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Telecom Model

The document outlines a financial model for a telecom company named Tio, which plans to enter the VPN services market. Tio forecasts a 5% growth rate after an initial 40% growth from winning a tender for 100 bank branches, with significant investments in infrastructure and equipment. Key financial components include revenue generation, maintenance costs, CAPEX, and a DCF valuation approach to assess Tio's financial viability.

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9 views8 pages

Telecom Model

The document outlines a financial model for a telecom company named Tio, which plans to enter the VPN services market. Tio forecasts a 5% growth rate after an initial 40% growth from winning a tender for 100 bank branches, with significant investments in infrastructure and equipment. Key financial components include revenue generation, maintenance costs, CAPEX, and a DCF valuation approach to assess Tio's financial viability.

Uploaded by

jainaniket839
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Financial modelling

Building a small Financial Model

By CA. Amarjit Kaur


Case study: Valuation of Telecom
Company
Telecom Case Study
Tel has a big business in Retail industry and they would like to enter telecom business. They are
interested in only VPN services which they will implement between different offices. They have named
its business “Tio” and before entering into domain, they have done some research and have emerged
with below key points:

• They have forecasted their numbers for 5 years and they have assumed that they will grow at
industry average (5%) afterwards.
• Tio will invest all the money (equity) for CAPEX in the infrastructure and equipment. They will raise
the same at 12%. Tio is planning to issue 100Mn shares in lieu of the amount.
• Tio will have to keep upgrading the infrastructure and equipment to cover different offices of various
clients.
• Tio expects the investment of around $150 Mn in network access for connecting different offices
every other year. This amount will change with inflation.
• The equipment investment varies with number of branches/ offices. This varies with time and
currently it is $.1 Mn per office.
• Initially, Tio has won a tender of 100 branches of a bank and expecting it grow at 40% for initial 5
years.
Telecom Case Study
• Tio is expecting to have a maintenance cost of 10% for
equipment and 15% for network.
• To handle all this, current manpower cost is $1 Mn
• Tio has entered into an agreement with government and has
agreed to share 5% of the revenue with government.
• Tio is expecting to generate revenue of $1 Mn per office and to
remain competitive in the market, it is not going to increase with
inflation.
• Tax slab in the country is 30% and depreciation of the
equipment and network is assumed to be 10%.
• Assignment

• Identify and calculatedifferent componentsofthe revenueandcost.

• CreateP&L.

• Identifydifferentpartsof CAPEX.

• Use DCF to value Tio.


Telecom – Assumptions
• Applying 40% on branch/ office growth
• Finding out manpower cost with inflation
• Calculating CAPEX with inflation and other parameters
Telecom – CAPEX
• Calculating CAPEX for DCF
• Calculating cumulative CAPEX for depreciation
Telecom – P&L
• Calculating PAT
Telecom – Valuation
• Applying DCF

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