A SUMMER TRAINING REPORT

On ROI analysis

Bharti-Airtel ltd.
SUBMITTED BY:
NIRMALA VERMA & KHYATI GADHIA ACADEMIC YEAR: 2005-2006

SUBMITTED TO:
AES POST GRADUATION INSTITUTE OF BUSINESS MANAGEMENT GUJARAT UNIVERSITY AHMEDABAD

Acknowledgement:
We take this opportunity to express our heartfelt gratitude to one and all that have helped us make this project a reality. Practical training is of utmost importance to students like us who have no work experience prior MBA. It not just gives one the opportunity to learn things first hand, but also a chance to experience and apply the theoretical knowledge one acquires through the first year.

At the onset, we would like to thank Airtel for giving us an opportunity to do summer training with them. It is a company of huge stature and spread and we value our association with it.

We express our gratitude to Mrs. Aloka verma, Budgeting & control manager, Finance department Airtel, Ahmedabad for her continued support. She gave some valuable insights and suggestions, which helped to shape the project. She also provided necessary resources and her valuable time and attention. We would like to thank Mr. Pramod Bhandari, the Executive, Ahmadabad. We would also like to thank Mr.Ram Rathi and Mr.Parth Mehta for their valuable insights and support.

We would also like to thank Prof. Mayank Joshipura and the entire faculty for providing us the theoretical base and inputs throughout the first year, which helped us in our summer training.

Last but not the least We would like to thank Mr.Raveen Bhatnagar and Mr.Vimal naggi, HR department Airtel, Ahmedabad for providing opportunity to work with Airtel.

Executive Summery:

Telecommunication today, is one of the fastest growing sectors in todays world. It has got an important role to play in connecting people turning a world into a global village. Seeing to past twenty years there has been tremendous growth in this sector. The trend of a phone per family is turning to phone per person. This has happened with the increasing growth of mobile sector because of its time and convenience. Mobile has changed the life style of people. Competition has increased and hence the demand of customers. As a result of which mobile as well as its usage is getting less costly day by day. The main reason is that companies are ready to give the best available services at the lowest price. If you now see the industry it can be noted that all the competitors are giving same services at approximately same tariffs. Every company intends to earn maximum profit. Bharti-Airtel limited is one of profit making entity in telecom sector. So in order to identify profit center of each and every tower/sites, they called upon us to assist them in executing their project for Return on investment.

Our study highlights many facts about: The current scenario of return on sites. Analysis of expenses related to towers & how to minimize excessive expenses. Analytical study of prepaid & postpaid revenue of one month. Average payback period of investment. Display effects of the ROI. In order to minimize Excessive expenses, we have further investigated DG sites. So it reduces diesel expenses by converting those sites into electricity.

During the course of our study, we came across many requirements demanded by vendors, which are valuable to management.

After the study we gave them certain recommendations for improving negative ROI, among which many were known to department. Still we gave them detailed list of recommendations from our side in which there were some recommendations, which are not been taken seriously before.

Finally, we have successfully converted 70 DG sites in electricity. So there is remarkable saving of Rs. 13, 00,000.

Above all it was nice learning and exposure for us to work with Bharti-Airtel, which is one of best in telecom industry.

CONTENTS

Sr. No.
1. 1.1 2. 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 3. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 4. 4.1 4.2 5. 5.1 5.2 5.3 5.4 5.5 5.6 6. 7. 8.

Particulars
Indian telecom sector Cellular services Organization profile Organization history in brief Vision Business Strategy Business Achievement & Awards Board of director Management Structure Corporate Structure SWOT analysis Bharti-Airtel growth paradigm Business solution Return on Investment Introduction Methodology Site details Process of calculation ROI Expense analysis Revenue analysis ROI analysis Project of converting DG sites into Electricity Process of site utilization Working Learning & contribution to the company Application Tools & techniques Knowledge & skill acquired from the company Contribution to the company Recommendations Limitation Bibliography Glossary Annexure - 1 Annexure - 2

Page no.
1 2 5 6 7 7 8 9 12 14 16 17 22 23 25 27 28 30 31 35 42 44 46 47 48 50 50 50 51 52 53 54 55 56 58 63

PART A

Indian Telecom sector

1. The Indian Telecom Sector

India is the fourth largest telecom market in Asia after China, Japan and South Korea. The Indian telecom network is the eighth largest in the world and the second largest among emerging economies. At current levels, telecom intensiveness of Indian economy measured as the ratio of telecom revenues to GDP is 2.1 percent as compared with over 2.8 percent in developed economies (CRISIL, www.ibef.com). Indian telecom sector has undergone a major process of transformation through significant policy reforms. The reforms began in 1980s with telecom equipment manufacturing being opened for private sector and were later followed by National Telecom Policy (NTP) in 1994 and NTP'1999. Historically, the telecom network in India was owned and managed by the Government considering it to be a natural monopoly and strategic service, best under state's control. However, in 1990's, examples of telecom revolution in many other countries, which resulted in better quality of service and lower tariffs, led Indian policy makers to initiate a change process finally resulting in opening up of telecom services sector for the private sector. Policy reforms can be broadly classified in three distinct phases

The Decade of 1980's saw private sector being allowed in telecommunications equipment manufacturing. Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL) were formed and a Telecom Commission was set up to give focus to telecommunications policy formation.

