Project report of nepal telicom
- 1. INTRODUCTION 1.1 Company’s profile: NEPAL TELECOM was registered on 2060-10-22 under Company Act, 2053. Then Nepal Telecommunications Corporation (NTC) was dissolved and all assets and liabilities were transferred to Nepal Telecom effective from 2061-01-01 (i.e. 13th April 2004). The company with its long history is on the way of customer service and nation building. In Nepal, operating any form of telecommunication service dates back to 94 years in B.S. 1970. But formally telecom service was provided mainly after the establishment of MOHAN AKASHWANI in B.S. 2005.Later as per the plan formulatedin First National Five year plan (2012-2017); Telecommunication Department was establishedin B.S.2016. To modernize the telecommunications services and to expand the services, during third five-year plan (2023-2028), Telecommunication Department was converted into Telecommunications Development Board in B.S.2026. After the enactment of Communications Corporation Act 2028, it was formally establishedas fully owned Government Corporation called Nepal Telecommunications Corporation in B.S. 2032 for the purpose of providing telecommunications services to Nepalese People. After serving the nation for 29 years with great pride and a sense of accomplishment,Nepal Telecommunication Corporation was transformed into Nepal Doorsanchar Company Limited from Baisakh 1, 2061. Nepal Doorsanchar Company Limited is a company registered under the companies Act 2053. However the company is known to the general public by the brand name Nepal Telecom as registered trademark. Nepal Telecom has always put its endeavors in providing its valued customers a quality service since its inception. To achieve this goal, technologies best meetingthe interest of its customers has always been selected. The nationwide reach of the organization, from urban areas to the economically non- viable most remote locations, is the result of all these efforts that makes this organization different from others. Definitely Nepal Telecom’s widespread reach will assist in the socio-economicdevelopment of the urban as well as rural areas, as
- 2. telecommunicationsis one of the most important infrastructures required for development. Accordingly in the era of globalization, it is felt that milestones and achievements of the past are not adequate enough to catch up with the global trend in the development of telecommunication sectorand the growth of telecommunication services in the country will be guided by Technology, Declining equipment prices, market growth due to increase in standard of life and finally by healthy competition. Converting NT from government owned Monopoly Company to private owned, business oriented, customerfocused company in a competitive environment, Nepal Telecom invites its all-probable shareholders in the sacred work of nation building. 1.2 Objective 1.2.1 Mission “Nepal Telecom, as a progressive, customer spirited and consumer responsive entity, is committed to provide nation-wide reliable telecommunication services to serve as an impetus to the social, political and economicdevelopment of the country.” 1.2.2 Vision “NT vision is to remain a market leader in information and technology sector in the country while also extending reliable and cost effective services to all.” 1.2.3 Goal “NT goal is to provide cost effective telecommunication services to every nook and corner of the country.” 1.3 Product and services: Nepal Telecom is the key market player as it holds about 60.30% of totals no. mobile phones and 91 % of total no of Fixed Telephones. (NTC-MIS-2067, Aswin). It has 221 Public Switch Telephone Network (PSTN) exchanges in 72 districts and has covered all 2915 VDC with Basic Telephone service. It offers various products like Basic
- 3. telephone, Mobile telephone, Internet, ISDN,PSTN, Leased line, CDMA phone, sky data card, etc. It has starred SIP telephony service for the Nepalese lying beyond the country to call Nepal from round the world in its own tariff through internet. 1.4 Objective of the Study: Objectives of the study are guidelines by which the study can be conducted in a systematic manner. The main objective is to assess the strengths and weakness of Nepal Telecom. The specific objectives are: 1. To analyze the contribution of Nepal Telecom in total revenue of government of Nepal as a largest tax payer of a nation. 2. To examine financial position of the company. 1.5 Research methodology The first step in preparation of this report is to design the framework of the research. The task begins with the collection of necessary data and information concerning the study. The data and information collected has been studied carefully and presented them systematically and get them analyzed so as to meet the objective of the report. All data provided has been thoroughly studied and then search design was planned. 1.5.1 Source of data collection. Data are collected both from primary and secondary sources from the organization. 1.5.1.1 Primary data: The data collected for the very first time by observation, discussion and interviewingMr. Prakash Pokhrel, senior assistance, Tax-Vat section at NTC’s central office Bhadrakali. 1.5.1.2 Secondary data: The data were collected from various booklets, pamphlets, magazines and websites and reports submitted
