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Dialog Telekom records Rs. 2.40 b profit after tax in 1Q, 2006

Dialog Telekom Ltd, post consolidation with subsidiary performance, recorded a Profit after Tax (PAT) of Rs. 2.40 billion for the quarter ended March 31, 2006. Dialog Telekom and its subsidiary Dialog Broadband Networks (Pvt) Ltd "the Group".

DTL recorded a PAT of Rs. 2.31 billion representing a 34 per cent earnings growth relative to the figure of Rs. 1.72 billion recorded for the corresponding quarter in 2005.

For the quarter ended March 31, 2006, the company's revenue increased by 51 per cent to Rs. 5.83 billion as compared to the first quarter of 2005.

Revenue growth is fuelled by parallel growth in the key revenue drivers of subscriber base, network reach, increase in usage per customer and expansion in international business.

Revenue growth has been driven by the consistent growth in both pre-paid and post-paid subscriber base. Domestic revenue, which consist mainly of pre-paid and post-paid revenue, accounted for approximately 71 per cent of the company's revenue in the first quarter of 2006.

Total revenue includes 34 percent from post-paid revenue, 37 per cent from pre-paid revenue and 8 percent from International Roaming revenue. When compared with results compared to the first quarter of 2005, pre-paid contribution has increased from 33 per cent to 37 per cent with a growth in subscriber base from 1.18 million to over 1.84 million.

The company's direct costs for the period amounted to Rs. 2.07 billion compared to Rs. 1.32 billion in the previous year, which is a 56 per cent increase. In terms of costs, the company's direct costs as a proportion of revenue have increased marginally from the 34 per cent recorded in the first quarter 2005 to 35 percent for the same period in 2006.

Significant components of direct cost are Telecom equipment depreciation, Network cost, International Origination cost, Outbound roaming cost, Lease circuit rental costs and International Telecommunication Levy.

The company's operating costs of Rs. 1.32 billion for the quarter increased by 63 per cent when compared to the first quarter of 2005.

Operating costs comprise mainly of selling and distribution expenses, manpower and general administration costs.

Selling expenses inclusive of sales commission, advertising and promotional expenses was the most significant contributor of operational expenditure (54 per cent)

Manpower cost accounted for 24 per cent of total opex and remained constant compared to the corresponding period in 2005. As a proportion to revenue, manpower has been maintained under 6 per cent.

Based on the Finance Act No. 11 of 2004 enacted by Parliament in late 2004, a levy was imposed on International Telecommunication operators with retrospective effect dating back to March 2003.

Accordingly DTL has provided for this levy in full (Rs. 201 million) in its financial statements under direct costs, of which Rs. 128 million has been settled as of date.

The PAT figures for the quarter ended March 31, 2005 and 2006 are stated after the deduction of this levy. It is envisaged that the Telecommunications Regulator would determine a refund of a part of this levy as compensation for rural network development. Any such refund would be reflected as a cost reversal at a future date and has not been taken in to account at this stage.

The company also showed similar growth in Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). EBITDA was recorded at Rs 3.10 billion for the quarter ended March 31, 2006 compared to Rs 2.19 billion for the period ended March 31, 2005 representing a growth of 40 per cent.

The company recorded an EBITDA margin of 53 per cent and a PAT margin of 40 per cent in first quarter 2006. The first quarter 2006 shows an improvement of four points each in terms of EBITDA and PAT margins compared to the fourth quarter 2005.

In terms of Cost to Revenue ratios, direct costs and operating costs relative to revenue for the quarter ended March 31, 2006 stand at 35 per cent and 23 per cent.

Although these ratios showed an increase of 1 point and 2 points compared to the same period in 2005, the cost to revenue ratios have improved by 2 points each relative to performance in the immediately preceding quarter of Q4, 2005.

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