Surge in revenues for PTCL in 1HFY13

The Pakistan Telecomm-unication Company Limited announced its half-yearly financial results to its shareholders yesterday, which indicate that the telecom giant not only achieved strong growth in revenues, but also managed to control its core costs and expenditures.
Though PTCL didn report the second quarter results, and rather provided just the half-yearly accounts, the second quarter performance seems to be the driving force behind all-things-good in the 1HFY13 financials. A 26.5 percent growth in revenues is significant compared to the relatively smaller top line gains PTCL has made in the last two years or so.
PTCL offers services in all key telephony segments, including fixed lines, wireless local loop, broadband, corporate business solutions, carrier services and international telephony (LDI). After witnessing a secular decline in Voice business since 2005-06, the Company refocused in recent years, away from Voice business, towards the now-growing segments of broadband services and corporate enterprise solutions.
The LDI business still seems a fair bit of spark left for PTCL, which is the dominant player in this segment. The now-suspended arrangement of the International Clearing House (among LDI operators) was operative for nearly a month in October, and PTCL is expected to have improved its revenues from the LDI segment during that time. Sources say that improved call termination rates in the aftermath of ICH suspension (compared to pre-ICH days) are helping the LDI operators earn more revenues.
The top line growth was complemented by a checked growth in the cost of services, which grew by just under 13 percent. These costs exhausted 65.9 percent of revenue in 1HFY13, which is 797bps less than same period last year. Hence, PTCL scored gross profits worth Rs12.65 billion in this period, which is a whopping 65 percent greater than it earned in 1HFY12.
The spending on both the administrative and selling expenses increased during the period, but proportionally less compared to the revenue growth. Combined, the two expense heads consumed 15.09 percent of the revenue in 1HFY13, which is 154bps less than what they used up last year.
A nearly six percent decline was seen in the Companys other operating income, which includes dividend from its subsidiary Ufone and investments. PTCL also reported a loss of Rs216.2 million on disposal of property, plant and equipment, incurred during the period. But the all-round operating gains begin to disappear when another major, one-time expense is taken into account.
During the first quarter of this fiscal year, PTCL completed its second voluntary separation scheme in its bid to rationalise its workforce. A one-off expense of Rs9.46 billion has been reported by the Company, which blights the rest of the income statement. Compared to an operating profit of Rs4.5 billion in 1HFY12, PTCL had to contend with an operating loss of Rs1.01 billion during the period under review.
PTCL closed its half-yearly accounts with a net loss after tax of Rs742.6 million. The Companys shareholders received a loss of 15 paisa per share, compared to profit of Rs1.41 in 1HFY12.
PTCL is expected to close the FY13 with a positive bottom line if the revenue growth momentum continues. Thanks to the VSS, future growth in costs may remain in check. As for revenues, PTCL is expected to leverage its networks & infrastructure for its broadband and data offerings, which are drivers of growth. Fate of the ICH would also be a factor in determining the extent of revenue growth in future.

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PTCL Company

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Rs (mn)                       1HFY13      1HFY12       Chg

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Revenues                     37,139      29,340     26.58%

Cost of services            (24,487)    (21,682)    12.94%

Gross margin                  34.07%      26.10%         -

Other operating income        1,626       1,726     -5.81%

VSS Cost                     (9,467)        -            -

Profit/ (loss) after taxation  (743)      2,844   -126.11%

Net margin                    -2.00%       9.69%         -

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Source: KSE announcement