vvvvA STUDY ON THE PERFORMANCE OF SBI MUTUAL

FUND WITH OTHER MUTUAL FUNDS

A Study At

OPERATIONAL EFFICIENCY OF TATA

TELESERVICES

By
O.N.SANTOSH
III Semester, MBA
Reg.No.07MB3598

Guide

Mrs. VASANTHA, MBA, M.COM, M.phil

Professor
MSB, Chennai.

Magnus School of Business,

140, Marshalls Road,
Egmore, Chennai-600008.

A project report submitted to the University of Mysore in partial

fulfillment of the requirement of MBA Degree Examination of
2007-2009.
 UNIVERSITY OF MYSORE
MAGNUS SCHOOL OF BUSINESS
EGMORE
CHENNAI-600001.

CERTIFICATE

This is to certify that Mr. O.N. SANTOSH Student of III Semester MBA course has
prepared this project report entitled “A STUDY ON OPERATIONAL EFFICIENCY
OF TATA TELESERVIES ” A Study at. TATA TELESERVICES, CHENNAI., in
partial fulfillment of the requirement of MBA degree examination of 2007-2009.

ACADEMIC HEAD
(Prof.
S.V.Ganesan)
 UNIVERSITY OF MYSORE

MAGNUS SCHOOL OF BUSINESS

EGMORE
CHENNAI-600001.

GUIDANCE CERTIFICATE

The project report entitled “A STUDY ON THE OPERATIONAL EFFICIENCY OF

TATA TELESERVICES., CHENNAI, is written by Mr. O.N. SANTOSH under my
guidance. The report is submitted to the University of Mysore in partial fulfillment of the
requirements of MBA degree examination of 2007-2009.

PROJECT GUIDE

(Prof. S.VASANTHA)
 DECLARATION

I hereby declare that this project report titled “A STUDY ON OPERATIONAL

EFFICIENCY OF TATA TELESERVICES” a case study prepared by me under
guidance of Mrs. VASANTHA, MBA, M.COM, Professor MSB, in partial fulfillment
of the requirement of Master in Business Administration Degree to be awarded by the
University of Mysore for academic year 2007-2009.

I further declare that the project report has not been submitted earlier to any
Institute/University for any degree or diploma.

Date:

Place:

(O.N. SANTOSH)

[Reg. No. 07MB3598]

 ACKNOWLEDGEMENT

I wish to express my sincere gratitude to few people without whose support,

guidance & encouragement, this project could not have been completed.

I would like to express my gratitude to Prof. Mr. S.V.GANESAN, BSC,

B.TECH., PGDBM ( IIM-B) Academic Head of Magnus School of Business,
Chennai, for providing me an opportunity to undertake this project work, thus making
way for enhancing my knowledge about the project.

I am extremely grateful to my project guide Mrs. VASANTHA, MBA,Professor,

MSB, for her kind and valuable guidance in completing this project.

I sincerely Thank Mr. V.V. PRAKASH, of TATA TELESERVICES, Chennai,

who spent their valuable time in providing information and suggestions to me when
required.

Date:

Place:

(O.N. SANTOSH)

[Reg. No. 07MB3598]

 INDUSTRY PROFILE

Introduction to telecommunication

Telecommunication is the assisted transmission of signals over a distance for the

purpose of communication. In early times, this may have involved the use of smoke
signals, drums, semaphore, flags or heligraph. In modern times, telecommunication
typically involves the use of electronic transmitters such as the telephone, television,
radio or computer. Early inventors are the field of telecommunication includes Alxeander
Graham Bell, Guillermo Marconi and John Logie Baird. Telecommunication is an
important part of the world economy and the telecommunication industry’s revenue has
been place at just 3 percent of the gross world product.

Telecommunication is an important part of modern society. In 2006, estimates placed

the telecommunication industry’s revenue at $1.2 trillion or just under 3 % of the gross
world product (Official exchange rate).

Telecommunication Industry in India

India’s telecom sector has shown massive upsurge in the recent years in all respects of
industrial growth. From the status of state monopoly with every limited growth, it has
grown in to the level of an industry. Telephone, whether fixed landline or mobile, is an
essential necessity for the people of India. This changing phase was possible with the
economic development that followed the process of structuring the economy in the
capitalistic pattern. Removal of restriction on foreign capital investment and industrial
de-licensing resulted in fast growth of this sector. At present the country’s telecom
industry has achieving a growth rate of 14 percent. Till 2000, through cellular phone
companies were present, fixed landline where popular in most part of country. Today the
industry offer services such as fixed landlines, WLL, GSM mobiles, CDMA and IP
services to customers. Increasing competition among players allowed the prices
drastically down by making the mobile facility accessible to the urban luxury. Major
players in the sector are BANL, MTNL, Bharati teleservices, Hutchisson Essar, BPL,
Tata, Idea, etc with the growth of telecom services, telecom equipment and accessories
manufacturing has also growth in a big way.

The Indian telecommunication network with 110.01 million connections is the fifth
largest in the world and the second largest among the emerging economies of Asia. The
wireless technologies currently in use are global system for mobile communications
(GSM) and Code division multiple access (CDMA). There are primarily 9 GSM and 5
CDMA operators providing mobile services in 19 telecom circles and 4 metro cities,
covering 2000 towns across the country.
EVOLUTION OF THE INDUSTRY IMPORTANT MILESTONES

History of India Telecommunication

1851 First operational land lines were laid by the government near Calcutta
1881 Telephone service introduces in India
1882 Merger with the postal system
1923 Formation of Indian radio telegraphy company (IRT)
1947 Merger of ETC and IRT into Indian radio and cable communication company
1985 Depart of telecommunication established, an exclusive provider of domestic
And long-distance
1986 Videsh Sanchar Nigam limited (VSNL) for international telecommunications
And Mahanager telephone Nigam Limited (MTNL) for service in
1997 Telecom Regulators Authority of India created
1998 Cellular Services are launched in India. New National Telecom policy is
adopted.
1999 Cellular services are launched in India. New National Telecom policy is
adopted.
2000 DOT becomes a corporation, BSNL
OVERVIEW OF TELECOM INDUSTRY

Indian Telecom sector, like any other industrial sector in the country, has gone through
many phases of growth and diversification. Starting from telegraphic and telephonic
systems in the 19th century, the field of telephonic communication has now expanded to
make use of advanced technologies like GSM, CDMA, and WLL to the great 3G
Technology in mobile phones. Day by day, both the Public Players and the Private
Players are putting in their resources and efforts to improve the telecommunication
technology so as to give the maximum to their customers.
The Indian telecom sector can be broadly classified into Fixed Line Telephony and
mobile telephony. The major players of the telecom sector are experiencing a fierce
competition in both the segments. The major players like BSNL, MTNL, VSNL in the
fixed line and Airtel, Hutch, Idea, Tata, Reliance in the mobile segment are coming up
with new tariffs and discount schemes to gain the competitive advantage. The Public
Players and the Private Players share the fixed line and the mobile segments. Currently
the Public Players have more than 60% of the market share.
SCOPE OF TELECOM INDUSTRY

The telecom industry is growing at a great pace and the growth rate is expected to double
with every passing year. There are many new developments in the telecomm sector,
including the ingress of 3G technology that the Indian market is witnessing at present.

