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MTNL (MTNL)
Telecom
Beyond repair – bailout required; SELL. MTNL reported another quarter of
disappointing operating performance with an EBITDA loss of Rs3.2 bn (nearly 2X qoq).
Cash support is now completely eroded with 3G/BWA payouts. The recent TRAI
recommendations on excess spectrum pricing and spectrum renewal pricing further
drag the value of the company down. The company has little fundamental value and
needs equity injection to remain a going concern. Cut target price to Rs35; SELL.
Another quarter of revenue decline, massive loss of Rs6 bn at net income level
MTNL reported revenues of Rs9.2 bn (including one-off revenues of Rs0.8 bn from leasing of
infrastructure for Commonwealth Games versus Rs1.8 mn in the previous quarter). Adjusted
revenues of Rs8.4 bn were down 4% qoq and 9% yoy – this in a seasonally strong quarter,
reflecting sustained deterioration in MTNL’s market positioning. Another quarter of provisions for
retiral benefits (Rs2.6 bn) led to an EBITDA loss of Rs3.2 bn, nearly 2X qoq. Net loss for the quarter
was Rs6.7 bn versus Rs6 bn in the previous quarter.
Earnings-based or DCF-based valuation meaningless; reiterate SELL
A massive 3G/BWA payout, a non-increasing revenue base, a cost structure which is out of control,
weak competitive positioning, subscale operations (presence in only 2 circles), and sustained tariff
pressure continue to dent the earnings power of MTNL. Lack of earnings visibility even in the
medium term renders earnings or DCF-based valuation for MTNL meaningless, in our view. In
addition, potential spectrum-related payouts (one-time for excess and recurring on renewals)
based on current TRAI recommendations have an NPV impact of Rs43/share (>100% of current
market price), per our computations.
The stock will likely continue to trade at asset-based valuation (cash on books, real estate assets,
2G/3G/BWA spectrum in Mumbai/Delhi, and other telecom infrastructure). We retain our SELL
rating on the company with a revised target price of Rs35/share (Rs50/share earlier).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MTNL (MTNL)
Telecom
Beyond repair – bailout required; SELL. MTNL reported another quarter of
disappointing operating performance with an EBITDA loss of Rs3.2 bn (nearly 2X qoq).
Cash support is now completely eroded with 3G/BWA payouts. The recent TRAI
recommendations on excess spectrum pricing and spectrum renewal pricing further
drag the value of the company down. The company has little fundamental value and
needs equity injection to remain a going concern. Cut target price to Rs35; SELL.
Another quarter of revenue decline, massive loss of Rs6 bn at net income level
MTNL reported revenues of Rs9.2 bn (including one-off revenues of Rs0.8 bn from leasing of
infrastructure for Commonwealth Games versus Rs1.8 mn in the previous quarter). Adjusted
revenues of Rs8.4 bn were down 4% qoq and 9% yoy – this in a seasonally strong quarter,
reflecting sustained deterioration in MTNL’s market positioning. Another quarter of provisions for
retiral benefits (Rs2.6 bn) led to an EBITDA loss of Rs3.2 bn, nearly 2X qoq. Net loss for the quarter
was Rs6.7 bn versus Rs6 bn in the previous quarter.
Earnings-based or DCF-based valuation meaningless; reiterate SELL
A massive 3G/BWA payout, a non-increasing revenue base, a cost structure which is out of control,
weak competitive positioning, subscale operations (presence in only 2 circles), and sustained tariff
pressure continue to dent the earnings power of MTNL. Lack of earnings visibility even in the
medium term renders earnings or DCF-based valuation for MTNL meaningless, in our view. In
addition, potential spectrum-related payouts (one-time for excess and recurring on renewals)
based on current TRAI recommendations have an NPV impact of Rs43/share (>100% of current
market price), per our computations.
The stock will likely continue to trade at asset-based valuation (cash on books, real estate assets,
2G/3G/BWA spectrum in Mumbai/Delhi, and other telecom infrastructure). We retain our SELL
rating on the company with a revised target price of Rs35/share (Rs50/share earlier).
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