RCOM plunges 22pct in morning Trade

Shares of Anil Ambani-led Reliance Communications on Friday plunged as much as 22 per cent in the early morning trade on the Bombay Stock Exchange, a day after the telecom firm reported its first quarter results.

Shares of RCOM today opened at Rs 500.05, and dropped to touch an intra-day low of Rs 410.05, down by Rs 90 or 21.95 per cent over Thursday’s close.

The scrip was trading at Rs 439.65, down 12.08 per cent in the morning trade on the BSE, and 59.41 lakh RCOM shares had changed hands at 1100 hrs.

"RCOM's Q1 EBIDTA came in 10 per cent below estimates as wireless was hit by continued lack of elasticity," global financial services major Citigroup said in a research note.

The ADAG firm had reported a 23.9 per cent jump in its first quarter net profit at Rs 1,512 crore, on the back of a sharp growth in subscriber base.

"RCOMs' whole-hearted participation in wireless growth is contingent on consumer mix change through the GSM foray, key for re-rating but some time away and not without risks," Citigroup said in its report.

However, the decline in wireless is partially offset by global EBITDA, which benefits from the significant rupee depreciation, it added.

Meanwhile, Citigroup has cut its estimates for FY09-10 EBITDA by 13 per cent to reflect lower revenue per minute in line with peers, lower elasticity, staggered rollout of GSM and higher net debt that is partly offset by accounting change on translation losses or gains and lower tax rates.

Further, Citigroup believes that the returns from RCOM's heavy investment in the global business might be back-ended.

"The hive-off of towers in a separate company (RTIL) has business potential with increasing number of operators, and could unlock value in the medium term," it added.