Reliance Communications Rating Under Review - Motilal Oswal

RELIANCE COMMUNICATIONS: 3G launch in key metros unlikely to offer significant first-mover advantage; Uncertainty persists on regulatory/capital raising outlook; Under Review

- Reliance Communications issued a media release announcing launch of 3G services in Mumbai, Delhi, Kolkata and Chandigarh.

- RCom is the first operator to launch 3G in key metros. By March 2011, the company expects to launch 3G services in 13 circles.

- Bharti and Vodafone are other two private operators with 3G spectrum in Delhi and Mumbai.

- RCom also has plans to launch 3G in other circles in FY12 by entering into roaming agreements with other operators.

- RCom's 3G spectrum has revenue coverage of ~55% which is the second lowest among major wireless operators being the lowest at ~40% revenue coverage.

- We expect incremental 3G revenue to contribute ~3-4% of RCOM's mobile revenue in India by FY12E. RCom trades at EV/EBITDA of 8.4x FY11E and 6.7x FY12E. Given continued regulatory uncertainty, our rating on RCom is currently Under Review. We continue to believe that a potential policy revamp would be positive for GSM incumbents like Bharti and Idea.

Source : Equity Bulls

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