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Mahanagar Telephone Nigam Ltd.
Topline losses continue
2Q results disappoint; Maintain Underperform
In 2Q FY11, MTNL reported loss of Rs6bn vs loss of Rs4.5bn in 1Q FY11 & profit
of Rs206mn in 2Q last year. Losses were higher than our expectation as topline
fell QoQ after adjusting for non-recurring revenue from wet-lease of infrastructure
for the Commonwealth Games. Operating costs and interest outgo rose due to 3G
related spend but lack of any 3G revenue uplift. Re-iterate Underperform.
Revenue erosion continues
In 2QFY11, MTNL’s wireline revenues (rental & call charges) fell 6% QoQ while
cellular revenues fell 3% QoQ. ARPU fell QoQ for basic wireline (-3% QoQ),
broadband (-4% QoQ) and cellular (-5% QoQ). MTNL’s broadband sub base at
~0.9mn is now ~26% of MTNL’s fixed-line sub base. Reported revenue in 2Q
grew 11% QoQ led by non-recurring revenue of Rs1.8bn from wet-lease of
infrastructure for the Commonwealth Games.
Turnaround not in sight; estimates cut
Factoring 2Q trends, we have cut our FY12E revenue forecasts by 11%; FY11
estimates are supported by wet-lease income. Loss estimates for FY11-12E have
also moved higher led primarily by higher interest outgo.
No longer a debt-free company
We estimate MTNL’s net debt at ~Rs40bn by Mar ’11 vs net cash of Rs70bn in
Mar ’10. Outgo of Rs111bn towards 3G & BWA spectrum drained MTNL of the
large cash balance that was likely a key attraction for investors seeking value in
the stock. Our estimates capture recent income-tax refund of ~Rs8bn received by
the company.
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