative expense ratio, selling expense ratio, materials consumed

ratio, etc. The lower the expense to sales ratio, the larger is the profitability and higher the

expense to sales ratio, lower is the profitability.

Formula - ExpenseNet Sales

∗100

2006 2007 2008 2009 20100

2

4

6

8

10

12

0.14 0.11 0.14 0.13 0.13

11.33

8.82

65.31 5.03


MTNL

Bharti Air-tel

While interpreting expense ratio, it must be remembered that for a fixed expense like rent, the

ratio will fall if the sales increase and for a variable expense, the ratio in proportion to sales

shall remain nearly the same. It is a key indicator of the economic efficiency of an organization.

A significant rise in the expense-to-sales ratio may indicate that the expense is less cost-

effective than it could be. Minor fluctuations in the ratio are normal and not cause for concern.

Bharti Airtel has not been performing upto the mark as far this ratio is concerned. It reported

expense to sales ratio of 11.33 in the year 2006 which decreased to 6 in 2008 and to 5.03 in

2010. MTNL on the other hand, has been performing much better on this front. It recorded


Page 39

expense to sales ratio of 0.14 in the year 2006 which operated on almost the same exceptional

level in the five years to come. It declined slightly to 0.11 in 2007 and in 2008 it was back to

0.14. But this ratio cannot be said a very strong financial indicator in general accounting

perspective. Therefore, just the fact that MTNL fares comparatively well on this parameter

shouldn’t be taken as a concrete base for arriving at any conclusion. A low expense to sales

ratio does not qualify that MTNL is performing better than Bharti Airtel or any other firm in the

telecommunication industry. Besides that, it should also be noticed that the rate at which the

expense to sales ratio of Bharti Airtel is declining is much more than that of MTNL, which has

been operating at the same level. Therefore, keeping in account its steeply declining rate if this

ratio, it can be inferred that Airtel might take a better position in the further years to come


Page 40

5. Return on Equity - Return on equity (ROE) measures the rate of return on the ownership

interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at

generating profits from every unit of shareholders' equity (also known as net assets or assets

minus liabilities. Many analysts consider ROE the single most important financial ratio applying

to stockholders and the best measure of performance by a firm's management.

Formula – Net Income afterTaxes

Owner ' s Equity

2005 2006 2007 2008 20090

50

100

150

200

250

300

350

400

450

150.5

92.174 64.6

26.765.3

106.2

212.7

329

407.9

Return on Equity

MTNL

Bharti Air-tel

Years

2005-06 2006-07 2007-08 2008-09

-80.00

-60.00

-40.00

-20.00

0.00

20.00

40.00

60.00

80.00

100.00

120.00

-38.80

-19.65-12.70

-58.67

62.63

100.28

54.68

23.98

Growth in ROE

MTNL

Bharti Airtel


Page 41

It is used as a general indication of the company's efficiency; in other words, how much profit it

is able to generate given the resources provided by its stockholders. Investors usually look for

companies with returns on equity that are high and growing. A high return on equity indicates

that the company is spending wisely and is likely profitable; a low return on equity indicates the

opposite. As a result, high returns on equity lead to higher stock prices. Some analysts believe

that return on equity is the single most important indicator in publicly-traded companies. In this

five year analysis of the two giants, MTNL registered Return on Equity of 150.5 in the year 2005

which is an acceptable number in itself. But thereafter, Return on Equity has been falling, much

like any other financial indicator of the PSU. In 2007 it reached 74 and further in 2008, it fell to

64.6. The Return in Equity dipped to a great extent in the year 2009 when it fell by 58.67% to

settle at abysmal low number of 26.7. Bharti Airtel had Return on Equity of 65.3 in the year

2005, which was almost half the value of what MTNL was had at that point of time. It rose by

62% to reach a better level of 92.1, but it was still lower than that of MTNL. The numbers

changed for both companies in the year 2007 when Bharti Airtel overtook MTNL. Bharti Airtel’s

ROE doubled in the year 2007 that what it was in the previous year. It was no looking back since

then. Bharti Airtel continues to sore new heights for the two coming years and MTNL touched

new lows.


Page 42

6. Earning per Share - Earnings per share is generally considered to be the single most

important variable in determining a share's price. It is also a major component used to calculate

the price-to-earnings valuation ratio. The portion of a company's profit allocated to each

outstanding share of common stock. Earnings per share serve as an indicator of a company's

profitability.

There are three types of EPS numbers:

Trailing EPS – last year’s numbers and the only actual EPS

Current EPS – this year’s numbers, which are still projections

Forward EPS – future numbers, which are obviously projections.

