One of the few services sectors that are expected to weather the coronavirus times somewhat better is the telecommun
One of the few services sectors that are expected to weather the coronavirus times somewhat better is the telecommunications. So how exactly have Pakistani telecom players been doing in these times? Early evidence indicates that the sector, whose growth was already hurting in pre-corona times due to weak economic growth and high inflation, is still headed for uncertain times. The market, which is dominated by pre-paid subscriptions, is prone to fluctuations in airtime recharges that form the bulk of revenues.
The first quarter ended March 31, 2020 provides partial clues. The nationwide lockdown, which started March 23, comes to about 10 percent of the first-quarterly period. In those roughly 9 days, the telco’s in Pakistan had to shut down their in-house retail operations as well as witness the closure of a major part of third-party outlets that sell new Sims, airtime and devices. The second quarter will provide better clues of the impact of such closures as well as the remarkable decline in overall economic activity.
Jazz, the market leader, saw its topline decline by 3 percent year-on-year to Rs49 billion in 1QCY20, latest financials from Veon (Jazz parent) show. This is despite the fact that the operator added nearly 4 million new customers to reach 62 million users as of March end. The 9 percent yearly drop in the average revenue per user (ARPU) to Rs 247 per months explains it, even as data usage nearly doubled. Veon feels topline growth would have been 13 percent if “tax regime changes” from 2019 are excluded.
Latest results from Telenor Group show that Telenor Pakistan recorded a rather higher topline fall, at 10 percent year-on-year, to settle its revenues at Rs25.5 billion for the first quarter. Despite an addition of over a million subscriptions in the quarter under review, the 14 percent decline in monthly ARPU to Rs181 hits on the high side. However, some cost-savings were at work as the gross profit and Ebitda reduced proportionally lower by 8 percent and 9 percent, respectively.
Ufone recorded a 14 percent topline decline, as per the PTCL Group’s statement to BR Research after the announcement of 1QCY20 results last month. Most of that fall is attributable to the loss of “service fee,” which was annulled by the top court last summer and which has affected the whole sector. Customer churn was also higher. Ufone is also beset by high financial costs on its forex-denominated liabilities. The operator closed 1QCY20 with a hefty net loss that plunged the Group profitability into red.
Will a sector that wasn’t doing stellar in the immediate months before the lockdowns catch an infection this quarter? Lockdowns have now significantly eased, but future growth may still be impacted as operators dial down on network expansion due to logistical and cash-flow concerns. Be that as it may, the sector’s offerings of high-speed data and digital financial services can provide valuable growth in these times. Innovative product development and creative marketing is required to increase the uptake of both.