Long distance: International calling drops significantly on higher rates
Revenues of LDI operators likely to fall with low probability of ICH case resolution .
KARACHI:
The Long Distance International (LDI) minutes are dropping drastically because of higher rates. Since there is low probability of an early resolution of the International Clearing House (ICH) dispute, the revenues of LDI operators are likely to fall, says a report prepared by Topline Securities.
Explaining the background of the ICH case, the report said in order to reduce grey traffic, the government, in June 2014, withdrew its previous policy directive, which constituted the ICH arrangement among 14 LDI operators on August 13, 2012. The move came partly in response to the pressure from the Competition Commission of Pakistan.
However, some LDI operators had reservations, one being that the government had issued the new notification without their consent, violating the previous agreement, which said any amendments would be made in consultation with all the stakeholders.
LDI operators, therefore, won a stay order from the Sindh High Court against the government decision. The case is still pending in the court and the ICH arrangement is intact.
“We attach low probability to an early resolution of this dispute between the government and the LDI operators,” the report said. “We believe the LDI operators may start charging low call rates averaging $0.02 to $0.03 per minute compared to $0.088 per minute charged under the ICH arrangement.”
Explaining the rationale behind its prediction, the report said Telenor and China Mobile (Zong) have already started charging lower rates and their respective market shares are rising.
With growing competition, PTCL, which has the major share in the cartel’s revenue, would realise that it would be better off leaving ICH and competing Telenor and Zong as LDI minutes, on ICH rates, are decreasing fast.
LDI revenues fell from Rs20 billion in 2013 to Rs8.4 billion in the first half of 2014, the report said. Considering the substantial fall in minutes at $0.088 per minute, full-year LDI revenues would remain around Rs14.8 billion.
It added that after 2014 when PTCL will decide to compete with Telenor and Zong, LDI revenues will stabilise at Rs12 billion in 2015, assuming monthly LDI minutes at an average of 850 million and call rate at $0.025 per minute.
The market has already priced in dissolution of the ICH arrangement and the PTCL stock has fallen 12% since June 17, 2014, underperforming the benchmark KSE-100 index by 13%, the report said.
“We believe that call rate of $0.025 per minute and 850 million monthly minutes will prevail in the long-run. Due to falling LDI revenues, we estimate that PTCL’s earnings will remain flat in coming years,” the report concluded.
Published in The Express Tribune, September 11th, 2014.
The Long Distance International (LDI) minutes are dropping drastically because of higher rates. Since there is low probability of an early resolution of the International Clearing House (ICH) dispute, the revenues of LDI operators are likely to fall, says a report prepared by Topline Securities.
Explaining the background of the ICH case, the report said in order to reduce grey traffic, the government, in June 2014, withdrew its previous policy directive, which constituted the ICH arrangement among 14 LDI operators on August 13, 2012. The move came partly in response to the pressure from the Competition Commission of Pakistan.
However, some LDI operators had reservations, one being that the government had issued the new notification without their consent, violating the previous agreement, which said any amendments would be made in consultation with all the stakeholders.
LDI operators, therefore, won a stay order from the Sindh High Court against the government decision. The case is still pending in the court and the ICH arrangement is intact.
“We attach low probability to an early resolution of this dispute between the government and the LDI operators,” the report said. “We believe the LDI operators may start charging low call rates averaging $0.02 to $0.03 per minute compared to $0.088 per minute charged under the ICH arrangement.”
Explaining the rationale behind its prediction, the report said Telenor and China Mobile (Zong) have already started charging lower rates and their respective market shares are rising.
With growing competition, PTCL, which has the major share in the cartel’s revenue, would realise that it would be better off leaving ICH and competing Telenor and Zong as LDI minutes, on ICH rates, are decreasing fast.
LDI revenues fell from Rs20 billion in 2013 to Rs8.4 billion in the first half of 2014, the report said. Considering the substantial fall in minutes at $0.088 per minute, full-year LDI revenues would remain around Rs14.8 billion.
It added that after 2014 when PTCL will decide to compete with Telenor and Zong, LDI revenues will stabilise at Rs12 billion in 2015, assuming monthly LDI minutes at an average of 850 million and call rate at $0.025 per minute.
The market has already priced in dissolution of the ICH arrangement and the PTCL stock has fallen 12% since June 17, 2014, underperforming the benchmark KSE-100 index by 13%, the report said.
“We believe that call rate of $0.025 per minute and 850 million monthly minutes will prevail in the long-run. Due to falling LDI revenues, we estimate that PTCL’s earnings will remain flat in coming years,” the report concluded.
Published in The Express Tribune, September 11th, 2014.