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Research
Reliance Communication - 1QFY2013 Result Update - Angel Broking
Posted On : 2012-08-15 09:28:44( TIMEZONE : IST )
For 1QFY2013, Reliance Communications (RCom) reported modest results with a better-than-expected performance on the operating front due to an ~3% qoq decline in network-related expenses. Due to lack of triggers except for the planned monetization of its Infratel business and listing of the under-sea cable business in Singapore, which can cut down its debt by more than half, we remain Neutral on the stock.
Quarterly performance: RCom reported revenue of Rs.5,319cr, almost flat q-o-q. The wireless revenue came in at Rs.4,527cr, up merely 0.5% qoq, on the back of a 0.4% qoq growth in minutes of usage (MOU) to 228min. The average revenue per user (ARPU) slipped by 1.0% qoq to Rs.98. The overall network traffic grew by 1.7% qoq to 105bn min. RCom's overall EBITDA margin improved by 29bp qoq to 31.0%, aided by an ~3% qoq lower network operating cost (NOC). The PAT for the quarter came in at Rs.162cr, boosted by a 6.3% qoq decline in depreciation costs. RCom had in the past, increased the useful life of certain fixed assets like towers, which led to a decline in depreciation costs.
Outlook and valuation: The company's recent quarter performance is in line with its peers, with a qoq decline in major key performance indicators (KPIs). With increasing competitive intensity in the industry, we believe it is difficult to see any major improvement in the voice business any time soon as a significant cut has been taken by telecom companies including RCom on 3G tariffs and as a lot of regulatory uncertainties continue to prevail. Currently, the company is striving to reduce the debt level in its books and has again maintained its stance of possibly selling stake in its tower assets, which might help the company to deleverage its balance sheet and reduce debt. This can act as a positive trigger to the stock price coupled with the company's plan of listing its under-sea cable business in Singapore. We maintain our Neutral view on the stock.
