Ufone a Wholly-Owned Subsidiary of PTCL Faces a Loss of Almost 5 billion in 9 Months

Ufone, Pakistan’s fourth-placed 3G operator appears to be getting worse. Ufone, a wholly-owned branch of the PTCL Group (KSE: PTC), noted a net loss of almost Rs 5 billion in nine months, that hauled down the profitability of the telecom company by nearly two-thirds.

PTCL Company which has been PTCL Group’s key bread-winner also exhibited flaws over the nine month period. The company’s top line went down by 7% year-on-year to Rs 58.1 billion. In spite of having a tight cover on operating expenses, the company’s bottom line fell by 9% year-on-years to Rs 7.9 billion.

Ufone a Wholly-Owned Subsidiary of PTCL Faces a Loss of Almost 5 billion in 9 Months

However Ufone’s feeble performance reverberated much more with the group financials. Further blow came from the firm’s finance costs that hurdled by about a third during the period. It was Ufone whose losses in the period more than five times the same period last year caused a great drain in group’s productivity, despite the managers keeping a check on core costs and operating expenses.

Ufone is in that stage where it is developing its foot-mark in the 3G mobile broadband market. The mobile operator took a huge loan to fund its 3G development plan. It is a competitive market, even though the majority of 2G market remains off 3G. Ufone, for its part, has been constantly adding 3G subscribers, and as of September 2015, it had a 20% share in the 18-million strong market.

Whereas Ufone may stay a cost center for a time being, the PTCL Group is not being facilitated by the flagship PTCL Company’s lack of top line progress. Even in the most latest quarter, the broadband-cum-fixed line operator saw its income slip by 5%.

The company’s primary wireless broadband product Evo, had its subscriptions decreased to 1.27 million by the end of August 2015, a sharp 32% drop almost a year ago. The company’s wireless local loop users were down 78% year-on-year as of June 2015. Fixed line users also went down slightly, remaining just above the three-million mark. The company could only mark 1 lac new subscriptions to its DSL broadband system.

Ufone’s struggle at this point is logical. PTCL Company should work hard to resolve the issue. If not resolved the group profitability will be pulled in only one direction, which is downwards.

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