2006 2007 2008 2009 2010

-60

-40

-20

0

20

40

60

9.21 7.4

6.462.67

-48.63

10.62

21.27

32.940.79

24.82

Earning per Share

MTNL

Bharti Airtel

As shown in the preceding figures, the earning per share of Bharti Airtel has been registering a

mammoth increase almost every year, except for the year 2010. The EPS has been almost

doubling during 2006 and 2007. 2007 showed that the EPS almost doubled from 10.62 in 2006

to 21.27 in 2007. This depicts a very optimist picture of the company and further strengths

investor’s faith in it. Earning per share showed the highest numeric value in the year 2009 and


Page 43

that was 40.79, almost a double that the figures of the year 2007. It showed highest percentage

gain in 2007-08, but it has been rising all this while. But in 2010, EPS fell by a considerable

margin to reach at 24.82. As far as MTNL is concerned, it witnessed Earning per Share of 9.21 in

the year 2006 which was lower than that of Bharti Airtel in that year by a very minute margin.

In the years to come, Earning per Share declined to 7.4 in the year 2007 and further to 6.46 in

the year 2008. Year 2009 wasn’t any good either as the company further registered very low

Earning per Share of 2.67. 2010 witnessed yet another negative parameter of MTNL and EPS

was not an exception. It plunged down to -48.63 in that yea, further worsening company’s

image. This goes on to show that MTNL has not been able to sustain its investors’ faith in its

credibility. May be that explains the fact why MTNL did not issue any new shares during this

span of 5 years.


Page 44

INVESTMENT VALUATION RATIOS

Investment Valuation Ratio ratios are used by investors to estimate the attractiveness of a

potential or existing investment and get an idea of its valuation. When looking at the financial

statements of a company many users can suffer from information overload as there are so

many different financial values. This includes revenue, gross margin, operating cash flow,

EBITDA, pro forma earnings and the list goes on. Investment valuation ratios attempt to simplify

this evaluation process by comparing relevant data that help users gain an estimate of

valuation. Stock market valuations depend on investor sentiment, i.e. the overall beliefs of the

investing public, which are in turn based on company and general news. Investors work with

the given stock valuations and examine how worthwhile it is to invest in the shares. Investment

valuation ratios mainly work with stock market share price and compare it with earnings, sales,

dividend and other performance indicators like operating cash flows. These ratios give

prospective investors some idea of how worthwhile the investment is likely to turn out.

Different investors with different goals and perspectives use different ratios. The various

investment valuation ratios discussed here are as follows:

Operating Profit per Share

Dividend per Share

Free Reserve per Share

Book Value per Share


Page 45

1. Operating Profit per Share - Operating profit is the profit after subtracting expenses

such as marketing, cost of goods sold administration and general operating costs from revenue.

Operating profit per share seeks to the profit which is credited per share of a company. Quite

evidently, higher the operating profit, higher the operating profit per share.

Formula - OperatingProfitNoof Shares

2006 2007 2008 2009 2010

-60

-40

-20

0

20

40

60

80

13.96

14.15 14.495.87

-48.57

21.32

38.28

56.16

69.5

36.65


MTNL

Bharti Airtel

As depicted above in the graph, the company’s Operating Profit per Share has been constantly

rising over these five years, except for the year 2010. From a meager 21.32 in 2006, it has

grown to 69.5 in 2009. But in 2010, it declined by almost a double margin to settle at 36.65.

When this growth is plotted, the company showed highest gain in 2006-07 and that was of 79.6

%. The rate of increase has been declining for the forthcoming years, but the Operating Profit

per Share has not witnessed a decline. The same does not hold true for MTNL as well. The

financials of the firm showed the operating profit per share to be Rs 13.96 in the year 2006. It


Page 46

registered a slight increase in the year 2007 and was reported to be 14.15 in2007 and 14.19 in

2008. In the year 2009, the operating profit per share was as low as 5.47 which implies that for

every share held in MTNL, shareholders get just Rs 5.47 as their share of operating profit. If this

was not disheartening enough, operating profit per share further declined to reach a negative

figure of -48.57 in the year 2010. This could be attributed to the negative operating profit that

MTNL reported in the year 2010.


Page 47

2. Dividend per Share - The the sum of declared dividends for every ordinary share issued.

Dividend per share (DPS) is the total dividends paid out over an entire year (including interim

dividends but not including special dividends) divided by the number of outstanding ordinary

shares issued. Dividends per share are usually easily found on quote pages as the dividend paid

in the most recent quarter which is then used to calculate the dividend yield. Dividends over

the entire year (not including any special dividends) must be added together for a proper

calculation of DPS, including interim dividends. Special dividends are dividends which are only

expected to be issued once so are not included. The total number of ordinary shares

outstanding is sometimes calculated using the weighted average over the reporting period.

