PTCL Pakistan Telecommunication : Q3 - Report 2018

CONTENTS

02

Board of Directors

03Corporate Information

04-05

Directors' Review

06

Condensed Interim Financial Statements

• 10-11Condensed Interim Statement of Financial Position

• 12Condensed Interim Statement of Profit or Loss

• 13Condensed Interim Statement of Comprehensive Income

• 14Condensed Interim Statement of Cash Flows

• 15Condensed Interim Statement of Changes in Equity

• 16-26Notes to and Forming Part of the Condensed Interim Financial Statements

  Condensed Consolidated Interim Financial Statements

• 30-31Condensed Consolidated Interim Statement of Financial Position

• 32Condensed Consolidated Interim Statement of Profit or Loss

• 33Condensed Consolidated Interim Statement of Comprehensive Income

• 34Condensed Consolidated Interim Statement of Cash Flows

• 35Condensed Consolidated Interim Statement of Changes in Equity

• 36-47Notes to and Forming Part of the Condensed Consolidated Interim Financial Statements

BOARD OFDIRECTORS

Chairman PTCL Board

Maroof Afzal

Members PTCL Board

Abdulrahim A. Al Nooryani

Arif Ahmed Khan

Hatem Dowidar Serkan Okandan Rizwan Malik Khalifa Al Shamsi Hesham Al Qassim Mudassar Hussain

CORPORATEINFORMATION

Management

Dr. Daniel Ritz

President & Chief Executive Officer

Mohammad Nadeem Khan

Chief Financial Officer

Syed Mazhar Hussain

Chief Human Resource Officer

Saad Muzaffar Waraich

Chief Technology and Information Officer

Sikandar Naqi

Chief Business Development Officer

Adil Rashid

Chief Business Services Officer

Jahanzeb Taj

Chief Business Operations Officer

Muhammad Shehzad YousufChief Internal Auditor

Moqeem ul Haque

Chief Strategy Officer & Chief Commercial Officer

Company Secretary

Saima Akbar Khattak

Legal Advisor

Zahida Awan

Executive Vice President (Legal)

Bankers

Registered Office

Conventional

Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Al Habib Limited The Bank of Punjab Citibank N.A. - Pakistan Faysal Bank Limited

PTCL Headquarters,Sector G-8/4, Islamabad-44000, Pakistan. Fax: [phone] E-mail:[e-mail]:www.ptcl.com.pk

Auditors

Habib Metropolitan Bank Limited Habib Bank Limited

KPMG Taseer Hadi & Co.,

Chartered Accountants

Industrial & Commercial Bank of China Limited JS Bank Limited

Share Registrar

Khushhali Bank Limited MCB Bank LimitedNational Bank of PakistanSoneri Bank Limited

FAMCO Associates (Pvt.) Limited8-F, Next to Hotel Faran, Nursery,

Block-6, P.E.C.H.S., Shahra-e-Faisal, Karachi. Tel: [phone]

Standard Chartered Bank (Pakistan) LimitedTelenor Microfinance Bank Limited

Fax: [phone] E-mail:[e-mail]

The Bank of Khyber

U Microfinance Bank LimitedUnited Bank LimitedIslamic

Meezan Bank

DIRECTORS'REVIEW

The Directors of Pakistan Telecommunication Company Limited (PTCL) are pleased to present to the shareholders the un-audited financial information of the Company for the nine months period ended 30th September 2018.

During the period under review, PTCL's revenue was Rs. 52.6 billion - almost at par with the revenue of same period last year (SPLY). PTCL's leading fixed Broadband DSL service posted revenue growth of 7% over SPLY. Investments made in Charji/LTE during previous years also yielded positive results with year-on-year (YoY) revenue growth in double digits. Similarly, revenue from Corporate services also grew considerably by 14% over SPLY. However, due to increase in illegal / grey traffic termination as well as continued conversion of subscribers to OTT and cellular services resulting in reduced voice traffic volumes, revenue from Voice services, both domestic and international, declined during the period.

PTCL's operating profit of Rs. 5.2 billion and net profit after tax of Rs. 4.8 billion during the period decreased by 17% and 26% respectively over SPLY. Main reasons for the said reduction were higher marketing and customer acquisition costs incurred at the beginning of the current financial year, increased expenses of international connectivity and network maintenance owing to currency devaluation and lower non-operating income mainly due to reduced availability of funds. Excluding the one-off items, PTCL's net profitability, however, decreased by 13% in a like-to-like manner. Based upon cost optimization measures undertaken, the overall operating expenses during the period, however, increased by 2% only over SPLY.

PTCL Group's revenue of Rs. 93.2 billion during the period grew by 6% over SPLY. Besides the stability in PTCL's revenue as aforesaid, Ufone's revenue increased by 10% YoY despite tough competition in cellular market. Similarly, revenue of Ubank grew by 65% over SPLY as well.

