Morning Call about – Higher LDI rates prevail while Ufone supporting growth – Arif Habib Limited

Karachi, June 03, 2013 (PPI-OT): CCP and LDI operators’ case in SHC deferred till 13th of August. The hearing of Competition Commission of Pakistan (CCP) regarding penalty imposed on LDI operators took place in Sind High Court (SHC) on Thursday May 30, 2013.

According to Arif Habib Limited as no significant development materialized and the case has now been deferred till August 13, 2013.

With more than 8 months since the implementation of International Clearing House (ICH) in Oct’12, the ~400% (USc 8.8/min) increase in int’l incoming call rates continue to persist signaling all but positively for telecos. This is despite the controversial arrangement going through its ups and downs between different High Courts, Trade Commissions and Agencies from United States and through the CCP.

LDI Monthly minutes for May’13 shows a MoM decline Actual LDI minutes for May’13 have seen a minor 6% MoM decrease at 559mn mins. International incoming traffic appears to have been stabilized around 600mn mins (previous 5month average) after suffering initial shock post ICH implementation. Going forward from June’13, Arif Habib Limited has kept monthly mins at the 600mn mark wit seasonal uptake in Eid and Haj to be witnessed.

Ufone Revenues of PTC to show improvement
Recently released mobile phone subscribers data by Pakistan Telecommunication Authority (PTA) till the month of Mar’13 shows Ufone subscriber’s downward trajectory from Dec’12 to Feb’13 has seen an upward bounce in Mar’13 by a minor 1.1% (264,107 subscribers increase MoM) as the ban on SIMs at retail outlets had been withdrawn by the Gov’t. Going forward, Arif Habib Limited sees a further increase of mobile phone subscribers despite the recently re-imposed SIM Activation Tax, which Arif Habib Limited believes will not impact new SIM sales.

Outlook and Recommendation
Arif Habib Limited continues to keep Arif Habib Limited ‘BUY’ stance on PTC with Dec-13 DCF based target price of PKR 29.3/share, offering a healthy upside potential of 28% from current levels. The stock is currently trading at PER of 8.8x and offering a healthy dividend yield of 8% based on CY13 earnings.

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