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

3.5

4

4 4 4

1

00 0 0

2

1

Dividend per Share

MTNL

Bharti Airtel

Dividends are a form of profit distribution to the shareholder. Having a growing dividend per

share can be a sign that the company's management believes that the growth can be sustained.

Here in this case, it is cumbersome to make an inter-firm comparison because Bharti Airtel has

not issued any dividend from 2006 to 2008, may be because it wanted to withhold its earnings

in the form of retained earnings. But the company has issued dividend in the year 2009 and the

dividend per share is 2. It also issued dividend in the year 2010 and the ratio was 1. Further

inter-firm analysis would be possible if the company distributes dividend the next year, but as

of now, no conclusions can be drawn on an inter-firm basis. But an intra-firm analysis is possible


Page 48

at this front, the result of which is no different from other financial indicators of MTNL.

Dividend per share of MTNL was 4.5 in the year 2005 which further declined by a small margin

to settle at 4 and it continued to operate at the same level of 4 for three consecutive years,

viz. , 2006, 2007 and 2008. It declined to 1 in the year 2009 which was still lower than Bharti

Airtel for that year. Dividend per share of MTNL for the year 2010 was 0 compared to 1 of

Bharti Airtel, which further justifies its financial position.


Page 49

3. Book Value - A measure used by owners of common shares in a firm to determine the level

of safety associated with each individual share after all debts are paid accordingly. Should the

company decide to dissolve, the book value per common indicates the rupee value remaining

for common shareholders after all assets are liquidated and all debtors are paid.

In simple terms it would be the amount of money that a holder of a common share would get if

a company were to liquidate.

Formula = Total Shareholder Equity−Preferred Equity

Total OutstandingShares

2006 2007 2008 2009 20100

50

100

150

200

250

178.36 184.59 189.23 191.42

149.97

38.71

60.19

106.34

145.01

96.24

Book Value

MTNL

Bharti Airtel

This ratio gives a fair idea of what a common shareholder can claim from the company because

of their holding the shares. The book value of a particular share is the price an investor gets

after all these have been paid to. It is not the market price of a share. Here the Book Value of

the company’s share has been climbing the ladder over the years. From a modest Rs 38.71 in

2006, it doubled to 60.19 in 2007 and reached 106.34 in the year 2008. It reached the high of

145.01 in the year 2009 and then witnessed a major decline in the year 2010. Besides the

decline in 2010, Airtel has been performing phenomenally well on this front and is further


Page 50

strengthening its investors’ faith in it. MTNL on the other hand has much higher book value per

share than Bharti Airtel. It reported book value per share of Rs 178.36 in the year 2006, which

increased by slight margin to reach Rs 184.59 in the year 2007 and Rs 189.23 in the year 2008.

It went on to increase to 191.42 in the coming year, but registered a considerable decline in

2010 and settled at 149.97 The vital observation here is that the rate of increase in book value

per share of Bharti Airtel has been much more than that of MTNL over the span of five years.

Still, at the end of the year 2010, MTNL registered more book value per share than Bharti Airtel.

The reason for the high value of book value per share of MTNL is that the company came into

existence years before Bharti Airtel came into telecommunication industry. Secondly, MTNL is a

zero debt company. Therefore at the time of its liquidation, if at all that does happen, the

company would have lesser debts to repay to its creditors. That explains the fact why MTNL has

high book value per share.


Page 51

4. Free Reserve per Share – Free reserve per share is the amount of free reserve allocated

to a single share of the firm. This ratio is basically dependent on the amount if free reserve that

a company possesses. Therefore, given all things are constant, free reserve per share is directly

proportional to the amount of free reserve and inversely proportional to the number of shares

that a company has issued.

2006 2007 2008 2009 2010

-50

0

50

100

150

200

143.51156.09 153.61

164.94

-37.35

28.11

49.88

83.18

121.78

84.64


MTNL

Bharti Airtel

2006 2007 2008 2009 20100

5000

10000

15000

20000

25000

30000

35000

10606.77 10999.3 11291.36 11429.378818.4

5437.42

9515.21

18283.82

25627.38

34650.19Free Reserve

MTNL

Bharti Air-tel


Page 52

The free reserve of Airtel has been increasing manifolds over this short span of five years. Free

reserve was Rs 5437.42 crore in 2006 and then in 2007, it was 9515.21 Crore. The growth didn’t

halt at any point and it further doubled to Rs 18283.81 Crore in 2008, Rs 25627.24 Crore in

2009 and Rs 34650.19 Crore in the year 2010. Though huge amount of free reserves are good

for any company, but it may also indicate that the company is not managing its free reserve

efficiently. Airtel could have invested this amount in a profitable venture to gain additional

profits because idle money generates no income. As far as free reserve per share is concerned,

it has been increasing at a considerable rate and in 2010; it overtook MTNL on this front. As far

as MTNL is concerned, its free reserves have been constant in this span of first four years.

