Calculation of EVA of two companies

According to calculations that were conducted by ourselves, the Economic Value Added indicator of Kazakhtelecom company was -422,320,001 tenge in 2011, in 2012 it became -58,616,537 tenge and in 2013 it suddenly rose and became positive – 9,389,312 tenge. Here we can see extremely high fluctuations of this indicator. We suppose that such fluctuations happened because the company sold 49% of its shares to Sonera Holding B.V. By this we mean that in 2011 the mangers paid very high dividends to the shareholders and dividends, in their turn, are reflected in calculating WACC. Thus, WACC became very high and it affected the EVA, in general. More WACC – less EVA, we think. Therefore, in 2011 Economic Value of the company was extremely low. In 2012 and 2013 the situation became better due to innovational reformation and new policies which the company inserted and the use of Assets became more effective and met the expectations of the managers. Especially, we can see it in increase of Return of Asset measurement: in 2011 it was 4%, while in 2012 and 2013 it became 4,8% and 4,7% respectively.

What about Britishtelecom, here we see much better situation in comparison to Kazakhtelecom for the reason that in 2011 Economic Value Added of Britishtelecom was £1,038,000,000. Nevertheless, in 2012 it declined significantly on £100 million. We assume that this result happened because of conducting of London Olympic Games in 2012. By this we mean that, in 2012 the company had to provide services within the whole territory more intensively than usually. Therefore, the costs and expenses were increased, leading to borrowing much more money. The cost of Debt is also reflected in the formula of WACC, meaning that WACC increased, too. Thus, EVA in 2012 plunged sharply because of high debts. In 2013 the situation became much better. EVA rose and became more even it was in 2011. In 2013 EVA was £1,142,000,000