PTCL Group’s growing losses

If the financial situation of the telecom giant is any guide, all is not well in the telecommunications sector. Yesterday, the Pakistan Telecommunications Company Limited (PSX: PTC) posted its financial results to the bourse for the nine-month period ended September 30, 2022. Despite a decent topline increase of 8 percent year-on-year for the group to Rs110.5 billion during 9MCY22, the consolidated bottomline went into deep red with net loss of Rs5.6 billion, as opposed to Rs3.6 billion net profit in same period last year.

Breaking down the PTCL Group results into its components, one can see that it is the PTCL holding company that continued to provide strong support to the group financials, as opposed to the subsidiaries (mainly Ufone and UBank) that collectively were a source of financial strain for the group in the period under review. This is despite the fact that the subsidiaries together scored comparatively better topline growth rate than the holding company (mostly due to UBank, as Ufone revenues are under pressure).

At the PTCL Company, revenues went up by nearly 7 percent year-on-year to Rs61.1 billion, showing steady growth in the topline that is sourced from retail (fixed broadband, wireless and voice), wholesale & corporate, and international segments. However, the operating profit of the firm declined by 12 percent year-on-year to Rs3.2 billion, as the fixed-line leader faced growing cost pressures on account of rising prices of fuel and electricity as well as higher administrative overheads and selling/marketing expenses.

Still, the PTCL Company was able to post a 45 percent increase in its net profits during the period, reaching Rs8.2 billion during 9MCY22. This was thanks mainly to the ‘other income.’ This income head more than doubled compared to the same period last year to reach Rs9.8 billion, as there were significant gains for LDI business on account of PKR depreciation as well as higher returns on long-term investments.

However, this solid contribution to the group financials was nullified by the Rs13.85 billion in net losses posted by the subsidiaries together (as opposed to a net loss of Rs1.98 billion in the same period last year). While subsidiaries cumulatively posted topline increase of nearly 10 percent year-on-year to reach Rs49.4 billion in 9MCY22, they fell into operating loss of Rs2.1 billion due to rising costs.

The real damage to the bottomline was delivered by ‘finance costs,’ which jumped more than 3 times over 9MCY21 to reach Rs24 billion in the period under review. Due to sharp increase in discount rate over the past 12 months, the steep interest rates, especially on Ufone’s long-term loans from banks, were at work there. Going at this rate, the PTCL Group looks set to close the ongoing calendar year on a negative note not seen in recent years.