In 1990s, telecommunications sector also benefited from the general opening up of the economy. NTP 1994 was the first attempt to give a comprehensive roadmap for the Indian telecommunications sector.
o o

Availability of telephones on demand (targeted by 1997) Universal service covering all villages and one PCO per 500 persons in urban areas at the earliest (targeted to be achieved by 1997)

o o

Telecom services at affordable and reasonable prices World standard quality of services

NTP 1999 brought in the third generations of reforms in the Indian telecommunications sector.

1.1 Cellular Services

There are 25 private companies providing mobile Services in 19 Telecom Circles and 4 Metro cities, covering 1500 towns across the country. Presently, there are five private service operators in each area, and an incumbent state operator. Almost 80% of the cellular subscriber base belongs to the pre-paid segment.

Total Subscribers .No. 1 3 2 4 5 6 7 8 Group Company Airtel Hutch BSNL IDEA Aircel Reliance MTNL Spice (as on 31st May 2006) 21860212 18060225 18000908 8062961 3024871 2155886 2097478 2027551

Reliance MTNLSpice 3% 3% 3% Aircel 4% IDEA 11% Airtel 28%

Airtel
Hutch
BSNL
IDEA
Aircel
Reliance
MTNL

BSNL 24%

Spice

Hutch 24%

Airtel has highest GSM subscribers in India. It is 28% of total market share.

PART B

Organization Profile

2. ORGANIZATION PROFILE:

As we spread wings to expand our capabilities horizons, remains best put the and explore new focus the and our

fundamental seek the out

unchanged: in

technology it at the

world of

service

ultimate user.

2.1 ORGANIZATION HISTORY IN BRIEF:

Bharti Tele-Ventures (BTVL) was incorporated on 7th July, 1995, for promoting investments in diversified telecom service projects. The company was formed as a 80:20 joint venture between the Bharti Group through its subsidiary Bharti Telecom and STET International Netherlands NV, a company promoted by Telecom Italia, Italy.

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 is a leading provider of telecom services with more than 12 million customers in India. The company is structured into two main groups, Mobile Services which offers GSM Mobiles Services and Infotel Services which provides broadband & Telephone, long distance and enterprise services. The company was first GSM Operator to have more than ten million customers and also the first telecom company to cover all the 23 telecom circles of India, which this coverage facility the company became the first operator to have an All-India footprint. All the services of company is been provided under brand name AIRTEL .

2.2 VISION:

To be responsive to the needs of our customers To trust and respect our employee To continuously improve our services- innovatively and expeditiously To be transparent and sensitive in our dealings with all stake holders.

2.3 BUSINESS STRATEGY:

To achieve the strategic objective company has developed following strategies.

Focus on maximizing revenues and margins. Capture maximum telecommunications revenue potential with minimum geographical coverage. Offer multiple telecommunications services to provide customers with a "one-stop shop" solution. Position itself to tap data transmission opportunities and offer advanced mobile data services. Focus on satisfying and retaining customers by ensuring high level of customer satisfaction.

Leverage strengths of its strategic and financial partners. Emphasize on human resource development to achieve operational efficiencies. To increase the numbers of retailers from time to time with the increasing demand for the product by the end user the Consumer. To satisfy the customer by providing the best network with the widest coverage. Providing various types of schemes and offer the widest range of products available with the company.

2.4 BUSINESS:
Bharti Tele-Ventures current business includes Mobile services Fixed-line National and international long distance services

VSAT, Internet services and network solutions

2.5 Achievement & Awards:

In last 10 years, Bharti-Airtel limited has achieved many first & unique records: It was first to launch nationwide roaming operation It was first across the 1 million and 5 million customers marks. It was also the first to launch service overseas. It was first to launch life time validity card of Rs. 999. To have lifetime validity in 12 installments of Rs. 99 only, is also available.

The company was awarded the Indian mobile operator of the year 2005 by Asian mobile News.

The company received 2 awards at the prestigious Advertising Agencies Association of India (AAAI): The companys flagship brand Airtel was awarded with a silver for the brand campaign of the year. The companys flagship brand Airtel was awarded with a silver for the best advertising Film.

The company was ranked as Indias 2nd best Employer based on a survey conducted by Hewitt Associates in association with CNBC.

The company had been awarded as Indias best managed company announced by Asia money in December 2004.

The company was awarded with the world Communication Best Brand Award of the Year by London based Emap Communication group in October, 2004.

The company was awarded the emerging company of the year by the Economic Times in October 2004.

The company was amongst the worlds top ten companies on share price gain given its 276% change in price per share over last year according to the Business Week.

Airtel

won

the

AVAYA

GLOBAL

CONNECT

CUSTOMER

RESPONSIVENESS AWRAD, 2005for best customer service in the telecom sector.

Airtel won the prestigious WORLD COMMUNICATION AWARD for being best operator in the world on project management.

Bharti- Airtel bagged the FIRST POSITION FOR QUALITY amongst all service companies and overall silver trophy at the CII NATIONAL SIX SIGMA AWARDS.

Airtel enterprise services won the FROST & SULLIVAN MARKET LEADERSHIP AWARD for managed WAN services market, 2005.

Bharti Airtel has become the first Indian company to win the prestigious MIS ASIA IT EXCELLENCE AWARD 2005.BHARTI won the award in the best change management category for its IT COP [COMMUNITY OF PRACTICE] transformation over 3 years culminating in a strategic on demand outsourcing partnership with IBM.

