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Corporate Strategy | "VSNL- The Global Foot Print"

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VSNL- The Global Foot Print

- by Ashutosh Garg *

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Page - 7

There was a decline in the operating profit margin (Excl OI) from 28.31 percent to 27.03 percent mainly due to the increase in operating and other expenses. Operating profit margin (including OI) too showed a decrease from 30.48 percent to 29.28 percent.

Valuations

At current market price of Rs.390, VSNL is quoting at a PER of 25.92x. On EV/Sales and on EV/ EBIDTA basis it is quoting at 3.27x and 8.44x of its TTM ended Jun' 05 earnings respectively.

It also has several strategic investments, which has significant value in terms of the entry barriers for the competition.

Industry scenario

The Indian telecom sector has entered an exciting phase and is achieving a double digit growth year over year (estimated CAGR 13.42 for 2002-2006).

  • Tata, while acquiring VSNL from Indian Government, estimated the VSNL's PSU monopoly to last at least over the next two years.

  • Daily Corporate News Analysis by KRC research. www.valuenotes.com

  • Figures taken from Country Industry Forecast Report. (The Indian Telecom Industry 1996-2006).

    • However, with the entry of more operators, the industry will also witness tariff rebalancing and a marketing blitz followed by a major consolidation phase with some acquisitions and mergers. The subscriber base of cellular services in India has increased from a modest 4.69 lakhs subscribers in June 1997 to a whopping 85.2 million in June 2006.

    ILD Segment : The past year has seen significant changes in the Rs. 7,000 crore international long distance sector, which was liberalized with effect from April 1, 2002. The last year had also witnessed a sharp decline in international settlement rates and domestic tariffs.

    The Tata Indicom Enterprise Business Unit or TIEBU, is an initiative by all the telecom services companies of the Tata Group to halt fall in revenues. It was formed in the first week of April 2003 after signing an MoU by VSNL, Tata Teleservices Ltd., Tata Teleservices (Maharashtra) Ltd., Tata Internet Services and Tata Net.

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    * Contributed by: -
    Ashutosh Garg,
    (Final year MBA Student)
    ICFAI Business School, Kolkata

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