A telecom giant has had a disappointing quarter lately. Group profits at the Pakistan Telecommunications Co. Limited (PSX: PTC) were down by 59 percent year-on-year in the quarter ended June 30, 2018, as per a PSX announcement. This marked another quarter when non-operating events marred the modest gains made PTC had made in stabilizing its revenues and controlling costs and operating expenditures.

Looking at the financials, it is apparent that the massive downfall in ‘other income’ is at work behind the profitability slump. The group has been earning fewer rupees on its liquid holdings, which have been used to finance the ongoing capex as well as make payments on account of the voluntary separation scheme announced in 2016. Meanwhile, continued PKR devaluation led to a surge in the group’s finance costs in the quarter under review, just as the quarter before.

Of the three group companies – the PTCL Company, Ufone, and U Microfinance Bank – it is the PTCL Co. that didn’t return revenue growth in the second quarter when seen on a year-on-year basis. The shortfall has been more than made up by both Ufone and UBank, which underwent decent revenue growth of 5 percent and 71 percent year-on-year, respectively. Calculations based on available data suggest that Ufone is still in net loss, though the scale of losses has gradually come down.

The negative one percent yearly drop in the PTCL Company’s 2QCY18 top-line is a bit odd. Both its retail and wholesale revenues went down in the quarter, by one percent and three percent year-on-year respectively. In the retail business, on a yearly comparison basis, the growing revenue streams – mainly the DSL broadband (up 6%) and Charji wireless (up 77%) – were overpowered by declining revenue streams – chiefly voice (down 6%) and Evo wireless (down 71%). Coupled with the drop in non-core income, the firm’s net profits dropped 26 percent year-on-year to Rs1.88 billion.

Overall, the group is still in a good stride in the first half this calendar year as operating profits have been up 57 percent year-on-year to Rs4.2 billion. The group revenues stood at Rs60.6 billion in 1HCY18, up four percent year-on-year. As PTCL Company revenues have remained flat in this period, growth has arrived from the remaining subsidiaries. But thanks to the 62 percent in ‘other income’ and finance costs doubling in the first half, group profitability was down 45 percent year-on-year to Rs2.1 billion.

Over at the bourse, the PTC stock has failed to excite, dropping over ten percent since January 1, 2018. It is unclear when Ufone will return to zero losses. But revenue growth at the PTCL Company, the heavyweight, needs to pick up substantially and soon, especially in DSL broadband, the promising retail segment. Until then, non-core factors will continue to muddy the group’s financial health.