Brand Airtel continued to create buzz. Airtel reigned supreme as the buzziest brand of the year in a survey conducted by agencyfaqs.

Airtel won the Readers digest trusted brands gold award for the mobile service provider category in India.

Bharti telesoft has been ranked amongst Asias top 100 technology companies by red herring, a technology and innovation magazine. The company has also made it to Deloitte Technologys India fast 50 programmers that rank the 50 fastest growing technology companies by regions.

2.6 BOARD OF DIRECTORS

The Company is headed by Chairman & Group Managing Director- Sunil Bharti Mittal who is assisted by two Joint Managing Directors- Akhil Gupta and Rajan Bharti Mittal. The Company also has two Presidents- Mobile Services and Infotel Services; this responsibility includes Fixed-line, Long Distance and Broadband Services. The company also has two corporate directors-CMDs office and HR. The Presidents have to report to the Chairman and Managing Directors. The head of units and SBUs report to the respective business's President. The above details are shown in below chart:

2.7 MANAGEMENT STRUCTURE

An apex team of Corporate Directors has been constituted. The Corporate Directors have supervisory and strategic responsibilities for functional areas across business lines. The Directors oversee functional areas including Business Development, Human Resources, Marketing, Corporate Communication, IT & Technology, Finance, Legal, Corporate Affairs, Corporate Strategy & Planning and Supervisory Director cum Chief Mentor mobility. The organization structure is designed to ensure that identical businesses are run along similar lines and best resources in any functional field, be tapped to serve the best interests of the entire group. The structures also defines the role of the Head of the units who are totally empowered to manage their respective companies and are fully responsible for business operations to build world-class organizations with a high degree of customer focus.

2.8 CORPORATE STRUCTURE

2.9 SWOT analysis:

Competitive Strengths

Bharti Tele-Ventures believes that the following elements will contribute to the Company's success as an integrated telecommunication services provider in India and will provide the Company with a solid foundation to execute its business strategy:

Nationwide Footprint - As of April 30, 2005, 100% of India's total mobile subscribers resided in the Company's twenty-three mobile circles. These 23 circles collectively accounted for approximately 100% of India's land mass;

Focus on telecommunications to enable the Company to better anticipate industry trends and capitalize on new telecommunications-related business opportunities;

The strong brand name recognition and a reputation for offering high quality service to its customers;

Quality management team with vision and proven execution skills; and The Company's strong relationships with international strategic and financial investors such as SingTel, Warburg Pincus, International Finance Corporation, Asian Infrastructure Fund Group and New York Life Insurance.

Airtel is offering a slew of innovative and customized products and services for its customers. Some of these include:

Airtel Live A multi access entertainment portal on the mobile with the most comprehensive content in the spheres of movies, music, sports and mobile games. Properties, which can be experienced and downloaded, include games, color wallpapers, video clips, polyphonic ringtones, music messages, jokes, news, stock tickers etc. Content on Airtel Live can be

accessed through voice (by dialing 646), SMS (sending keyword to 646), GPRS (Airtel Live mobile portal) or the web (www.airtelworld.com).

Hello Tunes Airtels Ring back tone service, Hello Tunes, is an exclusive and personalized mobile music service where the caller hears songs and other sound clips instead of the traditional switchboard ringring tone. Customers can choose from a collection of Bengali, English and Hindi amongst others.

Missed call alert - 'Never Miss a Call on your Airtel' - An innovative service from Airtel, the customer is informed about the calls that he or she missed when their phone was either switched off or not reachable.

Widest roaming coverage nationally and internationally - As a result of the largest spread across 21 circles in India, Airtel offers its customers of staying connected with their near and dear in one of the largest number of locations in India. Airtel also offers the largest international roaming coverage across 125 countries and 250 networks across the globe.

Easy Bill 1st time in Bengal, Airtels state-of-the-art billing system not only makes sure bills are easy to read but also ensures error free billing.

Choice of Number Only Airtel offers its customers the freedom to choose their own lucky number for a connection for oneself or even for another member within the family.

GPRS and MMS Customers can receive instant access to the Internet from their mobile phones through their Airtel GPRS services or send colored picture messages with sound clips via the Airtel Multimedia Messaging service. With the launch of GPRS services, Airtel will be the 1st operator to offer GPRS services on GSM in the state. Airtel is targeting to offer attractive benefits on GPRS for its customers.

M-Bill Customers can know their bills even before receiving them. All information is available via a mini statement on SMS giving details of current charges, total amount due and payment due date.

Power of 32K SIM Airtels 32K Sim is Indias most powerful simcard that offers customers host of facilities in a convenient way. It enables

customers to save up to 250 numbers in the phone book and up to 30 messages in the inbox.

World class customer care Airtel believes in delighting customers at every step of their mobile phone experience Only Airtel provides a national call center number 121and sate-of-the-art customer care facility.

Weakness:

Bharti-Airtel ltd. faces significant competition from private operators and government controlled companies. These government controlled companies may have significantly greater recourses than Bharti-Airtel ltd.

High competitive intensity results in higher churn rates, higher customer acquisition cost and an increased pressure on the margins.

It is highly capital intensive and has long gestation period. So Bharti-Airtel ltd. will require additional financing at diminishing rate in the form of debt or equity to meet further capital requirement.

Changes in technology may render current technology obsolete or require making substantial capital investment to upgrade existing infrastructure.

