Telenor’s revenue increases in PKR terms

ISLAMABAD: Telenor Pakistan’s revenue declined by around 8% in NOK (Norwegian Kroner) terms, while appreciated 4% in PKR terms during the first three quarters of 2022 and remained NOK 3.390 billion (Rs82.57 billion) compared to NOK 4.270 billion (Rs 79.36 billion) during the same period of 2021.

According to Telenor Group’s financial results, Telenor Pakistan reported a total of NOK 1.320 billion (Rs 29.53 billion) in revenues during the third quarter of 2022 compared to NKO 1.425 billion (Rs 26.68 billion) during the same period of last year i.e. 2021 and registered around 7.5% decline in NOK terms and 10% increase in PKR.

The Group stated that Pakistan was affected by unprecedented flooding this quarter, affecting around 33 million people, which amounts to around 15% of Pakistan’s population. The situation impacted the spending power of consumers and also caused network outages along with increasing cost.

On 14 October, Islamabad High Court decided the case of applicability of sim tax in favour of Telenor Pakistan for the period from 1 July 2014 to 30 June 2020. As a consequence, provision for sim tax was reversed, which impacted service revenues positively by NOK 0.1 billion and EBITDA positively by NOK 0.6 billion. The tax was already abolished with effect from 1 July 2020.

Service revenues, on an underlying basis, decreased by 3%, negatively impacted by the flooding situation. However, data revenues increased by 18%. Reported service revenues increased by 10%, positively impacted by the reversal of sim tax provision.

Subscriber based declined by 756 000. At the end of the quarter, the subscribers’ base stood at 48.8 million, which is the same level as the same period last year.

Opex increased by 32%, mainly due to higher energy prices. Underlying EBITDA declined by 22%, driven by increase in opex. Reported EBITDA increased by 70%, positively impacted by the reversal of sim tax provision.

In second quarter 2022, Telenor recognized an impairment of assets of NOK 2.5 billion related to Telenor Pakistan as a result of several negative developments. A significant increase in interest rates, country risk premium and market premiums impacted the Weighted Average Cost of Capital. A hike in energy prices and increased global inflation made the outlook for Telenor Pakistan challenging.

Further, the Supreme Court in Pakistan concluded the license fee to remain at the level set by the Pakistani Telecommunication Authority. As a consequence, the Group reassessed the value in use of non-current assets and recognized impairment losses in the second quarter related to property, plant and equipment and right-of-use assets in Telenor Pakistan.

Year to date, the reported operating profit decreased by NOK 1.1 billion to NOK 16.4 billion primarily due to Telenor Pakistan’s impairment of NOK 2.5 billion in the second quarter, partly offset by the gain of NOK 1.7 billion on divestment of fixed non-core assets in Sweden in the first quarter.

The group stated that for the first three quarters, licenses and spectrum fees of NOK 2.9 billion include NOK 1.7 billion related to additional spectrum fee pursuant to the Supreme Court of Pakistan ruling through a short order and the detailed judgement is still awaited, see note 7 for more information.

“We see positive trends for mobile service revenues in the Nordic region, with a growth of 4% in the third quarter”, said Sigve Brekke, President and CEO of Telenor Group.

For the Group, high energy prices, especially in Norway, Denmark, and Pakistan, continue to be a headwind. However, the negative effects are, this quarter, countered by a reversal of sim tax provision in Pakistan, leading to 2.5% EBITDA growth. Free cash flow came in at NOK 5 billion, implying a cash generation so far this year of NOK 10 billion.

With regards to the outlook for the year, Telenor maintains the expectation of low single digit growth in service revenues. Although a significant increase in energy prices is weighing on the EBITDA, a positive one-time effect in Pakistan this quarter supports maintaining the outlook of organic EBITDA around last year’s level. The capex to sales ratio is expected to be in the previously indicated range of 16-17%.

Copyright Business Recorder, 2022