KARACHI, Feb 24: Pakistan Telecommunication Company Limited (PTCL) managed to spring a pleasant surprise for its shareholders, when the company came up with an interim cash dividend of Rs2 per share (20 per cent) along with the half term results ended December 31, 2004.

"Historically, PTCL does not pay an interim dividend and excepting a few analysts, the market did not generally anticipate the telecom to announce an interim pay out," commented Mohammad Sohail, director, equity brokering and research at Jahangir Siddiqui Capital Markets.

His corporate stock brokerage firm had predicted about an accurate possible interim pay out between Rs1.50 to Rs2 per share and the reason for that was interesting.

It wasn't perhaps to go with the privatisation hype as most people would believe it to be. The JSCM pre-result review on the telecom had explained why it thought an interim payout could be imminent: "During the current fiscal year, state owned entities are likely to announce higher dividends to help government overcome its fiscal deficit caused by oil subsidy.

PSO has recently announced a record interim cash dividend of Rs11 per share. Contrary to its tradition, PTCL may also announce Rs1.5 to Rs2 per share interim cash dividend to help government meet its budgetary requirement".

Government holding almost all of the equity in state-owned enterprises, it went to benefit most from dividend payouts by such companies. But the important thing from small shareholders perspective was that they received a boon where none was expected.

Other than that, there was nothing unusual about PTCL's earnings for the six months ended December 31, 2004, which at Rs2.85 per share came quite close to the market forecasts that ranged between Rs2.80 to Rs2.93.

The telecom posted after-tax profit amounting to Rs14,523 million, representing 9.4 per cent increase over taxed profit of Rs13,276 million earned in the corresponding period of the previous year.

In a statement issued by the PTCL along with the second quarter and half-term results, the company said it was conscious of increasing competition in the telecom sector in the country and was taking measures to protect its leading position in the market.

Accordingly, the Board of Directors had in the past six months approved major investment projects of over Rs25 billion to provide three million additional telecom lines throughout the country over the next two years, mainly through the latest Wireless Local Loop (WLL) technology.

The company also affirmed that the government through the Privatization Commission (PC) was pursuing privatisation of the PTCL in right earnest. The government has envisaged sale of 26 per cent shares in PTCL along with transfer of management (by June this year).

The company's revenue grew 6.4 per cent during the first half to Rs39,157 million, from Rs36,799 million in the similar six months of the previous year, which was claimed to be encouraging considering that the company had in the past one year substantially reduced its tariff in most segments.

The domestic revenue increased by 7.4 per cent mainly due to a record 461,000 additional lines put in service during the six months under review. Nation wide dialling revenues also grew during the period in the face of stiff competition in that segment from mobile telephone operators.

Similarly, revenue from outgoing overseas calls increased due to a significant 50 per cent growth in volume consequent to reduction in tariff affected by the company in August 2004.

Operating costs increased by 11 per cent on account of volume related increase in foreign operator charges for international outgoing calls and increase in employee related cost after 15 per cent COLA and other contractual and regulatory related costs took affect.

The increase in costs were offset in part by higher dividend income from Ufone and better treasury measures, which yielded higher income on savings and lower financial charges.

The company highlighted a couple of factors that could squeeze its earnings outlook for the rest of the year. But it said plans were in place to minimise the impact by maximising volume growth and bringing about operational efficiencies and improved customer focus.