Pakistan Telecom is expected to post 9 percent growth in profit after-tax for the nine-month period ended March 31 because of higher volumes after making reductions in tariff. The profit of largest telephone service provider would settle around Rs 21.4 billion with an Earning Per Share (EPS) of Rs 4.19 compared to Rs 19.5 billion during the corresponding period last year, said Ali Janjua, research analyst at Atlas Investment Bank.
The profit would be higher because of volumetric growth, resulted from across the board reductions in tariff, line rent and connection charges, he said, adding that Allocated Lines in Services (ALIS) have increased from 4.8 million at the end of December 2004 to almost 5 million at the end of March 2005, while international revenues are expected to grow substantially.
On the back of this impressive growth, Ali Janjua said: "We expect full year profitability to increase by 3 percent to Rs 29.9 billion (EPS: PR5.86). With a proactive management in place we expect PTCL to become a more streamlined company. Privatisation is also under way, and is expected during the third quarter of the current calendar year."
"With interest from top-notch companies like Singtel, Etisalat (UAE), Malaysia Telecom and China Telecom we expect PTCL to trade with a privatisation premium", he added.
PTCL is expected to post a slight decline in earnings over the previous quarter, as EPS for 2QFY05 was Rs 1.62. Despite an increase in ALIS, this decline is because of the impact of a decline in tariffs, line rent and connections charges. There has been a substantial increase in NWD traffic due to tariff reduction and much higher ALIS increase y-o-y due to lower connection charges, he said.
We are bullish on PTCL's prospects for the remaining part of the year as the last quarter of the fiscal year historically shows the largest increment in ALIS, which contributes the most to the top line. Ufone has been showing an increase in users and thus contributing to the top line.
The entrance of Telenor in the cellular market in March, and the expected arrival of Warid Telecom will help bolster PTCL's revenues as PTCL provides the backbone to these providers.
Besides an EPS of Rs 5.86 for FY05, we expect a dividend at Rs 5 per share for the year identical to that of last year's, he added.
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