Zacks senior telecom analyst David Weissman, CFA sees many companies in his coverage with very favorable outlooks, but one company he is reiterating his Hold rating on is Videsh Sanchar Nigam (VSL). Here are a few reasons why:
'We maintain our Hold rating on VSL, a global service provider with leading coverage in India. The company lost its monopoly for International Long Distance (ILD) services in 2002, following deregulation in the telecom sector which fostered competition in this emerging market. New technologies, such as VoIP, are both a threat and an opportunity for VSL as overall revenue per user continues to fall with subscribers accessing lower cost technology alternatives.
'Nevertheless, advanced features can be provided and VSL has enhanced its mobility, broadband, calling card, Internet telephony and IP-VPN services, along with expanded coverage outside India. The company's recent acquisitions establish a formidable foundation to contend on a global basis.
'We remain neutral on VSL as there is a higher-than-normal degree of investment risk associated with the consolidation of its global acquisitions outside of India. While we expect VSL's initiatives and recognition to gain visibility in the near future, the company must also tackle the competitive nature of telephony services within India.
'We are concerned with the balance of growth and the retention of subscribers and maintain our hold recommendation based on a stock valuation that, in our opinion, is fairly priced. We set a target price of $30.00 based on an EV/EBITDA of 12.'
Read the full analyst report on VSL.
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