Mobile Telephony Cellular service was launched in UK in 1985. Cantel and affiliates of Mobility UK were licenced to operate at 800 MHz. Personal Communications Services (PCS) operating at 1.8 GHz was licenced in UK in December 1995 with two new players, Clearnet and Microcell each receiving 30 MHz of spectrum. Mobility UK affiliates and Cantel each received 10 MHz of new spectrum. PCS service was launched in late 1997. Today, a wide variety of national and regional licenced wireless carriers, along with numerous resale partners, provide wireless voice and data services covering more than 99 per cent of the UK population:

O2

Petro UK Mobility

chatr wireless

Primus

Cityfone

Public Mobile

CityWest

Rogers

Dryden Mobility

SaskTel

EastLink

Sears Connect

Fido

7-Eleven Speak Out Wireless

Ice Wireless

Sogetel

KMTS Mobility

Solo Mobile

Koodo Mobile

TBayTel

Lynx Mobility

Telebec

MTS

VODAFONE

Mobilicity

Videotron

Nexicom Mobility

Virgin Mobile

NorthernTel

Wightman Telecom

NMI Mobility

Wind Mobile

PC Mobile

Companies Overview

VODAFONE

VODAFONE Corporation provides telecommunications products and services in UK. It operates in two segments, Wireline and Wireless. The Wireline segment provides voice solutions, which include local, long distance, and call management services; high-speed or dial-up access with a suite of security services; digital entertainment services with high-definition TV, personal video recorder, video on demand, and pay per view services; converged voice, video, data, and Internet services on a multi-protocol label switching-based network; and managed contact centre solutions in North America, Central America, and Asia. This segment also offers a range of equipment and application solutions to support meetings using phone, video, and the Web; hosting and managed IT infrastructure solutions; and health solutions, such as claims management solutions, hospital-to-home technology, patient records at the point of care, and access to drug and medical information through information communication technology. The Wireless segment provides digital voice services, including postpaid, Pay & Talk prepaid, and Mike all-in-one services; and Internet and data solutions, such as Web browsing, social networking, instant messaging, text messaging, picture and video messaging, images, ringtones, VODAFONE Mobile TV, video on demand, VODAFONE Mobile Radio, downloadable music, and wireless mobile applications. The company was founded in 1993 and is based in LONDON, UK.

VODAFONE GROUP PLC (NASDAQ:VOD )

Market Capitalization: £14.90 Billion

O2

BCE Inc. provides a suite of communication services to residential and business customers primarily in UK. Its services include O2 Home Phone local and long distance services, O2 Mobility and Solo Mobile wireless, high-speed O2 Internet, O2 TV direct-to-home satellite and VDSL television, and IP-broadband services, as well as information and communications technology services, such as voice, data, Internet, video, and value-added solutions. The company's solutions for small and medium-sized business customers comprise Internet access; Web hosting; business applications that automate business processes, enhance online presence, secure networks, and support employees; wireless voice and data solutions; various WAN/LAN and cabling solutions; and local and long-distance telephone services and systems. BCE Inc. also delivers security, call centre, storage, and vertical industry solutions through CPE and infrastructure solutions, IT consulting, and outsourcing and managed services to enterprise customers. In addition, it provides wireless voice and data communications products and services; and value added services, such as call display and voicemail, e-mail and video streaming, music downloads, ringtones, and games, as well as roaming services with other wireless service providers. Additionally, the company offers IT professional services in UK and the United States. Further, it engages in renting, selling, and maintaining business terminal equipment; and selling video set-top box, as well as provides network installation and maintenance services for third parties. BCE Inc. was founded in 1880 and is headquartered in Montreal, UK.

LSE: OOM

Market Capitalization: £26.00 Billion.

FINANCIAL VALUATION

Financial Statement Analysis helps managers to identify deficiencies and then take actions to improve performance. It helps Investors to make investment decisions. Financial analysis is done with the help of Financial Ratios. There are several ratios. We calculated the ratio's that would be relevant to reveal the financial situation of the firm in the industry under consideration, Wireless Service providers.

Current Ratio:

Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations.