- 4. by seniors and colleagues to the SMART team during SMART report making and presentation. 1.6 Limitation 1. The time to complete this report was very limited. 2. Group coordination became a great limitation. 3. As it was our first financials study of an organization, how far we did too but we were unable to cover all financial information. 4. We were unable to interview top managers of NTC. 5. Due to the secrecy of the performance evaluation,the exact data is not available. 6. Some of the information was extracted from the website, magazines so that data may not be accurate and updated. CHAPTER 2 ANALYSIS AND INTERPRETATION 2.1 Sales and Services The main services provided by the communication companies categorized and described as follows: 2.1.1 PSTN 2.1.1.1Public switch telephone network (PSTN): PSTN is a wired telephony service where a wire in the field of Telecommunications,Nepal Telecom has been the trusted partner of
- 5. the people of Nepal since 2032. In order to make life of a Nepali easier, Nepal Telecom makes continuous effort to introduce the latest technology of communications.As always, Nepal Telecom is devoted towards our customersatisfaction and national development with all communicational prospect and technologies. 2.1.1.2 ADSL (Asymmetric direct subscriber line): It is the broad band internet service provided by Nepal telecom where a single PSTN line is capable of providing the internet and voice data at a time. 2.1.1.3Dial-Up: Dial-Up is the narrow band internet service where a modem is to be connected to the computer. Laptop computer is unable of using dial-up connection. Using dial-up only one task can be done. 2.1.2 GSM 2.1.2.1 3G Service (WCDMA Service):To fulfill the ever growing demands and to browse and access the web pages like video based programs (Live TV browsing) NT installed WCDMA based 3G system which offers 384 kbps of downloading and 64kbps of uploading data speed. This 3G 1X (Third Generation Technology) allows the subscribers to have the instant data transfer/connectivity with high speeds up. This technology enables easier/smooth migration to other higher EVDO/EVDV systems (i.e. data only and /or data with voice systems). 2.1.2.2 GPRS (General packet radio service): It is the mobile internet service provided by NTC and is most famous amongst the users. It is the cheapest internet charge amongst the service providers. The charge costs 15paisa per 100kb data transfer. 2.1.2.3Post-paid and Pre-Paid service: This is the service where a GSM user can switch into a prepaid and postpaid tariff. 2.1.2.4WiMAX service: Nepal Telecom (NT) launched the 4G WiMAX IEEE 802.16e service first time in Nepal. This service is available throughout the country. WiMAX enables broadband wireless anytime; anywhere using any
- 6. WiMAX enabled devices, whether it is a laptop, desktop modem, digital phone or even a game device. Mobile WiMAX creates a seamless broadband environment at home,in the office and on the move. 2.1.3 CDMA Service 2.1.3.1 CDMA phone: It is the service provided by NTC where the priority is given to the remote costumers.The foremost application of CDMA is the digital cellular phone technology from QUALCOMM that operates in the 800MHz band and 1.9GHz PCS band. CDMA phones are noted for their call quality 2.1.3.2 Sky Data Card: It is the volume based internet service. It is focused for the researchers and visitors exploring new places and connecting from there. 2.1.4 SIP PPP: It is the internet phone provided by the organization where a costumeraround the globe can log in the website and can download the software and can call Nepal as per the tariff. It requires broadband internet. 2.2 Competitors analysis 2.2.1 Spice Nepal private limited 2.2.1.1Profile: Popularly known as “Ncell”, Spice Nepal Private Limited is the first private GSM mobile operator in Nepal. The company was establishedin 2004 and commercially launched on 17th September 2005. Ncell is tied up with many different international Operators of more than 31 countries adding up to 74 operators around the world. 2.2.1.2 Profile of the current business, both marketplace (physical) and market space (electronic): The core business of SNPL is providing GSM mobile service which includes sales of sim card and wireless voice module service. The sales
- 7. of the sim card are physically by filling up required firms through the firm’s sales counters and its local agents. Other related services enabled through internet are GPRS (General Packet Radio Service), MMS (MultimediaMessagingService), PRBT (Personal Ring Back Tone), Voice call, SMS, Voice Mail, Sms2Email, Missed Call Notification, and related value added services. Ncell operates on dual band frequency; 900 MHz and 1800 MHz and also allows effective and higher capacity and data transfer for services like GPRS and EDGE. 2.2.1.3Key (current and emerging) business model in the industry The distribution of Ncell sim card is prompt on demand basis. IT is not used for the distribution process but is used for vendor identification of suppliers and customercare management in its Value Chain. Customer care service and value addition services are competitive advantage over its rivals through the use of Information Technology as claimed by the IT officer. Information Technology is an integral part of functional activities (Marketing, HR, Finance and Sales) for the company and also is highly implementedfor providing services (business) through SNPL’s website. The company do not uses MIS system but is extensively using features of the ERP system for co-ordination and regulation of functional units for consolidated activities. Automated interdepartmental emailing, file sharing features and interdepartmental meetingschedulers are the core features of the system incorporated between different functional units. The focus of the company in the coming years will be on value added services and expansion of its data and voice related services.IP phones will be introduced which will provide high speed internet connectivity. Some of the main IT enabled mobile services in the present are; WAP (Wireless Application Protocol), GPRS (General Packet Radio Service), EDGE (Enhanced Data rates for GSM Evolution) or EGPRS, PRBT (pre-define-specific Ring Back Tone) and SMS2Email. 2.2.2 United telecom limited
