After changing its accounting year to December, the telecom giant has posted yet another quarter of healthy financial results. In a notice sent to the Karachi Stock Exchange, the Pakistan Telecommunication Company Limited reported a net profit of Rs3.37 billion for 3 months ended June 30, 2013. The nearly 16 percent quarter-on-quarter profitability increase owes itself to both top line growth and cost containment.
During the Apr-June quarter, revenues reached Rs20.6 billion for the PTCL Company, showing a quarterly growth of 6.45 percent. Though PTCL has been operating in almost all the key voice and data segments, lately the revenue growth has come primarily from its emerging segments of broadband services and corporate solutions focused on institutional business.
Considering the largely untapped nature of Pakistans broadband market, PTCLs wire-line and wire-less broadband services both are expected to further boost its top line. Further top line support has unexpectedly come from the LDI telephony segment following the controversial implementation last year, and later suspension, of the International Clearing House among LDI operators, PTCL being the largest.
Though ICH didn hold for long, it has resulted in improved call international rates for operators who, despite a slowdown in landing minutes, recorded growing revenues.
The Apr-June quarter was doubly nice for the LDIs, apparently due to a rise in incoming minute volume. According to BMA Capitals earnings preview, "international incoming minutes went up in 2QCY13 (avg. ~600mn mins/month) that declined substantially to average around 550mn mins/month in 1QCY13", due to elections taking place during this period.
PTCL has now begun to reap benefits of its second voluntary separation scheme that was completed in September last year and had cost it Rs9.46 billion. During the quarter, cost of services remained checked at 5.6 percent on a quarterly basis. In addition, the administrative expenses and selling/marketing expenses also recorded single-digit hikes of 7.8 percent and six percent, respectively.
Profit margins gained more ground midway through the income statement when PTCLs other income increased nearly 13 percent over 1QCY13. The Ufone dividend was likely absent in the second quarter, too - so, the growth in other income is expected to have come from interest on loans to subsidiaries and return on bank placements.
The finance costs also provided a breather towards the bottom line, declining by 71.4 percent over previous quarter. It appears that PTCL has been able to rein in its hitherto high exchange losses.
Finally, small yet important gains made in nearly all income and expense heads culminated in net margin of 16.34 percent in 2QCY13 - 132bps more than 1QCY13. That helped PTCL to close its half-yearly financials on a sound footing: Rs40.1 billion in revenues and Rs6.2 billion in PAT. On a consolidated basis, the PTCL group recorded revenues of Rs65.6 billion and PAT of Rs7.8 billion in 1HCY13.
This trend of top line growth and cost control measures is expected to further improve company fortunes in near future. Future group level decisions, such as acquisitions of Warid and 3G licenses for its subsidiary Ufone, in addition to a broadband penetration strategy will determine how well poised PTCL is to exploit the data market in Pakistan.
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PTCL Company
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Rs (mn) 2QCY13 1QCY13 QoQ chg
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Revenues 20,677 19,425 6.45%
Cost of services (13,496) (12,780) 5.60%
Gross margin 34.73% 34.21% -
Other income 1,077 953 12.96%
Operating Profit 5,191 4,738 9.56%
Profit/ (loss) after taxation 3,378 2,916 15.83%
Net margin 16.34% 15.01% -
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Source: KSE announcement
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