A subscription offer after more than a year
By SHABBIR H. KAZMI
Apr 03 - 09, 2000
WorldCALL Payphohes Limited (WorldCALL) was incorporated on
December 14, 1995 and received Certificate of commencement of business on April 21, 1996.
The main activity of the Company is installation, operation and maintenance of a
countywide smart card payphones network.
It is important to note that this public offer has come after a long
period. In 1999 no new company made a public offer, only one company was listed in 1998
and the shares were floated by only four companies in 1997.
The Company has obtained licence to establish, operate and maintain
card payphone service across the country, with local, NWD and 1SD calling facility from
the Pakistan Telecommunication Authority (PTA). The licence has been issued for an initial
period of 15 years, and may be extended, if the Company performs well, for a further
period of 15 years. However, if PTA decides not to extend the licence beyond the initial
term of 15 years then it will serve a notice to that effect to the Company at least one
year prior to the expiry of the initial period.
First Capital Securities Corporation Limited (FCSC) is the main sponsor
of the Company. FCSC is a leading investment and financial services company and is listed
on all the three stock exchanges in Pakistan. FCSC's shareholders include Gulf Commercial
Bank Limited, Al-Faysal Investment Bank, and a number of other domestic financial
institutions. FCSC provides corporate finance, money market and brokerage services to
domestic and international clients.
The recent public offer of WorldCALL for 97500,000 ordinary shares of
the face value of Rs 10 each was at Rs l5 per share, including the premium of Rs. 5 per
share, of the total value of Rs. 142,500,000 was fully underwritten.
The Company's head office is located in Lahore and its fifteen (15)
regional offices are located in Lahore, Karachi, Rawalpindi, Islamabad, Gujranwala,
Faisalabad, Multan, Peshawar, Sahiwal, Hyderabad, Quetta, Sukkur, D. I Khan, Jhelum and
The Company primarily resells PTCL's services through its supervised
and stand-alone payphones network. The customers purchase the card first and use it later.
The Company is billed by PTCL equal to the actual card usage by the customers. The prepaid
nature of the business results in quick cash flow generation and substantial reduction in
collection risk. Additionally, the payphones start revenues soon as they are operational
which means an investment payback period of less than two years approximately. It is due
to these favourable business economics that the Company has managed to establish itself as
a leading payphone network in a very short time.
As on December 31, 1997 the Company had 401 payphones in stock out of
the total 5,699 payphones purchased as of that day. The remaining 5298 payphones have been
installed in over 110 cities and towns. The purchased phones comprised 59l stand-alone and
5,108 supervised payphones. The installed payphones comprised 515 stand-alone and 4,783
supervised ones. The Company purchased payphones from various suppliers.
Expansionary plans to continue
WorldCALL intends to expand the coverage of its payphone network to
include town and cities that do not contain adequate number of payphones to meet the local
demand. For this purpose it is planning to purchase and install 8,000 payphones during the
next 12 months. Out of these 8,000 new payphones, as per the PTA directives, 30 per cent
will be stand-alone while the balance to be supervised payphones. For this purpose the
Company has estimated a total expansion cost which will be primarily financed through the
funds being raised from the Pre-IPO and public offer in addition to the cash generated
from business operations.
In Pakistan, at present, there are ten payphone companies operating
stand-alone and supervised payphone networks. These include WorldCALL, Telecard, TelTips
and Telecom Foundation. Whereas major supervised payphones operators include WorldCALL,
Call Point, Global Telecom, VTT, Supertel, Sachal and Ace Quality.
Valuation and outlook
The limited number of operators in each market should provide
considerable protection to the industry as it learns new skills. False starts are
inevitable. We remain enthusiastic about the growth of tele industry. It is necessary to
introduce investors to investment thesis and valuation measures. It is important to
understand key drivers of telecom stocks. Investors should be on the lookout for these
issues in order to stay ahead of the curve once the pay card phone industry finally
develops in Pakistan. The wireless telecom industry still appears very much fragmented. In
the absence of industry information valuation measures are vulnerable to rapid industrial
growth. In order to provide an insight as to the future prospects of such concerns it is
necessary to highlight certain key areas, which need to be addressed by the players. There
are six key criteria in making investment decision on telecom stocks: 1) early mover, 2)
marketing 3) focus 4) scale, 5) scalability, and 6) management.