- 8. 2.2.2.1Profile: United Telecom Limited (UTL) is a consortium of 4 companies, who have come together in a joint venture to explore various telecom opportunities in Nepal. UTL had participated in the tender floated by NTA for Basic Services Based on WLL Technology for the then Kingdom of Nepal. After going through all NTA requirements,UTL was awarded the Letter of Intent by NTA to provide WLL based services, International Long Distance, Domestic Long Distance and Lease Lines Services. 2.2.2.2 Profile of the current business, both marketplace (physical) and market space (electronic): UTL provides mobile service based on WLL and uses CDMA technology. Both pre and post paid business models are offered and are provided impromptu from the firm’s sales unit. Code Division Multiple Access (CDMA) technology is the state-of-the-art technology offeringreliable service with high-speed data capability. UTL has procured the equipment, which offers the followingfeatures;CDMA 3G 1X(IS-2000) with Voice, G3 Fax and Data. Besides the sales and voice transfer UTL also offers value added services and customerbased services through its websites. The system, in addition to voice and data services, would be capable of providing the followingfeatures: 1. Wake-up Call/ Reminder Facility 2. Abbreviated Dialing 3. Call forwarding 4. Call Transfer 5. Call Waiting (Call Alert) 6. Dynamic STD/ ISD facility 7. Call Hunting Facility/Mobile Access Hunting 8. Voice Mail Service(VMS) 9. G3 Fax 10. Data Service 11.SLA( Selective Line Access) 12. Conference Calling 13. Three Way Call (TWC)
- 9. 14. Conference Calling (CC) 15. CLIP( Calling Line Identification Presentation) 2.2.2.3Key (current and emerging) business model in the industry The business model for the Wireless Local Loop (WLL) technology that UTL conduct is “UTL is able to deliver telephones to local communities within hours rather than every days or weeks or months”. The business model of UTL takes the advantages of the fact that the people of Nepal find it difficult to get the telephone connection or GSM service provided by the only player, i.e NTC. Also the business model exists because of the people’s need for over demand and less supply of this service. In addition, migration to the future 3G systems (CDMA 2000 3X/ IMT-2000/NGN- Next Generation Network), which are likely to be popular in the coming decades, is possible. The proposed 3G 1X technology/ system allows easy and smooth backward compatibility to the IS-95A and IS-95B. It is, therefore,expected that this technology/state of art equipment will not obsolesce for several decades. The system offers a wide range of supplementary services and has the capability to support Intelligence Network (IN) services. 2.2.3 Market power and market share: The subscriber base of incumbent NDCL has reached 8, 68,046 whereas that of Spice Nepal is 7, 02,975 hence a total of 15, 71,021 subscribers. The numberof postpaid subscribers has gone down by 1644. NDCL distributed 2,629 new lines in the last quarter whereas SNPL distributed 2, 12,260 lines in the same period. SNPL now holds 44.75% of the market share, 8.75% more than the previous quarter whereas that of NDCL continued to decrease in this quarter as well, going down to 55.25%. The mobile customerbase is growing basically due to prepaid mobile scheme,which has crossed the 1.5 million mark at the end of this quarter. Apart from Kathmandu Valley, NDCL is providing mobile service in 43 districts and Spice Nepal Pvt. Ltd. too
- 10. has extended its service in 25 districts. The mobile network of NDCL has now 395 (previous data) Base Transceiver Stations (BTSs) whereas SNPL has 315 BTS in 900 and 1800 MHz band. Hence the Number of subscriber to Base Transceiver Station (BTS) ratio of NDCL is 2198 in comparison to 2232 of SNPL. The mobile penetration is increasing steadily to reach 5.95 in this quarter. Total manpower involved in providing this service stands at 566. Spice Nepal predicts that if the present discouraging rules and regulations of NTA, lack of strict cyber laws etc., prevails then the industry would not be able to enable IT even within the next five years. UTL is planning to change their devices as technologies are changing rapidly so they are planning to change their suppliers depending upon the technology and price factor along with the quality. The proposed 3G 1X technology will allow easy and smooth Backward Compatibility to IS-95A and IS-95B. It is, therefore, expected that this technology/ state of art equipment will not be obsolete for several decades. UTL predicts that it will look into expanding its operations into all related areas including: 1. Rural Telephony 2. Mobile Trunking 3. Total Network Solutions for Banks, etc The NTA is soon to implement e-transactions in its operation and hence will be e-ready to facilitate the companies in the firm. Further full enforcement of cyber laws can bring trust and transparency for e- transactions. Expansion of IT infrastructures such as VSATs and Tele- centers will increase awareness of IT literacy and hence the web based customers.The firms as well as other government agencies are focusingon various trainings and counselingprograms. This will help to increase IT and technology literacy for senior staffs in the related organization. Further, the easy communication and global telecommunication revolution will create both awareness and need for the existing telecommunication industry to adapt both IT and other advanced technology based application to integrate in its newer business models and business processes.
