If reports of the Presidents collection call to the UAE are true, the timing was remarkable. Media sources quote the head of state making a quiet trip to ask Etisalat to pay up on its $800 million, which the Emirati telecom giant has withheld over a legal dispute for many years.
Pakistan Telecommunication Limited (PTCLA) announced its half-yearly results on Thursday. Profits slid by 25 percent in the first six months compared to the same period last year, driven largely by intense competition in the sector and the gradual shift away from fixed line telecommunications in the country.
Despite aggressive marketing and positioning of its product portfolio - which saw an increase of 30 percent increase year-on-year - the largest telecom company in the country was unable to attract as many customers as the previous year and saw a decline in the top line by 6 percent when compared to the corresponding period.
The troubles don end there; intense competition from mobile telephony operators and cheaper fixed-line operators saw services prices declining which in turn squeezed the gross margins by 9 percent, down to 28 percent.
A keen eye for cost cutting bore fruit for the management at PTCLA as they were able to curtail administrative costs by 9 percent year-on-year despite a 15 percent increase in prices for the economy overall.
Value added services are the growth area for the telecom sector, and while PTCL still holds the lions share of the market, - 60-70 percent - analysts following the market contend that smaller players are slowly chipping away at PTCLs market dominance.
The saving grace for the company remained its cash rich balance sheet. Other operating income, which takes into account dividends from subsidiaries - read Ufone - and return on cash parked with banks, increased by a significant 43 percent. Mind you, dividend income pales when compared to return of cash not deployed for business activities.
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PTCL
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Rs (mn) 1HFY11 1HFY10 chg 2QFY11 2QFY10 chg
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Revenue 27,698 29,425 -6% 13,842 14,953 -7%
Cost of Services 20,074 18,672 8% 9,889 9,291 6%
Gross Profit 7,624 10,753 -29% 3,953 5,661 -30%
Gross Margins 28% 37% -25% 29% 38% -25%
Admin and General 3,299 3,638 -9% 1,535 1,959 -22%
Selling and Marketing 1,205 927 30% 671 487 38%
Other Income 3,187 2,232 43% 1,293 1,123 15%
PAT 4,023 5,354 -25% 1,941 2,785 -30%
EPS (Rs) 0.79 1.05 0.38 0.55
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Source: KSE notice
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