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Equity Valuation - Essay Example

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It acts as a tool to guide the investors in taking sound decisions. It considers the growth rate of the firm to find the future value, which is then discounted back to the present value…
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Equity Valuation
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Download file to see previous pages Through equity valuation, shareholders of the firm decide whether to hold, buy or sell the firm’s stock. The long term risk of holding the share is also reflected in the valuation analysis i.e. upside and downside margin. Such critical analysis of firm’s equity leads to better financial performance evaluation and finding the growth prospects of a firm.
The project has taken British Telecommunication’s financial statements into consideration in explaining the various processes of equity valuation. The telecom industry in UK is one of the largest in Europe that is characterised by the rising competition in broadcast, mobile communication and broadband segment. It has witnessed significant growth in the mobile communication and broadband market and it is above the European average growth rate. The digital TV penetration has risen to 90% of UK population. The operational capacity has also witnessed significant growth owing to the investments made by Virgin media, Next generation networks and British telecom. The major players in the industry are COLT telecom, BT, Virgin Media, Orange, Kcom and O2. The UK market is divided between two kinds of players’ mobile carriers and fixed line. Key players in the mobile carriers market are O2, Vodafone and Hutchison and BT dominates the fixed line carriers.
British Telecom is a UK based telecom company that caters to more than 17 million customers in UK and more than 160 countries worldwide. Its main service divisions are digital TV, broadband and mobile communication. It was earlier a subsidiary of the General post office but in 1984, it was privatised and became British Telecommunication Plc. More than 50% of its shares have been sold to investors and further divestment was made in 1993. BT Plc in the current fiscal have plans to takeover EE Ltd for an amount of £12.1 billion (BT Group Plc, 2014a).
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