May 1, 2007

Rcom plans Flag listing in 6 months

Reliance Communications (RComm) is looking at unlocking value for its shareholders by listing its wholly owned subsidiary, Flag Telecom, and the recently spun-off tower business. The company intends to do this in the next six months even as it has earmarked a capital expenditure of Rs 10,000 crore for the current financial year.

Addressing the media here today, Reliance Communications Chairman Anil Ambani said, “We are looking at unlocking shareholder value through various modes such as listing of Flag Telecom and the tower business or by roping in strategic investors and partners or private equity majors. We will do this in the next six months.”

Reliance Telecom Infrastructure was spun off into a separate entity with the tower business to reduce its set-up and operating costs, resulting in cost efficiencies and greater financial flexibility. It has 12,000 towers worth Rs 3,000 crore. The company is planning to set up another 8,000 towers, increasing its total number to 20,000 by the next year.

Ambani said the expansion plans of the company would be funded through debt, “which would be non-recourse to Reliance Communications”.

Reliance Communications has been planning to list its wholly owned subsidiary, Flag Telecom, on the London Stock Exchange. The company has also short-listed four merchant bankers — Goldman Sachs, Deutsche Bank, Morgan Stanley and UBS – for the process.

It is planning to divest around 15 per cent of equity in the company and is looking at using the funds for its expansion plans. The plans include building the world’s largest, next-generation, undersea cable network with an investment of $1.5 billion.

The company has also announced a capex of Rs 10,000 crore that would be used for the rollout of both its CDMA and GSM operations. This would also include its foray into 3G and 4G technologies, while the company is expecting more spectrum to be released by the end of this quarter.

Stock Outlook :

Rcom has a great potential to become the largest telecom provider in the country in coming years.the stock has been aming the highest gainer in the sensex in past 6 months.With a great value unlocking Factor on its side rcom is set to become a long term multibagger stock for investors who are planning to hold it for 1 or 2 year more.With listing of its subsidy companies like Reliance Telecommunication Infrastucture limited (RTIL) & Flag telcom in coming 6 to 8 months the stock will scale new heights.

BUY RCOM ON DECLINE WITH A TARGET OF 650 + ( 12 to 18 Months Hold).


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