Morning Call about – 3G/4G Spectrum an ARPUs booster for Ufone (PTCL) – Arif Habib Limited : AsiaNet-Pakistan

Morning Call about – 3G/4G Spectrum an ARPUs booster for Ufone (PTCL) – Arif Habib Limited

November 26, 2013 | Brokerage | Share:

Karachi, November 26, 2013 (PPI-OT): The Telecom sector been in the limelight (giving a 15% return MTD) following positive developments on both 3G auction and grey traffic front which have primarily driving factors.

According to Arif Habib Limited re-iterates Morning Call dated – 10 th Oct’13 on the possible impacts on the ARPUs of Ufone (PTC’s 100% owned subsidiary). 3G Auction gains momentum as Consultant finally hired

As per latest developments, PTA has selected Value Partner Management Consulting Limited (VPMCL) of Italy as a consultant for the auction of next generation 3G/4G auction license. A financial bid (demand) of USD 1.5mn from the consultant has been accepted by PTA. The appoint of the consultant signals towards a major step in completing the auction process which according to estimates should happen sometime next year in Feb’14.

This can be a major revenue booster for PTC as every 5% increase in ARPU’s translates into an annualized bottom line impact of PKR 0.10/share. However Arif Habib Limited has not incorporated this scenario in Arif Habib Limited valuations yet as Arif Habib Limited waits for the success of PTC in the auction.

Uplifting of ARPUs for Ufone with 3G/4G Spectrum
Given that Ufone (100% owned subsidiary of PTC) is successful in its bid to acquire the spectrum, Arif Habib Limited could foresee a major upswing in company’s Average Revenue per Users (ARPUs), which for the past have been declining by of ~3%YoY to ~5%YoY in CY12 and CY13E respectively.

ARPUs could show decent 5%-15% growth in initial phases
In general Arif Habib Limited suspects 3G spectrums will likely increase mobile internet usage and further penetrate amongst the vast majority of prepaid (~95% of the total Ufone user base). At the same time encouraging and developing upcoming fields such as M (Mobile) – Commerce, which could further add to the benefit of increasing ARPUs. In the following table Arif Habib Limited has summarized a sensitivity of increase in ARPUs and their impact on the PTC’s bottom line.

Annualized Impact 
Increase in ARPU                     5%     10%     15% 
ARPUs (PKR)                       2,282   2,390   2,499 
Increase in Top Line (PKR mn)     2,614   5,228   7,842 
Bottom line Impact - PKR          0.10    0.19    0.29 
Source: AHL Research 

Arif Habib Limited currently have a ‘Buy’ stance on PTC, Arif Habib Limited prices target for PTC stands at PKR 34.6/share for Jun’14 (offering 15% upside from current levels) while the scrip trades at PBv and PE of 1.22x and 8.62x on CY14 estimates.


Category: Brokerage