Tower and fibre sharing agreements of Anil Ambani -owned Reliance Communications (RCOM) with Reliance Jio is not giving desired cash flow to the former, according to a Deutsche Bank report.

“We note that the cash flow impact of its tower and fiber deals has been less than our expectation,” as per the report.

“RCOM had signed deals with Jio to lease out its towers and fiber, which we valued at NPV Rs 15/share. Our previous target price of Rs 57 consisted of Rs 42/share for the RCOM’s business (DCF) and Rs 15/share value for RCOM’s deals with Jio,” notes Deutsche bank report while revising its value to Rs 30/share.

The company is expected to make losses of Rs 1,600 crore and Rs 2,250 crore in the next two financial years, thanks to aggressive pricing strategy of Jio.

The report points out that Rcom lacks the cash flows to invest in subscriber acquisition and network expansion. With numerous agreements with Jio a “merger with Jio in the medium term cannot be ruled out but we don’t foresee an upside to RCOM shareholders from any such a possibility”.

Deustche Bank said revenue for Rcom’s FY18 -FY19 may reduce by 14% and 21% respectively. EBIDTA for both the years may also drop by 17% and 21%, said the analysts. It forecasts of a revenue CAGR of -4.6% in (FY17-19E) compared to likely sector revenue growth of 6-8% per annum.

Deutsche Bank forecasts RCOM’s India mobile revenues to fall 3-5% p.a. over the next two years as well. This fall will be because Rcom cannot invest as much as Jio and will not be able to grow data revenues to offset the fall in voice revenues.