- 11. 2.3 Market analysis Market analysis may take two distinct forms. In the first, it is a method used by investors to look at the market and try to determine whetherit is going up or down, in order to make investment decisions. In the second, it is a field used by marketers to analyze the target market of their clients and determine the best courses of action to take to improve sales and profitability. Market analysis as used by investors involves lookingat numerical data and attempting to discern patterns or determine probable future movement based on that data. Investors usingmarket analysis will look at how prices within their specific sector are moving, how the market as a whole is tending, and what individual events might affect the prices of stocks and commodities they are trading in. When performing a market analysis, an investormust also consider events such as announced mergers, profit predictions for a coming quarter, and new technological discoveries. Some investors take a primarily mathematical approach to market analysis, looking at reams of historical market data and crunching every number at their disposal through their own algorithms in an attempt to predict the market’s future path. Other investors take a more ‘gut’ approach to market analysis, relying on news sources and rumors surroundingcompanies’ activities to sketch a rough picture of possible market tendency. 2.3.1 Fields of market analysis: 1. Global market analysis 2. Industry market analysis 3. Market trend analysis 4. Business market analysis 2.4 Financial: present, past and future The company has different types of stakeholders like investors, employees,customers, government,creditors etc. The types which show more concern to the company’s financials are employees and investors. For employees and investors,the concern is like how and to what extent the company will prosper in coming days. Although we
- 12. cannot predict future,but we can use our intelligence and business acumen to deal with future if stakeholders’ concern are to be addressed properly. Before saying anything on future, we should briefly see how the company performed in last ten years’ time. For this purpose, financial statemenst are analyzed from the financial year 2056/57 to 2065/66. If we analyze total revenue of the company for last ten years, compounded Annual Growth rate (CAGR) of the company in terms of revenue has been 17.05%. So total revenue of Rs. 5.32 Billion has gone up to Rs.21.98 Billion in F.Y.2065/66 i.e. it has gone up by more than four times the revenue of 2056/57. If we analyze the data on year on year basis, then it is evident that initial few years growth is in the range of 10 plus percentage. But from year 2059/60 and afterwards, as GSM subscribers started to rise, revenue growth happened on 15 plus percentage basis. Financial year 2061/62 is showing less growth in comparison to other years due to the closure of GSM lines for a significantly long period. After then as CDMA subscribers started to rise, like anything in the range of 20-25%. If we analyze expenses part of profit and loss account, expenses has shown a compounded annual growth rate of 14.78%. In this period total expenses Rs.2.45 Billion (F.Y. 2056/57) has gone up to Rs.8.48 Billion (F.Y.2056/57) i.e. almost increased by 3.5 times. But analyzing the total expenses on year on year basis, uneven fluctuations can be seen. In couple of financial years, total expenses had decreased also in comparison to previous years. But in totality, expenses have increased in the range of 10-20 percent. Major component of cost is employee cost; it is almost in the range of 12-17% of total revenue. Administrative expenses include 4% and 2% towards royalty and contribution to rural development fund. This is bound to increase as revenue of the company increase. One of the amortization cost depreciation is likely to increase in coming years, as the rates applied for calculation is very low which is in effect will inflate the profit. In an industry like telecom where technological advances will make the asset no longer usable in shorter period of time, useful life of the asset and depreciation rates have to be revised accordingly.
