Worldcall Telecom Limited

Worldcall Telecom Limited (PSX: WTL) is a public limited company incorporated in Pakistan in 2001. WTL commenced its operations in 2004. The company provides Wireless Local Loop (WLL) and Long Distance and International (LDI) services in Pakistan. Besides, the company is also engaged in re-broadcasting international/national satellite/terrestrial wireless and cable television and radio signals, interactive communication and to develop, maintain and operate licensed telephony services. The company is authorized by PTA and PEMRA to provide these services.

Pattern of Shareholding

As of December 31, 2023, WTL has a total of 4.982 billion shares outstanding which are held by 29,381 shareholders. Local general public, with a stake of 53.28 percent forms the biggest shareholder group of WTL followed by associated companies, undertakings and related parties which collectively hold 32.93 percent shares of WTL. Foreign general public accounts for 6.8 percent shares of the company while joint stock companies hold 6.76 percent shares. The remaining shares are held by other categories of shareholders.

Performance Trail (2019-23)

The topline of WTL which had been deteriorating until 2021 began to rise thereafter. Conversely, its bottomline never showed a positive figure after 2019. The margins had been dropping to show their worst picture in 2021. The circumstances slightly improved in 2022 as evident by a positive EBITDA margin and lower magnitude of net loss. However, the margins worsened yet again in 2023 (see the graph of profitability ratios). The detailed performance review of the period under consideration is given below.

In 2019, WTL’s topline shrank by 12 percent which came on the back of lower revenue across the categories – telecom, broadband and others. The drop in interconnect, settlement and other charges also pushed the direct cost down by 22.86 percent year-on-year in 2019. Operating cost also plunged by 18.57 percent in 2019 due to rightsizing of human resources which drove the salaries and wages down. While direct cost and operating cost provided some relief, other expense massively grew as the company booked provisions for expected credit losses on long-term receivables. The provisions for expected credit losses on trade debt also almost doubled during the year. This pushed the other expense up by 102 percent in 2019. Other income didn’t prove to be favorable as it inched down by 27 percent year-on-year in 2019. The result was 19.52 percent drop in EBITDA in 2019 while EBITDA margin also tumbled from 43.82 percent in 2018 to 40.11 percent in 2019. High depreciation& amortization charge and finance cost resulted in loss before tax of Rs.201.58 million in 2019 versus a profit before tax of Rs.562.28 million in 2018. However, tax adjustments resulted in a positive bottomline of Rs.65.49 million in 2019, showcasing a drop of 85 percent from last year. NP margin also slid from 10 percent in 2018 to 1.7 percent in 2019. EPS stood at Rs.0.02 in 2019 versus Rs.0.09 in 2020.

In 2020, the revenue further plunged by 18.59 percent which came on the back of a massive plunge in broadband services, followed by telecom services. Direct cost and operating cost also contracted in 2020. Other expense dipped on account of lesser provision booked in 2020 while other income also nosedived due to impact of IFRS 9 as well as lesser write-offs during the year. Despite rigorous cost saving, EBITDA ticked down by 22.71 percent in 2020 with EBITDA margin clocking in at 38 percent. The depreciation and amortization charges provided the much needed breather as it fell by 24 percent in 2020, however, finance cost rose by 9 percent year-on-year despite downward revisions in discount rate owing to COVID-19. Finance cost grew because of restructurings negotiated with the financial institutions and lesser liabilities written back in 2020. This resulted in net loss of Rs.150.27 million in 2020 with loss per share of Rs.0.06 in 2020.

2021 posted further 32.67 percent decline in the topline of WTL. Consequently, direct cost and operating post also diminished. Other expense magnified by 26.45 percent in 2021 due to impairment of long-term investment, loss on disposal on inventory and higher provisioning for expected credit losses on trade debts. Other income posted a rather gloomy picture as it slid by 52.96 percent year-on-year in 2021 on account of lesser write offs during the year. EBITDA of WTL which had been positive in the earlier years under consideration turned into loss of Rs.90.15 million in 2021. Depreciation and amortization also grew by 12.84 percent in 2021 while finance cost gave some breather as it fell by 43 percent year-on-year in 2021 due to monetary easing. Yet the net loss magnified by 902.41 percent in 2021 to clock in at Rs.1506.36 million with loss per share of Rs.0.51.

In 2022, the topline showed signs of recovery as it grew by 8.85 percent on the back of a robust long Distance & International (LDI) revenue with broadband segment providing added support. Direct cost grew by 6.34 percent in 2022 while operating cost slightly lowered as the company didn’t book provisions for advances to suppliers. Other expense also buttressed the EBITDA as loss on the disposal of inventory and impairment loss on long-term investment incurred last year were not there in 2022. Other income, however, didn’t support the bottomline due to lesser reversals of provisions and lesser write-offs in 2022. EBITDA entered the positive zone in 2022 to clock in at Rs.104.65 million, however, with a skimpy EBITDA margin of 4.55 percent. While depreciation and amortization almost stayed intact in 2022, finance cost grew by 24.915 percent, shoving the bottomline into loss zone. WTL reported net loss of Rs.1384.98 million in 2022, 8 percent lesser than last year’s mark. Loss per share moved down by 37 percent in 2022 to clock in at Rs.0.32.

In 2023, WTL’s topline registered healthy 27.91 percent year-on-year rise. This can primarily be attributed to a rise in Long Distance & International Earnings. Increased dependence on digital communication and rise in remote working fueled the demand of LDI services.However, massive rise in interconnect, settlement and other charges drove up direct cost by 51.59 percent in 2023. Operating cost mounted by 18.69 percent in 2023 due to hike in payroll expense as well as travelling & conveyance charges. High payroll expense was despite the fact that the company right-sized its workforce from 354 employees in 2022 to 317 employees in 2023. Other expense surged by 78.93 percent in 2023 due to hefty exchange loss owing to Pak Rupee depreciation. Other income inched down by 4.92 percent in 2023 as there was lower gain on adjustment due to IFRS 9, lesser liabilities written back during the year vis-à-vis last year as well as no gain recorded on the termination of lease in 2023. WTL recorded LBITDA of Rs.427.58 million in 2023 versus EBITDA of Rs.104.65 million in 2022. Depreciation and amortization charge for the year ticked down by 11.12 percent in 2023. However, finance cost showed no mercy and magnified by 59.87 percent in 2023 owing to high discount rate as well as surge in borrowings which pushed up WTL’s gearing ratio from 70.26 percent in 2022 to 111.47 percent in 2023. The company recorded net loss of Rs.2013.94 million in 2023 with loss per share of Rs.0.43.

Future Outlook

With multiple projects in pipeline such as blockchain deployment, fiber to home deployment in urban areas and strategic alliance with World Mobile Group (WMG), the topline of WTL is anticipated to show considerableimprovement. The evolution of technologies such as 5G also offers myriad opportunities for WTL and the telecommunication sector in general. WTL’s increasing appetite to invest in its R&D and infrastructure and tapping the unexplored business ventures will spur horizontal and vertical growth. The company plans to add 200,000 broadband subscribers in low-income areas. Besides, there is a new service named “CADNZ” in the pipeline which will cater to the banking sector. Furthermore, geographical penetration in the UK, Europe and the Middle East will also bear positive results. However, with unabated rise in direct cost as well as finance cost, the margins and bottomline present an unsure outlook.