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We believe that the market is focusing only on a
possible slowdown in domestic revenues and
ignoring the growth from the international business.
Valuations are close to all-time lows at 15x F2012E P/E
and 0.9x price to book.
Key Catalysts: Growth in investment revenues as the
Telefonica rollout is completed. Potential listing on the US
bourses. Announcement of recommendations on VAS by
TRAI. New acquisitions to enhance geographical presence or
service offerings and announcement of new deals with
telecom operator/s.
Key Investor Debate: We believe that the market is pricing in
the worst. The F1Q12 results were disappointing largely due
to the 5% QoQ decline in revenues from the domestic
business, reflecting an overall slowdown in the VAS space.
However, in F2Q12 international revenue growth has picked
up growing 51% QoQ and now account for close to 50% of the
total revenues. Domestic revenues continued to decline,
albeit at a slower pace (-3.5% QoQ). Management F2012
guidance of revenue growth of 20% and stable EBITDA
margins now appear more realistic, in our view.
Risks to our Call: Pressure on domestic business due to
regulatory changes; non-materializing of international
revenues to the extent as expected; loss of a major customer
and execution risk with global deals
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