ICH and How LDI Operators Are Being Benefited

Telecom companies listed on Karachi Stock Exchange are getting their best time of the year, thanks to defunct International Clearing House a.k.a ICH.

Before we even begin, let’s have a look at stock trends for various telecom operators (all indicators are as of 1 PM – Feb 7th, 2013):

PTCL

Wateen Telecom

 

TeleCard

 

WorldCall

Stock transactions in past one month clearly show that telecom operators remained in limelight at stock exchanges and improved par value of the shares along with trading volumes.

Telecom companies, at times, contributed as high as 25 per-cent to the total trading – or over 100 million of shares per day – at Karachi Stock Exchange.

Interestingly, this market trend is valid for all operators hinting that there is something common amongst them. One common factor is the announcements for 2012 performance that is planned for next week but the second and most important similarity is the ICH benefit that has struck all operators in equal manner.

This surge in stock value shows that ICH has benefited only and only the LDI operators and all those who were arguing that ICH could halt grey traffic or will bring foreign exchange are proved wrong.

Technically or legally, LDI operators can’t be blamed for implementation of ICH, just because it were not them who had approved it. It was actually MoIT that had issued the policy directive for the implementation of ICH – that was soon termed illegal by Competition Commission of Pakistan. Pakistan Telecommunication Authority, later on, ensured the implementation through a directive sent out to all LDI operators.

But assuming that ICH was not destined to benefit Pakistan, Pakistanis or any other entity of Pakistan, it is believed that LDI operators might have influenced MoIT in issuing the ICH policy directive, and motive for such an influence is visible in above given graphs.

Just for the records, ICH case is still pending judgment at Lahore High Court – and is suspended since October 30th, 2012.

Having said this, even after getting suspended the ICH has proven itself as to be a binding force between the LDI operators. Same operators – that were charging as low as 1.5 cents per minute for International Incoming Traffic — are now charging 6.25 cents per minute, apparently because they know that lowering the rate won’t help them much.

In other words, even when ICH is suspended, all operators are charging pre-ICH rates; hence the margins are high and companies are still earning good revenue from international incoming traffic.

This is only why that Pakistanis living abroad are still paying high rates even after the suspension of ICH, because operators have apparently fixed the rate and aren’t lowering them for the sake of competition.

For your review, following are the with-ICH and without-ICH rates:

	Without ICH	With ICH
AAR	12.5 cents / minute	17.6 cents / minute
ASR	6.25 cents / minute	8.8 cents / minute
LDI’s Share	5.0 cents / minute	5.9 cents / minute
APC	1.25 cents / minute	2.9 cents / minute

 

Experts say that revenues from international incoming traffic will remain high, unless it is proved that LDI operators have intentionally fixed the rates. CCP will come into play in any such case and may impose fines if telecom operators are found guilty for any such cartel.

Till then stocks will only surge, but risk is likely to remain high.

Not to forget, LDI operators are still liable to pay Rs. 25 billion for the APC, which they are holding thanks to court stay orders.

It is likely that someone (probably a court) may probe into MoIT’s decision of approving ICH when it was a clear voilation of competition rules. Chances for such an investigation during current government are low (for obvious reasons), but nation would love to know the motive behind the decision that pleased only a few companies.

Stock Quotes Via: Reuters