Following a large operating loss in CY22 on account of a massive ‘impairment loss,’ Telenor Pakistan appears to be on a less rocky path in early 2023, but challenges persist. Based on latest results announced by its parent Telenor Group for the quarter ended March 31, 2023, Telenor Pakistan recorded nearly 3 percent growth in total revenues to Rs27 billion and 16 percent growth in operating profit (EBIT) to Rs5.7 billion. (PKR-based results are derived after exchange-conversion from Norwegian Krone-NOK).
Core service revenues dropped 2 percent year-on-year to Rs21.8 billion in 1QCY23, despite the popular mobile network operator (MNO) opting for price-increase (just as other operators have done). On one hand, the average revenue per user (ARPU) metric went up by nearly 5 percent year-on-year to Rs179.4 per month in the quarter under review. But the blow came from a falling subscriber base, as mobile subscriptions were at 47.92 million as of March end 2023, some 1.33 million lower than March end 2022.
On top of weak revenues, the operating expenditures went up by 20 percent year-on-year to Rs12 billion during 1QCY23. This led to EBITDA (earnings before interest, taxes, depreciation and amortization) declining by almost a tenth over 1QCY22 to reach Rs12 billion. This fall was attributed by the Group to “lower service revenues in combination with higher energy prices and increased network maintenance costs”. With record inflation in prices of goods and services, there is no respite in the offing on this front.
To weather this storm, Telenor Pakistan, just as other MNOs, may have to prioritize what matters the most to preserve financial health in these precarious times. “The management focus for Pakistan is to maneuver in the very challenging business and macroeconomic environment by prioritising high-ARPU customers, balancing network quality and further adapting the organization,” the Group noted in its quarterly report. That statement suggests that subscription base may further decrease (along with FTEs).
Amid tight cash flows and rising cost of borrowing, investment inflows in the telecoms industry have also taken a hit. For Telenor Pakistan, capex spending (excluding lease) was almost halved in 1QCY23 at Rs2.45 billion compared to same period last year.Likelihood of rebound in capex is very low, as the Group further noted in the report that “The macro-economic outlook for Pakistan remains challenging and the entity is still sensitive for impairment. These risks require continuous monitoring and are being closely followed up at both local and Group level”. Let’s see how the remaining quarters turn out for the operator.
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