In order to provide high quality telecommunication services, Bharti-Airtel ltd. has to depend on the quality of the networks maintained by other operators and their willingness to cooperate with Bharti.

With the steady growth of the Indian economy and service sector, there is increased requirement of talented management personnel. Given the track record and success of our employees, other companies often look at Bharti as a hunting ground to hire talent.

Opportunities:

Growing market : The Indian telecom industry has shown robust growth in 2004-05 and is poised to be the fastest growing and the most competitive wireless market in the world. As on 31st march, 2005 wireless penetration in India was 5% as against countries like china 27%, Philippines 42% and US 64%.

Number portability: Number portability would allow customer to retain their telephone number even after switching service provider or network. The system would give us high churn of customer of other telecom operators.

Broad band & data market : The growth potential of broadband & data market is believed to be immense. The penetration level of broad band services is currently low in India. Our strategy has been to provide broadband services through DSL along with regular fixed line telephone services.

Integrated solution: With the creation of the enterprise services business, we have positioned ourselves well to tape the high-end Corporate market and our ability to provide an entire range of services make us the preferred choice of corporate.

Emerging technology:

With the emergence of newer technologies in the future like 3G, WiMax, Triple play etc., we believed that we are in favorable position to benefit from the current and new technologies which would result in strengthening our market leadership.

Threats:

Number portability : Just as number portability is an opportunity to us; it is also a threat to the extent that it will allow other operators to take customers from our network. How ever we believe that we should stand to gain from the introduction of number portability in the country.

New entrants: The Indian economy is growing at a tremendous pace making it an attractive destination for many foreign telecom players. The government recently announced their plan to hike the foreign direct investment levels in the telecommunications sector to 74% from the current 49%. According to various media reports, this announcement has given a remarkable boost to the sector with foreign majors announcing their interest to enter the Indian telecommunications market.

Skilled manpower & talent: With the steady growth of Indian economy and the service sector, there is increased requirement of talented management personnel. Given the track record and success of our employees, other companies often look at us as a hunting ground to hire talent.

2.10 BHARTIs GROWTH PARADIGM:

2.11 BUSINESS SOLUTION:

Information Broadcast

Information Broadcast is a means of simultaneously disseminating information to multiple employees/customers over SMS. It also gives the flexibility of sending messages at a predefined time and pre-defined date. The user logs on to the solution through internet, types the message, selects the group he wants to send the message to and after defining the date and time just clicks on the send' button. Call Centers , Business today is run for the customers. To manage customer queries (pre sales and post sales), clients require setting up small call centers with minimum expenses. To help out clients with such requirement Airtel proposes the call center solution. This solution helps the clients to start up a local call center with facilities to receive 4-5 simultaneous calls. These call centers can be in a single location or multi location.

Audio Conferencing by Airtel Instead of traveling to meet with customers and suppliers many Enterprises are saving on travel costs by using Airtel's Audio Conferencing facility. Audio Conferencing is an easy way to have multiple people participates in the same phone call together. To avail of audio conferencing one does not need to install any expensive devices, one's landline or mobile phone will suffice. The user has an option of either giving out a list of numbers to be dialed out, or he can be provided with a dial in number to which people call into.

Corporate SMS Directory

This service enables a user or a set of users to upload their mobile numbers, names and

locations in an Airtel Server. These users can then access their numbers by using the SMS facility on their phones. AirTel provides space to its clients to upload their directories onto its servers.

These numbers need not be just AirTel Mobile numbers. These can even be your fixed line numbers. Two or more numbers can be given for the same person. Now customers need not to call up your reception to enquire about numbers. Store as many personal numbers in your address book as you want.

PART C

Return on Investment

3. RETURN ON INVENSMENT
What is Return on Investment? ROI is an accounting valuation method. The ROI is a return ratio that compares the net benefits of a project, versus its total costs. For example, if a project has an ROI of 300%, the net benefits derived from that project are three times those of the expected total costs to implement the project. As such, the ROI calculation represents the relative value of the project's cumulative net benefits (benefits minus costs) over the analysis period, divided by the project's cumulative total costs, and expressed as a percentage.

Because the numerator (Net Income) is an unreliable corporate performance measurement, the outcome of the formula for ROI must also be unreliable to determine success or corporate value. However the ROI formula still shows up in many annual reports...

Return on Investment overstates economic value The degree to which ROI overstates the economic value depends on at least 5 factors. 1. 2. Length of project life. If this is longer, the overstatement will be bigger. Capitalization policy. If the fraction of total investment capitalized in the

books is smaller, the overstatement will be bigger. 3. Rate at which depreciation is taken in the books. Depreciation rates that

are faster than straight-line basis will result in a higher ROI. 4. Lag between investment outlays and earning back these outlays from cash

inflows. If the time lag is greater, the degree of overstatement will also be greater. 5. Growth rate of new investment. Fast growing companies will have

lower Return on Investment.

Calculation of Return on Investment. Formula: Net Income / Book Value of Assets = ROI

A better alternative is: Net Income+Interest (1-Tax Rate) / Book value of Assets = ROI

3.1 INTRODUCTION:

Bharti-Airtel ltd. has maintained its strong position at financial level as well as market level. It is largest mobile service provide in India, both in terms of revenue as well as subscribers. So in order to identify profit center of each and every tower/sites, they called upon us to assist them in executing their project for Return on investment.