PUBLIC AND PRIVATE PLAYERS

MTNL, BSNL, VSNL are the major Public Players, whereas Airtel, Idea, Hutch, Tata,
Reliance, BPL are the leading Private Players in the country. Some of them are entering
foreign markets as well. The Bharati Telecom will be launching its services for the NRIs
in the US with the help of Airtel CALLHOME service.

The market shares of the leading public and Private Players

3G TECHNOLOGY IN INDIA
From the time of telegraphs Indian telecom sector has witnessed an immense growth and
has diversified into various segments like, Fixed Line Telephony, mobile telephony,
GSM, CDMA, WLL etc. The telecom industry is growing at a fast pace introducing
newer technologies. Even the network operators and handset providers are also
coming up with newer value added services and advanced technology cell phones
with multimedia.

Now it's time to welcome the much-awaited 3G Technology. Bharat Sanchar

Nigam Limited is all set to launch the technology by December 2007. Not only the
network providers but also the handset providers in India are waiting eagerly for the
launch of 3G to earn very high revenues from the value added services provided by
the technology.
The technology is initially being launched on CDMA platform. The technology is being
tested over various platforms and cellular networks.

EXISTENS OF 3G TECHONOLOGY
3G Technology was implemented in Japan for the first time in the world. Today the
technology is serving 25 countries over more than 60 networks having its existence
in Asia, Europe and USA. Video conferencing has been a major factor in the success
of the technology.
CDMA2000 3G SUBSCRIBERS BASE WORLDWIDE

3G SUBSCRIBERS BASE (IN MILLIONS)

MAJOR PLAYERS:
There are three types of major players in Telecom Services:
Stated owned companies (BSNK and MTNL)
Private Indian owned companies (Reliance Infocomm, Tata Teleservices)
Foreign invested companies (Hutchison-Essar, Bhrathi Tele-Ventures, Escotel, Idea
cellular, BPL Mobiles, Spice Communications)

TATA TELESERVICE:
Established in 1996, Tata Teleservices, one of the 96 companies of Tata Group, has its
network in 20 circles. It is the first company to launch CDMA mobile services in
India. With investment of Rs.36, 000 crores during financial year 2005-06, Tata
Teleservices has reached the mark of 1.07 crore subscribers.

The company covers a wide range of services like Mobile services, Wireless Desktop
Phones, Public Booth Telephony and Wire line services. It also offers some value
added services like voice portal, roaming, post-paid Internet Services, 3-way
conferencing, group calling, Wi-Fi Internet, USB Modem, data cards, calling card
services and enterprise services.

Tata Teleservices has partnered with Motorola and Ericsson for providing reliable
services to its customer base.

Tata Teleservices Limited along with Tata Teleservices (Maharashtra) Limited serves
over 15.9 million customers (with 75% increase in FY 2007 over March 06-sub base)
covering over 3200 towns. Income from Telecommunication reached to 1,095.13,
with 7.9 lakhs mobile subscribers and 8.3 lakhs fixed wireless subscriber.
 Formerly named as Hughes Tele.com (India) Ltd., Tata Teleservices Maharashtra
Limited (TTML) with 70.83% equity shareholding by TATA Group, is the premier
telecommunication service provider licensed to provide services in Maharashtra
(including Mumbai) and Goa. In February 2002, the Government of India released
25% of VSNL's equity to Tata Teleservices.

MARKET SHARE OF CDMA WIRELESS AS ON 31.12.06

OPERATOS MARKET SHARE

RELIANCE 59.6%
TTSL 32.7%
BSNL 6.7%
MTNL 0.4%
HFCL 0.3%
SATYAM TELELINK 0.2%
COMPANY PROFILE

Tata Teleservices is part of the INR Rs. 2, 51,543 Crore Tata Group that has over 80
companies, over 3, 30,000 employees and more than 3.2 million shareholders. With a
committed investment of INR 36,000 Crore (US$ 7.5 billion) in Telecom (FY 2006), the
Group has a formidable presence across the telecom value chain.

Tata Teleservices spearheads the Group’s presence in the telecom sector. Incorporated
in 1996, Tata Teleservices was the first to launch CDMA mobile services in India with
the Andhra Pradesh circle.

Beginning with its acquisition of Hughes Telecom (India) Limited in December 2002
[now renamed Tata Teleservices (Maharashtra) Limited], which provides services in the
Mumbai and Rest of Maharashtra telecom circles, the company has swung into expansion
mode and currently has a pan-India state-of-the-art network.

Having pioneered the CDMA 2000 technology platform in India, Tata Teleservices
has established a 3G-ready robust and reliable telecom infrastructure in partnership with
Motorola, Ericsson and Lucent. The company has also received the license from the
Department of Telecommunications to launch GSM services as well. With this launch set
for early 2009, TTSL is on the threshold of emerging as a true-play dual technology
telecom operator.

In November 2008, Tata Teleservices entered into an agreement with Japanese

telecom major NTT DOCOMO, as part of which the Japanese company acquired a 26%
stake in TTSL for USD 2.7 billion. The transaction marks a key step in the strategic
evolution of Tata Teleservices, as it moves towards a pan-India dual network presence.
On a broader level, the transaction is also expected to mark the beginning of a
relationship of broader co-operation between Tata companies and the Nippon Telegraph
and Telephone Corporation (NTT).
 The potential benefits and synergies from the alliance with DOCOMO cut across
marketing, handset development and technical support, all of which are expected to
create new opportunities for both companies. The alliance will also accelerate Tata
Teleservices’ GSM plans and help the company penetrate the market with advanced
technology and new VAS offerings.

Tata Teleservices’ bouquet of telephony services includes mobile services, wireless

desktop phones, and public booth telephony and wire line services. Other services include
value-added services such as voice portal, roaming, post-paid Internet services, 3-way
conferencing, group calling, Wi-Fi Internet, USB Modem, data cards, calling card
services and enterprise services.

Some of the other products launched by the company include prepaid wireless desktop
phones, public phone booths, new mobile handsets and new voice and data services such
as BREW games, voice portal, picture messaging, face book, M commerce applications,
polyphonic ring tones, interactive applications like news, cricket, astrology, etc.

STRATEGIC ARRANGEMENTS
(I) Investment in Tata Teleservices (Maharastra) Limited (TTML)
In December 2002, the company acquired 50.38% of the paid up equity capital of
Hughes Telecom Limited (HTIL), the basic technology services providers in the state of
Maharashtra.
(II) Investment in Tata Internet Services Limited (TISL)
As part of its initiatives to optimize synergies between the basic telephony, internet,
virtual private network (VPN) and data center services, the company had invested Rs.
150 Cr in TISL to make it, a fully owned subsidiary.