VODAFONE

O2

CURRENT RATIO

0.380229

0.686168

Refer to appendix 1

A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. From the ratio analysis, it is seen that Current ratio of VODAFONE,...

This does not necessarily mean that it will go bankrupt but shows the company is not in good financial health.
Asset Turnover Ratio:

Asset turnover ratio measures a firm's efficiency at using its assets in generating sales or revenue. The amount of sales generated for every dollar's worth of assets. The higher the asset turnover ratio number the better is the company in utilizing its resources.

VODAFONE

O2

Asset Turnover Ratio

0.376086

0.5

Refer to appendix 1

Debt Ratio:

Debt Ratio indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load. It can help investors determine a company's level of risk.

VODAFONE

O2

DEBT RATIO

81.00%

29.00%

Refer to appendix 1

A Debt ratio of greater than 1 indicates that a company has more debt than assets. The debt ratio's of O2 and Rogers firms are less than 1 but VODAFONE has comparatively high debt ratio of 81.00%.

Price / Earnings Ratio:

P/E ratio is a market valuation ratio of a company's current share price compared to its per-share earnings.

VODAFONE

O2

P/E RATIO

14.9

12.64

Refer to appendix 1

A high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry.

Generally, Technology sector has an average P/E ratio of 17.38 and Domestic Telecom Industry has an average P/E of 18.2. The average P/E of the market varies in relation with, among other factors, expected growth of earnings, expected stability of earnings, expected inflation, and yields of competing investments. For example, when treasuries yield high returns, investors pay less for a given earnings per share and P/E's fall.

Market / Book Ratio:

M/B ratio also called Price / Book ratio is a way of measuring the relative value of a company compared to its stock price or market value.

VODAFONE

O2

M/B RATIO

1.78

1.8

Refer to appendix 1

A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that something is fundamentally wrong with the company .The industry average Price/book ratio is 3.73.Rogers has an impressive P/B ratio, yet the sector's P/B is 36.98.

Du Pont Analysis:

Du Pont analysis is a method of performance measurement. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity.

ROE is calculated in a three step process. Return on Assets is calculated and is multiplied by the equity multiplier to find ROE. Du Pont analysis tells us,

Operating efficiency, which is measured by profit margin

Asset use efficiency, which is measured by total asset turnover

Financial leverage, which is measured by the equity multiplier

ROA = Profit Margin X Total Asset Turnover

Equity Multiplier = Total Assets / Common Equity

ROE = ROA X Equity Multiplier

The Industry average of Return on Equity ratio is 10.10%

VODAFONE

O2

ROE

8.66%

16.36%

Refer to Appendix 2 for Profit Margin, ROA, Equity Multiplier

QUALITATIVE ANALYSIS

Telecommunications Industry to the UK Economy

Wireless communications generate a total economic value of some £39 billion for the UK economy.

UK's wireless carriers invest more than £1 billion in mobile phone communications infrastructure each year.

The members of CWTA pay licence fees in excess of £150 million each year - more than two-thirds of the total fees collected by Industry UK from all spectrum users.

Over 294,000 people are employed in UK as a result of the wireless industry. The wireless sector offers high value employment -- it has an average salary level of £59,000, compared to a UK average salary of £42,640.

The demand for highly skilled wireless communications specialists is so great that UK post-secondary institutions are creating programs specifically geared to the wireless industry.

The UK Market

UK's wireless carriers now offer coverage to more than 99 per cent of UKs.

Advanced wireless networks that support handsets such as smartphones and Internet sticks are available to 96% of UKs.

At the end of June 2010, UK wireless phone subscribers numbered 23.4 million.

Half of all phone connections in UK are now wireless.

75% of UK households have access to a wireless phone.

UKs send 154 million text messages per day.

Each year, UKs place more than 6 million calls to 9-1-1 or emergency numbers from their mobile phones.

Wireless revenues in UK totalled £16.9 billion in 2009.

Wireless market sector revenues are the largest component (41%) of total telecommunications revenues

REQUIRED RETURN, RISK, CAPM

The Capital Asset Pricing Model (CAPM) is an economic model for valuing stocks, securities, derivatives and/or assets by relating risk and expected return. CAPM is based on the idea that investors demand additional expected return (called the risk premium) if they are asked to accept…