Objective of study:

Analyze returns on each tower and sites in terms of revenue and expenses for the month of May, 2006. Analytical study of payback period. Recommend how to minimize excessive expenses, so that company would be benefited.

Utility of study:

With the help of this study, the company will be able to know profitable sites in each zone. It also helps to identify sites which generate more expenses. Management will be able to get initiatives for non-profitable sites.

3.2 METHODOLOGY:
The major investment of telecom sector is in towers. Bharti-Airtel makes two types of investment one is in towers & second is infrastructure investment.

The following details required for calculating ROI at bharti-Airtel: Investment (fixed assets) a. infrastructure b. tower/sites Revenue a. Prepaid Revenue b. Postpaid Revenue Expenses a. security b. caretaker c. water charges d. rent e. diesel f. electricity g. depreciation h. variable cost

Sources of data:

Management has provided essential data for our project. For further information, we have gone through the annual report of the company.

Tool for analysis:

We have taken Return on investment as a tool for our project.

3.3 SITE DETAILS:

There are total 1400 sites divided in 4 different zones. The following table provides detail about on air sites as on 31st may, 2006:

Zone TOTAL

A bad Sites No. 425

Baroda

Surat

Rajkot

270

325

380

1400

Sites on air

Rajkot, 380

A bad, 425

A bad
Baroda
Surat
Rajkot

Surat, 325

Baroda, 270

3.4 PROCESS OF CALCULATING ROI :

STEP-1:
We calculated expenses of each tower/site. We made list of on air site as on 31st may, 2006. Then we plotted expenses like security, rent, diesel, electricity, depreciation etc.

Site name

Diesel

Security

Water charge

Care taker 4751 4751 4751 4751

R A S B

3557 2436 6213 1063

4751 9292 9292 9292

300 300 300 300

Site name

Rent

Depn

Variable cost

Electricity

R A S B

6000 8924 15097 7500

292240 299084 303927 312988

35273 40439 123110 44526

11000 11000 8740 11000

STEP-2:

We calculated revenue by following formula: MOU * outgoing rate = revenue generated from sites

Outgoing rate: a. Postpaid rate: 1.50 b. Prepaid rate: 1.75

Site name R A S B

Prepaid MOU 124270 128167 115432 163815

Postpaid MOU 165104 110615 188680 152259

Prepaid Revenue 217472 224292 202006 286676

Postpaid Revenue 247650 165922 283020 228384

Total Revenue 465128 390214 485026 515064

STEP-3:

The major investment of Bharti-Airtel is in towers and infrastructure. So total investment included a. Infrastructure investment b. Investment in different types of tower. We took information of above data from management.

Site name R A S B

Infrastructure 2106731 2048952 1494777 1119027

Investment 2000000 600000 1000000 1000000

Total invest. 4106731 2648952 2494777 2119027

STEP-4:

Then expenses compared with revenue generated by sites in terms of prepaid & postpaid revenue. So we calculate net revenue by following formula:

Net revenue = total revenue total expenses. (We take net revenue as annual bases)

Site name R A S B

Total Revenue 465128 390214 485026 515064

Total Expenses 359872 376226 471430 391420

Net Revenue 105256 13988 13596 123644

Annualized Revenue 1263072 167856 163152 1483728

STEP-5: We calculated ROI by following formula:

Annualized Revenue ROI =--- ----------------------------- * 100 Book value of Assets

Site name

Annualized Revenue

Total Investment 4106731 2648952 2494777 2119027

ROI

R A S B

1263072 167856 163152 1483728

30.75 % 6.34 % 6.54 % 70.01 %

STEP-6:

Finally payback period calculated. Average payback period of all the sites is 6 years. It is calculated for further analysis by following formula:

Site

Cash Expense

Cash Revenue

Annualize Cash Inflow

Total Invest.

Payback Period

R A

67632 77142

465128 390214

4769952 3756864

4106731 2648952

10 9

S B

167503 78432

485026 515064

3810276 5239584

2494777 2119027

8 5

So, by this way we have calculated Payback period. In above table, we kept payback period in months.

3.5 EXPENSE ANALYSIS:

1. Rent:
Rent is paid on all sites on monthly bases. There might be more than one landlord for the same site. We have prepared one database which facilitates management to map rent expenses. We plotted technical sign off id for all sites. This database is very helpful to company. It solved many problems related with basic mapping.

This database include following: Site name Tech. site id Name of landlord Landlord address Location Zone Date of agreement Period of agreement Bank name A/c. number

rent 3000000 Expenses (Rs.) 2500000 2000000 1500000 1000000 500000 0 A'bad Baroda zone Surat Rajkot
rent

The above chart shows that highest rent goes to Rajkot zone.

2. Electricity:
Electricity is required for running any tower. Bharti-Airtel paid electricity bill after 2 months. They always try to convert all sites into permanent electricity sites, because if sites run on diesel caused high expenditure.

electricity 4000000 3500000

Expenses (Rs.)

3000000 2500000 2000000 1500000 1000000 500000 0 A'bad Baroda zone Surat Rajkot

electricity

The above chart shows that highest electricity expenses occurred to Rajkot zone.

3. Security: All sites required security guard. Bharti-Airtel paid also caretaker and water charges as per requirement. Water charges paid mostly in Rajkot zone.

Security Expenses:

security 1400000 1200000 Expenses (Rs.) 1000000 800000 600000 400000 200000 0 A'bad Baroda zone Surat Rajkot
security

The above graph represented that security expenses high in Rajkot zone.

