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Amid macroeconomic headwinds, how good or bad was 2019 for the telco’s? Well, it’s accounting time, and the first one to go is Telenor Pakistan. Looking at Telenor Group’s financials released earlier this week for the year ended December 31, 2019, it is clear that Telenor Pakistan struggled quite a bit in 2019. Nearly all key indicators took a dip in rupee terms, an effect that was pronounced in Norwegian Krone (NOK) terms due to significant rupee depreciation against the greenback in the relevant period.

For the Fornebu, Norway-based telecom group, its Pakistan-based mobile network operator (MNO) posting a double-digit topline decline in NOK terms must be dispiriting, as if regulatory uncertainties weren’t enough. (For more on the regulatory hiccups in the year past, read: “Telecoms: renewal saga isn’t over,” published November 13, 2019).

Over a longer timeline, the 2019 financials look as if the MNO has been teleported back into 2016 in rupee terms, and even earlier in NOK terms. No wonder the group’s latest annual report ended up using the term “challenging” three times to describe how the local market in 2019 fared for Telenor Pakistan. Lower revenues and higher costs was the sad combination quarter after quarter in the year gone by.In rupee terms, Telenor Pakistan revenues summed up to almost Rs106 billion in CY19, which is a 5 percent drop over the previous year. This is mainly due to the fact that the sector in general, Telenor Pakistan and other MNOs, could no longer charge the 10 percent “service fee” on account recharge after an apex court ruling last summer.

All revenue streams declined for the second-ranked operator in the period under review. However, “subscription and traffic” revenue segment, which is the breadwinner, suffered the most. The drop was somewhat, not entirely, offset as the company added nearly two million subscriptions during the year, with total subscriptions reaching 45.38 million as of 2019 end.

The demand-side of the economy has felt hard done by the tide of high inflation ripping through food and energy prices throughout 2019. Most consumer-facing industries are suffering, and telecommunications is no exception. But the gradual slide in the MNO’s average revenue per user (ARPU), in both PKR and NOK terms, must be disconcerting at the HQ. The ARPU stood at Rs187 per month for CY19, which is a nominal decline of 10 percent year-on-year. When seen in real terms, the decline is further conspicuous.While revenues fell, the descent in operating profitability was more severe. The operating profits almost halved in the year under review to Rs23 billion. This came on the back of rising prices of utilities, especially electricity, as well as higher network costs due to network expansion. The Ebitda margin also took a hit, falling to 44.6 percent in the year, compared to 57.3 percent in CY18.

Despite the tough odds, the company pumped Rs25 billion in capex in Pakistan, an amount that is 43 percent more than the same period last year. It is also the highest capital spending since 2016. Meanwhile, the Telenor Group has dropped no hint that it is aiming to settle the pending legal matter of the renewal of its GSM license. It is not striking a defiant note either. However, it has disclosed to shareholders that “the company has a stay order until the final outcome”.

Would 2020 be different? It appears that the lingering litigation with the government over license renewal and the depressed consumer economy will leave the MNO’s sponsors sober again this time next year.