Consequently, free reserve per share has also been pretty much constant over the years and

higher than that of Bharti Airtel for the first four years. The year 2010 hit MTNL’s financial

numbers hard and free reserve per share declined to a great margin, so much so that it reached

a negative number of -37.75. A constant level of free reserve could mean that company has not

been making many investments outside or else, it could be making investments, but it is not

gaining much profit from those investments so that those could be added up in free reserve.


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Efficiency Ratios

Efficiency Ratios are typically used to analyze how well a company uses its assets and liabilities

internally. Efficiency Ratios can calculate the turnover of receivables, the repayment of

liabilities, the quantity and usage of equity and the general use of inventory and machinery.

Some common ratios are accounts receivable turnover, fixed asset turnover, sales to inventory,

sales to net working capital, accounts payable to sales and stock turnover ratio. These ratios are

meaningful when compared to peers in the same industry and can identify businesses that are

better managed relative to the others. Also, efficiency ratios are important because an

improvement in the ratios usually translate to improved profitability. Efficiency ratios are the

financial statement ratios that measure how effectively a business uses and controls its assets.

Efficiency ratios measure the quality of a business' receivables and how efficiently it uses and

controls its assets, how effectively the firm is paying suppliers, and whether the business is

overtrading or undertrading on its equity (using borrowed funds). These ratios look at the

internal working of the company and measure the efficiency with which the business manages

its resources and liabilities.

The Efficiency Ratios discussed here are –

Total Asset Turnover Ratio

Investment Turnover Ratio


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1. Asset Turnover Ratio - The amount of sales generated for every rupee's worth of assets.

It is calculated by dividing sales in rupees by assets in rupees. This ratio is useful to determine

the amount of sales that are generated from each rupee of assets. Asset turnover measures a

firm's efficiency at using its assets in generating sales or revenue - the higher the number the

better. It also indicates pricing strategy. Companies with low profit margins tend to have high

asset turnover, those with high profit margins have low asset turnover. For companies in the

retail industry we would expect a very high turnover ratio - mainly because of cutthroat and

competitive pricing.

Formula - RevenueAsset

2006 2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

0.370.32 0.3 0.27

0.13

0.72 0.75

1.03 1

0.88

Asset Turnover Ratio

MTNL

Bharti Air-tel

The asset turnover ratio has been low for these five years keeping in sync with the fact that

companies with high profit margin have low asset turnover ratio. There has been no major

fluctuation in this ratio over the years, but the ratio is quite low. That implies that the assets are

not being used that efficiently to generate sales for the firm the way they should be. Airtel

recorded asset turnover ratio of 0.72 in 2006 which increased to 1.03 in 2008 and further


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decreased to 0.88 in 2010. Asset turnover ratio touched a high of 1.03 in the year 2008, which

implies that for every asset of Re 1, Bharti generates revenue worth Re 1.03. MTNL paints more

dismal picture. Asset Turnover Ratio was registered to be 0.37 in the year 2006; it decreased to

0.32 in the year 2007 and to 0.27 in the year 2009. It reached abysmally low at 0.13 in the year

2010. It implies that for every asset of Rs 100, MTNL generate sales of worth Rs 13 which is a

abysmally low number in itself and signifies a very uneconomic and injudicious use of

company’s assets, fixed as well as current assets. This low number could have been justified if

MTNL was making high profits. But unfortunately that’s not the case here. Therefore, low asset

turnover ratio in case of Bharti Airtel can be justified to some extent, but as far as MTNL goes,

there is no justification for low asset turnover ratio except for inefficient use of assets of the

company.


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2. Investment Turnover Ratio - This is used to determine how many times the investment

or net worth of the dealership is turned into net sales. It seeks to find whether the investment

made in any sort of venture is viable or not, and whether it is resulting into any kind of sales for

the company or not.

2006 2007 2008 2009 20100

2000

4000

6000

8000

10000

12000

14000

16000

418.72 441.4 557.39 465.09 509.54719.7 705.82

10952.8511777.76

15773.32

Total Investment

MTNL

Bharti Air-tel

2006 2007 2008 2009 20100.00

5.00

10.00

15.00

20.00

25.00

30.00

13.3011.12

8.489.58

7.18

15.64

25.29

2.35 2.89 2.26

Investment Turnover Ratio

MTNL

Bharti Air-tel


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A higher ratio indicates good use of the funds placed into the business. Airtel registered highest

investment turnover ratio in the year 2007 and it was 25.29 which implies that for every

investment worth Re 1, Airtel generates sales worth Rs 25.29. Investment increased in the year

