Reliance Communication rings on possible value unlocking

Reliance Communication spurted 5.95% to Rs 648.20 at 10:48 IST on BSE on reports its 95% owned tower business subsidiary is planning to raise nearly Rs 5,000-6,000 crore through an initial public offering.

The stock had hit a 52-week high of Rs 844 on 10 January 2008 and a 52-week low of Rs 371.25 on 16 March 2007.

The scrip had underperformed the market in the one month to 1 February 2008, falling 16.59% as against the Sensex's 10.33% decline. It had also underperformed the market in the past three months, slipping 22.13% against the Sensex's 8.68% slide.

India’s second largest listed telecom firm by sales has an equity capital of Rs 1032 crore. Face value per share is Rs 5.

At the current price of Rs 648.20, the scrip trades at a PE multiple of 76.61, based on Q3 December 2007 annualised EPS of Rs 8.46.

Reliance hopes to sell 10% of the post-issue capital in Reliance Telecom Infrastructure and will file a prospectus for the IPO with the regulator this week, reports suggest.

Reliance Telecom Infrastructure, which owns about 25,000 mobile towers, plans to expand them 40,000 by March and to 60,000 a year later, Chairman Anil Ambani said in an investor conference call last week.

Reliance Communication’s net profit fell 43.4% to Rs 436.48 crore on 11.8% rise in sales to Rs 3403.52 crore in Q3 December 2007 over Q3 December 2006.

Reliance Communication provides telecommunication services. The company provides wireless, wire line, voice, data and Internet communication services.

RCom connects with West Bengal

Reliance Communications (RCom) advanced 1.82% to Rs 472 on reports that it has bagged an e-governance project from the West Bengal government and signed a master service agreement with the state in this regard.

RCom is to set up 1,860 common service centres (CSC) across the state for providing government-to-government, government-to-business, business-to-business and business-to-consumer services. Without divulging the financial details of the project, the company said the project would benefit 26 lakh households in the state.

The business model will be on a built-own and operate basis.Each of the CSC would have a minimum of a one personal computer, voice-data-video communication. The CSCs would be managed by a village level entrepreneur as franchisee of RCom.RCom will provide training and support to village level entrepreneurs in setting up of the infrastructure.

Tariff reduction spells gain for telecom shares

Telecom pivotals of the Sensex and Nifty were up between 0.7 - 2%, after the latest order of the telecom regulator slashing tariffs for users.

VSNL rose 2% to Rs 386.50, Reliance Communications gained 1.3% to Rs 405.50, Bharti Airtel gained 1.1% to Rs 747 and MTNL gained 0.7% to Rs 146.25, boosted by news of the Telecom Regulatory Authority of India (TRAI) cutting access deficit charges.

Reliance Communications (RCL) had bounced back in the past two days after the company announced on Monday (19 March) that it had got the court's nod for demerger of its two business in favour of a separate company. It had risen to Rs 400.30 from Rs 376.90 on 16 March 2007. Earlier, the RCL stock had tumbled on concerns of increased competition from Vodafone after the British mobile services provider, on 15 March, reached a partnership agreement with Essar. From Rs 398.55 on 14 March 2007, RCL retreated to Rs 376.90 by 16 March 2007.

VSNL had recovered from the lower level after a setback in early February - early March 2007. From Rs 355.25 on 5 March 2007, VSNL's scrip had firmed up to Rs 377.70 by 20 March 2007.

The total amount of access deficit charge (ADC), the fee paid by all telecoms users to fund loss-making rural network expansion by state-run Bharat Sanchar Nigam (BSNL), has been reduced to approximately Rs 2000 crore from the existing level of Rs 3200 crore for the financial year 2007/08, TRAI informed.

Apart from the cut in the annual charge firms pay, the regulator also abolished the ADC on all outgoing international calls from a previous 80 paise per minute. The charge on incoming calls from overseas was cut by 38%. The new fee structure will be applicable from 1 April 2007.

Market men are also awaiting announcement regarding annual licence fees and spectrum charges for wireless telephony. In the Union Budget 2007-08, the finance minister proposed setting up a committee to consider reduction in annual licence fees and spectrum charges for wireless telephony, in order to align them with international rates. At the moment, wireless companies pay 6-10% of net revenues as license fee and 2-6% as spectrum charges based on the circle and the spectrum used.

The Department of Telecom (DoT) favours a 6% annual license fee compared to the existing 6 - 10%, and is likely to recommend a cut. But the final call on this will be taken by the finance ministry.

