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Considering the challenges of operating in a pandemic year, the year 2020 ended on a relatively better note for a telecom major. Calculations based on the Oct-Dec quarterly results announced by Telenor Group earlier this week show that Telenor Pakistan has achieved a topline of Rs25 billion – this translates into a growth of 7 percent over previous quarter. On a yearly basis, the revenues in that pandemic-affected quarter were almost the same when compared to the pre-pandemic comparative period last year.

During the quarter, the core subscription and traffic revenues continued to decline, even as non-mobile revenues helped shield the topline to an extent. The mobile network operator did well to add over a million subscribers in the quarter, but its average revenue per user (ARPU) remained flat. During the Oct-Dec 2020 period, monthly ARPU had come down 3 percent year-on-year to about Rs176. For its ARPU to cross Rs200 per month barrier, Telenor has its work cut out to on-board a lot more high-spending users.

Financial situation turns brighter down the income statement. It is clear that Telenor Pakistan was successful in driving down operating expenditures in a tough year. Main areas of cost savings, as per the group’s latest quarterly report, include human resource costs, energy costs and consultancy charges. This helped the management to grow the Oct-Dec EBITDA to Rs13 billion, a decent 9 percent year-on-year. In terms of revenues, EBITDA jumped to 52 percent, compared to 47 percent in Oct-Dec 2019.

Lower depreciation and amortization expenses in the quarter under review also helped, helping the operator turn in an operating profit growth of 35 percent year-on-year to Rs5 billion. Such growth is quite a feat, in a difficult year for the sector and the economy both during and after the Covid-related lockdowns. And to achieve it with a 50 percent lower capital spending is also telling, albeit future growth is dependent on sustained capex.

The side effects of pandemic year, however, become obvious when analyzed on an annual basis. Calculations show that the CY20 topline declined by 5 percent year-on-year to Rs101 billion. This yearly fall is similar to the drop seen in CY19. The setback: CY20 topline was lower than what Telenor Pakistan scored in CY17! There will be a lot of catching up to do in 2021. While it is a challenge to attract high-end users, it is also not easy to effectively monetize the 47 million+ subscriptions in a price-sensitive market.

A tight lid on costs and expenses in 2020 helped keep EBITDA at the same level of Rs54 billion as previous year. But this, again, is about the same level as back in 2017. The operating profit came down 11 percent year-on-year to Rs21 billion, as depreciation/amortization costs came in higher in first half. This level of profitability was seen in earlier parts of last decade. In short, in real terms, the financials are transported several years back, albeit this trend was also visible in pre-pandemic times. Amelioration is on the cards in 2021 if the pandemic remained contained and lockdowns continued to be unnecessary.


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