PTCL Group's operating profit of Rs. 6.8 billion for the period increased by 65% over SPLY mainly on account of growth in Group's revenue. However, the Group's net profit after tax at Rs. 3.9 billion declined by 26% over SPLY mainly due to enhanced financial costs on account of devaluation of Pakistani currency as well as reduced non-operating income during the period. Excluding the one-off items including the said devaluation, the operating and net profitability of the Group increased by 34% and 27% respectively in a like-to-like manner.

The financial strength of your Company was acknowledged during the period through an independent rating exercise as a result of which JCR-VIS assigned PTCL a long-term rating of AAA.

For the financial year 2018, the Directors declared an interim cash dividend of 10% (Re. 1.00 per share).

Your attention is drawn to note 13 and note 10 of PTCL's and PTCL's consolidated interim financial statements for the period respectively, which, inter-alia, describe that the matter relating to certain employees' rights under the PTCL pension scheme is pending before the Supreme Court of Pakistan.

During the period, PTCL continued with its comprehensive Network Transformation project and accordingly several additional exchanges were fully transformed in various regions. In this regard, 670 new MSAGs were commissioned, adding over 197K additional VDSL2 broadband ports. Moreover, 33K new GPON lines were also added in the network to provide high speed FTTH (Fiber to the Home) broadband services. Commensurate with the said transformation of Access and Switching network elements, the IP and Transport network layers were also revamped to ensure smooth service provisioning to our esteemed customer base. The ongoing transformation program delivers positive results in terms of reducedcustomer complaints, higher customer numbers, better ARPU and increased revenue in upgraded exchanges. Besides, various commercial promotions with attractive terms were continued to encourage new subscriptions of DSL broadband services as well as conversion of existing customers to higher speed and volume packages. Resultantly, customer base availing 5Mbps and above DSL broadband packages grew over four times during the period.

In view of the increasing demand of Charji LTE services, the wireless broadband access network is being continuously transformed in different regions / cities to provide Charji LTE services with higher speeds and volumes thus considerably improving customer experience. In this regard, additional 10 new Charji LTE BTS sites were deployed in various regions through reuse of swapped equipment. At the same time, through various promotions having attractive commercial terms e.g. free device swapping, double volume and re-connect offers etc., existing EVO 3.1 Mbps and 9.3Mbps subscribers were persuaded to shift to the Charji LTE services which can provide speeds up to 75Mbps. Consequently, the Charji customer base increased by 66% during the period.

PTCL also partnered with Netflix, the world's leading streaming content provider, to give customers access to quality international content, thus further enhancing their viewing experience. Customers having 8Mbps and above unlimited internet packages can enjoy Netflix subscription for six months free of cost.

During the period, your Company signed new Cloud Infrastructure Services and Connectivity Services agreements with various enterprise customers thus expanding its customer base. At the same time, the Enterprise Solutions and Cloud Services portfolio was further enhanced by signing reseller partnership agreements with global IT companies. PTCL and Telenor Pakistan, for the third consecutive year, have entered into a fiber leasing agreement, under which PTCL will deliver fiber footprint to Telenor Pakistan for 2018. Further, PTCL has introduced Cyber Threat Intelligence (CTI) services to its valuable customers by leveraging Etisalat-Telefonica CTI capabilities.

As part of its CSR (Corporate Social Responsibility) initiatives, your Company took part in the 'Rung Do' program of WWF Pakistan by committing to support plantation of 200,000 mangrove seeds in Lasbela district of Balochistan thus helping to protect inhabitants of Miani Hor island from potential threat of flooding in the foreseeable future. Further, PTCL also inducted 100 young engineers and business graduates under Summit Programme 2018 from top institutions and universities across Pakistan which would help to develop future leadership of your Company.

Being the leading national telecom operator, PTCL contributed in supporting the national sports by sponsoring Hockey Cup 2018, Pakistan team in T20 cricket series i.e. Pakistan vs New Zealand, West Indies and Scotland as well as Islamabad United Team in Pakistan Super League Season 3 (PSL3) held during the period. The said contribution aided significantly in enhancing brand value of your Company. PTCL was recognized by Brand Finance as the 'Fastest Growing Brand in Pakistan'. Being a national carrier, your Company proudly launched a special Brand Campaign 'Hum hain PTCL, hum hain Pakistan' on the Independence Day.

The management and employees of PTCL remain committed to provide quality service at competitive prices through concentrated efforts to be the partner of choice for our customers and also to improve shareholders' value.

On behalf of the Board

Dr. Daniel Ritz

Maroof Afzal

President & Chief Executive Officer

Chairman

Islamabad: October 11, 2018