In Focus: Pakistan Telecom (PTCL) (24112008)

PTCL recently announced its 1Q09 result, where the company has posted PAT of PKR3.178bn (EPS: PKR0.62) as compared to PAT of PKR3.02bn (EPS: PKR0.59) during 1Q08 showing a rise of 5.51 percent YoY. Further, top line of the company has risen by 5.26 percent YoY, which was primarily due to (a) upwards revision in tariffs of fixed line, (b) higher interconnectivity charges (USD0.10/min), (c) rise in broadband customers to over 56K, (d) increased value added and carrier services.
Fixed Line numbers down, but still contribute well!
Fixed Lines declined in numbers by 6 percent during FY08, while revision in pulse duration is to bode well for the company. The fixed line customers have opted to switch to cheaper and more convenient means of communication (cellular and wireless telephony). Also, the revision of pulse duration (to PKR2.50 per minute for landline to mobile calls)would make calls even more expensive. The Wireless segment (Vfone) has also remained more or less stagnant with 1.18mn lines capturing market share of 50.68 percent, however the company’s cellular arm Ufone has captured 2nd place amongst operators with bettered market share (20.96%).
Value Added Services to steady up...
Broadband services last year have not shown any prominent signs of improvements as its users grew to 56k versus 30k during the first year. A recent addition, SmartTV will give its customers an experience of triple play (interactive TV, fixed line, broadband internet) through one connection, however will cater only high end consumers who could afford such an expensive service.
Carrier/Interconnect Services to stay crucial
Recent increase in Int’l interconnect charges to USD0.10/min is foreseen as positive for PTCL’s topline growth owed to it’s large backbone network, which serves all cellular operators in addition to the other telecom service providers. Through its carrier services, PTCL caters various cellular operators in the rural areas to use its satellite communication services enabling the flow of GSM traffic from cellular sites located in rural and remote areas to PTCL hub stations.
What's ahead?
Striding ahead the company has initiated various network rollout plans to improve network coverage and quality of service. Furthermore, the introduction of (1) SmartTV and (2) Broadband in four new cities extending from the mega cities making the number to over 100 cities and eyeing for 144 cities, (3) Carrier Services (DPLC/IPLC, Interconnect Services, Metro Fiber & SkyLink) are envisioned beneficial for the company in the long term.
PTCL due to its vast backbone and network presence, remains the key telecom performer, despite the stiff competition it has seen during the post de-regulation era owed to the competition it had to face. Traditional fixed-line telephony in Pakistan is stagnant in terms of customer numbers as mobile substitution has taken over, but there is some movement in the WLL market, which witnessed 11% growth during the first quarter of the year. We expect the fixed line to further drop by about 3 percent in the FY09 at around 4.2mn subscribers. Despite declines in such numbers, PTCL with wide array of services and using its Carriers’ carrier position to its advantage, has managed to stage stability.