PTCL: lower profits

After having a good run in the first two quarters of 2021, the telecom giant seemed to be catching its breath in the third quarter. As per its latest financials posted to the bourse for the three-month period ended September 30, 2021, Pakistan Telecommunications Co. Limited (PSX: PTC) Group registered a more than 50 percent year-on-year decline in net profits despite over 5 percent growth in the topline.

If it weren’t for the massive growth in ‘other income,’ the PTCL Group would have ended up with a net loss in 3QCY21. And if it weren’t for higher finance costs and impairment losses, the Group profitability would have seen a stellar rise in the quarter under review. Disaggregating the consolidated results, it appears that while the PTCL Company did rather well in 3QCY21, it was the subsidiaries (Ufone and UBank) which collectively weighed down the quarterly financials for the group.

The PTCL Company – which provided 55 percent to the group topline of Rs34.5 billion in the quarter under review – managed to grow its revenues by 6 percent year-on-year, accounting for roughly 60 percent of the gain in group topline. The broadband, corporate and wholesale business have been providing healthy growth in sales. The largely-untapped fiber-to-the-home market segment beckons for the company.

While the PTCL Company’s operating profits declined by 22 percent year-on-year to Rs859 million in the quarter under review, the firm still managed to increase its net profits by 41 percent to Rs1.9 billion. That feat was achieved, mainly, due to the exceptional rise in ‘other income’.

Over at the subsidiaries, they grew their combined revenues by 5 percent year-on-year to Rs15.4 billion – the growth is more pronounced at UBank than Ufone. However, their combined operating profits sharply came down by roughly 75 percent to Rs262 million in 3QCY21. Disproportionate growth in ‘cost of services’ and ‘selling and marketing expenses,’ much higher impairment losses, and ballooning ‘finance costs’ ensured that the two subsidiaries posted a net loss of Rs1.17 billion in the quarter.

That combined loss at the subsidiaries is a long way down from net profits of Rs163 million they had together scored in same period last year. Overall, during 9MCY21, PTCL Group topline had increased by 7 percent year-on-year to Rs102.4 billion, its operating profit had jumped 34 percent year-on-year to Rs5.1 billion, and the net profits had surged by 140 percent year-on-year to Rs3.7 billion. Not bad at all! Let’s see what the final quarter of the year has in store for the giant. Ufone, which recently acquired fresh spectrum, has to up its game and effectively monetize its network to provide better returns to the Group.