Research Corner - PTCL PROfiT RISES; FORMS DEAL WITH NETFLIX TO PROVIDE ITS CUSTOMERS HIGH QUALITY STREAMING CONTENT.
The Pakistan Telecommunication Company Limited (PTCL) recorded a 42 percent rise in profitability during the nine months of 2016 as against to the corresponding period previous year. PTCL's revenue reached Rs88.8 billion and with effective cost optimization measures, the operating expenses of the company were declined by 3 percent resulting into a net profit of Rs3.9 billion.
PTCL's revenue for the above said period was Rs54.3 billion with growth in DSL broadband revenue. PTCL's operating expenses during the period were declined by 6 percent resulting into the net profit of Rs7.6 billion. For the third quarter of 2016. PTCL Group revenue rose by 2 percent with net profit of Rs876 million as against to a net loss of Rs371 million in the same period of previous year whereas the Company's profitability rose by 9 percent in the third quarter. Based on the half-yearly financial results for 2016, the company earlier declared an interim dividend of Re1.00 per share.
PTCL, after privatization, has announced that the fourth voluntary separation scheme (VSS) for its 9,000 employees. The management believes that this time the VSS is predicted to be availed by approximately 3,000 employees as the scheme offers an even more attractive package than the last schemes. The VSS will be effective from November 28, 2016 with a maximum compensation that a single employee will get as predicted Rs13.5 million.
The previous VSS was greatly appreciated by employees as it provided a very lucrative package. In the last scheme of 2014, the company could not relieve all the employees, who opted for this scheme, since business could not let go of such a sizable employee base at once, and risk stalling operations.
However, with the successes reaped from the previous schemes and enhanced company presentation, PTCL was now in a better position to offer this scheme to approximately 3,000 employees.
According to the latest VSS, regular employees will receive transition pay with a multiplier of four, whereas the New Compensation Pay Group (NCPG) employees will receive it with enhanced multiplier of six times in accordance to the years of service. Minimum length of service for eligibility of pension has been declined from 20 to 18 years and the retiring employees will get the pensionary benefits of additional two years of service.
The allowances of six months for regular employees and 15 months for NCPG employees were also part of this lucrative package.
Experts said that the VSS is a sign of management move to enhance efficiency as the company has approximately Rs32 billion cash on its books counting cash and short term investments. Employee cost makes a considerable contribution to company's cost of services and administrative expenses of around 23 percent and 14 percent, respectively, which totals to around Rs14 billion.
It is also added that initial estimates offer that PTCL could potentially book a one off VSS expense on the books with a pre-tax impact of Rs1.96/share initially. This will lead PTCL in to loss per share for the period FY16 of Rs0.36/share. However, the VSS amount can be staggered into few years resulting in limited yearly impact.
The experts believe that the reduction in operating costs would lead to enhancing earnings through improved efficiencies and lower salary expenses. In the past, last VSS schemes have led to reduction in salary expenses of around 5-10 percent, which would result in cost of saving of around Rs1 billion yearly.
Furthermore, PTCL becomes the first Telecommunication operator in the country to ink a partnership contract with Netflix, the worldwide internet television network for Pakistan market. After this contract, PTCL and Netflix would use their respective resources for mutual benefit, using and maximizing the viewing experience and penetration of Netflix services in Pakistan.
This deal would serve as a way forward for both PTCL and Netflix to offer digital content fans in the country with Netflix streaming. PTCL will support and promote original Netflix content in the country.
The Company became the only service provider in the country with advanced caching servers and technical pairing with Netflix to offer the superior viewing experience since Netflix's global launch in January 2016.
Netflix is the world's leading Internet television network with over 86 million members in over 190 states enjoying >125 million hours of TV shows and movies per day, counting original series, documentaries and feature films. Netflix members can watch as much as they want, anytime, anywhere, on nearly any Internet-connected screen and they can play, pause and resume watching, all without commercials or commitments.
PTCL is the largest information communication technology and entertainment service provider in the country, touching millions of lives by its broadband and digital television services. Always striving to attain customer satisfaction, the company has entered the collaboration with Netflix to provide its customers high quality streaming content.
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|Publication:||Pakistan & Gulf Economist|
|Article Type:||Financial report|
|Date:||Dec 18, 2016|
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