PTCL earned an after-tax profit
of Rs4 billion or Rs0.78 per share
in calendar year 2014, down 75%
compared to Rs14.7 billion or Rs3.09
per share in 2013. STOCK IMAGE
Higher-than-expected voluntary separation scheme (VSS) cost and declining margins eat up Pakistan Telecommunication Company Limited (PTCL)’s profits in 2014.
The local broadband giant’s earnings fell by 75% in the year, the company revealed in its financial report.
PTCL earned an after-tax profit of Rs4 billion or Rs0.78 per share in calendar year 2014, down 75% compared to Rs14.7 billion or Rs3.09 per share in 2013.
Revenues remained almost flat as it grossed Rs130 billion in sales during the review period, down slightly compared to Rs131 billion in the previous year. With the results, the company announced a cash dividend of Rs1.50 per share or 15%, which is in addition to the interim dividend of Rs1 per share already paid by the company.
The results were well below market expectations, according to Zeeshan Afzal, Head of Research at Taurus Securities. He, however, said it wasn’t really negative because a very high VSS cost ate up much of their profits.
The local internet giant, which holds a whopping 80% share in the broadband market, reported Rs8 billion as VSS cost during the review period.
“Most analysts were expecting a VSS announcement this year but none had expected it to be that high,” Afzal told The Express Tribune.
Another hit to the company’s profit came from the decline in its gross profit margin, Afzal said, eating up roughly Rs6 billion from the bottom line.
Margins fell to 31.7%, down by more than four percentage points from 35.9% in the previous year.
The decline in gross profit margin was mainly driven by the loss in the company’s long distance international (LDI) business, Afzal said. The company saw a significant drop in its LDI minutes, which dropped to 298 million in the third quarter of 2014 compared to an average 537 million in the same quarter of 2013.
Explaining the reasons behind the lost LDI minutes, information and communications technology expert Parvez Iftikhar said the rise in over the top (OTT) services, competition from Telenor and Zong and the grey telephony took away much of PTCL’s LDI business. The international traffic, which had been driving PTCL’s LDI revenues, is fast shifting to OTT services, such as Skype, Viber and WhatsApp, Ifitikhar said.
Moreover, Telenor Pakistan and Zong both got some of the LDI minutes that PTCL had been terminating under the international clearing house (ICH) – a telecom gateway set up by the Ministry of IT and Telecom in October 2012 under which PTCL was terminating all international calls made to Pakistan.
Zong obtained an LDI licence in December 2013 and a month later Telenor, too, exited the ICH setup. The two operators have been terminating their international minutes themselves, breaking the business of the ICH cartel.
Published in The Express Tribune, February 12th, 2015.
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