TISL has entered into a Memorandum of Understanding (MoU) with VSNL on March
15, 2005 for VSNL to manage TISL assets and most of the existing customer base.
(III) Brief History of VSNL

The first Submarine Telegraph Cable from U.K. Landed in Bombay in 1870, heralding
the year of external telecommunications in India. The Eastern Telegraph Co. (ETC) of
1872 And the India Radio Telegraph Co. (IRT) of 1927 merged to from the India Radio
and Cable communication Co. (IRCC) in 1932.

TTML ORGANIZATION:
Tata Teleservices Maharashtra Limited (TTML) spearheads the Tata Group’s presence
in the Indian Telecom Sector by begin the primer telecommunication services provider,
licensed to provide services in Maharastra and Goa.

Formerly Hughes Telecom (India) Ltd., the company was renamed to Tata
Teleservices Maharashtra Ltd subsequent to the acquisition of 70.83% equity
shareholdings by TATA group in December 2002. The company’s shares are traded n
the Bombay stock Exchange (BSE) and National stock exchange (VSE). TTML’s
bouquet of telephony services included mobile, fixed wireless phones (FWP), public
telephone booth & wire line services. Its suite of broadband Data network & application
services include Leased Lines, DSL, Wi-Fi, Ethernet, Managed Gateway Services & Web
conferencing services. The company has deployed the latest 3G 1X CDMA technology
in the state of offer wireless communication services like mobile & fixed Wireless
phones to its customers.
GROWTH OF TTSL:
Tata Teleservices is part if the INR Rs.96723 Crores (US$ 22 billion) Tata group, that
has over 96 companies, over 250,000 employees and more than 2.8 million share holders.
With a committed investment of INR 36,000 Crores in Telecom (FY 2006), the Group
has formidable presence across the telecom value chain.

Tata teleservices spearheads the Group’s presence in the telecom sector. Incorporated
in 1996. Tata teleservices was the first to launch CDMA mobile services in India. Tata
teleservices bouquet of telephony services includes mobile services, wireless desktop
phones, public booth telephony and wire less services. Other services include value
added services like voice portal, roaming, post-paid internet services, 3-way
conferencing, group calling, Wi-Fi internet, USB modem. Some of the other products
launched by the company include prepaid wireless desktop phones, public phone booth ,
new mobile handset and new voice & data service such as BREW games, ring tones
cricket etc.

Tata Indicom redefined the existing prepaid mobile market in India, by their offering –
Tata indicom ‘Non Stop Mobile’ which allows customers to receive free incoming calls.
Tata teleservices today has India’s largest branded telecom retail chain and is the first
service providers in the country to offer as online channel www.i-choose.in to offer
postpaid mobile connections in the country.

Tata teleservices has a strong workforce of 6000. In addition, TTSL has created more
than 20,000 jobs, which will include 10,000 indirect jobs through outsourcing of its
manpower needs. Today, Tata Teleservices Limited along with Tata Teleservices
(Maharsahtra) Limited serve over 20 million customers in over 3400 towns. With as
ambitious rollout both within existing circles and across new circles, Tata Teleservices
offered world-class technology and user-friendly services in 23 circles.
VISION:
Trusted Services to 100 million Happy Customer by 2011.

MISSION:
To empower every Indian to connect with the world affordably.

VALUES:
• Fairness through meritocracy.
• Trust based on accountability.
• Tenacity for result.
• Pioneering sprit.
• Excellence in Execution.
• Leadership with Humility.

MOBILE SERVICES:
True paid - Entry into the prepaid mobile segment.
In October 2004, the company enters into the prepaid market segment by launching Tata
Indicom true paid offer talk time (with no administrative and hidden cost).

FIXED WIRELESS SERVICES:

During 2004 the company repositioned its fixed services with enhances features like
g\high speed Internet without modem, SMS and voice mail under the sub-brand name
“Walky”. Through “Walky” company share increased to 70%.
FUNCTIONAL AREAS OF TTSL:
1. Business Improvement Group (BIG)
a. Business Excellence
b. Strategy Planning
c. Risk Management
d. Circle Operating Officers.
2. Corporate Regulatory.
3. Finance, Legal and Support services
4. Human Resource and Support Service
a. Policy Formation,
b. Business Ethics,
c. Learning and development of employees,
d. Reference Scheme,
e. Medical Insurance,
f. Job posting, etc.
5. Information Technology (IT)
a. To provide inputs to enable (IT)
b. To have state of the art architecture.
c. To develop and maintain strategic alliance,
d. To rollout best practices by using benchmark tools.
6. MARCOM (Marketing)
7. Network
a. Process implementation
b. Fault management
c. Spare management
d. Network performance
e. MIS (Management information system)
f. Best practice implementation
g. Operation support
h. Backbone of network handover & network protection
i. Customer complaint analysis
 j. Network meet
k. New feature implementation
l. VSNL operation support, etc.
8. Supply chain Management (SCM)
a. Sourcing,
b. Vendor development
c. Purchasing logistics, ware housing,
d. Inventory management.
INDUSTRIAL PIONEERS:
1907 - Asia’s first steel plant at Jamshedpur, courtesy the vision of Jamsetji and his
son Dorab and Ratan.
1910 - Hydro Power introduced in India.
1932 - India’s national air carried launched
1998 – India’s first indigenous car.

INDUSTRIAL PRACTICES FIRSTS:

1912 – 8 hr working day.
1915 – Free medical aid.
1917 – Schooling for workers children.
1920 – Leave with pay, workers PF scheme.

ABOUT TATA GROUP:

• India’s largest business group,
• Diverse businesses in 7 sectors, like Information technology, Engineering,
Materials, Services, Energy, Chemicals and Consumer products.
• Revenues equivalent to 3.2% of Indian’s GDP international 38 % Group Revenue
• Operations in over 80 countries
• Products and services exported to 85 countries
• Largest employer in private sector over 298,500 employees
• Group revenue FY 2007: Rs 129,994 Cr / $28.8 bn

5 LARGEST COMPANIES:
• TCS – Rs. 92,898 cr / $23.5 bn
• TATA MOTORS – Rs. 26,609 cr / $6.7 bn
• TATA STEEL – Rs. 49, 872cr / $12.6 bn
• TAT POWER – Rs. 23,729cr / $6.0 bn
• VSNL – Rs. 14,717 cr / $3.7 bn.
GROUP CORPORATE CENTRE

R N Tata, Chairman, Tata sons Group
chairman
J J Irani, Director, Tata Sons, Tata quality
management
Ishaat Hussain, Finance Director, Tata
Sons Finance, Legal
Arun Gandhi, Executive Director, Tata
Sons, Tax Compliance
N A Soonawala, Vice Chairman, Tata sons
R Gopalkrishnan, Executive Director,
Tata Sons, Brand Management, Human
Resources
R K Krishna Kumar, Director, Tata Sons
Alan Rosling, Executive Director, Tata
sons Internationalization
 PRODUCT PROFILE

Before going in depth into the product profile of Access Business Unit of TTSL,
we shall understand the concept of 3G technology, pre paid and post paid.

