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PTCL Profits up by 18 percent

KARACHI (October 31 2002) : Pakistan Telecommunication Limited profit for the first quarter ended Sept 30, 2002, posted an increase of nearly 18 percent, to Rs 4.977 billion, translating into an earning per share of Re 0.98, compared with the same period a year ago.

Revenue depicted a 5 percent growth, to Rs 16.55 billion, compared to same period a year ago, reflecting positive impact of the aggressive line-expansion drive undertaken by the telecom giant.

“Nevertheless, reported revenue is 9 percent below our estimates,” said Austin Ismat, research analyst at First Capital Securities.

The brokerage house was of the opinion that revenues have experienced a greater negative impact from the recent downward revisions in NWD and outgoing international calls. “But, we stand by our stance that lower revenues from international outgoing traffic, resulting from lower tariffs would not have a critical impact on total revenues of the company. This is because the contribution to total revenue from this head has already been on the decline in previous years due to falling tariff. On the other hand, NWD that were lowered on a test-basis for 3 months, starting Sept 1, 2002, are expected to revert back to their original levels.”

Other income has fallen by 17 percent because the company installed more lines in 1QFY03, higher than expectations. Thus, the utilisation of cash towards expansion lowered cash deposits, translating into decline in other income.

A very positive development for the company has been the 52 percent reduction in financial charges. Financial charges

have fallen on account of the declining stock of debt. The company mostly uses internal cash for expansion, probably reducing the need for short-term financing.

Going forward, PTCL's aggressive focus on line-expansion will keep the growth in domestic revenues strong enough to mitigate the impact of falling international revenues.

PTCL targets 600,000 additional lines during FY03. In view of the impending deregulation, PTCL's huge network would prove its greatest differential advantage once new entrants emerge on the local telecom scene. PTCL's bigger network shall not only allow it greater area coverage throughout the country but would also let it enjoy higher economies of scale compared to its peers. Of course, depending on the speed with which PTCL fulfils new connection demands from customers, the additions to activated lines will also boost income from call traffic as well as line rent and installation charges.

With respect to activation of installed lines, brokerage likes the proposal floated by PTCL's newly-established Marketing Department to offer connections to customers at retail outlets, the same way cellular-operators do. If the top-management does give a positive nod to the said suggestion, PTCL's fixed-line connections will be offered at Ufone's existing outlets.

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