RCom spurts as annual wireless license fee may drop

Reliance Communications surged 4.5% to Rs 426, on hope of a cut in license fees for wireless services in the coming months.A strong 21.3 lakh shares changed hands in the counter on BSE.

Telecom shares had surged from late-January 2007 to early-February 2007 on expectations of aggressive bidding for Hutch-Essar. The expectations came true, when Vodafone, on 11 February 2007, emerged as a top-bidder for Hutchison's 67% stake in the fourth largest cellular service provider, at an enterprise value of a stunning $18.8 billion.

Reliance Communications (RCL) had surged to Rs 515.10 on 5 February 2007 from Rs 434.95 on 24 January 2007. From this high, the RCL stock had declined to Rs 407.45 by 27 February 2007, partly due to concerns of equity dilution arising from the large $1 billion foreign currency convertible bonds (FCCB) issue.

The finance minister proposed setting up a committee to consider reduction in annual licence fees and spectrum charges for wireless telephony, in order to align them with international rates. At the moment, wireless companies pay 6-10% of net revenues as license fee and 2-6% as spectrum charges based on the circle and the spectrum used. The Department of Telecom (DoT) favours a 6% annual license fee compared to the existing 6-10%, and is likely to recommend a cut. But the final call on this will be taken by the finance ministry.

Subscriptions for mobile services are growing at a fast clip in India. The country recorded 6.5 million net new subscribers in January 2007, making it the fastest growing major mobile phone market in the world.

RCL’s consolidated net profit jumped 198 % in the December 2006 quarter to Rs 924.42 crore, on 26% growth in consolidated revenue to Rs 3755.30 crore.

On 5 February 2007, RCL raised $1 billion from an FCCB issue. The conversion price for the FCCBs was pegged at Rs 661.23 per share, representing a premium of 30% to the volume weighted average price of shares on 5 February 2007. In the event that all FCCBs are fully converted into equity, the share capital of the company will increase by approximately 6.67 crore shares.

Profit-booking sets in after a firm start

The BSE Sensex slipped from a high, as profit-booking began immediately after a strong opening. At 10:18 IST the BSE Sensex was up 61.58 points, to 14,417.52. It had opened higher, at 14,436.18, and surged to a high of 14,465.38 as buying continued. From this point, it started falling, and touched a low of 14,385.78

The total turnover on BSE amounted to Rs 561 crore.The market-breadth was strong on BSE, with 1,338 shares advancing compared to 459 that declined.Among the 30-Sensex pack, 22 advanced while the rest declined.Telecom services provider, Bharti Airtel, was the top gainer, up 1.86% to Rs 806.50, on a volume of 51,264 shares.

ABB gains on quarterly outcome
ABB rose 2.7% to Rs 3905, after the company announced 42.6% growth in net profit in the December 2006 quarter along with a 5-for-1 stock-split.A strong 7,775 shares changed hands in the counter on BSE.

The stock had surged in early-February 2007. It had later pared gains in a weak market before firming up again on the eve of the results. The stock had risen nearly 2% on Thursday (15 February 2007) to Rs 3800.95. The results were announced on Friday (16 February 2007), the day when the market was closed for a public holiday.

ABB has reported 42.6% growth in net profit in the December 2006 quarter to Rs 134.95 crore from Rs 94.61 crore in the December 2005 quarter. Income from operations has surged 44.6% to Rs 1426.31 crore (Rs 985.72 crore).

ABB India had a record order intake during the year (year ended 31 December 2006), up 50%, at Rs 5,623.60 crore compared to Rs 3,764.50 crore last year. The record growth in order intake has helped ABB India to increase its order backlog to Rs 3,372.30 crore, nearly 60% more than the order backlog of Rs 2,103.20 crore at the beginning of the year.

ABB India plans to invest Rs 250 crore over the next two years to set up new factories, augment its existing capacities and foray into new areas. The company will set up factories in Delhi, Baroda, Nasik, Mumbai and parts of Karnataka.

The $100 million (nearly Rs 450 crore) investment in India that ABB announced in 2004 will be completed by the end of the first quarter of this year (March 2007), or early second quarter.

Reliance Mutual Fund's stake buy spawns interest in Avaya GlobalConnect
Avaya GlobalConnect, a communication solutions provider, rose 3.6% to Rs 278.40, extending Thursday's rise.As many as 36,642 shares changed hands in the counter on BSE.

