Motilal Oswal neutral on Reliance Communication

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Motilal Oswal neutral on Reliance Communication

Motilal Oswal has come out with its report on telecom sector. The research firm has maintained neutral rating on Reliance Communication.

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Motilal Oswal has come out with its report on telecom sector. The research firm has maintained neutral rating on Reliance Communication .

"Post our recent interaction with Mr. Himanshu Kapania, Managing Director of Idea Cellular, we believe regulatory headwinds continue to be strong with industry risk perception at heightened level post government's tough stance on intra-circle roaming/ excess spectrum liability and no clear roadmap for industry consolidation/liberal M&A framework. However business momentum remains strong with 1) Visibility of 20%+ revenue growth for Idea driven by continued industry recovery and market share gains for India, 2) Data opportunity providing a medium-term growth driver, and 3) Expected operating leverage driven by improving RPM and asset utilization."

"GSM subscriber net adds (ex RCOM and Tata DOCOMO) is 6.7m in Nov-11 v/s 7.1m in Oct-11, down 6% MoM and 61% YoY. All major operators except Uninor reported higher net additions on MoM basis. Idea reported the highest net additions of 2.17m, up 33% MoM. Bharti and Vodafone reported largely flat net adds on MoM basis."

"Reiterate Buy on Bharti Airtel / Idea Cellular  with a price target of INR465/125. We expect 19% proforma EBITDA CAGR (adjusting for partial consolidation of Africa operations in FY11) for Bharti and 30% EBITDA CAGR for Idea over FY11- 14E. We remain Neutral on RCom due to high leverage, regulatory overhang, and continued pressure on revenue market share."

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To read the full report click on the attachment