Reduce RCOM - TP Rs.70 - Geojit BNP Paribas Financial Services

- Reliance Communication's (RCOM) revenue was in-line while the EBITDA margin was lower than analysts' estimates due to higher access costs and marketing spend.

- Inactive subscriber write-offs translated into higher ARPU. The company has cleaned up its subscriber base, writing off 23% of total subscribers over the last two quarters. The revenue impact of which was offset by a 21% ARPU increase.

- Net debt/EBITDA is very high for RCOM; deleveraging is the key.

- The company is in discussion with multiple parties on a tower deal.

- The 3G subscriber base increased 27% q-q to 6.1 million, average data usage also showed improvement.

- Management commentary indicates good times ahead for the industry. RCOM expects tariffs in India to increase more than 10% over the next 12-18 months.

- The company has already raised tariffs in two phases and does not intend to compete on pricing in prepaid segment.

- RCOM expects network costs to come down 8-10% over the next year.

Source : Equity Bulls

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