PTCL posts record income of Rs23bn
KARACHI: Pakistan Telecommunications Company Limited (PTCL) – the state-run telecom bellwether – posted a growth of Rs23.08 billion during the financial year ended June 30, 2003, due to increase in its operating profits. The PTCL accounts and payout announced on Wednesday exceeded market expectations significantly with net income soaring by 16.50 per cent. The dividend payout at Rs3.50 per share was also historic highest.
“The PTCL’s revenues were up just 2 per cent. Nonetheless, a 5pp (percentage point) improvement in gross margins to 52.60 per cent has ensued the 12 per cent growth in operating profits,” said Tanvir Abid, Head of Research at brokerage Jahangir Siddiqui Capital Markets. Its financial charges plunged by 58.60 per cent, attributable to the reduction in the entity’s debt level, absence of exchange losses and low interest rates. Other income, on the other hand, soared by 18.60 per cent to Rs1.919 billion. The telecom giant’s revenues during FY03 inched up by 2 per cent to Rs67.74 billion on the back of higher domestic revenues, which registered a 6.20 per cent growth.
“This is to have resulted from enhanced customer base and surge in traffic volume,” said Abid. “According to PTCL, expansion, upgradation and modernisation of network, leased lines and value added services have also contributed to the revenue growth,” he said and added: “NWD (nationwide dialing and international outgoing traffic are also to have picked up on the beneficial implications of the tariff re-balancing package.”
During the year, PTCL’s active lines network expanded by 0.328 million units. The growth in new connections was spurred by the 50 per cent slash in installation charges by the company last year. “Growth in the size of PTCL’s Activated Lines in Service (ALIS) network ensues a proportional increase in line rent revenues, which is not subject to any price elasticity and thus flows directly to the bottom line,” said Abid.
The potential for telephone growth in Pakistan continues to be huge considering the low tele-density compared to other regional countries. The PTCL’s international revenues, on the other hand, declined by 8 per cent on the drag of lower international settlement rates and the strengthening of the rupee.
“Operating costs have declined due to implementation of IAS 19 that prompted accounting changes – lower depreciation than last year to the tune of Rs2-2.5 billion because of lower depreciation rates and reversal of some provisions made for doubtful receivables in the past,” said Faisal Potrik, research chief at First Capital.
Furthermore, increase in other income might largely be driven by the dividend that PTML (Pak Telecom Mobile Limited) – its 100 per cent owned subsidiary – has just declared. “Active Lines (ALIS) have grown by about 500,000 lines in the outgoing year while line capacity has gone up by more than 600,000 lines in FY03,” said Potrik.The growth in ALIS would contribute positively to revenues in the future as it, at least, ensures a continuous inflow of line rent to the company.
Investment analysts believe the company has been ultra-conservative in making provisions, especially those for its receivables (such as NCI-World Com) in the last few years. Thus, one should continue to see a reversal for at least the next two years and these accounting changes would trickle to earnings to compensate for stagnant revenues, resulting in after taxation growth.
The present bear run has ensured that PTCL is trading at an attractive dividend yield of 9.1 per cent (higher if an investor consider two payouts in the next 13 months) and around 8x earnings. The telecom giant’s operating margins have improved ensuing from greater operating efficiencies and lower operating expenses. According to PTCL, there has been a major cost saving on foreign operator costs, employees’ retirement, depreciation and amortisation.
The financial accounts boded favorably with investor sentiments at Karachi bourse, with the PTCL shares – having 18 per cent weightage in the benchmark KSE-100 index – recovering by 2.60 per cent from Wednesday’s intra-day low price to close at Rs37.90. At current levels, PTCL is trading at a PER (price earning ratio) of 8.3x and offers a lucrative 9.2 per cent dividend yield. Its earning per share also rose to Rs4.53 in FY03 from Rs3.88 the corresponding year.
Source: The News