KARACHI - The YoY outstanding revenue of Pakistan Telecommunication Company Limited (PTCL) is likely to increase by 9 percent during current financial year due to anticipated surge in international revenues of the company. However, PTCL wholesale revenues are expected to hurt further on account of growing participation of other telecom operators in various segments of telecommunication services such as LDI (Long Distance & International) LL (Local Loop), WLL (Wireless Local Loop) and FLL (Fixed Local Loop). The growth in FLL revenues is also projected to drop sharply in line with declining subscribers' number. The WLL segment also lacked momentum as depicted 4.6 percent fall in subscriber base during 1HFY09. On the other hand, international revenues are expected to increase due to increasing incoming international traffic, increased APC and depreciated Pak rupees. Additionally, Ufone's subscribers touched a level of 19.3 million in December 08, increasing by 7 percent in 1HFY09, far better than the 2 percent increase in total cellular subscribers in the same period. However, declining trend in ARPU (average revenue per user) remains the chief concern for Ufone as the total cellular subscribers for FY09 are expected to be 90.2 million, with Ufone's at 20.3 million. Ufone's ARPU is expected to settle at USD1.56 (down 31 percent YoY in USD terms and 10 percent YoY in PKR terms). A statistic of concern here is that of cellular imports which have declined by 69pc YoY in 1HFY09. PTCL's competitive edge remains its diversified product portfolio; it is consistently gearing up to cash in on new technologies as fixed local loop (FLL) gradually ceases to be the chief revenue generator. Secondly, a significant positive for PTCL is its capital structure; since PTCL is entirely equity financed, it fares better in the prevailing high interest rate environment. However, as per consolidated accounts, the debt to equity ratio is markedly different (1QFY09: 0.37x), primarily because of the financing arrangements of Ufone as it continues to incur increasing capex so as to retain market share in the face of cut-throat competition. Moreover, PTCL's current ratio stands at a comfortable level of 1.9x, primarily due to its cash-rich position. On the basis of dividend yield (FY09E: 15.3 percent), PTCL is the most attractive amongst telcos in the region. The DY is also 0.6 percent lower than the average DY of KSE-100, yet it is 30.7 percent higher than the research data compiled by InvestCap. A DPS of Rs2.25 is expected in FY09, attributing a payout ratio of 83pc. The scrip is considerably attractive at the prevailing levels; the FY09 PE(x) is at 5.4, while that of KSE-100 is 6.43. On the other hand, the PE (x) of the research is 4.41. With a book value of Rs19.8/sh, the PBV (x) also stands at an attractive level of 0.74. In lieu of latest developments, research has revised the target price of PTCL downwards by 14 percent; the revision primarily stems from Ufone, as expectations for subscriber numbers and ARPU have been trimmed. The SOTP based June 09 TP now stands at Rs36/sh, with 92 percent (Rs33.0/sh) and 8 percent (Rs2.8/sh) weightage of PTCL's standalone operations and Ufone respectively. This still attributes an upside of 144 percent from PTCL's current levels.