>Tata Communications Ltd. (INDIA INFOLINE)

Pricing pressure to dampen wholesale voice growth
Wholesale voice (ILD & NLD) business is likely to face continued challenges as realizations declines and operators fight for voice volumes. Tata communications experienced nearly 20% yoy fall in gross revenvue/min in FY08 and we expect as annual 5-7% drop over yje next two years.

Leverage, uncertainty in land disposal remain key concerns
The company has incurred ~US$500mn capex in the current financial year and plans to spend a similar amount in FY10. Since operations may not be FCF positive, debt would fund as estimated capex of ~US$1.5bn over FY09-11. Thsi could push debt burden to 1.1x in FY10. Separately, the company owns 773 acres of valuable land in major cities, which we value at Rs 113/share. However, the uncertain timing of any potential transaction is a concern, especially since crash from land sale could be used to repay debt.

Data business revenue CAGR seen above 20%
Enterprise & Carrier data is expected to witness a health 20% + CAGR in revenues over FY09-11 on the back of capacity addition in cable network. We have factored in a higher revenue growth as compared to that for Bharti and Rcom's enterprise business is given the larger scale of asset ownership and expansion is managed data centre services.

To see full report: TATA COMMUNICATIONS