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After scoring some improvements in 2021, Pakistan’s telecom giant has not had a great start to the year 2022. As per the latest financial results posted to the bourse for the three-month period ended March 31, 2022, the Pakistan Telecommunications Company Limited (PSX: PTC) Group witnessed its consolidated operating profits to slide by 87 percent year-on-year to come down to Rs313 million, as its bottomline plummeted 197 percent year-on-year in the quarter to post a net loss of Rs1.55 billion.

The 1QCY22 consolidated topline growth at 3 percent year-on-year was weak, which was made worse by 11 percent year-on-year rise in cost of services, leading to 17 percent decline in gross profits. There is stiff competition for broadband customers in the market, due to which organic growth in data subscriptions is hard to come by. Meanwhile, raising connectivity prices to wholesale and retail users, in line with inflationary pressures being absorbed by core costs and expenses, is not an option.

Breaking down the PTCL Group performance into its constituent parts – the PTCL holding company and the subsidiaries Ufone and UBank – provides a better perspective on overall 1QCY22 financial performance.The topline growth at the holding company (at 4% YoY to reach Rs19.6 billion) was nominal, which underscores difficulties in increasing retail, wholesale and corporate connectivity users.

Growth in cost of services, administrative expenses and selling expenses was proportionally more than topline growth. Therefore, the PTCL Company’s operating profit plunged 39 percent year-on-year to Rs947 million. It was due mainly to 45 percent growth in ‘other income’ and a significant fall in finance costs that the holding company was able to close the quarter with 10 percent yearly growth in net profits, which reachedRs1.9 billion and provided much-needed financial space to the group.

Over at the subsidiaries (Ufone and UBank), the combined topline growth was 3 percent year-on-year in 1QCY22, reaching Rs15.4 billion, thus providing 44 percent of revenues to the group topline. The impact of slow sales was compounded by much higher growth in core service costs as well as operating expenditures. That resulted in a cumulative operating loss of Rs633 million in 1QCY22 for the subsidiaries, compared to operating profit of Rs820 million in the same period last year.

The real blow came to the subsidiaries (and consolidated financials, in turn) when their combined finance costs more than doubled in the period to reach almost Rs6 billion. This is presumably linked to servicing the long-term loan that Ufone acquired last year to finance its spectrum license purchase. As a result, the subsidiaries together posted a massive net loss of Rs3.46 billion in 1QCY22, which was 29 times higher than their net loss in the same period last year. Let’s see how the subsidiaries fare in rest of the year.

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