Combined GSM+CDMA monthly adds may surpass Bharti Airtel:
Reliance Communications has recorded cumulative 8.3 million wireless users in the first two months of its pan-India GSM foray.
We forecast its GSM subscriber base at 36 million by FY10, accounting for 35.1% of the total base of just over 100 million. We have assumed average monthly additions of about 2.5 million over the next two years, which would surpass Bharti’s estimated run rate of about 2.2 million/month.Earnings ramp up seen beyond FY10; Retain BUY:
Reliance Communication is likely to witness earnings pressure on higher interest cost in FY10 as interest income may not be enough to cover charges on its estimated Rs 266 billion debt in FY10. This could weigh in the near-term stock performance. However, as capex intensity declines, the company is expected to generate free cash flow to the tune of Rs 18 billion in FY10.Checkout: Reliance Communication India - Ready To March Ahead With 3G Broadband
Reduce FY10E EPS by 15.1% as we trim our revenue (by 5%) and OPM (by 100 bps) estimates. However, valuations appear attractive (6.5x FY10E P/E) and earnings may ramp up 31% yoy in FY11.
Retain BUY.
