WorldCall telecommunications Group was established in 1955 when First Capital Securities Corporation Ltd started incubating WorldCall Payphones, now known as WorldCall Communications Limited. WorldCall is part of a larger conglomerate and along with First Capital Securities Corporation Ltd.

It owns a mix of telecom, print and media, technology, financial services, retail and property development businesses with both national and international coverage.

WorldCall Communication had the wide payphone network in the country and through its two subsidiaries has laid out a wire network in the most affluent areas of Karachi and Lahore. WorldCall Group is one of the private telecom operators in the country with an extensive and diversified telecom businesses including Wireless Local Loop (WLL) through CDMA 2000 1X technology in over 40 cities, nationwide presence of long distance and international (LDI) network with 44 POPs, over 70,000 payphones, largest broadband HFC networks in Pakistan providing triple play (CATV, broadband internet, telephony), the pioneer prepaid calling card "Hello" and rights to dark fibers in a national long haul network being built across Pakistan.

WORLDCALL HOLDS THE FOLLOWING LICENSES:

-- Local Loop license in all 14 telecom regions of Pakistan (WLL) and Fixed local loop license in Lahore and Karachi telecom regions

-- Long Distance and International (LDI) license

-- Cable TV license

-- Card Payphone Service license

-- Prepaid Calling Card service license

-- Audio Tex license

-- Internet Service Provider License

-- Non Voice Communication Network license

-- Electronic Information Services license

-- Data Network Operator License

WC pioneered "Supervised Payphones" business model in the country. Moreover, WC Phonecards was the first company to introduce prepaid calling card service in the country. WC also developed the first ever-broadband HFC convergence infrastructures in Pakistan and is the only operator in Pakistan and one of the few in the region to provide a triple play (CATV, internet and telephony).

In order to maximize operational depth, WorldCall Multimedia Limited ("WML"), WorldCall Broadband Limited ("WBL") and WorldCall Communications limited ("WCL") have been merged into WorldCall Telecom Limited, WTL, to form a single operating entity. The merger was completed and came into effect from 1st July 2005.

WorldCall Telecom Limited provides various telecommunications services in Pakistan. The company operates through two segments, Telecom and Broadband. The Telecom segment engages in the provision of wireless local loop, and long distance and international telephony services, as well as in the operation and maintenance of public payphones network. The Broadband segment offers Internet over cable and cable television services. The company is headquartered in Lahore, Pakistan. WorldCall Telecom Limited is a part of the WorldCall Telecommunications Group.

Following the merger, WorldCall Telecom has now become the single largest fixed-line payphone operator and single largest HFC/Cable Operator (CATV, IOC, VoIP/MSAN Telephony) in Pakistan. It is also positioned as a premium WLL and LDI operator. Post merger, WorldCall Telecom is now positioned as the only Multi Services Operator (MSO) in Pakistan capable of offering a variety of telecom services.

WorldCall is expanding its state of the art Hybrid Fiber Coaxial (HFC) networks to new localities in Lahore and Karachi. This venture has received a good response, reflected in the high number of subscribers. It has also initiated VoIP over cable service in Karachi.

In March 2007, WorldCall Telecom Ltd announced launching of its new high-speed fiber optics network titled Optical Metro Access Networks (OMAN). The company announced that launched high-speed fiber optics network would be accessible to Small & Medium Enterprises (SMEs), banks, financial institutions, bandwidth providers and wireless operators both GSM & CDMA.

The merger of WorldCall Telecom was completed and came into effect from 1st July 2005. The Company started commercial operations of LDI on 1st of December 2004 and WLL on 8th of June 2005 respectively. The FY06 became the first complete year of operations as the merged company.

During the year, the company operations have grown sustained growth with the expansion of WLL service to 42 new cities, the most important being Karachi and the service coverage has been enhanced by nearly 100%. At the same time, Long Distance and International (LDI) operations have shown significant strength and have performed exceptionally well in international termination and provisioning of local interconnect facilities for WTL's own local loop operations. Moreover, WTL has achieved a leading position in the market for broadband operations in Pakistan by becoming a Gigabit operator in the retail segment. Considering last year's connectivity closed at around 300 Mbps, this represents a 300% growth in this segment.

