Cellular teledensity in the country rose to 68.2% by Mar'12, up by 3.8ppt FYTD following 11%YoY growth in total subscribers to 118mn. With the exception of Warid, all the other cellular operators recorded double digit growth in subscriptions, with Zong leading the way with a 61%YoY increase. Operating profitability of the cellular sector as represented by the three largest operators (Mobilink, Telenor and Ufone) is healthy. All three major operators have recorded near double digit rise in 1QCY12 revenues, with Telenor (+23%YoY) leading the way. Total broadband subscribers in the country reached 1.9mn in Feb'12, which denotes a 3%MoM and 57%YoY growth respectively. We retain our Overweight stance on PTC where the scrip offers upside of 37% to our TP of PkR18.5/share. That said, recent political uncertainty (resignation of PM) could delay the formation of much anticipated International Clearing House (ICH) project.
Cellular subs reach 118mn in Mar'12: Cellular teledensity in the country rose to 68.2% by Mar'12, up by 3.8ppt FYTD following 11%YoY growth in total subscribers to 118mn. With the exception of Warid, almost all the other cellular operators recorded double digit rise in subscriptions, with Zong leading the way with a 61%YoY increase in subscriptions, which now stands at 15.7mn. In the process, Zong has overtaken Warid (YoY subscribers down 19%) as the fourth largest cellular operator in the country, with a market share of 13%.
Cellular EBITDA margins are largely healthy: Operating profitability of the cellular sector as represented by the three largest operators (Mobilink, Telenor and Ufone) is healthy. All three major operators have recorded near double digit rise in revenues in 1QFY12, with Telenor (+23%YoY) leading the way. Of particular note for Telenor is that 'Financial Services' (Easy Paisa) has contributed 3ppt to the company's revenue growth, underscoring the growth potential of mobile banking services in Pakistan. While ARPUs have been flattish, rising subscriber base has been the key revenue driver. EBITDA margins are also in good shape with Telenor recording impressive growth in margins; however Ufone's margins have slipped by 3.3ppt YoY to 39.6% in 1QCY12.
Broadband subscribers reach 1.9mn in Feb'12: Total broadband subscribers in the country reached 1.9mn in Feb'12, which denotes a 3%MoM and 57%YoY growth respectively. DSL remains the dominant broadband technology, with a 43% market share followed by Wimax (29% market share). EvDO remains the fastest growing broadband technology in Pakistan where subscribers have more than doubled over the last year to reach 495k, representing 26% of the market share. We believe that PTC is the market leader in both DSL and EvDO technologies.
Recommendation – Buy PTC: We retain our Overweight stance on PTC where the scrip offers upside of 37% to our TP of PkR18.5/share. Surprise dividend announcement (DPS of PkR1.5-PkR2.0) before end-Jun'12 could be a key trigger for the share price in the near term. PTC is trading at FY13 P/E and dividend yield of 6.7x and 11.9% respectively. That said, recent political uncertainty (resignation of PM) could delay the formation of much anticipated International Clearing House (ICH) project.
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