2008 to 2010 by a huge amount which was not followed up by an equivalent increase in the

sales; consequently the investment turnover ratio has decreased by a huge margin. But if the

first two years are taken into account when the investment is at a low level, it is noticed that

the investment turnover ratio has been excellent. In 2006 it was taken to be 15.64 and in the

year 2007, it increased to 25.29. In the years 2008 and 2009, Bharti Airtel mage huge

investments which could be because excellent rate of return must be available. And therefore,

investment turnover ratio decreased by a great extent. But MTNL did not make such huge

investments in any of these five years and they have been pretty much constant throughout the

span of five years. It registered investment turnover ratio of 13.3 in the year 2006 which

declined to 11.12 in the year 2007 and to 9.58 in the year 2009. Keeping in account the fact that

MTNL did not made any considerable amount of investment, the investment turnover ratio can

be termed as satisfactory.


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Leverage Ratios

Leverage is defined as the relation between debt and equity financing or debt-equity ratio.

Equity as we know is created by personal funds of business owners or entrepreneurs,

stockholders etc. These funds have no claim on assets of business. Leverage as we defined is

the shorthand of business to achieve funding. Higher equity increases leverage and vice versa.

And thus if business is leveraged fully we are not able to borrow money. Companies that are

highly leveraged have more chance of bankruptcy if they are unable to generate payments on

their unable debts and also they may even lack leaders in near future.

Leverage ratios are those ratios which are used to calculate the financial leverage of a company

to get an idea of the company's methods of financing or to measure its ability to meet financial

obligations. There are several different ratios, but the main factors looked at include debt,

equity, assets and interest expenses. These ratios are used to measure a company's mix of

operating costs, giving an idea of how changes in output will affect operating income. Fixed and

variable costs are the two types of operating costs; depending on the company and the

industry, the mix will differ.

Companies with high fixed costs, after reaching the breakeven point, see a greater increase in

operating revenue when output is increased compared to companies with high variable costs.

The reason for this is that the costs have already been incurred, so every sale after the

breakeven transfers to the operating income. On the other hand, a high variable cost company

sees little increase in operating income with additional output, because costs continue to be

imputed into the outputs. The degree of operating leverage is the ratio used to calculate this

mix and its effects on operating income.

By using a combination of assets, debt, equity, and interest payments, leverage ratios are used

to understand a company's ability to meet it long term financial obligations. The ratios

discussed here are

1. Debt Equity Ratio 2.Interest Coverage Ratio


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1. Debt Equity Ratio - The debt to equity ratio is the most popular leverage ratio and it

provides detail around the amount of leverage (liabilities assumed) that a company has in

relation to the monies provided by shareholders. The lower the magnitude of ratio, the less

leverage that a company is using. Total liabilities include operational liabilities that are required

to run the business. These are not long term in nature and can distort the debt to equity

ratio. It is a measure of a company's financial leverage calculated by dividing its total liabilities

by stockholders' equity. It indicates what proportion of equity and debt the company is using to

finance its assets.

2006 2007 2008 2009 20100

0.1

0.2

0.3

0.4

0.5

0.6

0.7 0.65

0.47

0.330.28

0.14

Debt Equity Ratio

Bharti Air-tel

2006 2007 2008 2009 20100

5000

10000

15000

20000

25000

30000

35000

40000

4796.29 5310.81 6570.34 7713.655038.92

7345.56

11443.27

20241.49

27643.97

36737.18

Debt Equity Ratio

Debt Equity


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A high debt equity ratio indicates that a lot of debt is being used to finance the operations. The

company could potentially generate more earnings than it would have without this outside

financing. If this were to increase earnings by a greater amount than the debt cost (interest),

then the shareholders benefit as more earnings are being spread among the same amount of

shareholders. This ratio has been declining for the company and it means that less and less of

debts are being used to finance the operations of the company. Since 2006, equity is being

more than debt. This pattern continues for forthcoming years too where equity increases in a

greater proportion than that of debt. This portrays that Airtel has an excellent debt-equity

structure which continues to be better than its counterparts in the telecommunication industry.

Here an inter firm analysis between Bharti Airtel and MTNL is not possible because MTNL is a

zero debt company; which implies that it does not has any debt.


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2. Interest Coverage Ratios - The interest coverage ratio tells us how easily a company is

able to pay interest expenses associated to the debt they currently have. The ratio is designed

to understand the amount of interest due as a function of a company’s earnings before interest

and taxes (EBIT). Some will actually replace EBIT with EBITDA. It is different for each sector,

but an interest coverage ratio below 2 may pose a threat to the ability of a company to fulfill its

interest obligations. The interest coverage ratio is very closely monitored because it is viewed

as the last line of defense in a sense. A company can get by even when it is in a serious financial

bind if it can pay its interest obligations.

