WorldCall Telecom Limited has been in the spotlight for the greater part of the current year, less for its performance and more for the several non-binding negotiations for the acquisition of its majority stake by corporates.

A third-tier stock on the Pakistan stock exchange with its closing price at Rs 2.67 last Wednesday, it is a stock that punters and day traders love to dabble in for making a quick profit; which is why WorldCall Telecom Limited’s (WTL) scrip on most working days is among the volume leaders. On Nov 02 alone, 10m shares changed hands at PSX.

On Sept 7, Arif Habib Limited, manager of acquisitions, informed the stock exchange that WTL was in receipt of a public announcement of intention of acquisition by WorldCall Services (Pvt) Ltd (Lahore) and Ferret Consulting, F.Z.C. (Ajman, UAE), to buyout 489m ordinary shares of WTL.

These share represented 56.8pc of the paid-up capital of the company and 0.350m Convertible Preference Shares (100pc of the Convertible Preference Shares issued by WTL).

But these were not the first to make a public announcement of intention to acquire WTL.

A month earlier Oman Telecommunications Company (Omantel), having a controlling stake in the WTL, said it had ended discussions with a Pakistani investor about purchasing the 56.8pc stake, in the diversified telecommunications operator, after a period of due diligence did not yield a favourable deal.

The salvation of WTL may lie in a tie-up with a financially sound international operator that has the financial muscle to infuse a large dose of liquidity into the company to resuscitate it

The parties referred to were Allied Supplies and Services (Private) Limited and Dunya Technologies (Private) Limited which had shown interest in the buyout of WTL majority stake.

WTL became an associate company of Oman Telecommunications Company (Omantel) after acquisition of major shareholding by Omantel in 2008 at a purchase price of $193m. Omantel is the largest communications service provider in the Sultanate of Oman.

At the last count, on Sept 30, 2015, besides the 56.80pc shares with the holding company, other shareholders with significant stake in WTL included public sector companies and corporations with 11.95pc stock; Banks, development financial institutions, non-banking finance companies, insurance companies and modarabas with 11.95pc shares and general public holdings at 25.58pc of the paid-up capital.

WorldCall Telecom Limited is not new to Pakistan. It has been around for over 20 years as it launched its business in June 1996 with payphone operations.

The company is engaged in providing wireless local loop (WLL) and long distance and international (LDI) services in Pakistan, re-broadcasting international/national satellite/terrestrial wireless and cable television and radio signals It also has interactive communication and to establish, maintain and operate the license telephony services.

WTL has been issued a licence by the Pakistan Telecommunication Authority (PTA) and Pakistan Electronic Media Regulatory Authority (PEMRA), to carry out its operations.

WorldCall Telecom held total assets at Rs4.5bn. Against the ordinary share capital of Rs8.6bn and preference share capital of Rs3.5bn, the company carried a staggering amount in accumulated loss at Rs9.52bn on the balance sheet.

For the nine months ended Sept 30, 2015 (the last accounts released by the company) WTL posted a net loss of Rs2.92bn up from Rs1.82bn in the same time earlier year.

The revenue for the period amounted to Rs1.53bn, showing decline of 16pc over the revenue of Rs1.82bn for the corresponding period of the previous year.

Chief Executive Officer, Babar Ali Syed stated in the directors’ report that the revenue from the broad band segment had improved but the LDI segment adversely affected the underlying results after ICH deregulation.

Financial performance was also suppressed by a higher charge of network depreciation and hefty fixed costs resulting in gross loss of Rs699m.

Adverse foreign exchange movement corroded other income whereas incorporation of the operating overheads, finance cost and tax led the company to close the period with a net loss.

The company is facing strong competition headwinds from the market. The financial results of WTL after Sept 30, 2015 are awaited.

The hugely discounted price of the company stock at the market raises suspicions of more losses that would add to the accumulated deficit of Rs9.52bn that sat on the balance sheet at Sept 30, 2015.

The salvation of WTL may lie in a tie-up with a financially sound international operator that has the financial muscle to infuse a large dose of liquidity into the company to resuscitate it.

The interest of the general public in a successful conclusion of a takeover deal is not just the hope of seeing the balance sheet wiped off the accumulated losses, but they have an eye on the mergers and acquisitions regulations by virtue of which, the acquirer would have to make an announcement for the purchase of 50pc of the shares owned by the general public.

Since majority shareholding is usually bought/sold at a premium to the market value, small public holders hope to make big gains, in case a deal is sealed.

Published in Dawn, Business & Finance weekly, November 7th, 2016