Karachi, May 26, 2023 (PPI-OT): PTC: Higher costs dilute revenue growth
Pakistan Telecommunication Company Limited (PTC) held its Analyst Briefing yesterday to discuss its financial performance and outlook. To recall, company posted a loss of Rs7.8bn (LPS: Rs2.1) on a consolidated basis for CY22. Bottomline for 1QCY23 also deteriorated 2.67x YoY to a Loss after tax of Rs5.7bn, primarily due to the significant spell of rupee devaluation as the Group had unhedged FX liabilities.
Company's consolidated bottom-line has been affected by several macro factors during the recent quarters including energy price hikes, additional tax imposed by the government, significant rupee devaluation and increase in borrowing costs. Impact of rupee devaluation at the group level was over Rs5bn during CY22.
Growing FTTH network, increasing 4G customer penetration throughout Pakistan by Ufone, and Ubank maintaining its pace of growth by extending its financing book are some positive triggers for revenue growth. On the other hand, expectations of further increase in fuel and power tariffs, elevated general inflation and continued rupee devaluation will keep profitability under pressure during CY23.
Bottomline remains under pressure due to Macro factors
Pakistan Telecommunication Company Limited (PTC), the largest and oldest national fixed line telephone company, has evolved over the years to become the country’s only integrated telecom provider with a network infrastructure that covers the entire value chain. PTC is the second largest FTTH operator by revenue and also owns one of the top mobile networking companies. Company also has presence in the financial sector through Ubank providing consumers with branchless banking and digital commerce services.
Despite sturdy performance in the fixed broadband, mobile data, business solutions, and financial services leading to sustainable revenue growth, the company posted a loss after tax of Rs7.8bn (LPS: Rs2.1) on a consolidated basis for CY22. Moreover, at the group level, the impact of the currency depreciation was over Rs5bn for CY22. Bottomline for 1QCY23 also deteriorated 2.67x YoY to a Loss after tax of Rs5.7bn.
The management, in its Corporate Briefing session held yesterday, shared that the increases in fuel and electricity prices, employee staff costs and general inflation continued to put pressure on bottom-line.
Expanding FTTH network
Management shared that with a 73% market share, its flagship company, PTCL, continues to dominate the Fixed Broadband industry. Its Fiber To The Home (FTTH) service subscriber base doubled on a YoY basis during CY22 from 99k to 208k. The segment’s market share grew by 10ppt during CY22. However, the company’s Voice and Wireless segments showed a decline in revenue during
CY22. With a fiber footprint of 60k kms and broadband base of 1.6mn customers, PTC is the second largest FTTH operator by revenue as of now and aims to become the largest by CY23 end.
Ufone continues to reap benefits of the recent investments
Ufone's revenue during 1QFY23 increased by 20% year over year as it continues on its growth track. Ufone recently hit the historic milestone of 24mn subscribers, increasing its market share by 0.4ppts. 1QFY23 also saw network upgrade initiatives to improve user experience for Ufone customers. Ufone recorded the second largest customer net additions in the business during the first quarter thanks to the enhanced user experience, rise in engagement acquisition numbers, and faster internet speeds. Management expects positive contribution to continue from the recent investments made to expand Ufone’s footprint.
Ubank maintains its growth trajectory
The group’s microfinance and branchless banking subsidiary, U Bank, continued its growth trajectory despite the extremely challenging macroeconomic environment. Ubank added 100 branches during CY22, taking the total number to 301 while the total number of ATMs also increased from 195 to 232 in CY22. Ubank has also received a commercial license for extending nationwide Islamic Banking services. Revenue during CY22 grew 35% YoY supported mainly by increase in deposit base (+Rs37bn) and loan portfolio (+Rs14bn). Revenue for the first quarter of this year also showed a significant growth of 73% YoY whereas net profits climbed 65% YoY while maintaining a solid balance sheet position. Currently, 56% of the Gross loan portfolio of the bank is secured by gold.
Group continues to prioritize expansion amid challenges
Growing FTTH network, increasing 4G customer penetration throughout Pakistan by Ufone, and Ubank maintaining its pace of growth by extending its financing book are some positive triggers for revenue growth. On the other hand, expectations of further increase in fuel and power tariffs, elevated general inflation and continued rupee devaluation will keep profitability under pressure during CY23.