- 13. As a rough estimate, from this year depreciation expenses would increase almost in the range of 50 to 100% depending on the type and nature of the asset. It is evident that the higher depreciation charge would have an impact on the profits reported by the company. Similarly the profit after tax figure has gone up from Rs. 2.17 Billion to Rs. 9.96 Billion having CAGR of 17.81% i.e. 4.37 times growth. Similarly, if we talk from shareholder’s point of view, shareholders fund is increased from Rs. 12.88 Billion to Rs. 42.16 Billion i.e.it has increased by 3.27 times. In the last couple of years net profit margin is also in the range of 40 plus percentage and return of shareholder’s fund is also around 22-25%. It clearly tells us that as of present the financial health of the company is in good position. TABLE 1: Financials of the company of last five years is stated below: 2061/2062 2062/2063 2063/2064 2064/2065 2065/2066 Total income ( in thousands) 9194297 11058915 14751624 17889310 2214782 Personnel cost 1418531 1486851 1764934 2204296 3580212 Maintenance & operation cost 552162 655127 797398 1219002 1578348
- 14. Depreciation 1048436 1195081 1366504 1486129 1681293 Other cost 1253640 868129 2839466 2108427 1673739 Total cost 4272768 4215188 6768302 7017854 8513529 Profit before tax 4921429 6843727 7983322 10871456 13633990 Profit after tax 3542461 4936647 5652688 7942902 10178025 Net profit ratio (%) 38.53 44.64 38.32 44.40 45.96 Total share holder equity 20825835 23686027 26794281 35343894 41629022 Total capital employed 20850094 23686027 27985961 35343894 43280625 Return to capital employed (%) 17.10 22.17 21.88 25.12 24.94
- 15. Return to share holder equity (%) 17.11 22.18 22.40 25.57 26.44 Book value per share 138.84 137.91 178.63 235.63 277.53 No. Of shares 150000 150000 150000 150000 150000 EPS 23.62 32.91 37.68 52.95 67.85 After going through the figures put above, one can be reasonable satisfied with the growth of the company. But no analysis can be done in isolation,so we are comparing with one of the competitor in GSM Mobile, Spice Nepal. Spice Nepal who as per latest reports claim to have subscriber base of 30, 00,000 and even if ARPU of Rs. 250-300 is estimated, rough annual revenue will be in the range of Rs. 6 to 8 Billion. If they continue to grow like this, very quickly they can touch the figure of Rs. 10-12 Billion in revenue. Considering this success done within a span of 4 to 5 years, Nepal Telecom’s financials robustness can be under threat if competitors grow like this. CHAPTER 3 CONCLUSION AND RECOMMENDATION 3.1 Conclusion: Nepal Telecom, a leading company in the telecommunication sector working restlessly for decades has been providing world class services in Nepal throughout the country covering all the 75 districts and
- 16. covering all the VDC’s. It has been providing best services regarding telephony and internet access to the willing customers.It has completed successful seven years of privatization. The organization is working for the social service and has been continuing the joint venture with the traffic police and working for the awareness in the road accidents and helping the needy during the natural calamities. It is providing services as telephony (GSM, CDMA, PSTN, SIP PPP) and internet as (Dial-up, ADSL,EVDO,GPRS) other entertaining services as CRBT and free ten web sms provided. It covers about 4.5% of the national revenue and is playing major role in the infrastructure development by revenue. It has been recognizing itself as the largest tax payer to the government and has been leading the nation by revenue. Being a service provider it is facing a lot of challenges. The monopoly market has no longer existed between the organizations. The competitors are giving a heavy challenge to them; the competitors mainly Spice Nepal working under the management of Telaia Sonera, a famous European multinational company, United telecom (UTL), Smart telecom and Nepal Satellite company limited are too involved in the race. Beyond these services it has been implementingnew technologies for fulfillingthe desire of the customers. As a conclusion the services provided to the customers are satisfactory till now but a lot of improvement and a regular cope-up is to be made to hold the existing customers and to attract new customers from the competitive market as well. 3.2 Recommendations Improvement in the managerial environment: managerial environment includes the circulation of the internal commands, decisions, it is very important to cope up with the environment. Improvement in the customer care: any organization, usually the service based shouldalways give first priority to the customers. Holding the existing customeris more important than planning for inviting new ones because an unsatisfiedcustomercan stop ten new willing customers from joining the organization.
- 17. Distribution of versatile services: Customers are not properly satisfied themselves on the provided service as they want a complete and versatile service. So Nepal telecom should always keep flexibility of the services in majority to hold the existing customers and to attract new customers from the competitive market. Improvement in the decision making and policy: The decision making and policy formulation is found to be worst in the organization. Decisions based on the improvement and establishment of the new technology has not been properly respected. ‘Right work in the right time’ must always be kept in the prior consideration. Relations between the trade unions and management: the current cooperation between the trade unions and management is quite unsatisfactory,if the organization wants proper survival in the competitive environment it should always cope-up with the workers unions. References www.ntc.net.np www.google.com wikepedia.org NT Smarika 2066