Press release from Business Wire India
Source: Brickwork Ratings
Thursday, September 03, 2009 04:40 PM IST (11:10 AM GMT)
Editors: General: Consumer interest, Economy; Business: Advertising, PR & marketing, Banking & financial services, Business services, Financial Analyst, Information technology, Stock exchanges, Telecommunications; Technology
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Brickwork Ratings Assigns "BWR AAA+" for Tata Communications Limited's Long Term Debt Issue of INR 150 crores or INR 1.5 billion
Long Term Debt Issue: BWR AAA+ ; Outlook : Stable
Bangalore, Karnataka, India, Thursday, September 03, 2009 -- (Business Wire India) -- Brickwork Ratings has assigned BWR AAA+ (Pronounced BWR Triple A Plus) for Tata Communications Ltd. ("TCom" or "the Company") proposed Long Term issue of INR 150 crores or INR 1.5 billion. Brickwork Ratings' 'BWR AAA+' stands for an instrument that is considered to offer BEST credit quality in terms of timely servicing of principal and interest obligations. The rating factored, consistently good performance, dominant position of company in wholesale voice and enterprise data communication segment, highly experienced management with good execution capabilities, strong, committed promoter group, strategic moves being made by the company to accelerate growth.
Formerly known as Videsh Sanchar Nigam Limited, Tata Group acquired 45 % stake in VSNL in 2002 and subsequently raised it to 50.1% becoming the majority shareholder in the company. In 2008, the Company was renamed as Tata Communications Ltd. TCom is a leading global provider of telecommunication solutions, serving voice and data requirements of carriers and enterprises within the country as well as globally. It is a leader in Enterprise Data Services market in India and has a major share in Wholesale NLD and ILD voice traffic. With a leadership position in emerging markets, TCom leverages its advanced solutions capabilities and domain expertise across its global and pan-India network to deliver managed solutions to multi-national enterprises, service providers and Indian consumers.
PERFORMANCE OF BUSINESS OPERATIONS
TCom operates in three main business segments viz. wholesale voice, enterprise & carrier data and other services. In 2008-09, Wholesale Voice segment generated around 46.4 per cent of the total revenues followed by Enterprise & Carrier Data which contributed 38.7 per cent and balance by other segment. . TCom has maintained its leadership in wholesale voice segment with 44% share in ILD voice traffic and 53% share in NLD voice traffic.
CABLE CONSORTIUMS AND ALLIANCES
Tata Communications has participated in consortium of cable systems which include SEA-ME-WE 4, C2C, SAFE, EAC, APCN-2, Americas 2, CANTAT 3, 121 etc. The Company has alliances with BT, C&W, France Telecom, T-System, Telecom Italia, AT&T, Verizon Business, Sprint, SingTel, NTT, Telstra, KDDI, Telecom Malaysia to name a few.
ACQUISITIONS, JOINT VENTURES, ASSOCIATES
Tyco Global Network: Acquired in 2005, TGN consists mainly of an undersea fiber optic telecommunications network that connects northern Asia, America and Europe.
Teleglobe: Acquired in 2006, this global wholesale provider helped Tata Communications become the owner of a Tier-1 IP network. Teleglobe provides international voice, data, and value added services comprised mainly of mobile global roaming and signaling services.
Neotel (Associate): The second largest service provider in South Africa. South Africa has issued license to Neotel to provide telecommunication services (except mobile services). The Company has effective 49% stake in Neotel.
Joint Venture with CEC: CEC is a value-added telecommunications services and integrated IT solutions provider headquartered in Beijing, China. CEC has network reach throughout PRC, with no regional restrictions on its service capabilities. TCom can leverage key synergies between the Company's high performance global IP network with CEC's extensive IP VPN coverage in China.
FINANCIAL PERFORMANCE
TCom has posted good growth in total business. Income from operations increased 14.22 % to INR 37.5 Billion in FY09 as compared to INR 32.83 Billion in FY08. Company's profit from operations increased 28.64% to INR 4.18 Billion in FY09 as compared to INR 3.25 Billion in FY08. The profit before tax for FY09 was INR 7.13 Billion as compared to INR 4.50 Billion during FY08. The net profit stood at INR 5.16 Billion in FY09 as compared to INR 3.05 Billion in FY08, reflects higher other income and the presence of profit on sale of long term investments.
Due to continued pricing pressure in the voice segment resulting in declining Average Revenue Per User (ARPU), the Company has made strategic decision of moving towards data business. The Enterprise & Carrier Data segment has therefore been major contributor to the gross profit accounting for almost 63% share in overall gross profits. Profitability margins improved from 9.27% in FY08 to 13.76% in FY09. On standalone basis in FY08, the total debt was INR 7.78 billion which increased to INR 23.28 Billion in FY09
OUTLOOK
TCom's business mix is shifting towards enterprise data business which is expected to drive future growth to its overall operations. Various managed services are expected to contribute healthy EBIDTA margins. Indian broadband market is poised for strong growth owing to very low penetration level. TCom is poised to take advantage of the same. Combined with the backing of TATA group, excellent management, and strategic initiatives being taken to lead its growth, TCom is expected to further improve upon its overall performance and margins.
The wholesale voice business may face some pricing pressures due to increased competition and lower tariffs. However, increasing demand for bandwidth and cable connectivity has compensated for declines in voice segment. It is noteworthy that TCom's net margin remained stable despite tariff decline, because of reduction on interconnect cost. An important risk factor is the uncertainty in Government policy on spectrum allocation, auction of 3G as well as the Defense vacating spectrum. Looking to the company's strengths, Brickwork Ratings expects TCom to maintain its healthy performance and profitability, going forward.
Copyright ©, 2009, Brickwork Ratings.
Brickwork Ratings has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. Brickwork has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. Brickwork does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by Brickwork should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. Brickwork has the right to change, suspend or withdraw the ratings at any time without citing any reasons.
CONTACT DETAILS
Milind Diwakar, Analysts Contact, Brickwork Ratings, 1-860-425-2742, milind.d@brickworkratings.com
Mukesh Mahor, Analysts Contact, Brickwork Ratings, 1-860-425-2742, mukesh.m@brickworkratings.com
Anitha G, Media Contact, Brickwork Ratings, 1-860-425-2742, media@brickworkratings.com
K N Suvarna, Sr. VP - Business Development, Relationship Contact, Brickwork Ratings, 1-860-425-2742, kn.suvarna@brickworkratings.com
KEYWORDS
CONSUMER, ECONOMY, MARKETING, BANKING, BUSINESS SERVICES, Financial Analyst, IT, STOCK EXCHANGES, TELECOMMUNICATIONS, TECHNOLOGY
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