During the year, WTL successfully bid for Joint Venture (JV) operations establishment with Capital Development Authority. The JV shall deliver a landmark fiber optic infrastructure in Islamabad Capital Territories. It gives WTL joint ownership of the infrastructure to be deployed under this joint venture for a 30 years period. The company has also signed a contact for Metro fiber connectivity with Telenor for coverage extension in nine additional cities.

Digital cable and video on demand (VoD) services have also received an encouraging response from customers, providing WTL with an edge over competition in premium cable television services segment.

During the year 2006, the company generated revenues of Rs 4.4 billion, making profits of Rs 947.6 million. Revenue grew 5.4 times for the FY06, compared to the first period of operations. This was accompanied by a much smaller increase in direct cost, of 3.4 times. As a result, the gross profit of WorldCall Telecom grew by an impressive 23 times. The gross profit margin of the company has also grown significantly during the FY06 compared to the gross margin for the period from December 1, 2004 to June 30, 2005. This year, the company also posted a profit margin of 21.8% which signifies tremendous growth over the first seven months of operations when the company accounts had recorded a net loss. This shows that the company is now consolidating its position as a merged company in the sector.

During FY07, the revenue performance of WTL remained largely stagnant at FY06 levels, however the company posted a net profit after tax of Rs 623.5 million, 34% lower than the preceding year. A growth was witnessed in gross profit margin but net profit margin has dropped to 14% from 22% in FY07. Operating costs remained at the previous year's level owing to the company's efforts to control expenses.

A 96% increase in finance cost was one of the main reasons for the decline in profitability. Secondly, the gain on remeasurement of assets was also lower for FY07.

This indicates that the company has the potential to improve its profitability in future if financial costs are controlled since the operating performance of the company has shown marginal improvement.

The current ratio of WorldCall Telecom dropped drastically in the FY05 when the company started operating. As the company started functioning, its assets and liabilities have started building up, with trade debtors and creditors coming online. The FY05 witnessed increases in the levels of creditors and debtors, moreover as the long terms sources of financing came due, the current ratio declined further. In FY06, investments in short term borrowings component was added to the asset base of the company. Besides this, the company's cash and bank balances also built up rapidly. These developments have resulted in an improvement in the liquidity standing of the company.

FY07, however, saw another drop in the current ratio, as cash reserves dwindled while trade credit increased. This downward trend in liquidity management is a source of concern for WTL because a continuation of the trend may place the company in the danger zone, in terms of financial strength.

The asset management of WTL, in terms of inventory turnover and collection of receivables has registered a drop in efficiency for FY07. This is depicted in the longer collection period of receivables and the higher inventory turnover (days). Consequently the operating cycle has also been prolonged. This decline in asset management efficiency is not a good omen for the company as it will signify higher costs and hence lower profitability.

However, considering that WTL is a newly established company, which is still consolidating its position, the rising trend in inventory turnover and days sales outstanding seems reasonable as the company builds up its inventory and customer base. Consequently, it would prudent to expect further increases in the ratios as the company fully establishes itself in the market.

As the asset base of WorldCall Telecom widened and sales revenues increased during the FY06, the total asset turnover of the company also grew considerably compared to the first period of operation in FY05. Similarly the sales to equity ratio also improved, despite the growth in equity of the company. On the contrary, the stagnant level of sales revenue resulted in a decline in the ratios as equity and asset base of the company rose.

During the fiscal year 2007, WTL incurred a massive increase of 96% in financial charges. This has lowered its TIE ratio, bringing down the profits of the company. Nevertheless, the interest coverage is in the safe zone. However, the company may view the rising costs as a source of concern because of the drastic decline in TIE and its impact, not only on profitability but also on the short-term financial health of WTL.

The stability of the debt ratios reflect that WTL is consolidating its financial position, in terms of financial leverage. The debt ratios indicate that WTL is largely equity financed. This hints at the financial strength of the company.

The degree of financial leverage of the company continued to mount up to 2005 but registered a substantial decline in the FY06. During the year, WorldCall Telecom issued additional share capital and the profits made during the period further added to the equity base of the company. This had the effect of pulling down the debt to equity and long term debt to equity ratios of WorldCall Telecom. For the same reason, the debt to asset ratio has also posted a decline. The long term finances component of liabilities has been reduced significantly during the year as the loans mature. This also had the effect of increasing the current liabilities of the company. The company was also able to safely cover its finance cost during the FY06, indicated by a TIE of 4.18.