3G TECHNOLOGY:

If the future going in depth of wireless technology is 3G then rest assured. The is
also CDMA.
Through the 1st part of 2008 India witness to launches of 3G service is already hot
and running.
TTSL focus will be CDMA EV-DO based – capable of offering 500 Kbps and
burst rate is up to 2.2 mbps. Among technology that will be introduced will be video
messaging, push 2 talk (PTT), mobile Broadband, pocket PC Phones with advanced
features and tremendous VAS capabilities.
CDMA is based for 3 IMT-2000 technology that widely supports worldwide
CDMA 200, WCDMA and TD-SCDMA. But CDMA 2000 attained the fastest
momentum.
CDMA 200, the 1st IMT 2000 technology to be commercially deployed, now
hoasts of over 100 networks in 32 countries on 5 continents and show no sign of
slowing down.
CDMA 200 1st launched in south korea and in two and a half year it operates
across Asia, Australia, Europe, the ideal east, north and south America.
As of December 2006 there were nearly 50 million subscribers growth at a rate of
4 million per month, 38 % of all CDMA subscribers are 3G users today and in some
market such as south korea it is 50% of CDMA subscribers.
PREPAID:

The mobile subscribers buy a certain bucket of minutes in advance, and buy more
when they run out. A prepaid customer is effectively anonymous to the operator. He
purchases a ‘Scratch-card’, which allow him to load his telephone with prepaid
minutes, but the relationship ends there. No bill is presented for prepaid usage and
the subscribers may or may not choose to buy further cards.

POST PAID:
Postpaid customer receives a bill at the end of the period, often itemized with a
breakdown of the different types of services or destination for call made during that
period. Successive bills and rewards based on his or her usage pattern, which future
begin to offer incentives and contributes to lower customer churn and higher phone
usage.
The key to successful in the operator’s ability to create a two-way information
flow between himself and his prepaid customers just as he has with postpaid ones.
Consequently, the billing solution implemented within the operator’s operation center
must be able to create combined group of prepaid and postpaid customers.

ACCESS BUSINESS UNIT: (ABU)

• TTSL created the pay Telephone Business Unit as a separate business unit
in 2000 to systemize and structure the unorganized PTB industry.
• Pre-paid business model
• Faster and wider distribution of payphone and rural telephone in India.
• PTB business became India’s first branded and standardized payphone
offering.
• Successfully entered the rural markets in FY 2005-06 with and ramped up
more than 0.7 million rural constructions.
• Rated highest on CSAT among all telecom players by rural subscribers.
OBJECTIVES:

• To study the overview of operational expenses of TATA teleservices limited.

• To evaluate the operational efficient of Tamilnadu circle with other circles in
southern part of India.
• To evaluate the performance of TATA teleservices among other competitors.
• To evaluate the expenses management of Tamilnadu circle with other circles in
southern part of India:
REVIEW OF LITRATURE:
According to the study conducted by TRAI (2006) points to the fact that Chinese
operators have stronger business fundamentals in place. In specific the study points
out those Chinese companies are able to generate a higher rate of earnings before
interest, depreciation, amortization and tax margin. They earn high rate of return on
the capital employed at 21 per cent compared to a margin of 7per cent earned by
Indian companies. The study notes that total telecom revenue of Chinese telecom
companies, both cellular and fixed line operators stands at a whopping $72.70 billion
during the calendar year 2005 while in the same period Indian Telecom earned $19.50
billion. India operators pay a higher rate of service tax at nearly 12 per cent while the
Chinese companies pay only 3 per cent as service tax. When it comes to usage in
minutes India scored above china with subscribers talking on an average 400 minutes
a month compared to 300 minutes by Chinese users.

The financial performance of 32 relatively matched pairs of diversifying and non-

diversifying companies in five Indian industries is compared by George Paul (1985),
the finding indicate that diversification indicate that diversification is selectively
useful.

Anthony H. Catanach Jr (2000) in adopting SFAS No. 95, statement of cash flows
and financial Accounting Standard Board (FASB) specifically recognized the
important of operating cash flow information in assessing the long term survival
prospects of financial institutions. However, operating cash flow (OCF) are not a
required disclosure in the regulatory financial reports of these institutions.
Furthermore, none of the “problem financial institution” studies conducted to the date
has examined the distress prediction abilities of OCF. This paper argues that OCF are
useful measure of financial institution distress because they reflect the realized
operating risk of these firms. The study uses a latest variables modeling approach to
investigate the relationship between OCF and institution risk. A profit model cross-
selectionally examines the potential usefulness of OCF in the supervision and
monitoring of financial institution. The study uses savings and loan industry data
from the 1980s to test the research hypotheses. This sample includes a large number
of distressed institutions and covers several periods of structural change within which
to evaluate the robustness of OCF’s predictitive ability. The findings show that OCF:
(1) consistently reflect realized credit and interest-rate risk in S&l, (2) contribute
incremental to traditional thrift distress prediction models in five of eight years
examined, and (3) reduce type of I errors in out-of-sample test in several periods.
Overall, however, OCF do not appear to improve total classification accuracy in most
models examined.

The research (2004) applies Data envelopment Analysis (DEA) methodology to

evaluate the efficiency of units within a large scale network of petroleum distribution
facilities in U.S.A Multiple input and output are incorporated into a board state of
DEA models, yielding a comprehensive approach to evaluating supply chain efficient.
This study empirically separates three recognized importance and yet different causes
of performance shortfall which have been generally difficult for managers to identify.
They are I) managerial effectiveness ii) scale of operations and potential for a given
market area and III) understanding the resources heterogeneity via programmatic
difference in efficiency.

Deborah Magliozzi (2002) analyzed the Telecom Industry and found that telecom
industry has radically changed over last year from a monopoly to a competitive
market. A multitude of new technologies, liberalization and uncertainties about
regulation are the key effects in this period of transition. This study analyses the
economic and financial aspects of incumbent national operations in Europe through
the construction of appropriate strategic maps for the year 1998.

Brek (2005) studied the drive of leverage in Slovene blue-chip firms by focusing
on the trade-off and pecking order theory. He tested the dependence of leverage on
tangibility, profitability, and value of non-debt tax shields in the periods 2000-01 and
2002-03. In the first period only profitability exhibits statistical significance at a 0.05
level, while tangibility of assets and future growth opportunities are significance at a
0.1 level. Moreover, only tangibility of assets is statistically significant in the second
period. He found negative correlation between future growth opportunities and
leverage is positive.

FINANCIAL TERMS USED IN THE PROJECT:

REVENUE:
In business revenue or revenues (turn over in Europe) is income that a company
receives from its normal business activities, usually from the sale of goods ad services
to customers.

DIRECT COST:
A cost that can be directly traced to producing specific goods or services.
BAD DEBTS:
In accounting and finance, a bad debt is the portion of receivables that can no
longer be collected, typically from accounts receivables or loans. A bad debt in
accounting is considered an expense.

ACCESS CHARGES:
Access charges refer to payment made by long-distance carriers to local service
providers for originating and terminating calls on local telephone networks. The
regulation of access charge rates is therefore a form of price control.

