KARACHI, Sept 29: Pakistan Telecommunication Company Limited (PTCL) declared profit after tax in the sum of Rs29.2 billion for the financial year ended June 30, 2004. That translated into earning per share (eps) of Rs5.72. The PTCL board which met on Wednesday also proposed a cash dividend at Rs5 per share.

Both the earnings and dividend were way above the expectations of most equity strategists. But should those analysts bow their heads in shame and throw away their professional accountancy certificates in the litter? That would scarcely be fair.

Working feverishly on their calculators and watching fundamentals and the nine months' figure, analysts came up with numbers, which should have been fairly close to the actual.

Still some people may have been secretly chuckling for they knew what those analysts and other investors in the market knew not: that the accounts carried an extraordinary favourable adjustment of rupees in billions.

Taking unfair advantage of that "insider information", those people must have made killings in the days prior to the announcement of results. A sign of which was a surprising 10pc surge in PTCL stock price in the last two days of the previous week.

The profit and loss account released earlier in the day on Wednesday at the stock exchange showed better-than-expected numbers, but no 'extraordinary item'. A press release issued by PTCL in the evening, however, said it all.

The improvement in profit for the year under review was stated to have stemmed from the growth in voice traffic, tight control on expenses, lower financing costs and "reversal of certain provisions, which gave profitability an additional Rs1.6 billion one-time boost".

If there could be a litmus test of 'insider trading' in our capital market, this was one. And the strip has come out all red. It also happened to be the second such instance in 10 days, coming quite close on the heals of Hubco's generator fault about which some people were informed three days before others and profited from heir 'insider information'. But all of this should better be left at the door of chief watchdog, the chairman of the Securities and Exchange Commission of Pakistan, and look up to his grit in dealing with the issue, even if that be a shadow of his predecessor, the no-nonsense, fierce and fiery Khalid Mirza.

But back to the accounts: PTCL said in its press release that the company had posted a 26.4pc growth in its after tax profit, which stood at Rs29.2 billion "which is the highest ever profit of any corporate in the history of Pakistan".

Total revenue for the year under review amounted to Rs74.1 billion, which set a new record for the company. The growth was said to have been driven mainly by a 12.1pc improvement in international revenue and a 9.6pc improvement in domestic revenue. Due to improved profit, return on capital employed rose to 25pc from 20.3pc achieved the previous year.

Other figures, not discussed in the PTCL press statement, were the operating margin which improved to 56.6pc from 52.2pc, and financial charges could be reduced to Rs673m from Rs1.0bn.

The pre-tax profit increased by 18.6pc to Rs43.3 billion. For the year under review, the figure of provision for taxation stood at Rs14.2bn compared with Rs13.5bn the previous year.

The company said that the proposed disbursement of Rs5 per share in dividend represented profit payout ratio of 87pc, which compared with dividend at Rs3.50 per share last year, reflecting a profit payout at 77.3 per cent.

In its press statement PTCL stated that the deregulation of the telecommunication sector and growing competition from a number of new players and new technologies such as cellular and Wireless Local Loop (WLL) had put an end to PTCL monopoly position of earlier years.

The company admitted that the new environment would make it increasingly challenging to sustain profitability at current levels. The company was gearing up to meet the new challenges and to pursue new opportunities in the rapidly emerging competitive environment.

The share in the telecom gained Rs1.85 on Wednesday to close at Rs43.70. Annual shareholders' meeting is scheduled for October 29. Directors should be prepared to face some embarrassing questions, such as how the financial figures managed to travel to the market, even before they were released by the board?