KARACHI – The Pakistan Telecommunication Company Limited (PTCL) is expected to face a 17 percent decline in its admin expenses in the Financial Year 2012, while the consolidated operations, including Ufone’s, the company reflected plausible growth prospects.
Under the agreed terms of Sales Purchase Agreement (SPA), Etisalat is allowed to charge technical service fee at 3.5 percent on the consolidated revenues of the company for a period of five years, commencing from October 2006. The tenor of this levy will expire in the first quarter of FY12, which is expected to lead to 17 percent decline in admin expenses in FY12.
However, Etisalat withheld $800 million due to non-transfer of more than 3,300 properties, which as per terms of SPA was to be transferred to PTCL by March 2008. The government has transferred about 3,000 properties to PTCL, while around 296 properties have stayed disputed.
This dispute is mainly due to ambiguous ownership, as rights are also being claimed by provincial governments of Sindh and Punjab. This issue is likely to linger on and possibility of a solution is slim. The PTCL has received first dividend flows from Ufone worth Rs 695 million in FY10, contributing around 13.5 percent towards company’s other income.
Going forward, rising income through dividends will ensure some relief to the declining profitability of PTCL, which is suffering from sliding fixed line revenues. A dividend of Rs 650 million (Rs 0.13/share) from Ufone in FY11 is expected. The company’s loan of Rs 11 billion to Ufone will further boost profitability on standalone basis, as the company will book interest income of Rs 1.6 billion, with Rs 0.31/share, in FY11.
Ufone’s revenue has grown at a Compound Annual Growth Rate (CAGR) of 31 percent between FY06 and FY10 to Rs 41.7 billion, resulting in Ufone’s contribution surge to 42 percent in FY10 from just 16 percent in FY06. Faisal Khan at Arif Habib expected this trend to persist, resulting in cellular contribution to increase to 45 percent in FY11 and further to 49 percent by FY14, as company’s consolidated revenue grows at a CAGR of 4.8 percent from FY10 to FY14.
Ufone is expected to sustain its market share at 20 percent and this strong growth is expected to take PTCL’s consolidated top line to Rs 118.8 billion, exhibiting a 4.7 percent CAGR (FY10-14), he added. By FY10, the company’s standalone revenues (including Domestic, International, Vfone and Broadband) have registered a decline of 14 percent since FY08.
This contraction is mainly attributed to a decline in Fixed Line revenues, which has dropped from Rs 57.47 billion in FY08 to Rs 43.57 billion by FY10, a decline of 24 percent.