MARKETING EXPENSES:
The expenses on marketing activities such as advertisement campaign, media,
public relation activities, etc are the marketing expenses.
WIRELESS PLANNING COMMITTEE (WPC):
The part of the revenue paid for wireless planning committee for using the space
station, satellites, etc. for connecting the dels.
CHURN RATE:
We define our churn as the total number of subscribers who cancel (whether
involuntarily due to non-payment or voluntarily as such the subscribers request) from
our service during the period, expressed as a percentage of the average number of
subscribers during the period.

REVENUE PER USER (RPU):

A ratio used to express the profitability of a company on a per-user basis. RPU are
calculated by taking overall revenue and dividing by total number users:
RPU = Total revenue
Total customers
This ratio is mainly used by service providers, such telephone providers. This
measure helps companies to uncover deficiencies and plan strategies for growth. RPU
also help the company determine which product or service lines produce the most
revenue per customer and, therefore, which customer relationship are the most
important.

OPERATING CASH FLOW (OCF):

OCF is the amount used to represent the money moving through a company as a
result of its operations, as distinct from its purely financial transactions. The
operating cash flow ratio can gauge a company’s liquidity in the short term. Using
cash flow as opposed to income in some times better indication of liquidity simply
because, we know cash is how bills are normally paid off.

OPERATING COST:
 This is the expenses of maintaining property (e.g. paying property tax and utilities
and insurance); it does not include depreciation or the cost of financing or income
taxes. Also known as OPERATING EXPENSES.

OPERATING EXPENDITURE:
This is the amount used during a particular period directly in support of day-to-day
operations such as wages, maintenance, office suppliers, etc.

OPERATING MARGIN:
Operating margin gives analysts an idea of how much a company makes (before
interest and taxes) on each dollar of sales. When looking at operating margin to
determine the quality of a company, it is best to look at the change in operating
margin over time and to compare the company's yearly or quarterly figures to those of
its competitors. If a company's margin is increasing, it is earning more per dollar of
sales. The higher the margin, the better

Operating margin is the ratio of operating income to sales revenue.

OPERATING PROFIT:
The profit earned from a firm's normal core business operations. This value does not
include any profit earned from the firm's investments (such as earnings from firms in
which the company has partial interest) and the effects of interest and taxes.

Also known as "earnings before interest and tax" (EBIT).

Calculated as:

OPERATING PROFIT TO SALES:

Operating profit to sales is a useful ratio when evaluating value of a firm. It discounts
the effect of varying tax rates and benefits to give a more indication of the return
associated with the firm.

OPERATING RATIO:
Operating ratio measure a firm’s operating efficiency, calculated: company
operating expenses divided by its operating revenues.
The smaller the ratio, the greater the organization's ability to generate profit if
revenues decrease. When using this ratio, however, investors should be aware that
it doesn't take debt repayment or expansion into account.

YTD:
YTD is year to date; meaning the period beginning of the calendar year, January
1st of the current year, or the fiscal year up until today’s date.

OPERATING EXPENSES RATIO:

Operating expenses ratio is a useful ratio for the measurement of management
efficiency, it is calculated by operating expenses divided by net sales.
The operating expense ratio also known as the OER is the ratio between the total
operating expenses and the effective gross income for an income producing property.
Operating expenses are costs associated with the operation and maintenance of
income producing properties. They include such items as property taxes, property
management fees, insurance, wages, utilities, repairs and maintenance, supplies,
advertising, attorney fees, accounting fees, trash removal, pest control, etc. The
following are not operating expenses; loan payments, personal property and capital
improvements.

RETURN OF NETWORTH:
 Return on networth measure the return relative to investment in the company that
is how well the company leverages the investment in it. It is used to evaluate the
overall return.

DEBT/EQUITY RATIO:
A measure of a company’s financial leverage calculated by dividing its total
liability by stake holder’s equity. It indicates what proportion of equity and debt the
company is using to finance its assets.
CURRENT ASSET TURNOVER RATIO:
This indicates the efficiency of utilization of current assets. The more efficient the
management the greater is the turnover ratio.

ACID TEST RATIO:

A straighten test that indicates whether a firm has enough short-term assets to
cover its immediate liabilities without selling inventory. The acid test ratio is far
more strenuous than the working capital ratio, primarily because the working capital
ratio allows for the inclusion of inventory of assets.

RETURN ON ASSETS:
An indicator of how profitable a company is relatively to its total assets. ROA
gives an idea as to how efficient management is at using its assets to generate
earnings. Calculated by dividing a company’s annual earnings by its total assets,
ROA is displayed as a percentage. Sometimes this is referred by its total assets; ROA
is displayed as a percentage. Sometimes this is referred to as “return on investment”.

ROA tells you what earnings were generated from invested capital (assets). ROA
for public companies can vary substantially and will be highly dependent on the
industry. This is why when using ROA as a comparative measure, it is best to
compare it against a company's previous ROA numbers or the ROA of a similar
company.
LEVERAGE RATIO:
Any ratio 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.

A ratio 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.
 RESEARCH METHODOLOGY

MEANING F RESEARCH:
The term ‘Research’ refer to systematic method consisting of enunciating the
problem, formulating a hypothesis, collecting the facts or data, analyzing the fact and
reaching certain conclusion either in the form of solution towards the concerned
problem or in certain generalization for some theoretical formulation.

RESEARCH METHODOLOGY:
A research methodology defines what the activity of research is, how to proceed,
how to measure process, and what, constitutes success.

METHODOLOGY IS DEFINED AS:

1. The analysis of the principal of methods, rules and postulates employed by a
discipline.
2. The systematic study of methods that are, can be, or have been applied with in
a discipline.
3. A particular procedure or set of procedure.

TYPES OF RESEARCH:
“Analytical research” is selected for this project, since the researcher’s aim is to
analysis the operational efficiency of TATA teleservices limited”.

SOURCE DATA:
Both primary and secondary data are used for this research. Primary data is collected
through discussing with finance manager and management staffs.

Secondary data is collected through company websites, company profile and financial
statements.
 TOOLS USED:
Profitability ratio:
• Operating ratio
• Operating margin
• Return on networth
• Operating cash flow ratio
• Return on assets.

Financial leverage ratio:

• Debt to equity ratio
• Debt to capital ratio
• Interest coverage ratio
1) To evaluate the operational efficiency of TATA TELESERVICE with other
circles in southern part on India:
CHURN RATE:
We define our churn as the total number of subscribers who cancel (whether
involuntarily due to non-payment or voluntarily at such subscriber’s request) from our
service during the period, expressed as a percentage of the number of our subscribers
during the period
Churn total
Churn rate = -------------------------------------- X 100
Open EOP + Gross incremental

YEAR TAMIL NADU ANDRAPRADESH KRANATAKA KERALA

2006-07 3.56 2.4 3.22 2.98
2007-08 2.9 1.8 2.35 2.42

CHURN RATE

4
3.5
3
2.5
2006-07
2
2007-08
1.5
1
0.5
0
Tamil Andhra Karnataka Kerala
Nadu Pradesh

It is inferred that churn rate is more in Tamilnadu when compared to other circles in
both the years (2006-07 and 2007-08). Where as the churn rate is less in Andhra Pradesh
when compared to other states.

