Sunday, December 28, 2008

RELIANCE COMMUNICATION – A VALUE BUY

Company Web Site http://www.rcom.co.in/webapp/Communications/rcom/index.jsp

About the company:-

RCOM is an integrated player in the Indian telecoms sector. It was listed following the de-merger of Reliance Industries. RCOM is the second-largest player in the mobile segment, has an 80,000km-long India-wide optic-fiber network and owns the FLAG submarine cable network. RCOM has three business units: 1) Wireless, which includes a nationwide wireless network on CDMA and GSM; 2) Global Business comprising wholesale voice and data; and 3) Broadband for both retail and enterprise.

Near-term triggers:-

  • RCom wants to do a big rollout of their GSM network – market sources say it will happen in early January 2009. Looking at aggressive marketing of the group so far, this service can help RCom increase market share also.

  • RCom has been the first company to buy back FCCBs in global market:- RCom’s FCCBs are listed on the Singapore Stock Exchange and, till about two weeks ago, the company’s shares in the domestic bourses were trading at a discount of more than 50 per cent to the FCCB conversion price. It is like you take a loan of Rs 10 and have to pay back only Rs 5, it’s something like that. http://www.thehindubusinessline.com/2008/12/12/stories/2008121251801000.htm
http://economictimes.indiatimes.com/News/News_By_Industry/Telecom/RCOMs_the_first_co_to_buy_back_bonds_in_global_market/articleshow/3882728.cms

  • Recent media reports (Economic Times) stated that potential strategic investors, including Europe/US telcos are in talks with the promoter group of Reliance Communications to acquire 20-26% stake in RCOM via a combination of fresh equity issuance and stake purchase in the secondary market. In a press release on Dec 11, RCOM has stated that it receives proposals from international telcos for expressing an interest in acquiring a strategic stake from time to time. http://www.bseindia.com/qresann/news.asp?newsid={890B4F9E-9E70-469B-A998-04B4B766EA2B}&param1=1

  • Only three months after launch, Big TV, Reliance Communications’ DTH service in India, has passed 1 million subscribers. The key drivers have been aggressive sub acquisition through subsidies of set-top boxes and monthly fees, as well as an impressive marketing and distribution network across 4,000 towns and 103,000 retail outlets.

The company is one of leaders in Indian Telecom sector and warrants a place in the portfolio given its size and brand image.

Buy around 200-220 for investment target of 300 and above in 3-4 months. (Even 1-year timeframe is good enough for such a target of 35-40%)

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