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Reliance Communications (RLCM.BO; Rs93.05; 1H)
Takeaways from Mumbai – Reliance Communication presented at the Citi India
Investor Conference in Mumbai. Below are the key takeaways.
Minutes rebalancing will take 1-2 more quarters – The rebalancing of low margin
PCO minutes is likely to take 1-2 more quarters. The primary reason behind the
rebalancing has been to free up the CDMA spectrum for high speed data services
(on EVDO), which the company has aggressively expanded in the last quarter.
Rev/min has stabilized – Voice rev/min should remain broadly stable/slightly
decline and any large-scale tariff cuts by new entrants looks unlikely given operating
losses and funding constraints. Blended rev/min could move up if data pickup is
strong. Current non-voice wireless revenues at 20% are higher compared to the
GSM incumbents and the EVDO/3G services should help increase this proportion
further.
Focus on B/S – Capex guidance for FY12E is Rs15bn; low versus our current
estimates of Rs27bn and should help improve the net debt position (FY11E net debt
ex-equipment supplies payable stood at Rs320bn). We believe the low capex
guidance is unlikely to hurt the company in the near/medium term given it has
cushion of a relatively low network utilization.
Other updates – 1) Absolute subscriber loss at ~4m from MNP is low (in context to
overall sub base) and the company has been a net gainer in overall value terms
from MNP (in the last 3-4 weeks), and 2) tower portfolio is currently at 50,000
towers with 1.75x tenancy (captive tenancy is at 1.6x).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Communications (RLCM.BO; Rs93.05; 1H)
Takeaways from Mumbai – Reliance Communication presented at the Citi India
Investor Conference in Mumbai. Below are the key takeaways.
Minutes rebalancing will take 1-2 more quarters – The rebalancing of low margin
PCO minutes is likely to take 1-2 more quarters. The primary reason behind the
rebalancing has been to free up the CDMA spectrum for high speed data services
(on EVDO), which the company has aggressively expanded in the last quarter.
Rev/min has stabilized – Voice rev/min should remain broadly stable/slightly
decline and any large-scale tariff cuts by new entrants looks unlikely given operating
losses and funding constraints. Blended rev/min could move up if data pickup is
strong. Current non-voice wireless revenues at 20% are higher compared to the
GSM incumbents and the EVDO/3G services should help increase this proportion
further.
Focus on B/S – Capex guidance for FY12E is Rs15bn; low versus our current
estimates of Rs27bn and should help improve the net debt position (FY11E net debt
ex-equipment supplies payable stood at Rs320bn). We believe the low capex
guidance is unlikely to hurt the company in the near/medium term given it has
cushion of a relatively low network utilization.
Other updates – 1) Absolute subscriber loss at ~4m from MNP is low (in context to
overall sub base) and the company has been a net gainer in overall value terms
from MNP (in the last 3-4 weeks), and 2) tower portfolio is currently at 50,000
towers with 1.75x tenancy (captive tenancy is at 1.6x).
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