The topline decline – which was 18 percent in rupee terms and 29 percent in Norwegian Krone (NOK) terms – was the most pronounced in the flagship segment of ‘subscription and traffic’ revenues. What hurt the topline the most was the discontinuation of the 10 percent “service fee” this summer. Adding to the ado, the re-imposition of the WHT/advance income tax of 12.5 percent also left less for customers to spend on airtime and bundles.

The core costs didn’t go down in line with the topline, resulting in a steep reduction in gross profits. Calculations from the Telenor Group report show that Telenor Pakistan’s gross profits declined 38 percent year-on-year to Rs20 billion in 3QCY19 (3QCY18: Rs32 bn). The ‘cost of service’ is affected by higher network costs, rising utility and fuel prices as well as the impact of rupee devaluation on the imported materials and machinery.

Making matters worse, the operator witnessed a 6 percent growth in rupee terms in its operating expenditure bill. That growth went on to chisel some more meat off of the already-lean Ebitda figure, which stood at Rs10 billion in the quarter, down 55 percent over 3QCY18. Consequently, the Ebitda margin slid to 43 percent of sales, after recording a healthy 78 percent in the same period last year.

The worrying sign for the local affiliate is the steep fall in average revenue per user (ARPU). From Rs204 last year, the monthly ARPU had slumped to about Rs170 in 3QCY19. That double-digit decline is all the more disappointing given that the operator had added over half a million subscriptions in the quarter under review, as opposed to losing 0.3 million subs in the same period last year. It is hard to go for a price hike in a price-sensitive market.

The story is less dreary for the nine-month period, but the trend is still marked by a significant decline in the key financial indicators. The HQ has pumped significantly more capital expenditures into the country this fiscal thus far, but perhaps a topline turnaround will happen down the road. With the topline under a cloud, the operator needs to lean on some cost-cutting measures to cope with the scale of its topline decline.