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Old 18th May 2013, 10:07 AM
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Quote:
Originally Posted by Atiker View Post
More than double since April.

What's cooking?
It looks like a relief rally to me, but it's also possible that the stock has bottomed out for good.

There have been lot of positive developments for the company in the last two months.

First came the deals with Reliance Industries. That was followed by the Reliance Globalcom deal.

The company increased tariffs by as much as 30% in early May.

Also, there are rumors in the market that Reliance Communications will exit DTH business and sell it to Sun Group.

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Selling assets is no long-term solution to the problems of the company. Every time the company sells its assets, its revenues will decrease or costs will go up or both.

The tariff hike is a major positive, but I am not sure if the company has the pricing power to keep increasing tariffs in future too.

Reliance Industries' entry into telecom services with shakeout the entire sector. Whether Reliance Industries sees RCom as an ally or a competitor will determine the fate of Reliance Communications.

I think investors of RCom should just wait and watch RIL. If RIL gets aggressive and starts a new price war, investors should exit RCom. In such a scenario, benefits that RCom will get from deals with RIL would be nullified by the pricing pressures in the market.
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