PTCL in 2021

In a challenging year for connectivity business, Pakistan’s true carrier-of-carriers posted healthy growth in consolidated topline. As per the latest financial results posted to the bourse for the year ended December 31, 2021, Pakistan Telecommunications Company Limited (PSX: PTC) Group posted revenue growth of over 6 percent p.a., its second-highest pace in recent years, to reach all-time-high figure of Rs138 billion.

For the PTCL Group – which is composed of holding company PTCL and subsidiaries Ufone and UBank –2021 looks like a reversal of 2020? Back in CY20, consolidated bottomline saw a large 38 percent yearly jump (thanks to higher ‘other income’) despite there being a nominal decline in topline. CY21 saw a shift, when despite scoring decent topline performance and continued windfall from ‘other income’, bottomline contracted by a fifth, as proportionally higher growth in operating costs and finance costs wiped the gains.

Breaking down the consolidated financials, it is clear as day that the holding company – which accounted for 56 percent of the group topline during CY21 – continued to provide significant (in fact only) source of profitability to the group. PTCL Company’s topline grew by 7 percent year-on-year to reach Rs77 billion in CY21, as the firm gradually solidifies its retail broadband footprint via network modernization.

During last year, the sales have been particularly strong for the fixed broadband segment (12% yearly growth) in the consumer market, with exceptional growth reported by the PTCL Company in its fiber-to-the-home segment. Over in the institutional market, there is also healthy growth, as corporate business grew 10 percent and wholesale & carrier business increased 9 percent year-on-year.

Thanks to better operational efficiencies, operating profits for PTCL Company ameliorated by a solid 21 percent year-on-year to reach Rs4.2 billion, whereas net profits climbed 14 percent to reach Rs6.9 billion. Such strong contribution to group financials was not seen at subsidiaries, where performance seems mixed. While UBank has been providing consistent topline growth, Ufone, which is the last-ranked mobile network operator in a four-player market, is struggling to return net profitability for the group.

Collectively, the subsidiaries’ revenues grew 5.4 percent to reach Rs61 billion – as Ufone topline grew by 4 percent year-on-year and UBank topline increased by 8 percent year-on-year. However, the subsidiaries suffered a 58 percent decline in combined operating profits to Rs915 million. That situation was exacerbated by soaring finance costs down the line, as the combined net loss for the subsidiaries reached Rs4.29 billion in CY21, much higher than Rs2.75 billion as reported in the year before that.

Ufone becoming profitable is critical for the group fortunes. The management, which has been looking to re-energize Ufone by modernizing its network and expanding coverage footprint, took a bold decision back in September 2021 when it acquired 9MHz spectrum for 4G services, at a price tag of $279 million. In a difficult operating environment, the group balance-sheet has taken a big leap with this investment decision. Let’s see how soon this large capital spending helps unlock substantial topline growth at Ufone!