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UBS Investment Research
Tulip Telecom
Q ualcomm BWA licence—not a big issue
Event: newsflow—Qualcomm BWA application is deemed to be invalid
According to the Economic Times, Qualcomm may not be eligible for a Broadband
Wireless Access (BWA) licence in India as the Department of Telecom (DoT) is of
the view that Qualcomm did not apply for and acquire licences within three months
of the auction. However, the company denies violation of any rules and maintains
that it applied for licences within the required three-month window.
Impact: view the development as procedural issue
The newsflow is incrementally negative for Tulip as it holds a 13% stake in the
BWA JV with Qualcomm. However, we believe these are procedural issues and
view the event of Qualcomm not receiving the BWA licence as unlikely. Based on
our discussion with Tulip management, the company remains confident of
monetising its BWA investment. We value Tulip’s 13% stake in the BWA JV at
Rs9/share (at cost), contributing 3.5% to our price target.
Action: reiterate Buy with sum-of-the-parts-based price target of Rs260
We view any correction in the stock due to this newsflow as a buying opportunity.
We believe Tulip is well positioned to benefit from enterprise data growth given its
reach, relationships, enterprise focus, and largest last-mile fibre coverage. Further,
we believe the data centre offers upside potential to our valuation.
Valuation: Tulip is currently trading at FY12E EV/EBITDA of 4.1x
We value the core business at Rs251/share using a DCF-based methodology and
explicitly forecast long-term valuation drivers with UBS’s VCAM tool. We find
Tulip’s valuation attractive at 5.9x FY12E PE.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Tulip Telecom
Q ualcomm BWA licence—not a big issue
Event: newsflow—Qualcomm BWA application is deemed to be invalid
According to the Economic Times, Qualcomm may not be eligible for a Broadband
Wireless Access (BWA) licence in India as the Department of Telecom (DoT) is of
the view that Qualcomm did not apply for and acquire licences within three months
of the auction. However, the company denies violation of any rules and maintains
that it applied for licences within the required three-month window.
Impact: view the development as procedural issue
The newsflow is incrementally negative for Tulip as it holds a 13% stake in the
BWA JV with Qualcomm. However, we believe these are procedural issues and
view the event of Qualcomm not receiving the BWA licence as unlikely. Based on
our discussion with Tulip management, the company remains confident of
monetising its BWA investment. We value Tulip’s 13% stake in the BWA JV at
Rs9/share (at cost), contributing 3.5% to our price target.
Action: reiterate Buy with sum-of-the-parts-based price target of Rs260
We view any correction in the stock due to this newsflow as a buying opportunity.
We believe Tulip is well positioned to benefit from enterprise data growth given its
reach, relationships, enterprise focus, and largest last-mile fibre coverage. Further,
we believe the data centre offers upside potential to our valuation.
Valuation: Tulip is currently trading at FY12E EV/EBITDA of 4.1x
We value the core business at Rs251/share using a DCF-based methodology and
explicitly forecast long-term valuation drivers with UBS’s VCAM tool. We find
Tulip’s valuation attractive at 5.9x FY12E PE.
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