[Contd.]

Water charge:

watercharges 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 A'bad Baroda zone Surat Rajkot

Expenses (Rs.)

watercharges

The above chart shows that water charges high in Rajkot zone.

Caretaker:
caretaker 250000
Expenses (Rs.)

200000 150000
caretaker

100000 50000 0 A'bad Baroda zone Surat Rajkot

The above graph represented that caretaker expenses high in Rajkot zone.

4. Diesel: Diesel required for that sites where, no connection of electricity & Power cut. Mostly expenses occurred in Ahmedabad zone. Management wants to reduce expenses so that they try to convert 268 DG sites into electricity as prior project.

diesel 1600000 1400000 Expenses (Rs.) 1200000 1000000 800000 600000 400000 200000 0 A'bad Baroda zone Surat Rajkot

diesel

5. Depreciation:

Bharti-Airtel implemented SLM [straight line method] for depreciation. Depreciation is written off into 10 years.

depriciation 100000000 Expenses (Rs.) 80000000 60000000

depriciation

40000000 20000000 0 A'bad Baroda zone Surat Rajkot

The above graph represented that depreciation is high in Rajkot zone.

[Contd.]

6. Variable cost:

It included administrative, advertising, personnel expenses. We take 30 % of total revenue generated from each sites.

variable cost 25000000 Expenses (Rs.) 20000000 15000000

variable cost

10000000 5000000 0 A'bad Baroda zone Surat Rajkot

The above graph represented that variable cost is high in Baroda zone.

3.6 REVENUE ANALYSIS:

1. Postpaid Revenue:

Postpaid Revenue 25000000 Revenue (Rs.) 20000000 15000000

Postpaid Revenue
10000000 5000000 0 A'bad Baroda Zone Surat Rajkot

As per analysis, highest postpaid revenue comes from Ahmedabad zone. We evaluate that sites in Ahmedabad utilized effective postpaid MOU, so those generates better revenue compare to other zone.

[Contd.]

2. Prepaid Revenue:

Prepaid Revenue 40000000 35000000 Revenue (Rs.) 30000000 25000000 20000000 15000000 10000000 5000000 0 A'bad Baroda Zone Surat Rajkot

Prepaid Revenue

As per analysis, highest postpaid revenue comes from Ahmedabad zone. Similar to postpaid revenue, Ahmedabad zone generates maximum revenue in prepaid. Surat and Rajkot zones are follower in terms of revenues. Management should make efforts to increase revenue in Baroda zone.

3.7 ROI ANALYSIS:

After calculating annual revenue our next step is to find out Return on Investment.

1. Positive ROI:

Positive ROI

6%

25% 54%

A'bad

Baroda

Surat

Rajkot
15%

We analyzed that mostly revenue comes from Ahmedabad zone so that there are 54% positive returns on sites in Ahmedabad. There are high security, water charges, and rent depreciation expenses, so that only 6% positive ROI in Rajkot zone.

[Contd.]

2. Negative ROI:

Nagative ROI

29%

27%
A'bad
Baroda
Surat
Rajkot

24%

20%

Reasons for Negative ROI: 280 sites have launched recently. So their revenue growth is very less. It is one of main reason of negative ROI. Bharti-Airtel ltd. charged depreciation by using SLM. So the value of assets written off in 10 years. So there is huge amount of depreciation per site. It caused negative ROI. We can say that ,Diesel required for that sites where, no connection of electricity & Power cut. It is possible to reduce diesel expenses by converting DG site into electricity sites. Variable cost is also very high.

There are 130 sites which generate average revenue Rs.85, 000. Those sites utilization rate is less than 20%. Those sites are more than 1 year old.

PART- D

Project on converting Dg sites into Electricity

4. PROJECT OF CONVERTING DG SITES ELECTRICITY:

INTO

One of the reasons of negative ROI is high diesel expenses. So it would be beneficial for company to convert 268 DG sites into electricity.

Around 1000 sites have negative ROI. So it is essential to take necessary steps for improvement.

Airtel-bharti divided all sites into main 4 zones.

1. Ahmedabad 2. Baroda 3. Rajkot 4. Surat.

The following diagram shows DG sites in each zone:

SITES ON DG

Rajkot, 28 Surat, 65

A'bad zone, 83

Baroda, 92

zone A'bad

zone Baroda

zone Surat

zone Rajkot

4.1 PROCESS OF SITE UTILISATION:

Requirement of sites from marketing people

Planning & site survey

Acquisition & set priorities

Prepare agreement

Selection of vendor

Demand note from vendor

Payment of DD/ cash

Application to EB

4.2 WORKING ON DG PROJECT:

First of all, we have prepared MIS [management information system] to verify power status of all sites including WIP, hold & on air sites. The following table presents EB status of all sites as on 31st may, 2006:

EB STATUS ON PERMANENT SITES NO. 942 50 140 268 1400 TEMPARORY TAPPED DG TOTAL

We updated our database by making conversation with vendors on daily bases. We analyzed following reasons for delay:

Lack of proper communication Lack of co-ordination No follow-up Delay in DD

[Contd.]

As per MIS,

Consumption (per site) Diesel rate

Expense (per day)

Total Expense(per month)

36 liter. [1 hour = 2 liter.]

Rs.40

Rs.1440

Rs.43,200

The above table shows huge expenditures spend on DG sites. We concluded, it is very essential task for management to convert DG sites into electricity as soon as possible. It also helps to improve negative ROI.

