PTCL Profits Nosedive by 74% in 2014 after VSS

Pakistan’s largest telecom company, PTCL, reported massive decline of its profits for 2014. Compared to 2013, profits plunged by 74.8 percent due to huge expenses under the head of Volunteer Separation Scheme (VSS).

The telecom group made a profit of Rs 3.966 billion in 2014 as against profit of Rs 15.752 billion that it made in 2013, the financial announcement of the company reflecting group income numbers stated. The group Earning Per Share (EPS) declined to 78 paisas against previously good position in which it stood at 3.09 EPS due to the blessings of controversial International Clearing House (ICH).

The Volunteer Separation Scheme cost PTCL over PKR 8.174 billion

Whereas the company without its subsidiaries also showed a drop of 58.9 percent in profits which stood at Rs 5.207 billion in 2014 versus Rs 12.696 billion reported in 2013.

The decline in the profitability was seen due to VSS scheme that cost Rs 8.174 billion to the entire group. This expense also eroded group’s earning revenues which also showed decline of 1 percent after many years in the history of the company.

The company revenues in the outgoing year stood at Rs 129 billion as compared with Rs 131 billion in 2013, the balance sheet reported. It is because of the fact that the cost of services increased to Rs 88.72 billion in 2014 higher 5.5 percent than of 2013.

The company without its subsidiaries showed a drop of 58.9 percent in profits

But the huge drop of 74 percent in operating profit is worrisome for the company which decreased to Rs 6.201 billion in 2014 from Rs23.793 billion in 2013. The loss in operating cost is likely to be a huge investment of the company on the launch of 3G for its subsidiary Ufone.

The detail expenses and investment of the company however will be revealed later on as the company discloses its information later on.

Khurram Shehzad, Director Investment Strategy of Arif Habib Group said:

“Decline in PTCL’s profitability was due to VSS expenses, which aren’t a regular process in the company.

The company will recover its profits in the coming years as it is now more efficient after retrenchment of redundant staff member which showed up in the operating cost previously.

The company will hire fewer more efficient people to promote and expand its advance technology business which will be more productive to the company compared to old employees”.

On the other hand, the expense under the head of development and cost services may increase in years to come due to the expansion of 3G network for its subsidiary Ufone, he added.