Despite losing over a million subscribers, Telenor Pakistan, third-ranked mobile broadband provider, saw some growth in the topline, but it wasn’t enough to maintain profitability.
Pakistan’s Telenor company lost close to Rs. 22 billion in operating revenue in CY22 after making a respectable operating profit of Rs. 23 billion the year before according to the most recent financial report from Telenor Pakistan’s parent company.
The main reason for this was the sizable impairment loss that Telenor Group recorded for its Pakistan entity back in 2QCY22. Despite losing over a million subscribers, Telenor Pakistan, the third-ranked mobile broadband provider, saw some growth in the topline, but it wasn’t enough to maintain profitability.
Despite the fact that total revenues increased by 4% annually to Rs109.9 billion in CY22, this growth was negative in real terms because it was well below the economy’s double-digit inflation rate. In CY22, the average revenue per user (ARPU), which is less than $1 per month, increased marginally by 2% year over year to Rs179.
Due to the PKR meltdown during the analysis period, Telenor Pakistan’s topline was negative 7% for its parent company, Telenor Group, in its own currency (the Norwegian Krone, from which PKR-based results are obtained after exchange conversion).
FDI inflows into the country, including for telecoms, are being discouraged by high inflation, slow economic growth, and general instability.
With regard to Telenor Pakistan, its capital expenditures (excluding licences and spectrum) decreased by 9 percent in CY22 to Rs12.4 billion. EBITDA growth was marginally better at 9% year-over-year, reaching Rs 61.3 billion in CY 22 despite topline weakness (still negative 3 percent in NOK terms due to PKR depreciation in the period). EBITDA margin consequently increased from 53.1 percent in CY21 to 55.7 percent in CY22 (measured in terms of topline).
Contrasting sharply with the large operating loss, which in addition to the impairment loss was also impacted by high electricity and fuel prices as well as flood-related damages, Operating difficulties are anticipated to worsen going forward as more increases in fuel prices, power tariffs, and interest rates are anticipated following the restart of the IMF program.
After noting that the “recoverable amount” of Telenor Pakistan’s assets was NOK 5.8 billion as of June 30, 2022, Telenor Group stated in its report that “Telenor Pakistan is still sensitive to impairment.” Under the average exchange rate for CY22, that valuation comes to about Rs123 billion (roughly $450 million).