We tried to fill communication gap between vendors and management, so there will be proper follow up. We signified requirements of vendors to management. They accepted our suggestions. So we succeed to convert 70 DG sites into electricity.

Saving of one month:

Expense [per month]

Sites

Total saving

Rs.43200

70

Rs.12,96,000

PART E

Learning and contribution

5. LEARNING & CONTRIBUTION TO THE COMPANY

Working with Airtel was indeed an enriching experience where each day was a good learning experience in itself. Like everyone we had a lot of expectations from our summer project. We are glad to say that we have truly benefited from it.

5.1 Application of concepts, tools, techniques and skills learnt at AESPG IBM:

The learning from the first year of our course of study was of immense help in successful completion of the project. It was a wonderful experience applying what we had learnt and in a way the project helped re-enforce these concepts. These concepts were the foundation on which we worked.

5.2 Tools and Techniques

The tools and techniques of data analysis and presentation learnt at AES PGIBM in the variety of projects and reports done were very useful. I had a good idea about effective presentation skills. This helped bring a sense of professionalism in my approach as a whole.

5.3 Knowledge and skills acquired from the company

The corporate exposure that we received by working with Airtel was a great learning opportunity for us. It gave us a hand on practical experience of the theories we had studied which in a way helped us understand the theoretical concepts better.

We are basically commerce student; hence it took time to understand technical terms in telecom industry. But with the help of staff, we learnt a lot.

We are placed as coordinator in DG project, at that time we learnt how to plan, how to coordinate with vendors and the skill which is required to get information from different vendors.

In the project of ROI, we got practical experience by applying theoretical knowledge. We experienced that it is very difficult to deal with financial tools in practical life. But it was good learning for us.

5.4 Contribution to the company:

We have prepared one database which facilitates management to map rent expenses. We plotted technical sign off id for all sites. This database is very helpful to company. It solved many problems related with basic mapping.

We have prepared MIS [management information system] to verify power status of all sites including WIP, hold & on air sites. We updated our database by making conversation with vendors on daily bases. We signified requirements of vendors to management. They accepted our suggestions. So we succeed to convert 70 DG sites into electricity.

We gave them detailed list of recommendation for improving ROI from our side. There were some recommendation, which are not been taken seriously before.

5.5 Recommendations:

Following are recommendations given by us to Bharti-Airtel ltd.: There are 10 - 15 sites which have been cancelled; still Bharti-Airtel ltd. has to pay rent due to legal or other issues. Management should focus on these sites and try to take serious action. There is lack of coordination among all departments. Management should try to make effective communication among all. Bharti-Airtel ltd. has to pay high diesel expenses, which should be minimized by converting DG sites into electricity. Variable cost is also high; it must be reduced in Baroda zone. Management should reduce sites which have lower utilization rate & higher expenses. As we say earlier, 130 sites utilize less than 20% of their capacity. These sites do not generate revenue compare to other sites. Management should concentrate on these sites & try to get better utilization rate.

5.6 Limitation:
It is very good experience to work with Bharti-Airtel ltd. & we have learnt many practical skills in financial area, but there are following limitations:

We have studied real data during 2 months, but we cant publish real data into our project. According to companys policy, management does not reveal real financial information to outside world. ROI is based on net income. Net income is an unreliable corporate performance measurement; the outcome of the formula for ROI must also be unreliable to determine success or corporate value. So we are unable to measure efficiency of the company by this single tool. We have assigned 2 projects at the same time, so it was very difficult for us to concentrate on ROI project. Management is ready to give project for further analysis but Training period is only 2 months, so we cant take other financial tool for further analysis.

6. BIBLOGRAPHY:

www.coai.org www.indiacelluar.com www.airtel.in www.gsm.com www.bhartilive.touchindia.com www.airtelworld.in Annual report of Bharti-Airtel ltd. Bharti today [In-house magazine]