DETERMINATION OF OPERATING PROFIT FOR SOUTHERN CIRCLES:

 The profit earned from a firm's normal core business operations. This value does not
include any profit earned from the firm's investments (such as earnings from firms in
which the company has partial interest) and the effects of interest and taxes. Also known
as “Earning before interest and tax “(EBIT).

Profitability is an indication of the efficiency with which the operation of business is

carried on. Poor operational performance may indicate poor scales and hence poor profit.
A lower profitability may arise cue to lack of control over the expenses.

Operating profit = Gross profit – Operational expenses

Operating Profit for the year 2006-07:

Result collected directly from the company.

Calculation of Operating Profit for the year 2007-08:

YEAR 2007-08

Gross profit Opex Operating Profit

Tamil Nadu 14464.04 9217.47 5252.57

Andhra Pradesh 27759.99 13877 13883.03

Karnataka 22020.69 9037.9 12982.79

Kerala 6219.05 5537.2 681.4

Results of Operating Profit:

 YEAR TAMIL NADU ANDRAPRADESH KRANATAKA KERALA

2006-07 6655.94 12843.03 10465.4 -1359.62

2007-08 5252.57 13883.03 12982.79 681.4

OPERATING PROFIT

16000
14000
12000
10000
8000
2006-07
6000
2007-08
4000
2000
0
-2000
-4000
Tamil Andhra Karnataka Kerala
Nadu Pradesh

It is inferred that Andhra Pradesh has high operating profit when compared to other
circles in both the years (2006-07 and 2007-08). Kerala has given Low operating profit
during 2006-07, but which has improved during 2007-08.

DETERMINATION OF OPERATING RATIO FOR SOUTHERN CIRCLES:

 Operating ratio measures a firm’s operating efficiency. The smaller the ratio, the
greater the organization's ability to generate profit if revenues decrease. When using this
ratio, however, investors should be aware that it doesn't take debt repayment or expansion
into account.

Operating Expenses
Operating Ratio = -------------------------
Operating Revenue

Operating Ratio for 2006-07:

Results collected directly from the company.

Calculation of Operating Ratio for 2007-08:

YEAR 2007-08

Operating Exp Operating Revenue Operating Ratio

Tamil Nadu 9217.47 29214.37 0.316

Andhra Pradesh 13876.96 53586.91 0.259

Karnataka 9037.9 36408.31 0.248

Kerala 5537.2 18111.09 0.306

Results for Operating Profit:

 YEAR TAMIL NADU ANDRAPRADESH KRANATAKA KERALA

2006-07 0.277 0.22 0.249 0.362

2007-08 0.315 0.262 0.248 0.306

OPERATING RATIO

0.4
0.35
0.3
0.25
2006-07
0.2
2007-08
0.15
0.1
0.05
0
Tamil Andhra Karnataka Kerala
Nadu Pradesh

It is inferred that Karnataka has high operation efficiency in managing its expenses in
the year 2007-08, whereas Andhra Pradesh has effectively managed its expenses in the
year 2006-07 compared to other circles. Kerala showing high Operating ratio during
2006-07, have somehow managed to reduce it in 2007-08.

DETERMINATION OF OPERATING MARGIN FOR SOUTHERN CIRCLES:

 Operating margin is the ratio of operating income to sales revenue. Higher the margin
means that the firm has generated higher income from sales.
YEAR TAMIL NADU ANDRAPRADESH KRANATAKA KERALA
2006-07 23.5 26.13 31.48 -11.7
2007-08 17.97 25.9 35.65 3.76

OPERATING MARGIN

40

30

20
2006-07
10
2007-08
0

-10

-20
Tamil Andhra Karnataka Kerala
Nadu Pradesh

It is inferred that Karnataka has higher operating margin when compared to other
circles both the years (2006-07 and 2007-08).

DETERMINATION OF REVENUE PAID AS ACCESS CHARGES:

 Access charges are the fees that are paid to telephone networks to access their
networks. Access charges are a form of cost shifting that supports the most expensive
parts of the telephone infrastructure. Individuals pay flat rate access charges (Subscriber
Line Charges or SLCs. These are also known as "customer access line charge" (CALC)
or "end user line charge" (EUCL))

Percentage of Revenue paid as Access Charges:

Access charges
------------------------- X 100
Service revenue
Revenue paid as Access Charges for 2006-07:
Results directly collected from company.

Calculation for Revenue paid as Access charges for 2007-08:

YEAR 2007-08

Access charges Service rev. Revenue paid to access charges

Tamil Nadu 9166.2 34041.05 26.93

Andhra Pradesh 14401.83 64312.98 22.39

Karnataka 9461.99 41789.27 22.64

Kerala 9242.7 18578.51 49.75

Results for Revenue paid on Access Charges:

 YEAR TAMIL NADU ANDRAPRADESH KRANATAKA KERALA

2006-07 24.28 23.34 22.79 33.28

2007-08 26.93 22.39 22.64 49.75

ACCESS CHARGES

60
50
40
2006-07
30
2007-08
20
10
0
Tamil Andhra Karnataka Kerala
Nadu Pradesh

It is inferred that kerala is paying more for access charges when compared to other
circles in both the years (2006-07 and 2007-08).Whereas Karnataka and Andhra Pradesh
has reduced there Access charges in 2007-08 when compared to 2006-07.

DETERMINATION OF AVERAGE REVENUE PER UNIT (ARPU) ON ACTIVE

SUBSCRIBERS FOR SOUTHERN CIRCLES:
 A ratio used to express the profitability of a company on a per-user basis, RPU are
calculated by taking over all revenue and dividing by total number of users.
Service revenue
ARPU = -------------------------
Active subscriber base

This ratio is mainly used by service providers, such as telephone providers. This
measure helps companies to uncovered deficiency and plan strategies for growth. RPU
also helps the company determine which product or service lines produced the most
revenue per customer and therefore which customer relationship are the most important.

ARPU for the year 2006-07:

Results collected directly from company.

Calculation of ARPU for the year 2007-08:

YEAR 2007-08

Service revenue Act. Sub. base ARPU

Tamil Nadu 29214.37 747.233 39.09

Andhra Pradesh 53586.91 18553.372 288.83

Karnataka 36408.32 9628.984 378.11

Kerala 18108.09 4825.262 375.27

Result for ARPU:

 YEAR TAMIL NADU ANDRAPRADESH KRANATAKA KERALA

2006-07 328.69 417.82 467.35 366.279

2007-08 39.09 288.83 378.11 375.27

ARPU in Rs

500
450
400
350
300 2006-07
250
200 2007-08
150
100
50
0

Tamil Andhra Karnataka Kerala

Nadu Pradesh

It is inferred that average revenue per user is more in Karnataka when compared to
other circles in both the years (2006-07 and 2007-08). Average revenue per user has
increased in Kerala during 2007-08 when compared to 2006-07. Where as ARPU has
totally gone down in Tamil Nadu for the year 2007-08.

