KARACHI, Oct 12: With the change of auditors by the shareholders on Thursday, the main issue that troubled Callmate Telips Telecom Limited (CTTL) -- the long distance and international (LDI) private operator in Pakistan -- seemed to have been resolved.

The extraordinary general meeting of shareholders was held on Thursday as per schedule, which was chaired by company’s chief executive officer Ajmal Ansari.

An announcement made at the Karachi Stock Exchange after the close of trading session on Thursday notified that the shareholders with a majority decision had appointed Zahid Jamil & Co (chartered accountants) in place of the outgoing auditors for the year ended June 30, 2006. The new auditors, who were elected from among three firms in the run, were expected to present audited accounts within the next 15 days.

Analysts pointed out that Callmate had depicted growth in all key indicators over the past five years. Whereas the revenue increased at a five-year combined annual growth rate (CAGR) of 62 per cent to Rs3040m in FY05 from Rs273m in FY00, gross profits surged at a CAGR of 84 per cent. The company also turned to a profit of Rs432 million for FY05, from a loss of Rs30 million in FY'00. During the first nine months of the fiscal year ending June 30, 2006, profitability of the company had climbed by 230 per cent to Rs716m, translating in diluted earning per share (eps) of Rs10.95.

The company’s several years of affable relationship with auditors soured when disagreements became intense on whether it was appropriate to recognise revenue when the cards were actually utilised by customers (usage-based policy recommended by the auditors) or at the time of sale to dealers (despatch base policy followed by the company). From the unsavoury communication between the two that followed, it appeared that auditors believed that ‘certain other pending matters’ also warranted a ‘qualified’ audit report. The company would accept nothing but a ‘clean’ report.

On Sept 20, the company had issued a notice to the shareholders calling an extra-ordinary general meeting on October 12, the principal item on the agenda being the proposal to replace the auditors. The right of appointment of auditors being statutorily that of the shareholders -- and the majority equity naturally held by the management -- resolution moved in the meeting, like in all corporate cases was almost certain to be passed. The regulators did not seem to intervene to overturn shareholders’ decision.

A shareholder, who participated in the meeting on Thursday, said that apparently the representative of the outgoing auditors was also not present at the meeting. Many matters may still be watched with interest, the principal being whether the new auditors do or do not concur with the management’s policy of recognition of revenue.

Meanwhile, shareholders have watched with awe, the steep dip of an incredible 54 per cent in the price of company stock from Rs108 to around Rs50 in seven months. Simple calculation suggests that it could have caused loss to shareholders in the sum of Rs4 billion.