Formula - EBIT

Interest Expenses

2006 2007 2008 2009 20100

10

20

30

40

50

60

70

80

90

100

12.76

23.45

34.38

46.28

85.82

Interest Coverage Ratio

Bharti Air-tel

The company has this ratio above the acceptable levels. Generally, interest coverage ratio

below 2 is considered bad for company. The lower the ratio, the more the company is burdened

by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet

interest expenses may be questionable. An interest coverage ratio below 1 indicates the

company is not generating sufficient revenues to satisfy interest expenses. But here Bharti


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Airtel has been doing extremely good as the ratio has been increasing over the years. It

reported an exceptionally high interest coverage ratio of 12.76 in the year 2006 and there has

been no looking back. The ratio continued to soar northwards and it goes on to show that Airtel

has its financial numbers well in place.

An inter firm analysis is not possible because MTNL is a zero debt company, therefore it has no

intetest expense to its credit.

Liquidity Ratios


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Liquidity ratios are a class of financial metrics that is used to determine a company's ability to

pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger

the margin of safety that the company possesses to cover short-term debts. Common liquidity

ratios include the current ratio, the quick ratio and the operating cash flow ratio. Different

analysts consider different assets to be relevant in calculating liquidity. Some analysts will

calculate only the sum of cash and equivalents divided by current liabilities because they feel

that they are the most liquid assets, and would be the most likely to be used to cover short-

term debts in an emergency.

A company's ability to turn short-term assets into cash to cover debts is of the utmost

importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators

frequently use the liquidity ratios to determine whether a company will be able to continue as a

going concern. Investor look at liquidity ratios to determine the ability of a business to pay off

its short term obligations from cash or near cash assets to evaluate the risk associated if were

to invest in this company. Failure to pay off short term obligation may result in financial

difficulty or bankruptcy in near future.

The liquidity ratios discussed here are as following –

Current Ratio

Quick Ratio

1. Current Ratio - The ratio is mainly used to give an idea of the company's ability to pay back

its short-term liabilities (debt and payables) with its short-term assets (cash, inventory,


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receivables). The higher the current ratio, the more capable the company is of paying its

obligations. A ratio under 1 suggests that the company would be unable to pay off its

obligations if they came due at that point. While this shows the company is not in good

financial health, it does not necessarily mean that it will go bankrupt - as there are many ways

to access financing - but it is definitely not a good sign.

The current ratio can give a sense of the efficiency of a company's operating cycle or its ability

to turn its product into cash. Companies that have trouble getting paid on their receivables or

have long inventory turnover can run into liquidity problems because they are unable to

alleviate their obligations. Because business operations differ in each industry, it is always more

useful to compare companies within the same industry.

2006 2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.34 1.34 1.35 1.34

0.65

0.44 0.470.57

0.69 0.68

Current Ratio

MTNL

Bharti Airtel

2:1 is considered ideal current ratio. But here the company’s ability to meet its short term debt

obligation is not so satisfactory, because higher the ratio, the more liquid the company is. But

the current ratio of Airtel has not gone beyond 0.68. That implies that company might as well

have trouble meeting its short term debt obligations if at all it arises. But current ratio of Bharti

Airtel has been increasing at a considerable rate and it is a positive indicator of the company’s

liquidity. MTNL has been performing better on this front. MTNL’s current ratio was 1.34 in the

year 2006 which increased by a slight margin in the year 2007 to reach 1.35. In 2009, it was


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reported to be 1.37, but 2010 registered a downfall and the ratio reduced to 0.65, lower than

that of Airtel in that year. Therefore, it can be noticed that the ratio has been operating at

almost an equal level in the first four years. Therefore, barring the ratio of the year 2010, MTNL

is better equipped to handle short term debt obligation than Bharti Airtel.

2. Quick Ratio - An indicator of a company's short-term liquidity. The quick ratio measures a

company's ability to meet its short-term obligations with its most liquid assets. The higher the

quick ratio, better the position of the company. The quick ratio is more conservative than the


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current ratio, a more well-known liquidity measure, because it excludes inventory from current

assets. Inventory is excluded because some companies have difficulty turning their inventory

into cash. In the event that short-term obligations need to be paid off immediately, there are

situations in which the current ratio would overestimate a company's short-term financial

strength.

The quick ratio is calculated as:

2006 2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

1.4

1.27 1.25 1.26 1.25

0.650.45 0.47

0.550.65

0.72

Quick Ratio

MTNL

Bharti Airtel

The quick ratio of 1:1 is considered ideal. The quick ratio of the company has been pretty much

constant over these years. It was 0.45 in 2006, registered a minor increase in 2007, it was 0.47.

