KARACHI: The reduction in line rent, installation charges and international and nation-wide call charges would only erode as much as Rs 2.5 billion a year against government’s claim of over Rs 6 billion as these incentives would increase the number of users in the country and would boost the volume of both domestic and international calls.
PTCL,s tariff rebalancing exercise for FY04 finally looks to be completed. And it certainly turned out to be a historic rebalancing.

Even though the reduction in: line rent, installation costs, and increase in pulse duration during off-peak hours need to be’ approved by PTCL board, analysts believe that the numbers being circulated are pretty much final.
Analysts believe that government may have been harbouring some political and social motives and may be trying to win the hearts of the public through these measures.
Also, they believe that the government may want to make PTCL’s market share even more fortified in the face of competition owing to deregulation of the telecom sector. With cellular phone operators gaining market share at an amazing pace, the government may also aim to make PTCL more competitive against these cellular phone operators.

Prior to these tariff incentives, analysts were forecasting FY04-FY06 profitability in the range of Rs 25 billion to Rs 26.5 billion, thus implying some future growth from FY03 Profits of Rs 23 billion.

“However, with this newly announced package, we have had to revise downward our profit estimates for these future years,” an analyst said.

After incorporating these new tariff reductions, profit estimates for FY04-FY06 now stand in the range of Rs 23.3 billion -Rs 24.0 billion. . The stand-alone annualized impact of line rent reduction on annual profits, assuming 4.2 million average installed lines, for the year comes to around Rs 0.50-0.55 in terms of earning per share (EPS). Also, the stand-alone annualized impact of reduction in installation costs, assuming addition of 450,000 telephone lines amounts to Rs 0.04-0.05 in terms of EPS. The impact of the increase in pulse duration is also estimated to amount to around Rs 0.04-0.05 in terms of EPS. Total impact thus is Rs 0.6-0.7 on full year EPS.

With the reduction in line rent and installation costs, we have assumed that there is bound to be some elasticity, and we’ve made a conservative estimate by increasing an additional rise in installed line by around 50,000 lines per year. Also, we’ve assumed that installation of new ALIS would be concentrated 90 percent in the urban areas, while 1 0 percent would be rural .

With these assumptions and calculations, the dividend per share (DPS) for PTCL from FY04-FY06 now ranges between Rs 3.5-3.7. Prior to these reductions, DPS estimates had ranged between Rs 3.75-4.10.

Source: Businessrecorder
Date:11/10/2003