Avaya GlobalConnect said on Thursday (15 February 2007), a growth fund of Reliance mutual fund bought a further 3.51% stake in the company, taking the fund's total holding to 6.13%. The stock had risen 3.7% that day, boosted by the announcement, to Rs 268.50. The stock is up 32.1% from a recent low of Rs 210.65 on 10 January 2007.

In January 2007 , Avaya Global Connect reported robust Q3 December 2006 results. The consolidated net profit in Q3 December 2006 jumped 237% to Rs 8.43 crore (Rs 2.50 crore). Net sales for the same quarter rose 31% to Rs 153.96 crore. For April - December 2006, the consolidated net profit declined 32% to Rs 17.22 crore (Rs 25.46 crore), while sales rose 24% to Rs 437.82 crore.

Avaya GlobalConnect, recently, launched its unified communication solutions that will facilitate communication across multiple devices and interfaces such as personal computers (PCs), mobile phones as well as landlines. Avaya will integrate its solutions with existing networks and applications through partnerships with multiple vendors such as Microsoft, IBM, Nokia and Polycom.

FII-holding in the scrip, as at end-December 2006, was 4.37%, lower than the holding of 7.98% at end-September 2006.The current price of Rs 278.40 discounts its FY 2006 EPS of Rs 17.20, by a PE multiple of 16.1.

Telecom pivotals sustain interest; Bharti Airtel climaxes
Cellular service providers extended gains, pinning hopes on sectoral re-rating following Vodafone's deal for Hutchison-Essar.

Bharti Airtel was up nearly 2% to Rs 807.25. The stock hit a lifetime high of Rs 810.90. Reliance Communications was up 0.7% to Rs 470. As many as 2.9 lakh shares changed hands in Reliance Communications, while 77,004 shares got traded in Bharti Airtel.

Telecom shares had surged from late-January 2007 to early-February 2007 on expectations of aggressive bidding for Hutch-Essar. The expectations came true, when Vodafone, on 11 February 2007, emerged as a top-bidder for Hutchison's 67% stake in the fourth largest cellular services, at an enterprise value of a stunning $18.8 billion.

From Rs 686.90 on 24 January 2007, Bharti Airtel had surged to Rs 781.25 by 5 February 2007. It had slipped to Rs 728.80 on 12 February 2007 before bouncing back once again.

Reliance Communications (RCL) had surged to Rs 515.10 on 5 February 2007 from Rs 434.95 on 24 January 2007. From this high, the stock had declined to Rs 441.05 by 13 February 2007, partly due to concerns of equity dilution arising from the large $1 billion FCCB issue. The RCL scrip, however, recovered later.

Subscriptions for mobile services are growing at a fast clip in India. The country recorded 6.5 million net new subscribers in January 2007, making it the fastest growing major mobile phone market in the world.

Both Bharti and RCL reported robust Q3 December 2006 results. Bharti Airtel’s consolidated net profit, as per US GAAP, jumped 122.8% to Rs 1215.13 crore (Rs 545.30 crore), beating market expectations. Consolidated revenue for the same quarter rose 62.3% to Rs 4913 crore (Rs 3025.60 crore).

RCL’s consolidated net profit jumped 198 % in the December 2006 quarter to Rs 924.42 crore, on 26% growth in consolidated revenue to Rs 3755.30 crore.

The response to an IPO of the sixth largest cellular operator, Idea cellular, was strong. The IPO was subscribed nearly 50 times, with aggressive bidding by FIIs.

On 2 February 2007, Telecom Regulatory Authority of India (TRAI) decided to lower port charges by up to 29%, allowing cellular operators to connect to BSNL and MTNL lines, a move which is expected to result in tariff cuts.

Reliance Comm lines up USD 2.5 bn for investment

Anil Ambani-controlled Reliance Communications is making plans to pump in USD 2.5 billion (Rs 112,500 million) in its code division multiple access (CDMA) as well as global system for mobile communication (GSM) networks, reports Business Standard.

Ambani had recently outlined this plan at an earnings call for global investors, just days before Vodafone bagged Hutchison Essar Feb.11, 2007. Reliance Communications was counting on this acquisition to expand its GSM footprint in the country, as it shells out a royalty on its CDMA operations to Qualcomm.

The investment would compare favourably with the estimated USD 4 billion that has been invested by Bharti Airtel and Hutch in their entire wireless business till date.

Ambani has already outlined its plan to roll out 20,000 towers, locating CDMA as well GSM antenna on the same tower.The company is also looking at additional tower capacity through co-location agreements with all major operators.

The goal is to have signal available in any city with a population of 50,000 and more, taking the total number of towns covered from 2,200 now to nearly 4,000 by June this year.