Reliance Communications falls 4% on Deutsche downgrade

Romit Guha

NEW DELHI: Brokerage Deutsche Bank on Tuesday cut its rating on Reliance Communications to 'sell' from 'hold' citing high valuations, sending the telco's shares down over 4%. Of the four major announcements made by India's third largest telecom company by market share - tower sharing, lease of its optic fiber network, demerger of real estate and slashing rates of its third generation (3G) services - only the first two would add to the company's market value, the brokerage said in a report.

While it would take around four years "in an optimistic scenario" to realize the value from the real estate sale, the company's expectations that it would bring 40% of all new subscribers to 3G services, which offer high-speed internet, face execution risks, the brokerage said.

It added that the key challenge before the company is to gain revenue share, which is currently at 8%.