2.) TO EVALUVATE THE PERFORMANCE OF TATA TELE SERVICE

AMONG THE TELECOM COMPETITORS:
To determine the operating margin to competitors
Operating margin gives analysts an idea of how much a company makes (before
interest and taxes) on each dollar of sales. When looking at operating margin to
determine the quality of a company, it is best to look at the change in operating margin
over time and to compare the company's yearly or quarterly figures to those of its
competitors. If a company's margin is increasing, it is earning more per dollar of sales.
The higher the margin, the better.

Calculation of Operating Margin:

YEAR 2007-08

operating income Sales Operating Margin

Air tel 7315.47 17906.54 40.85

Reliance Communication 5513.01 12756.3 43.22

Idea 1465.01 4366.4 33.55

TTSL 953.73 4041.83 23.59

Result for Operation Margin:

Telecom operators Operating margin (%)

Airtel 40.85

Reliance communication 43.2

Idea 33.55

Tata teleservices 23.59

 Operating margin (%)

50
45
40
35
30
25 Operating
20 Margin (%)
15
10
5
0

Airtel Reliance Idea TTSL

Telecom operators

It is inferred that reliance communication has higher operating margin when compared to
other telecom operators and TTSL has the lowest Operating Margin.

Determination of operating cash flow ratio of competitors

 Operating cash flow is a measure of how well current liabilities are covered by the
cash flow generated from a company’s operations. It is calculated
OCF = Cash flow from operations / Current liabilities

Telecom operators Operating Cash flow ratio

Airtel 0.822

Reliance communication 1.66

Idea 3.61

Tata teleservices -0.207

Operating cash flow ratio

4
3.5
3
2.5
2 Operating cash
1.5 Flow ratio
1
0.5
0
-0.5
Airtel Reliance Idea
Telecom operators TTSL

It is inferred that idea has generated more cash in order to pay off the short term
liabilities when compared to other operators.

Determination of current ratio of competitors

 A liquidity ratio that measure a company’s ability to pay short-term obligations.

Current ratio = Current asset

----------------------
Current liabilities

Calculation of Current Ratio:

YEAR 2007-08
Current Assets Current Liabilities Current Ratio
Air tel 5406.81 9809.83 0.55
Reliance communication 20107.04 6309.33 3.19
Idea 2469.92 2153.03 3.19
TTSL 2447.42 1779.37 1.37

Result for Current Ratio:

Telecom operators Current Ratio

Airtel 0.55

Reliance communication 3.19

Idea 1.15

Tata teleservices 1.37

 Current ratio

3.5
3
2.5
2
Current ratio
1.5
1
0.5
0
Airtel Reliance Idea TTSL

It is inferred that reliance communication has higher current ratio compared to other
telecom operators. The Liquidity ratio is reliable when compared with other Telecom
operators.

Determination of leverage ratio or debt to equity ratio of competitors

 Any ratio 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.

A measure of a company’s financial leverage calculated by dividing its total liabilities

by stake holder’s equity. It indicates what proportion of equity and debt the company is
using to finance its assets.

Leverage ratio = Total liabilities

-----------------------
Share holders equity
Calculation for Leverage Ratio:

YEAR 2007-08
Total Liabilities Shareholders Equity Leverage Ratio
Air tel 16754.08 1895.93 8.83
Reliance communication 35093.38 1022.31 34.32
Idea 6429.66 2592.86 2.48
TTSL 6557.11 285 23

Results for Leverage Ratio:

Telecom operators Leverage Ratio

Airtel 8.83

Reliance communication 34.32

Idea 2.48

Tata teleservices 23
 Leverage ratio

40
35
30
25
20 Leverage ratio
15
10
5
0

Airtel Reliance Idea TTSL

Telecom operators

It is inferred that Reliance and TTSL has high debt to equity when compared to other
operators. TTSL leads the second position with a great difference while comparing Air
tel and Idea.
To determine the interest coverage ratio of competitors

Interest coverage ratio is a measure of interest paid out of profit earned. It is

calculated by profit before depreciation, interest and tax divided by the interest paid.

Calculation for Interest Coverage Ratio:

YEAR 2007-08
PBDIT Interest Interest coverage Ratio
Air tel 7366.15 282.07 26.11
Reliance communication 5744.9 456.55 12.58
Idea 1485.94 305.11 4.87
TTSL 1059.56 16.74 63.2

Result for Interest coverage Ratio:

Telecom operators Interest coverage ratio

Airtel 26.11

Reliance communication 12.58

Idea 4.87

Tata teleservices 63.2

 Interest coverage ratio

70
60
50
40
Interest
30
20 Coverage ratio
10
0

Airtel Reliance Idea TTSL

It is inferred that interest coverage ratio is more for TTLS compared to other telecom
operators. TTSL is acting with greatest justification to the Debentures holders, by paying
interest.
To determine the return on assets (%) of competitors

It is an indicator of how profitability a company is relative to its total assets. ROA

gives to how efficient management is at using its assets to generate earnings. Calculated
by dividing company annual earnings by its total assets, ROA is displayed as a
percentage. Sometimes this is referred to as “return on Investment”

Calculation for Return on Assets (%):

YEAR 2007-08
Annual earnings Total assets ROA
Air tel 17987.29 16754.07 107.36
Reliance communication 12988.19 35093.38 37.01
Idea 4386.13 6429.67 68.22
TTSL 4147.66 6557.11 63.06

Results for Return on Assets:

Telecom operators Return on assets

Airtel 107.36

Reliance communication 37.01

Idea 68.2

Tata teleservices 63.06

 Return on assets

120
100
80
60 Return on assets
40
20
0

Airtel Reliance Idea TTSL

It is inferred that return on assets in more for Air tel when compared to other telecom
operators. Even though Reliance has more assets when compared to other operators they
are not able to generate more returns through the asset. TTSL gains a nominal return on
its assets.
To determine the operating expenses ratio to competitors

Operating expenses ratio is a useful ratio for the measurement of management

efficiency, the operating expense ratio also known as the OER. Operating expenses are
costs associated with the operation and maintenance of income producing properties.
They include such items as property taxes, property management fees, insurance, wages,
utilities, repairs and maintenance, supplies, advertising, attorney fees, accounting fees,
trash removal, pest control, etc. The following are not operating expenses; loan
payments, personal property and capital improvements.

Operating Expenses
Operating Expenses Ratio = -----------------------
Net Sales
YEAR 2007-08
Operating expenses Net Sales Opex Ratio
Air tel 10621.14 17906.54 59.31
Reliance communication 7243.29 12756.3 56.78
Idea 2900.19 4366.4 66.42
TTSL 3088.1 4041.83 76.40

Telecom operators Operating expense ratio

Airtel 59.31

Reliance communication 56.78

Idea 66.42

Tata teleservices 76.40

 Operating expenses ratio

90
80
70
60
50 Operating expenses
40
30 Ratio
20
10
0

Airtel Reliance Idea TTSL

It is inferred that operational expenses is more for Tata teleservices compared to other
telecom operators. In order to make more profit TTSL should have more control on its
expenses.
3.) To evaluate the expenses management of Tamilnadu circle with other circles in
southern part of India:

It is evaluated by making use of expenditure / revenue. It is expressed in percentage.

