KARACHI, Feb 20: The Gulf-based parents of telecommunication companies listed on the KSE are giving a hard look to their Pakistani subsidiaries and reshuffling positions on the basis of recent results.

Three, of the four telecommunications companies listed on the KSE, have significant Gulf-based ownership. Those included Pak Telecom (PTCL); World Telecom (WTC) and Wateen Telecom (WTC). The fourth Pak Datacom, due to its frozen stock holding, hardly merits mention.

Ayub Ansari at AKD Securities explores the "GCC Connection" in his report released on Wednesday. As regards the PTCL, it is noted that the holding company, Etisalat, has reclassified PTC as a 'subsidiary' from 'associate'.

Etisalat holds 26 per cent stake in PTCL, only a fourth of the total equity, yet it enjoys 53pc of voting rights.

The favour bestowed on the holding company by virtue of the share-purchase agreement signed with the government. It allows Etisalat to put five nominees out of nine members on the board of directors.

The change to 'subsidiary' was thought to be in view of substantial voting power as well as some recent developments relating to weakening of former control impediments, (possibly relating to the VSS which is expected to substantially reduce redundant headcounts).

While PTC has been aggressively expanding its product line as it aims to enhance non-voice revenues, analysts believe that Etisalat would increasingly focus on cost controls, particularly relating to salary expenses.

In this regard, salary expenditure for Etisalat as percentage of revenues in CY12 stood at 13pc compared with 15pc for PTC as per accounts for FY12.

And finally, Etisalat in 2011 managed to renew the Technical Service Fee (TSF) agreement for another five years on identical terms where TSF would be charged at 3.5pc of consolidated revenues with an annual fee limit of $50m. Etisalat has maintained a dividend payout of 80pc for the last two years.

A similar payout ratio for PTC was expected going forward, though the upfront 3G license fee was recognised as a risk to payout.

The second Gulf-controlled telecom company, WorldCall Telecom (WTL) is 56.8 per cent owned by the Oman Tel (OTEL). WTL recently announced its CY12 results, which reveal earnings before interest, tax, depreciation and adjustments (EBITDA) rising in 4QCY12 to Omani Riyal (OMR) 0.56 million, translating into RsR140m compared with a negative EBITDA of OMR2.2m (Rs550m) for 3QCY12.

The reason for improvement was due to a boost in operating margins on account of higher LDI earnings.

WTL still recorded a loss of OMR2m (Rs507m) in 4QCY12, possibly due to higher provisioning expenses and currency translation losses.

However, loss was lower than the OMR3m suffered in 3QCY12.

OTEL was said to have expressed confidence that the planned second tranche of funding amounting to $35m would go through in 1QCY13, which would fund WTL's expansion programme.