In 2009 and 2010, it increased to 0.65 and 0.72 respectively, but still it is not above the

acceptable level of 1:1.. This implies that company could be devoid of liquid assets if a short

term debt obligation, if at all, arises. But the ratio has been showing a northwards trend which

is good MTNL, on the other hand, too has not been faring well on this front. Company’s


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financials show quick ratio of 1.27 in the year 2006 which declined up to 1.25 in the year 2007.

Ideally, 1:1 should be the quick ratio of any company and a quick ratio more than 1:1 implies

that liquid assets are lying idle and as the adage goes, “Idle money leads to no income”. Quick

ratio exceeding this range shows that the company has excessive liquid assets which are not

being put to judicious use. These assets include unutilized cash and other liquid assets which

can be invested in venture where it would lead to some amount of income.


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Conclusion and

Recommendations

In the preceding pages, the two companies, Bharti Airtel Pvt Limited and state owned

Mahanagar Telephone Nigam Limited, were analyzed and compared on various parameters of


Page 69

financial ratios. The analysis stated out some facts which are quite in sync with the current

market standing and stature of the two companies. Indian telecom industry has come of age in

these recent years. It is the fastest growing industry in the Indian economy with great potential

of further growth. It is also the second largest telecommunication network in the world in

terms of number of wireless connections after China with 688.38 Million telephone (landlines

and mobile) subscribers and 652.42 Million mobile phone connections as of July 2010.

Before stating a final conclusion about Bharti Airtel and MTNL on the basis of financial ratios,

let’s review the two companies on the basis of their performance in the markets. In line with

the results of the financial ratios, Bharti Airtel remains the lead player here too. Measuring its

performance on the National Stock Exchange (NSE), the company has total Market Cap of Rs

126,704.59 Crore as on 15 October, 2010, 17:31, which is far more than Market Cap of Rs

4,227.30 Crore of MTNL. Talking about stock prices, Bharti Airtel registered a 52 Week high of

Rs 376.95 and a 52 week low of Rs 252 as compared to 52 week high of Rs 92.75 and 52 week

low of 52.95 of MTNL. As the stock prices show, Bharti Airtel has been faring much better than

MTNL on the NSE. A look at the Nifty 50 graph of Bharti Airtel and MTNL substantiate the above

mentioned point.

Screen clipping taken: 16/10/2010 12:57 (Source –www. moneycontrol.com)

The two graphs show the movement of respective stocks mf MTNL and Bharti Airtel from May

2010 to 15 October 2010 on the Nifty Index of National Stock Exchange. Talking about Bharti


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Airtel, this clipping was taken on 16 Oct, 2010 and shows the movement of its stock over a span

of 6 months. On 15 Oct, Airtel was being traded at 334.25, a 9.64% increase from the previous

day’s close. During the months of May, June and July Airtel was trading below the Nifty Index,

but it took a leap in the month of August and September and performed relatively well than

Nifty 50 Index of NSE. And then again, October saw a decline in the stock.

Screen clipping taken: 16/10/2010 12:58 (Source – www. moneycontrol.com)

This shows the stock movement of MTNL on the Nifty index of National Stock Exchange. As it is

quite evident from the graph above, stock of State owned MTNL has been faring relatively low

as compared to the Nifty index of NSE. Month of June saw a relatively greater dip in stock price

of MTNL, but it recovered its position in the month of July and August. September witnessed a

slight decline. But stock was back to normal in the month of October. But as compared to Bharti

Airtel, MTNL has not been performing up to the mark, unlike its competitor. The following

graph shows the relative movement of Bharti Airtel, MTNL and Nifty Index.


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Screen clipping taken: 16/10/2010 13:22 (Source – www.moneycontrol.com)

During the last three months of August, September and October, Airtel has been shown

performing above the Nifty index and on the other hand, MTNL is seen to be faring below the

Nifty index. All these movements signify the market sentiment and investors’ mindset towards

the two companies. Where Airtel makes a very good investment destination, MTNL has been

losing its investors as well as investors’ faith in its credibility. Mere the fact that Bharti Airtel is

the reigning leader in the Indian Telecom Industry is enough to make it a most sought after

destination for parking one’s fund safely. MTNL does not guarantee that sort of reliability and

the same fact is depicted in its stock movement on the Nation’s biggest stock exchange, NSE.

This was the analysis between Bharti Airtel and MTNL on the basis of their performance on

National Stock Exchange. In the next few pages, we take a look at the analysis and the

conclusions of the Financial Ratio Analysis of the two firms, carried out in the preceding

chapters.