The below table gives the comparison of expense management with other circles.

Expenditure Andhra Pradesh Karnataka Tamilnadu Kerala

Collection Charges 2% 2% 3% 2%
Billing cost 1% 0.8 1% 0.8
Call center charges 2% 2% 1% 3%
Handset charges
20% 10% 11% 23%
(including spoilage)
Employee cost 4% 5% 5% 6%
Conveyance 0% 0% 0% 1%
Rent - Network cost 1% 1% 1% 1%
Power & fuel – Network
4% 3% 4% 6%
cost
Marketing expenses 2% 2% 4% 3%

It is inferred that expenses incurred for hand set subsidy is more in all circles
compared to other expenses.

Kerala circle does not have an efficient management whereas Karnataka has
effectively managed their expenses compared to other circles. Hence Karnataka has
operating margin compared to other circles.

To evaluate the expenses management the expense management of Tata teleservices

among other competitors
 It is evaluated by making use of Expense/Revenue. It is expressed in percentage. The
below table gives the comparison of expenses management with other competitors.

Reliance
Expenditure Bharti Airtel Idea Tata indicom
communication
Raw materials 0.30% 0.10% 0.09% 0.03%
Power &fuel cost 0% 2% 2% 1%
Employee cost 6% 5% 6% 6%
Other manufacturing
28% 24% 10% 54%
expenses
Selling and
22% 22% 0% 9%
administration
Miscellaneous 2% 3% 48% 4%
Interest 2% 4% 7% 0%
Depreciation 13% 14% 15% 9%

It is inferred that manufacturing expenses is more for telecom operators when

compared to other expenses.

Tata teleservices has incurred more manufacturing expenses (54%). When compared
to other competitors. Idea cellular has more miscellaneous expenses where as Bharti
Airtel has effectively managed their expenses when compared to other competitors.

To determine the degree of financial leverage and operating leverage:

Degree of financial leverage (DFL) may be defined as the percentage in earnings that
occurs as a result of a percentage changes in earnings before interest and taxes (PBDIT)
 Operating leverage reflects the extend to which fixed assets and associated fixed costs
are utilized in the business. Degree of operating leverage (DOL) may be as the
percentage change in operating income that occurs as a result of a percentage change in
unit sold.

Degree of operating leverage = (PBDIT + Expenses) / PBDIT

Degree of financial leverage = (PBDIT / (PBDIT – Interest)

TELECOM OPERATORS DOL DFL DCL

Airtel 2.44 1.04 2.54
Reliance Communication 2.26 1.09 2.46
Idea 2.95 1.26 3.72
Tata teleservices 3.91 1.02 3.98

It is inferred that Tata teleservices has high degree of combined leverage when
compared to other telecom operators.

FINDINGS

EVALUVATION OF OPERATIONAL EFFICIENCY OF TAMILNADU CIRCLE

WITH OTHER CRCLES IN SOUTHERN PART OF INDIA:
 • Kerala circle does not have effective expenses management whereas Karnataka
has effectively managed their expenses compared to other circles.

• Karnataka has more operating margin compared to other circles.

• In both the financial year 2006-07 and 2007-08 Tamilnadu circle has higher
churn rate when compared to other circles.

• Average revenue per line on active Del bases is found comparatively well with
Karnataka in the last year as well as in the current year.

• During 2007-08 there was a major drop in ARPU for Tamil Nadu.

• Kerala is paying more for access charges when compared to other circles in
both the year (2006-07 and 2007-08).

EVALUVATION OF THE PERFORMANCE OF TATA TELESERVICE AMONG

OTHER COMPETITORS:
 • Tata teleservices has incurred more manufacturing expenses (54%) when
compared to other competitors.

• Idea cellular has more miscellaneous expenses (48%).

• TTSL has good control over its miscellaneous expenses.

• Bharti Airtel has effectively managed their expenses when compared to other
competitors.

• Reliance communication has higher operating margin (43.2%) compared to

other operators.

• Reliance has more operating Margin (43.2%) and TTSL ahs the least
(23.59%).

• Reliance has higher current ratio (3.19) compared to other operators

.
• TTSL pays more interest coverage ratio, which shows its truthfulness towards
debenture holders.

SUGGESTIONS

EVALUVATION OF OPERATIONAL EFFICIENCY OF TAMILNADU

CIRCLES IN SOUTHERN PART OF INDIA:
 • Tamil nadu circles should control the operational expenses by means of cost
management in order to increase the profitability of the firm since operational
expenses plays a vital role in deciding the profitability.

• Churn rate is more in Tamilnadu, in order to decrease that the schemes must be
attractive and the company should follow effective marketing strategy to
attract the customers.

• By means of increasing the number of customers the average revenue per line
will also be increased so that profitability will also be increased.

• Tata teleservices should increase the number of signal towers to reduce the
access charge paid to other service providers from their Revenue.

EVALUVATION OF THE PERFORMANCE OF TATA TELESERVICE AMONG

OTHER COMPETITORS:

• Airtel has higher profitability compared to other telecom operators so in order

to increase the profitability.
 • Tata teleservices should minimize the expenses and should concentrate on
retaining the subscribers by introducing attractive schemes and should have
optimum leverage ratio and should follow effective cost strategy.

CONCLUSION

In the present scenario, the success and failure of any product or institution is basically
depends upon the satisfaction of the customers. In case of Tata teleservices, who is the
first CDMA service provider, should concentrate much on satisfactory level of the
customers. The company’s profitability mainly affected by operational expenses, access
charges and attrition of the customers. Therefore, the company should concentrate on
reducing the access charge, operating cost, acquiring & do all the need full in retaining
the customers and also should concentrate on profitability of the company by reducing its
expenses, as it acts as the important factor influencing the capital structure.

BIBLIOGRAPHY

1. Kothari, C.R. Research methodology (2002), Second edition, Vishva Prakasham,

New Delhi.
2. Financial analysis of telecom industry of china and India (2006), Telecom
Regulatory Authority of India (TRAI).
3. George Paul (1985), “A comparatively study of Diversified and Non-diversified
companies”, Journal of financial economies, Vol 9, pg 30-39.
4. Anthony H. Catanach Jr. (2000). An empirical study of operating cash flow
usefulness in predicting savings and loan financial distress, Advance in
accounting, Vol 17, pg 1-30.

WEB SITES

• Company profile, retrieved, from Tata Teleservices website:

www.tataindicom.com/t-aboutus-organisation.aspx
• Accounting terms, Retrieved from venture line website:
www.ventureline.com/glossary_A.asp
• Financial leverage, Retrieved from investopedia website:
www.investopedia.com.