WorldCall Telecom Limited

WorldCall Telecom Limited is one of the prominent telecommunication and multimedia service providers in Pakistan. Fifteen years on since its launch, the company offers an array of services in segments like data, entertainment and voice. WorldCall is an associate company of Oman Telecommunications which acquired its majority shareholding (56.8 percent) in 2008.
WorldCall holds licenses in key ICT segments like fixed local loop (FLL) telephony, wireless local loop (WLL) telephony, long distance and international (LDI) telephony, and broadband. As per PTA statistics, WorldCall had 435,851 WLL subscribers and 10,085 FLL in June 2011. The Company had unsuccessfully bid for a mobile cellular license in 2004.
The Company offers its customers wireless voice telephony based on CDMA technology, often clubbed with cable TV. WorldCall is one of the largest LDI operators in the country. Its broadband subscriber-base came under threat as various new wireless broadband service providers entered the market in the last two to three years and aggressively focused on major Pakistani cities.
WorldCall offers different broadband technologies like DSL, wireless and EvDO. The Company contributes to the two ICT-promotion funds in Pakistan - the Universal Service Fund and the R&D fund. It has participated in the USF-funded broadband projects in the telecom regions of Multan and Gujranwala.
Currently, WorldCall is struggling to maintain its position in the voice segment. The promising wireless broadband market needs even deeper penetration. WorldCall only returned to profitability in CY11, after running losses for successive years, indicating that its brand name has survived the adverse times.
FINANCIAL PERFORMANCE REVENUES WorldCall's net revenues grew by a decent 7.19 percent in CY11, which is a healthy sign as the Company's top line had previously shrunk by 11.23 percent in CY10. Despite having a diversified portfolio, WorldCall hasn't been able to offset the declining revenues from the FLL and WLL segments. This trend is also visible in the top line of Pakistani telecom giant, PTCL.
Detailed Company accounts are not available yet; however, the improvement in revenues appears to be on the heels of strong results in wireless broadband segment. The management had hinted that this segment strengthened in CY10, and would improve further in CY11. The reasons for the CY10 revenue dip were stated to be underperforming LDI segment, introduction of price cuts and delays in planned rollouts.
Direct cost Despite the rise in revenues, the direct cost of the Company declined by 9.12 percent in CY11, which reflects an improving cost control regime. The direct costs for the Company include overheads like inter-connect and settlement charges, bandwidth charges, and network maintenance fees. Out of every hundred rupees of net revenue earned, WorldCall spent Rs 75 on direct costs in CY11, down from Rs 89 in CY10 and Rs 84 in CY09.
Growing revenues and declining direct costs helped WorldCall score a gross profit of nearly Rs 2 billion in CY11, growth of a whopping 134.35 percent over CY10. Gross margin improved by 1,348bps to reach 24.85 percent in CY11.
Operating cost WorldCall's operating costs (summation of selling, marketing and administrative expenses) also showed a healthy decline of 9.3 percent in CY11, compared to an increase of nearly 20 percent in both CY10 and CY09. It is quite apparent that the Company has identified where the fat lies, and is consciously trimming it down. The operating costs exhausted 18 percent of net revenues in CY11, down from 22 percent in CY10.
WorldCall finally scored a significant operating profit in many years. A good, all-round operating performance solidified the Company's operating margin at 6.6 percent in CY11, compared to negative 10.2 percent in CY10 and a measly 0.18 percent in CY09.
Non-operating performance WorldCall has been incurring the "impairment loss on available for sale securities" for the past three years. In CY11, the Company lost Rs 27 million under this head, which is still a big amount, but comparatively lower than the losses of Rs 65.8 million in CY10 and Rs 167.8 million in CY09.
The Company got a major boost from its 'other operating income', which increased by a stupendous 767.8 percent in CY11 to reach Rs 504 million. This was partially offset by 'other operating expenses' of Rs 190 million in CY11.
Finance cost WorldCall's finance costs do not seem to be relenting, as they showed only a 3.87 percent decline in CY11, as the Company has been paying hefty mark-ups on its running finance and TFC facilities. Consequently, WorldCall spent 9 percent of its revenues in CY11 to foot its finance charges, compared to 10 percent in CY10 and 6 percent in CY09. During CY10, it retired two TFC issues, worth Rs 817 million and Rs 71 million.
Profitability WorldCall's CY11's financial performance has shown a marked improvement over CY10 when the Company posted Rs 1.14 billion in net loss. A better overall operating performance, coupled with a windfall non-operating income, helped WorldCall close CY11 on a high. After incurring losses for many years, the Company scored a net profit after tax of Rs 290.25 million in CY11. This translated into an EPS of positive 34 paisa for the Company's shareholders. Net margin came out to be positive 3.63 percent.
Future Outlook The ICT market in Pakistan is in for major readjustments and game-changing developments in CY12. The transition from voice to data networks in the post-3G milieu offers both opportunities and challenges to wireless broadband service providers. It remains to be seen how WorldCall Telecom, which is an established name in key segments, comes out and realigns its strategies in the wake of changing market situation. Top-line growth, cost rationalisation, and improved debt management may help the Company sustain the CY11 turnaround.
All information and data used are from reliable source(s) and subjected to extensive research after diligent and reasonable efforts to determine the soundness of the source(s). This analysis is not for the benefit of or discredit to any person, scrip or tradable instrument. The content(s) of this analysis shall not be construed as an advice or recommendation to trade. No relationship of client will be created between Business Recorder and user of this information. Professional advice must be taken by the reader before making investment/trading decisions. BR disclaims any liability for investment(s) made or liability accrued on basis of this analysis. The content(s) including all opinion(s), statement(s) and information are subject to change without prior notice and/or intimation.