EUR 120.00 For Business Accounts Only

MOSL: TATA COMMUNICATIONS (Neutral)-Recovery playing out slowly and steadily

TATA COMMUNICATIONS: Recovery playing out slowly and steadily

(TCOM IN, Mkt Cap USD5.8b, CMP INR1498, TP INR1380, 8% Downside, Neutral)

 

• Tata Communications (TCOM)'s 1QFY22 revenue/EBITDA was up 1%/-3% on a QoQ basis. It reported an 8% EBITDA miss on lower data traffic, impacted by the lockdown and provisions towards a newly implemented 8% license fee on ISP data traffic revenues. This marked the third straight quarter of EBITDA decline.
• We revise down our EBITDA estimate by 4% for FY23 due to the stock's lower than expected business performance, although we expect a 7%/8% revenue/EBITDA CAGR over FY21-FY23. Maintain Neutral.

 

EBITDA down 2.9% (8% miss); flat QoQ, adj for provisions

• Consolidated revenues were flattish at INR41b (up 1% QoQ; 2% miss), led by 5.5% growth in the Voice business, while Data revenue was flat. Usage-based revenues were impacted by the lockdowns affecting collaboration traffic in the Data segment.
• EBITDA declined 3% QoQ to INR9.9b (8% miss), primarily due to the impact of INR330m worth of provisions on account of an 8% license fee newly implemented by DoT on ISP revenues - the new license fee has also impacted Bharti's Homes and Enterprise businesses (charges on pure Internet services, which were allowed as a deduction earlier). Subsequently, the EBITDA margin contracted 90bp to 24%. Normalized for the provision impact, EBITDA would have been flat QoQ at INR10.2b.
• TCOM's PAT was in-line (-1% QoQ) at INR3b, whereas PAT adj for exceptional items stood at INR2.9b (down 3% QoQ; 7% miss)