Bloomberg News

Pakistan Telecom Sees Return to Profit as Workers Retire Early

October 24, 2012

Pakistan Telecom Sees Return to Profit as Workers Retire Early

A Pakistan Telecommunications Co. (PTCL) technician works with wires in a utility box in Karachi, Pakistan. Photographer: Asim Hafeez/Bloomberg

Pakistan Telecommunications Co. (PTC), the country’s biggest phone-service provider, forecast a return to profit by its fiscal fourth quarter as workers opting for early retirement cut labor costs.

“We will return to profitability after we absorb the cost of retiring employees,” Naveed Saeed, senior executive vice president for the Islamabad-based company’s commercial unit, said in an interview on Oct. 22. “Our revenue growth is strong and we are really trying to contain the costs.”

Pakistan Telecom has struggled to increase revenue from its fixed-line unit as mobile-phone operators including Telenor ASA (TEL) and China Mobile Ltd. (941) grab market share. The telecommunications market was deregulated in 2004, and the number of mobile-phone users jumped more than ninefold in the past seven years in the country of 180 million people.

Profitability for Pakistan Telecom was hurt in the first quarter as it absorbed the cost of a voluntary retirement progam that reduced its workforce by between 5,000 and 6,000 employees, Saeed said at the company’s headquarters. A similar program in 2008 saw 35,000 of 50,000 employees retire early.

Saeed forecast 7 percent sales growth for the current financial year, which ends in June. That’s higher than the 6.4 percent average annual revenue growth for Pakistan Telecom in the past five fiscal years, according to data compiled by Bloomberg. About half of the company’s revenue goes to paying salaries for an estimated 25,000 permanent and contractual employees.

Stock Performance

Pakistan Telecom fell 3.3 percent to 18.57 rupees yesterday. That pared the stock’s gain this year to 79 percent, compared with an advance of about 40 percent for the Karachi Stock Exchange 100 Index.

Pakistan Telecom, controlled by Emirates Telecommunications Corp. (ETISALAT), posted a loss of 8.26 billion rupees ($86.4 million) in the three months through September, its first quarterly loss in more than four years. That compared with a profit of 2.23 billion rupees a year earlier.

Fixed-line users fell to 2.9 million last year from the peak of 5.2 million in Pakistan Telecom’s financial year that ended in June 2005, as more people switched to mobile phones.

The number of mobile-phone users in the country grew to 119.8 million as of May this year from 12.7 million in 2005, according to the Pakistan Telecom Authority.

‘Steady Growth’

“They will be back to profit by the end of this year,” said Ayub Ansari, a Karachi-based analyst at AKD Securities, in a telephone interview. “There has been a steady growth in their core businesses. The cellular segment continues to grow, plus the broadband segment is also very exciting. That’s the next big thing for Pakistan and PTCL in particular.”

Pakistan Telecom derives most of its sales from the broadband unit, which has more than 1 million customers and contributes about 25 percent to profit, Saeed said. Aqeel Shigri, a spokesman, said the unit has a market share of 90 percent.

The company, which also owns the country’s third-largest mobile-phone operator Ufone, plans to bid for 3G bandwidth licenses the government plans to auction this financial year, Saeed said.

To contact the reporters on this story: Augustine Anthony in Islamabad at aanthony9@bloomberg.net; Haris Anwar in Islamabad at hanwar2@bloomberg.net

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net


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