Monday, May 11, 2009

>Reliance Communications (INDIA INFOLINE)

Revenue growth below estimates on weak wireless showing
Rcom Q4 FY09 revenues increased 2.2% qoq, lower than our expectations, on a weak wireless performance. Mobile revenues increased 2% over the previos quarter, much below our estimate for a 5.6% rise, However global segment made up for a relatively subdued wireless showing with a robust 12% jump in revenues. The company attributed this to ongoing synergies on integration of VANCO and Yipes Inc. Most of the growth came from data business with negligible contribution from voice.

ARPU fall worse than expected; MOU disppoints
ARPUs declined 10.8% qoq, worse than our expectations and also that for peers like Bharti. MOU at 372mins was disappointing especially since free minutes offered as part of GSM launch in 14 circles.

OPM increase in-line; staff, SG&A expenses decline
Rcom reported OPM of 38.2% in-line with our estimate. Although network opex and access charges increased, these were cushioned by decline in staff and SG&A costs. PAT growth came in above our expectations on higher interest and other income.

Capex intensity to decline; Maintain BUY
Rcom has incurred capex of Rs190bn in FY09, about 24% lower as against a revised guidance of Rs250bn, partly owing to network optimization. Wireless capex is likely to be completed by Sep'09 and the company has guided for a spending of Rs100bn in the current fiscal. It expects the incremental revenues from GSM subscribers to accrue from the current quarter. We project revenue CAGR of 19.5% over Fy09-11 while PAT growth would trail revenues due to net interest expenses from current year. Maintain BUY with a revised price revised target of Rs 252 from Rs213 earlier.