Ambit Capital on RCom

The mobile industry has been adding more than 15-16 million subscribers per month. However, the proportion of multiple SIMusers is on a rising trend, leading to more than 100 per cent penetration in some metro areas.

Consequently, the company believes subscriber based criteria is increasingly becoming irrelevant. According to RCom, MNP, which is set to be implemented over the next few months, is expected to be beneficial. The company expects competitive intensity to increase in the high-value post-paid and corporate subscribers and expects to be a net beneficiary of this move. The number of players is expected to go up further after launch of services by new players. This will put further pressure on revenue and profitability of all operators. RCom believes that it will not be possible for all the players to survive and remain profitable in the long term, and hence, consolidation is inevitable. Due to rising competition, margin dilution due to MNP implementation, cash outflow (3G spectrum auction) and regulatory uncertainty about spectrum allocation, Ambit maintains a sell on Rcom.