Subex Analysis: Debt Reduction to Boost Profits

A recent stock analysis of Indian RA vendors Subex highlights that their net profitability will be enhanced by the restructuring of their debts. However, their results remain vulnerable to the impact of currency fluctuations. See here for the full analysis by the Indian Economic Times.

The analysis is good, identifying the key trends in the company’s performance. However, the reasons given for Subex’s ‘stagnant’ sales are questionable. The article attributes the plateauing of revenue growth to ‘turbulence in the global telecom sector’. A fairer assessment is that Subex’s niche market has shifted rapidly from growth to saturation. Put simply, most telcos have now procured the kind of RA and FMS systems that Subex supplies. In this context, Subex’s increased emphasis on selling managed services is not just a good way of riding out any short-term doldrums in telecoms spending, but is vital to their long-term prosperity.

Meanwhile, Subex has announced another ‘multi-million dollar’ contract to supply its ROC RA and FMS, this time to an unnamed Middle East fixed and mobile telco. You can see the press release here. The description of Subex’s revenues as ‘stagnant’ overlooks recent trends in sales announcements. In short, over the last year, Subex has announced more large deals than all their major rivals put together. 2010 saw a notable reduction in sales announcements compared to the gold rush years of RA roll-out, and this has continued into 2011. It would not surprise me if, in 2011, one of the vendors with weaker financial backing cracks under the strain of diminishing revenues. In contrast, Subex has recovered from their darkest days, and is here to stay.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.