Tata Teleservices Maharashtra – Poor Show

Tata Teleservices Maharashtra continued to underperform. 4QFY08 revenues of Rs4.56 bn (+3.6% Q/Q; 19.8% Y/Y) were in line but EBITDA of Rs1.15 bn (+5.8%, +30.6%) was 2.5% below our estimate. Net loss of Rs206 mn came in lower (versus JPMe: Rs308 mn) due to higher other income. For the full year (FY08), TTML’s revs were up 21% Y/Y and EBITDA was up 40%.

Revenue momentum was decent despite slowdown in sub-additions to 0.35 MM vs. 0.54 MM in 3Q. ARPU decline (6.5% Q/Q) was lower versus recent trend; we estimate 4Q wireless ARPU
was ~Rs240 (RCOM: Rs320). Margin expansion was only 50 bps as interconnect/network costs were a tad higher. However, SAC (handset subsidy) is on a declining trend (Rs600 in FY08 vs. Rs900 in FY07). Notably, FY08 was TTML’s first ever year of a positive EBIT.

For FY09, the company is expected to be in Red losing Rs 0.28 / share.