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Reliance Communications gains in choppy market

September 3, 2009

Shares in Reliance Communications, India’s number 2 mobile operator, ended 5.3 percent higher at 290.70 rupees after the company said it had repaid early more than $1 billion of loans.

Reliance Comm shares had risen nearly 5 percent yesterday with a traded volume of nearly 4.2 million shares. It remained one of the top traded stocks today. This year the stock has surged nearly 28 percent.

Investor sentiment cemented as the No 2 mobile operator said it had repaid early more than $1 billion of loans and could repay more debt ahead of schedule.

The prepayment of loan would definitely have a positive impact on the profitability of the company as it would reduce the interest component of the outflow by as much as 7.5 billion rupees ($153 million) per year.

Reliance Infratel, 95 percent owned by Reliance Communications, said it plans to raise up to 50 billion rupees ($1 billion) by selling at least 10 percent stake to help fund its expansion plans. The company is expected to file the draft prospectus within a week.

The 5th largest mobile operator in the world has interests in telecom towers, VOIP solutions, broadband related services and DTH operations (Big TV).

The company’s revenue surged 15.5 percent to 61,452 million rupees while net profit margin rose 27 percent, but fell 1.8 percent year on year in Q1 FY10. With the new launch of its GSM services in 14 circles, for which the operator shelled out almost $2 billion, it expects significant cash flows from the operations.

Last month, two banking sources told Reuters that Reliance Communication had started preliminary talks to buy a stake in Kuwait telecom firm Zains African operations deal is valued around $10 billion.

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