7. GLOSSARY:

DSL

= Digital subscriber line

RTT = Roof Transmission Tower

RTP

= Roof Transmission Pole

GBT = Ground Based Tower

IBS

= In build Services

GPRS = General Packet Radio Service

MMS = Multi Media Services

MOU = Minute Over Usage

DG

= Diesel Generator

GSM

= Global services for mobile operators

CDMA = Code Divisional Multiple Access

PART -F

Annexure

Site name

Water Security charg e

Caretak er

Rent

Diesel

Electricity

Depreciatio n

Variable cost

Total Expense s

Postpaid revenue

Prepaid revenue

Total revenue

6,700

11,000

316,943

164,179

498,822

112166.95

435095.5

547262.42

10,600

11,000

272,653

186,356

480,609

152454.9

468732.3

621187.22

6,700

29,776

295,466

180,689

512,631

337644.21

264651.9

602296.06

6,000

11,000

283,512

158,560

459,072

114967.71

413565.4

528533.11

7,500

11,000

306,963

143,254

468,717

308027.38

169486.6

477514.02

6,000

11,000

316,943

164,179

498,122

112166.95

435095.5

547262.42

5,000

11,000

220,070

128,156

364,226

130659.85

296528.4

427188.21

5,500

11,000

312,711

229,575

558,786

475279.48

289970.4

765249.91

8,000

11,000

295,466

235,797

550,263

604551.90

181439.3

785991.17

6,000

11,000

289,717

189,831

496,548

334394.00

298375.3

632769.26

6,000

7,920

266,723

150,257

430,900

254475.43

246381.1

500856.52

6,000

11,460

271,558

141,262

430,280

51171.79

419702.7

470874.51

5,500

11,000

265,352

151,413

433,265

81180.77

423529.2

504710.02

9,292 O 6,000 11,000 270,179 154,541 451,012 150448.48 364689.6 515138.04

9,292

300

4,751

12,274

11,000

183,927

119,375

340,919

66309.85

331608.3

397918.17

9,292

7,000

9207

100,000

132,869

258,368

204607.40

238289

442896.42

9,292

300

4,751

5,500

8,395

6,000

292,356

178,973

505,567

93990.85

502586.2

596577.09

9,292

6,000

11,000

100,000

55,690

181,982

73073.79

112559.6

185633.40

9,292

6,500

11,000

100,000

144,481

271,273

152466.54

329137

481603.50

9,292

300

6,000

1,400

11,000

100,000

72,330

200,322

53545.29

187554.1

241099.40

300

4,751

6,000

11,000

100,000

56,705

178,756

56943.01

132073.2

189016.26

9,292

300

6,000

11,000

100,000

66,767

193,359

32504.09

190052

222556.09

9,292

9,900

26,060

272,472

173,918

491,642

161894.68

417832.5

579727.18

9,292

8,480

11,000

211,903

137,566

378,241

88021.36

370532.9

458554.23

9,292

300

4,751

11,418

14,600

298,625

168,561

507,547

102303.61

459565

561868.60

AA

9,292

8,250

2,114

12,116

183,927

159,508

375,207

152921.72

378772.5

531694.19

AB

9,292

6,000

11,000

270,179

154,541

451,012

150448.48

364689.6

515138.04

AC

9,292

300

5,000

11,000

220,070

216,546

462,208

82705.61

639114.4

721820.01

NOTE: This annexure shows our working on Expenses and revenues, but data is not real one. We have submitted real datasheet and working to the company.

Site name

Net revenue %Utilization

net

annual

Annual revenue Infrastructure Investment

Total invest ROI Cash-ROI payback period

cash revenue

48,441

57.40

4,384,604

581,290

2,169,429

1000000

3,169,429

18.34

138.34

0.72

140,578

101.38

4,958,773

1,686,939

1,726,528

1000000

2,726,528

61.87

181.87

0.55

89,666

76.25

4,621,575

1,075,986

1,954,657

1000000

2,954,657

36.42

156.42

0.64

69,462

77.83

4,235,678

833,539

1,835,116

1000000

2,835,116

29.40

149.40

0.67

8,797

62.46

3,789,118

105,565

2,069,627

1000000

3,069,627

3.44

123.44

0.81

49,141

57.40

4,393,004

589,690

2,169,429

1000000

3,169,429

18.61

138.61

0.72

62,962

80.62

3,396,381

755,542

1,200,699

1000000

2,200,699

34.33

154.33

0.65

206,464

75.40

6,230,099

2,477,565

2,127,112

1000000

3,127,112

79.23

199.23

0.50

235,728

102.59

6,374,326

2,828,737

1,954,657

1000000

2,954,657

95.74

215.74

0.46

136,221

74.21

5,111,262

1,634,655

1,897,172

1000000

2,897,172

56.42

176.42

0.57

69,956

66.90

4,040,155

839,476

1,667,232

1000000

2,667,232

31.47

151.47

0.66

40,595

56.40

3,745,826

487,136

1,715,575

1000000

2,715,575

17.94

137.94

0.72

71,445

66.19

4,041,564

857,341

1,653,519

1000000

2,653,519

32.31

152.31

0.66

64,126

69.65

4,011,656

769,511

1,701,787

1000000

2,701,787

28.48

148.48

0.67

56,999

99.72

2,891,109

683,985

839,270

1000000

1,839,270

37.19

157.19

0.64

184,528

3,414,342

2,214,342

1000000

1,000,000

221.43

341.43

0.29

91,010

59.46

4,600,389

1,092,122

1,923,556

1000000

2,923,556

37.36

157.36

0.64

3,651

1,243,817

43,817

1000000

1,000,000

4.38

124.38

0.80

210,330

3,723,965

2,523,965

1000000

1,000,000

252.40

372.40

0.27

40,778

1,689,331

489,331

1000000

1,000,000

48.93

168.93

0.59

10,260

1,323,125

123,125

1000000

1,000,000

12.31

132.31

0.76

29,197

1,550,367

350,367

1000000

1,000,000

35.04

155.04

0.65

88,085

97.65

4,326,684

1,057,024

1,724,717

1000000

2,724,717

38.79

158.79

0.63

80,313

80.36

3,506,592

963,760

1,119,027

1000000

2,119,027

45.48

165.48

0.60

54,322

60.50

4,235,364

651,859

1,986,254

1000000

2,986,254

21.83

141.83

0.71

AA

156,487

161.78

4,084,967

1,877,843

839,270

1000000

1,839,270

102.10

222.10

0.45

AB

64,126

69.65

4,011,656

769,511

1,701,787

1000000

2,701,787

28.48

148.48

0.67

AC

259,612

93.50

5,756,184

3,115,346

1,200,699

1000000

2,200,699

141.56

261.56

0.38

NOTE: This annexure shows our working on ROI and payback, but data is not real one. We have submitted real datasheet and working to
the company.