PTCL net profit crawls up

PTCL's net profit increased 1.56 per cent to Rs9.29b in financial year 2010 but it failed to meet market expectation.


Express August 28, 2010

Pakistan Telecommunication Company Limited’s (PTCL) net profit increased 1.56 per cent to Rs9.29 billion in financial year 2010 but it failed to meet market expectation.

The consensus of four research firms revealed that they expected the company to post a net profit of around Rs10.23 billion in July-June 2009-10.

The profit rose owing to cost efficiencies and strong growth in other operating income while the revenue dropped, analysts said.

Revenue dropped by 3.49 per cent to Rs57.2 billion during financial year 2010 compared with last year’s Rs59 billion, according to a notice sent to the stock exchange on Friday.

The drop is on the back of lower active fixed line subscribers and price competition with cellular operators, said IGI Securities senior research analyst Sana Abdullah.

Moreover, contraction in revenue was also from pockets of thriving grey telephony despite a crackdown by the Pakistan Telecommunication Authority (PTA), according to BMA Capital analyst Omar Rafiq. Grey telephony is the use of illegal gateway exchanges to bypass legal PTCL gateway.

Net profit was supplemented by 56 per cent lower finance costs and 20 per cent increase in other operating income on the back of dividend and higher interest income from its subsidiary Ufone, said Abdullah.

Profitability headed north mainly on increasing market penetration in the highly profitable broadband network, said Rafiq. In the broadband segment, PTCL is dominating with a market share of 81 per cent, according to IGI Securities.

Earnings per share crawled up to Rs1.82 compared with last year’s Rs1.79. Cost of sales for fixed line operations increased by one per cent on yearly basis to Rs38.3 billion, shrinking the gross margins by 300 basis points to 33 per cent. The spike in cost of sales came during April to June after a decline during the first nine months of financial year 2010.

Marketing expenses also depicted an increase of 18 per cent on yearly basis as PTCL aggressively promoted its EvDO broadband USB and Smart TV services during the period under review, informed Abdullah.

The company did not announce any payout with the annual results as the company had already paid a cash dividend of Rs1.75 per share during the year.

Published in The Express Tribune, August 28th, 2010.

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