After recording a significant amount of net loss (nearly Rs8 billion) in CY22, the country’s telecom giant seems to be be struggling in the ongoing calendar year as well. Based on the latest group financials shared with the bourse last week, the Pakistan Telecommunications Company Limited (PSX: PTC) Group recorded a net loss of Rs5.7 billion in the first quarter ended March 31, 2023. This 1QCY23 net loss is nearly four times the loss seen in the same period last year.

The group – which is composed of the PTCL Company and the main subsidiaries Ufone and UBank – ended up deep in the red despite double-digit topline growth in the period under review. Based on the latest financials, the PTCL Company’s topline went up 17 percent year-on-year to reach nearly Rs23 billion in 1QCY23. Among the subsidiaries, while UBank was profitable, Ufone incurred much higher losses.

The PTCL Company did much better when it came to reining in costs and expenses. As a result, it was able to post an operating profit of roughly Rs1.5 billion during 1QCY23, some 55 percent higher year-on-year. Meanwhile, Ufone recorded a large operating loss that led to a group-level operating loss of Rs321 million, which subsequently worsened down the line.

While the PTCL group received a big boost from the four-fold increase in its ‘other income’ on account of PKR depreciation and better returns from financial assets, those gains were swallowed by the spike in finance costs. The PTCL Company came out on the better side of that equation, as its ‘other income’ jumped almost five times, more than compensating for the hike in its own finance costs. As a result, the firm witnessed its net profits nearly triple to Rs5.5 billion during the quarter under review.

That solid contribution to group financials was marred by massive net loss at Ufone. The main culprit is the long-term loans at Ufone that contracted huge increase in interest payments after unprecedented rise in the policy rate. As the macroeconomic challenges are unlikely to resolve soon, the group’s financial resilience is expected to be tested further.

An earlier version of the article, originally published on April 26, 2023, gave the impression that both Ufone and UBank were in net loss during 1QCY23. The UBank management has conveyed that UBank has been profitable and only Ufone is in net loss. The article has been updated to reflect the position.