During the FY06, WorldCall Telecom posted an EPS of Rs 1.38. This represents a significant improvement in comparison to losses incurred during the first period of operations. The book value of the company's shares has also risen considerably. During the year, WorldCall Telecom increased its issued share capital and together with the accumulated profits for the period, this brought about the increase in book value of each share. As final dividend for the FY06, the Board of Directors of WorldCall Telecom proposed bonus shares at the rate of 15 shares for every 100 shares held.

The decline in profitability of the company n FY07 took its toll on Earnings Per Share, resulting in a 42% drop in EPS, bringing it down to Rs 0.83 for the year. In view of the future expansion plans, the directors have recommended no dividend be paid for the FY07.

The company's stock performance has not been very impressive for the year, as depicted in the graph. The stock remained below the KSE 100 Index for the larger part of the year.

FUTURE OUTLOOK: The Telecom sector of Pakistan is witnessing a period of dynamic growth and investment. Consequently, the year 2007 saw a number of acquisitions, while the Established local players displayed increased interest in enhancing their service potential in various segments.

During the year, the primary focus has been seen in the mobile, broadband and long distance segment where market potential has been duly recognized by significant new investment initiatives. Access ownership for local loop operators has started to mature while significant play in this segment is being seen.

In Wireless Local Loop, major deployment in the south has started to mature with Hyderabad being put into commercial operations recently. Commercial commencement in Karachi was scheduled for fourth quarter. The inclusion of Hyderabad has enhanced WorldCall Telecom's wireless service coverage to 40. WTL is targeting a major escalation in its network coverage for all its contributing segments over the next two years.

In Broadband segment, the Company crossed the mark of 500Mbps consumption of international IP bandwidth through its internet over cable (IOC) and CDMA 2000 1x high speed data offerings. Video on Demand (VoD) and digital channel offering, initiated in the second quarter, also received a very positive response from subscribers.

In Long Distance and International (LDI) segment, the Company maintained its market share. Expansions in the network capacity have been initiated to cater for additional volumes being generated from the WLL segment.

In payphone segment major focus on growth was maintained through the company's own deployments and expansions from white label operations segment. Enhancement of cities in coverage footprint continuously contributes towards growth in this segment.

Oman Telecommunications Company (Omantel) has been reviewing the option of buying majority stakes in the Company form the sponsors group and have conducted financial and legal due diligence for this purpose. As of date of this report, the Company was expecting a final decision from the board of directors of Omantel. However no such decision has been conveyed to the sponsors Group till the date of this report.

In March 2007, WorldCall Telecom Ltd announced launching of its new high-speed fiber optics network titled Optical Metro Access Networks (OMAN). The company announced that the launched high-speed fiber optics network would be accessible to Small & Medium Enterprises (SMEs), banks, financial institutions, bandwidth providers and wireless operators both GSM & CDMA.

These developments will expand the scale of operations of the company and augment future revenues. As a result, the company's profitability is likely to be boosted in future.

Moreover, WTL is finalizing rollout plans for extending its hybrid fiber coaxial cable operations to eight additional metropolitan centers in Pakistan with a coverage footprint of over a million homes passed. Connectivity for Internet over Cable (IoC) and cable television (analogue and digital) are envisaged as high priority services. A major escalation in advertisement revenues, by making a play on enhanced connectivity, is also planned in this regard.

WorldCall Telecom has also signed a contract with Capital Development Authority (CDA) for Joint Venture operations in Islamabad Capital Territories. The Joint Venture project shall address fiber optic connectivity requirements for all operators and service providers in ICT.

Moreover, the company has signed for WMAX deployment making use of its existing WLL infrastructure deployed in major metropolitan cities of the country. This will lead to a more profitable diversification of the company's portfolio and is aimed at covering areas not already covered by the company through its fiber optic network. The venture will promote growth in these areas. The company's WiMax network will be rolled out for internet broadband, point to point and multipoint connectivity, principally in highly attractive markets in central Punjab.

WorldCall Telecom has matured into a true multi service operator (MSO) and has systematically consolidated its position in the local telecom landscape. Lastly, WTL intends to expand its WLL network and for this purpose it has acquired a loan of 25 million from Amatis Limited. This loan is convertible, fully and partly, to ordinary shares of WTL and for this purpose the company has increased its share capital.