Telecommunication Service Sectors
Reliance communication Ltd (Rcom)
About Company
Rcom is the second largest wirelesses telephone services provider after Bharati Airtel.
In addition to telephony services the company also offers home entertainment services (BIGTV), enterprise solutions like data and network services, internet data center, broadband, leased lines, VPN, WIMAX etc.
Global Acquisitions
Rcom has acquired two UK based companies.
1. Vanco group - A network service provider.
2. Ewave - provides WIMAX service.
Acquisition boosted Rcom’s international operations in voice and data services.
These acquisitions cost has dragged down the company’s operating margins, but taking into consideration long term prospects these acquisition will boost the revenues.
Average revenue Per User (ARPU)
The telecom company’s profits and net margins will increase if ARPU increases.
Due to decline in revenues of PCO (public calling office) and cut in STD rates of mobile services the ARPU has declined from RS 317 to RS 282.
Going forward the company believes the revenues will increase once the company expands its PCO network in rural areas.
The ARPU will also increase after completing the roll out of high speed data network on a national basis.
GSM Expansion
Currently Rcom has 8 million users on its GSM network in circles (service areas) and is planning to roll out its network in another 14 circles at the year end and covering entire nation over the next one year.
Due to these expansions and roll out, through the entire nation, the company believes that it will gain customers due to number portability and it will also get reduction in interconnect charges due to use of its own network.
Interconnect charges like access charges and license fees which constitutes of 17% of revenues.
It’s Customer Base
The company’s GSM base has grown by 15% in the June quarter to 8 million subscribers while the CDMA base has gone up by 10% to 3.8 million subscribers.
Growth
The biggest growth is its voice and data services for retail customers a well as for corporate.
The company has improved its EBIDTA (earnings before interest’s depreciation, taxes and amortization) margins from 23% in fu06 to about 43% in FY08
This revenue is expected to stabilize at current levels.
The company will realize gains from higher broadband and data services at the end of CY09 which will in turn boost the ARPU this is mainly due to usage of their own network for their services.
Future gains
The company’s revenues will boost once it enters into 3G services. This year the company launched BIGTV (a home entertainment) whose revenues will be reflected in next year.
Returns
The company will provide good returns in long run in next 2 to 3 years
CMP - Rs.196.35
Buying Price - Below Rs.140 (It went down till Rs.131.10)
Target - above 60%
Duration - 2 to 3 years
Taking into consideration Rs.131.10 as buying price following are the returns
164% Target acheived in month of 19 May 2009. It went high till Rs.347 (Updated - 22 May 2009)
Latest Updates
(23 Dec 2008)
RCom has kept aside USD 1 bn for 3G rollout
Reliance Communications (RCom) has kept aside USD 1 billion for its 3G (third generation) telecom services rollout, reports Economic Times.
About Rs 47 billion investment in 3G, will be funded through RCom`s internal cash treasury of Rs 120 billion.
It is learnt that 3G rollout will start on the GSM (global systems for mobile communications) network, which is scheduled for a formal launch shortly.
The GSM net-work is already being tested in Mumbai and the nation-wide rollout will be over by June next year.
It is understood that the company is still discussing on whether to bid for the 3G license on a pan-India level or limit it only to the five metros.
RCom is looking for a strategic partner who will help in 3G rollout. Korean Telecom company SKCC is supposedly said to be in discussions with Reliance Communications for providing VAS for 3G, as well as IPTV.
SK C&C has said it is interested in leveraging its experience on the CDMA platform, and is looking for acquisitions in India, as well as partnerships and joint ventures.
(Updated - Dec 2008)
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