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Tata Communications Limited 09 July 2008

Update Report – 4Q 08 Results

Bandwidth capacity glut to result in pricing pressure

Common HOLD Direct access

Fundamental to indicates
research the full report
a 7% upside infree of charge
the common stock overatthe next 6-12 months. We
have calculated the target price based on fundamental factors, using a weighted average of target
Stock http://www.iirgroup.com/researchoracle/viewreport/show/20256
prices obtained by using DCF and SOTP valuation methods.

Ticker: TATA.BO
Target price: INR399.84
Current price: INR373.50 We reiterate the common stock a HOLD with a 6-12 month target price of INR399.84 per share.

ADR BUY The ADR is expected to appreciate by approximately 24% over the next 6-12 months. Approximately
17 percentage points of this upside is attributable purely due to the anticipated appreciation of the
Indian rupee against the US dollar over the same period. We have taken a 6-12 month investment
horizon for this company as we anticipate a significant positive currency impact on the ADR in the next
6-12 months1
Ticker: TCL
Target price: US$22.21
We upgrade the ADR (1 ADR = 2 common shares) from a HOLD to a BUY with a 6-12 month target
Current price: US$17.95
price of US$22.21.

Analyst Jinesh Joshi Investment horizon - short term actionable trading strategies
Editor: Shem Pennant This report addresses the needs of strategic investors with a long term investment horizon of 6-12 months.
Global Research Director: If this report is provided to you by your broker under the Global Settlement, you may now also access (free of
Satish Betadpur, CFA charge) the short term trading outlook that we publish from time to time for this issuer, looking at the
coming 5-30 days for readers with a shorter trading horizon. These are available on-line only at
www.researchoracle.com.
Next news due:
1Q 09 results, July 2008
Report summary
Tata Communications Limited’s (TCL) standalone net sales, EBITDA and adjusted2 net income were
significantly below our estimates in 4Q 08. Margins were below our expectations due to higher than
expected network costs, operating & other expenses and salaries & related cost as a percentage of
total income. Taking into account the 4Q 08 performance, we have revised our FY 2009 and FY 2010
sales estimates downwards. Going forward, we have lowered our EBITDA and operating profit
estimates for FY 2008 and FY 2009 as we expect network costs as a percentage of total income to
increase over the next two years. Furthermore we do not expect Tyco Inc and Teleglobe Global Network
(TCL’s subsidiaries) to be earnings accretive in the near term. In addition, due to the lack of clarity (in
terms of timeline) over the auction of wireless broadband spectrum we do not expect WiMax to
contribute meaningfully in the immediate future and as a result our model does not factor in revenues
derived explicitly from WiMax. Moreover, if the regulatory hassles for asset value unlocking (especially
for real estate) continue (land bank divestment still under the scanner of government) we expect the
market to discount for illiquidity. However, we believe the market has already priced in these factors
and the stock currently trades close to its fair value and as a result we maintain our HOLD rating on
the common stock

Currency impact for US investors:

The impact by itself of the anticipated currency movements on the ADR (now US$17.95), without
considering changes in the share price, is positive and is expected to be:

Over 6 months: US$19.40

Over 12 months: US$20.75

Page 1 Refer to page 5 for footnotes