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Thinks better placed for data with more fibre backhaul and CDMA spectrum
India is a data-starved market and RCOM has the maximum 3G spectrum relative to the competition. ARPU on the data
side is 3-4x that of voice. 3G drives growth at a sector level.
RCOM sees itself as much better placed than competition with 200,000kms of fibre backhaul. We understand that Bharti is
next in line with 120,000kms of fibre backhaul.
Significant CDMA advantage allows it to offer pan India EV-DO based products without getting into roaming
arrangements. Only Tata and RCOM are dual technology players and benefit from a robust spectrum bank. RCOM
believes that the CDMA flexibility should allow it to lead the data card market. RCOM currently segments data card
offerings by speed and covers all types of user. 5 MHz of 3G spectrum with pure GSM operators may be inadequate in the
medium term.
Believes that, globally, technologies such as CDMA and GSM will converge to LTE in the longer term.
Presence in both satellite TV (Direct to Home) and cable TV gives RCOM a larger addressable market and lower costs for
both content and set top boxes.
Valuation and risks
Our target price of INR152 is based on a blend of DCF and PE valuation and implies a PE multiple of 16.8x for FY12e
EPS and 12.6x for FY13e EPS. The stock is currently trading at a multiple of 12.7x FY12e EPS and 5.4x FY12e
EV/EBITDA.
Monetization of tower assets and introduction of a strategic investor would be key catalysts for the stock. The company’s
stretched balance sheet limits upside.
Upside risk: estimated pick up in 3G; downside risk is significant churn on account of MNP.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Thinks better placed for data with more fibre backhaul and CDMA spectrum
India is a data-starved market and RCOM has the maximum 3G spectrum relative to the competition. ARPU on the data
side is 3-4x that of voice. 3G drives growth at a sector level.
RCOM sees itself as much better placed than competition with 200,000kms of fibre backhaul. We understand that Bharti is
next in line with 120,000kms of fibre backhaul.
Significant CDMA advantage allows it to offer pan India EV-DO based products without getting into roaming
arrangements. Only Tata and RCOM are dual technology players and benefit from a robust spectrum bank. RCOM
believes that the CDMA flexibility should allow it to lead the data card market. RCOM currently segments data card
offerings by speed and covers all types of user. 5 MHz of 3G spectrum with pure GSM operators may be inadequate in the
medium term.
Believes that, globally, technologies such as CDMA and GSM will converge to LTE in the longer term.
Presence in both satellite TV (Direct to Home) and cable TV gives RCOM a larger addressable market and lower costs for
both content and set top boxes.
Valuation and risks
Our target price of INR152 is based on a blend of DCF and PE valuation and implies a PE multiple of 16.8x for FY12e
EPS and 12.6x for FY13e EPS. The stock is currently trading at a multiple of 12.7x FY12e EPS and 5.4x FY12e
EV/EBITDA.
Monetization of tower assets and introduction of a strategic investor would be key catalysts for the stock. The company’s
stretched balance sheet limits upside.
Upside risk: estimated pick up in 3G; downside risk is significant churn on account of MNP.
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