PTCL builds on improved operating performance

PTCLs financial performance for the year ended June 30, 2012 is indicative of better times ahead for Pakistans only integrated Telecommunications Company. The Company announcement of its FY12 results to the KSE yesterday shows all round gains in operating performance. And if it weren for the drop in other operating income, PTCL may well have also posted net profitability gains in FY12.
The revenues of the telecom giant grew by a healthy 8.66 percent during the 12 months ended June 30, 2012. PTCL has licenses in all the key telephony segments, and its revenue streams include PSTN (fixed lines), wireless local loop, broadband, corporate business solutions, carrier services and international telephony business (LDI).
The Company has posted decent top line growth in recent quarters, which indicates that the declining business from the Voice segment - which, some years back, used to be PTCLs bread and butter - is now being more than offset by gains and growth emanating from emerging segments like broadband services and corporate enterprise solutions.
Moving away from the voice business towards data services was the right strategy by the Etisalat-run company in the post-2006 period thus far. Today, PTCL is the market leader in services like broadband (both wire line and wireless), WLL telephony and Smart TV (PTCLs IPTV service). The Companys liaison with manufacturers of smartphones and tablet PCs is also driving the Companys core sales.
As mentioned earlier, the Company showed better operating performance over FY11. On top of the top line growth, the Company managed a controlled increase of only 7.37 percent in cost of services. This has shown itself in the 89bps improvement in gross margins which reached 25.22 percent in FY12. Overall, the gross profits increased by 12.66 percent during the period to Rs15.14 billion.
The spending on both the administrative and selling expenses was also checked. The two expense heads grew by 5.35 percent and 8.64 percent respectively, exhausting 41bps less of revenues in FY12 over previous year. That is pretty much all that went well for PTCL during the year.
The blow at the bottom came from a nearly 16 percent slump in the Companys other operating income, which includes dividend from its subsidiary Ufone and investments. This pushed the hitherto positive growth in margins to negative for the ensuing ones. Though the operating margin looks pretty healthy at 19.13 percent, it is still 190bps lower than that scored in FY11.
With a 1.32 times increase in finance costs which reached Rs482 million during the period, the PTCL company closed its FY12 books with a net profit of Rs7.24 billion - nearly three percent less than previous year. Net margin was recorded at 12.01 percent for the year, a slippage of 143bps over previous year. The EPS dropped by 3.42 percent during the period to Rs1.41.
With all its spectrum, networks and infrastructure, PTCL has an enormous footprint that it can still leverage to penetrate the largely untapped data market of Pakistan, through offering the triple play of data, voice and video on one line. Going forward, top line growth and cost control will continue to drive margins. There could be positive windfall gains from the ICH arrangement, should it get implemented.

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PTCL Company

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Rs (mn)                      FY12      FY11     Chg

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Revenues                  60,038    55,254    8.66%

Cost of services         (44,898)  (41,815)   7.37%

Gross margin               25.22%    24.32%       -

Other operating income     6,596     7,840  -15.86%

Operating profit          11,488    11,621   -1.15%

Net Profit                 7,212     7,428   -2.91%

Net margin                 12.01%    13.44%       -

EPS (Rs)                     1.41      1.46  -3.42%

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Source: KSE announcement