Telenor’s Topline Growth Witnesses a Decline in 2022

Telenor Pakistan has had a difficult start in early 2022 despite attaining positive topline growth in CY21 (after a two-year hiatus) to achieve Rs106 billion in revenues. According to the Telenor Group’s most recent financial statistics, its Pakistan business generated total revenues of Rs26.3 billion in the three months ending March 31, 2022, with year-on-year growth slowing to only 1%. Adjusting for inflation, this would be negative growth in the double digits in real terms.

Telenor’s Topline Growth Witnesses a Decline in 2022

The major revenue indicator for the second-ranked mobile network operator (MNO), average revenue per user (ARPU), was Rs171 per month in the quarter under review, down 2% year on year from Rs174 per month in 1QCY21. Despite greater mobile broadband penetration, the ARPU reduction is not unusual for Telenor Pakistan; as other telecom operators have also been harmed in a price-competitive market. The rise in WHT on airtime recharge in the mini-budget hasn’t been able to make any difference.

The rate of new subscriber acquisition appears to be diminishing as well. Telenor Pakistan added 134,000 subscribers in the quarter under review, which is much less than the 1.27 million connections added in 1QCY21. By the end of March 2022, the operator had a subscriber base of 49.2 million. Due to robust double-digit growth in data sales, the Norwegian-origin MNO’s service revenues climbed by 4% year on year to Rs22.2 billion in 1QCY22.

The impact of growing input costs (particularly fuel and utilities) can be seen in the operator’s EBITDA, which fell 4% year on year to Rs13.2 billion in 1QCY22. As a result, the EBITDA margin fell to 50 percent of topline in the quarter, down from 53 percent in 1QCY21. Operating profit witnessed a larger decline, by 12% year on year, to Rs4.9 billion in 1QCY22, due to a double-digit increase in operating expenses for the operator.

Capital spending has also been reduced. Telenor Pakistan spent Rs4.3 billion on capital expenditures (excluding licensing and spectrum costs), down 18% from the previous year. Improved operating cash flows and higher returns are driving operators to invest more in this declining-ARPU sector. It’s not easy to pull off in the current uncertain financial environment, especially with rising telecom tariffs! Let’s see if the incoming government’s cash-strapped budget forces them to boost taxes on telecom services and devices.

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