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The analysis done in the preceding pages show that Bharti Airtel has been performing better on

almost every parameter of the financial ratios. The results bring out the stark disparity that

exists between Bharti Airtel Pvt Limited and the state owned Mahanagar Telephone Nigam

Limited. One of the reason for choosing MTNL for this research work was to bring out the

difference between a state owned company and a private company. There is no driving force

behind MTNL’s operations, result of which is quite evident in its reports. The financial reports of

MTNL and its further financial arithmetic shows the obvious lack of zeal to succeed in the

market and in such a case, complacency is inevitable. MTNL seems to have taken no measures

whatsoever to strengthen its position in the market, and the probable reason could be the fact

that it is a state owned company and there is a clear absence of accountability in its

management and management’s policy and decision making. Almost all the ratios are in the

favour of Bharti Airtel. The following table shows a brief summary of the financial ratios of

Bharti Airtel and MTNL.

Parameter MTNL Bharti Airtel


Net Profit Margin

Return on Net Worth


Return on Equity


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Earning per Share


Dividend per Share N/A

Book Value


Asset Turnover Ratio

Investment Turnover Ratio N/A

Interest Coverage Ratio N/A

This preceding table presents a brief summary of the financial ratios of both the companies and

the table showcases positions of both the firms with respect to each other and states the same

undeniable facts

One of the possible reasons for MTNL’s debacle has been its ever tarnished brand image in the

eyes of the customers. MTNL does not seem to be attracting enough customers for its survival


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even in the wake of the fact that its prices and tariff plans are relatively much lower than that of

its counterparts in the industry. There is a certain sense of dubiousness associated with brand

image of MTNL and consequently, the company does not enjoy any sort of brand loyalty

whatsoever. The lack of stature results small market share which in turn results into obvious

loss that is being incurred by the company.

The following figure shows the market share of the Indian telecom industry, as on July 2010 –

21.84%

17.53%

17.26%

11.89%

11.29%

10.92%

6.31%

0.87% 0.73% 0.65% 0.49% 0.17% 0.06%0.01%

Bharti AirtelRelianceVodafone IndiaBSNLTATAIdeaAircelMTNLUnitechSistemaLoop StelHFCLVideocon

Bharti Airtel being the reigning player tops the market share with 21.84% followed by Reliance

(17.35%) and Vodafone India (17.26%). Nowhere does MTNL come into picture here, probably

because of the fact that MTNL does not have Pan India presence like Airtel and Reliance. It

basically operates in the metro cities of the nation, hence the smaller market share. Therefore,

market share shouldn’t be the right basis to judge it. However, its market share has no role,

whatsoever, to play in the dismal performance of MTNL over the years. It is true that MTNL has

low market share because of its limited reach to metropolitan cities of India, but there is no

denying the fact that MTNL’s share has witnessed no increase over the years, just like its

financial indicators.


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But besides the above mentioned reason, lack of efficiency and effectiveness in the operations

of MTNL is also responsible for its dismal performance over the years. The company has been

incurring huge costs in the form of excessive operating expenses and sales expenses which the

company has not been able to curtail. This lowers the operating profit which in turn reduces the

net profit of the firm. Company’s return on net worth too has not been satisfactory. MTNL has

excessive free reserve which could be put to judicious use, but are lying idle and in turn

generating no income.

MTNL needs a complete revamp as far as its brand image is concerned. It needs to shackle its

image of being an inefficient entity owned by state. It is a widely known and accepted fact that

MTNL rarely delivers quality as far as good service is concerned. The company has always been

associated with poor service and even pathetic customer care relations. This could be the

reason why MTNL seems to be losing its ever loosing grip on the market.

Telecom industry is characterized by extremely low switching costs. In more simple words, if a

customer is not satisfied with his/her current telephone service provider, he can switch to any

other service providers, say Airtel or Vodafone with the minimum costs possible. Similarly,

entry barriers in the industry are minimal. It implies that any new comer does not need to pass

many hurdles to make a mark in the industry. May be this is the reason that we have seen entry

of new players into the market such as MTS and Uninor which offers much attractive services

and prices. In such a situation, MTNL just cannot sit on their hands and wait for the inevitable

to happen. It got to take concrete steps in its interest.

The need of the hour is to bring accountability in every decision that the management takes for

the company. They need to locate the areas where they are lagging behind as compared to

their competitors and consequently, take measures to improve upon those shortcomings. For

instance, MTNL has relatively higher sales to expense ratio and higher operating expense too as

compared to Bharti Airtel. MTNL are already delivering low sales in the first place and in a

scenario like this, they just cannot afford to bear high selling and operating costs.


Page 76

Bibliography

www.investopedia.com

www.investorwords.com

www.airtel.in


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www.moneycontrol.com

www.beginnersinvest.com

www.wikinvest.com

www.busiessdictionary.com

www.accountingformanagement.com

www.bizwiz.com

www.bizfinance.com

www.referenceforbusiness.com

www.financial-dictionary.thefreedictionary.com

www.bizmove.com

www.bizterms.com


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Documents

Comparative Analysis Airtel and MTNL (Report)