TELECARD LIMITED

MARIAM NASIR
Manager Research, PAGE
Mar 03 - 09, 2008

INTRODUCTION

Telecard Limited was incorporated in Pakistan on October 29, 1992 as a public limited company. The shares of the Company are listed on the Karachi and Islamabad Stock Exchanges. The Company itself and through its subsidiary is licensed to provide fully integrated telecommunication services, these include basic wireless telephony, long distance and international services and payphones.

Telecard began its journey from a convenience-driven concept of the country's first ever payphone operation. Over the years, through a synergy of a dedicated team, cutting edge technologies and uncompromised values, it has become an important part of every other Pakistani individual. Its products and services are entirely about providing effective communication with better connectivity whether it is voice or data. Today, Telecard is a name that has become synonymous with a complete communication solution provider. The company believes in eradicating hurdles to convenient communication, every step of the way. We envision a fast-paced, growing and a much more integrated society.

PRODUCTS AND SERVICES

GOCDMA: GOCDMA is revolutionary concept where life revolves around a single goal: to bring people closer.

TeleCard LDI: With the vision of becoming a full-spectrum telecom service provider in Pakistan, TeleCard enters into the recently deregulated telecommunication market as a pioneer of Long Distance and International (LDI) Services.

SUPERNET Limited: SUPERNET started its services in 1994. The company is owned by the TeleCard Limited, a full telecom service provider. SUPERNET today is the largest DNO operating in Pakistan in the private sector, providing different services including Internet Access, Point-to-Point and Point-to-Multipoint communication services using radio and satellite access, and Integration solutions.

Prepaid Wireless Payphones: TeleCard embarked upon implementing the Wireless Telephony for public calling in rural, suburban and urban areas in a joint venture with Pakistan Telecommunications Company Limited (PTCL).

Public Access Calling & Street Side Payphones: Designed for use by general public for their basic, emergency, or impulsive calling. Specially sited at high visibility locations to provide round the clock access to a payphone. These street side payphones are excellent revenue and foot traffic generation propositions for retail outlets located near the phones.

FINANCIAL PERFORMANCE

The revenue for FY07 was Rs2.15bn compared to Rs2.56bn for the corresponding period. This reduction was a direct result of the continual and significant reduction in tariffs and competition in the telecommunications industry. Despite these formidable market and competitive circumstances, reduction in call charges, both from cellular and other Wireless Local Loop, company managed to post revenues above the corresponding reduction in call charges.

Further, management has taken a number of strategic and operating initiatives to underpin its corporate strategy, which provides an appropriate level of risk mitigation. These include investing substantially in the Code Division Multiple Access (CDMA) 1X WLL network. Currently, it represents the largest revenue generating investment in the organization.

The Company continues to leverage its large CDMA 1X data network by introducing Value Added Services (VAS) such as push/pull Short Messaging Service and Virtual Mailbox Services. These VAS initiatives have started to contribute positively to overall revenues, and management expects to see robust growth. The "On net" advantage continues to be built the company, and it currently forms the biggest Unique Selling Proposition of this brand in the market, adding new subscribers in the consumer segment. Building upon its operator's operator model, the company is the largest player in this market with over one hundred business partners operating on its Virtual Network Operator platform.

The Long-Distance and International business has come a long way since its inception under the Telecom Deregulation Policy. Concurrent to the growth in business maturity, this extremely dynamic market segment has experienced a number of substantive challenges. The company's LDI has gone from strength to strength during this period of growth.

RS. MN

FY06

FY07

CHANGE

Revenue

2,560

2,148

-16%

Cost of Sales

1,939

2,141

10%

Gross Profit

621

7

-99%

Operating Cost

510

566

11%

Operating Profit

111

(559)

-603%

Finance Cost

419

412

-2%

Other Income

215

439

104%

Profit/Loss Before Taxation

(93)

(532)

471%

Taxation

39

140

260%

Profit/Loss After Taxation

(54)

(392)

621%

Loss Per Share (Rs.)

(0.18)

(1.31)

621%

Gross Margins (%)

24.27%

0.31%

-

Operating Margins (%)

4.34%

-26.04%

-

Net Margins (%)

-2.12%

-18.25%

-

Cost of the company rose by 10% to Rs.2.14bn as against Rs.1.9bn in the same period last year. This resulted in a decline of 99% in the gross profit of the company to merely Rs.7mn (Gross margins: 0.31%). Operating cost of the company rose by 11% to Rs.566m which vanished the operating profits of the company and turned into losses worth Rs.559mn. Other income on the other hand increased by 104% but couldn't add significantly to the bottom line as the loss before tax increased from Rs.93mn to Rs.532mn in FY07. On the whole company losses for the fiscal year increased from Rs.54mn (LPS: Rs.0.18) to Rs.392mn (LPS: Rs1.31) in FY07.

CORPORATE STRATEGY & FUTURE OUTLOOK

The company itself and through its subsidiary, Supernet, has established itself as an alternate service provider. It is delivering fully integrated telecommunication services which include basis wireless telephony, long-distance and international, data services and payphones. The company's strategy to adopt CDMA as its choice of technology has contributed to its unique positioning in this market segment by providing genuinely differentiated services. This continues to be built on its already established WLL network. The CDMA technology has been fully vindicated, as CDMA has become the standard platform for all WLL operators in Pakistan. It also enjoys strong international acceptance. The company continues to invest in augmenting its range of services based on its CDMA platform, and leveraging strengths by offering bundled services to its customers.