Result Review: PTCL 1Q09 (06112008)

PTCL has 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.
Top line grows better services mix
Further, top line of the company has risen to PKR16.1bn against PKR14.3bn marked in corresponding period last year depicting minor increase of 5.26 percent YoY. This is primarily due to (a) increase in 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. Despite contraction in fixed line subscribers to 4.4mn from 4.6mn a total increase of 5.8 percent resulting from rise in tariffs, fixed line contributions have remained stable. While its wholly owned cellular subsidiary, Ufone posted a net profit of PKR155mn for the quarter.
Operating Costs remain stable while finance costs rise high!
However, operating costs of the company shrank to PKR12.05bn causing a decline of 0.6 percent despite while company’s gross margins expanded by comparatively higher rate of 24.91 percent. In addition, during the year finance cost of the company increased to PKR403.36mn against PKR139.32mn during same period last year, a rise of over 189 percent YoY, which was mainly due to foreign exchange loss incurred by the company owed to the depreciation of Pak Rupee.
Outlook
Moving ahead the company has undertaken various network rollout plans to improve network coverage and provide better quality services. Furthermore, the introduction of (1) SmartTV and (2) Broadband in four new cities extending form 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) will bode further growth for the company in the long term .
Also, the rise in interconnect charges to USD0.10/min, could prove fruitful for the company on international call termination due to its broad network backbone being a carriers’ carrier. Moreover, PTC is anticipated to witness tremendous growth backed by a favorable decrease in pulse duration from 5 min. to 2 min. (peak) and from 1 hr. to 4 min. (off-peak) for its fixed lines, thus resulting in considerable rise in its topline earnings.