Submarine Cables performs poorly amid tough competition

Bangladesh Submarine Cables' profit plummeted 25 per cent year-on-year to nearly Tk 476 million in the first quarter through September of FY25, mainly due to a reduction in revenue and higher operating expenses.

Earnings per share (EPS) fell to Tk 2.57 for July-September 2024 from Tk 3.22 for the same quarter a year ago.

In its earnings note, the company said the EPS had dropped for a decline in revenue and an increase in operating and maintenance expenses along with a jump in the number of shares.

The state-run submarine cable-based internet bandwidth provider's revenue from international private leased circuit (IPLC) rent was down 21 per cent year-on-year to Tk 788 million in the quarter while revenue from IP Transit service plunged 35 per cent to Tk 141 million in the quarter compared to the same quarter last year.

The management cut IPLC rent amid tough competition with International Terrestrial Cable (ITC) operators. Usually, more than 75 per cent of the revenue comes from this segment.

The overall revenue fell when operating expenses soared almost 36 per cent year-on-year to Tk 210 million in July-September this year due to higher fuel-oil costs.

At the same time, the company issued more than 22.13 million new shares to the government in the third week of September against share money deposits, causing a dilution of the earnings.

The Submarine Cable disbursed shares at Tk 75 each, including a premium of Tk 65, against share money deposits worth Tk 1.66 billion, received between FY16 and FY17.

The EPS was further diluted as new shares yet to be issued against government funds worth Tk 1.27 billion, received between FY22 and FY25, were taken into consideration in its calculation for July-September.

The latest funds were given for the implementation of the project named "Installation of 3rd Submarine Cable for expansion of the International Telecommunications System of Bangladesh". The to-be-issued shares were priced at Tk 75 each.

A share money deposit is the money paid in exchange for shares that have not been acquired yet. The government has injected funds into the company for implementation of various projects since its 2008 inception.

Meanwhile, the earning's disclosure drove the stock down 2.41 per cent to Tk 117.2 per share on Sunday on the Dhaka Stock Exchange.

The net operating cash flow per share, a measure of a company's ability to generate cash from its operations, came down to Tk 1.91 per share for the quarter from Tk 5.23 a year ago, mainly due to less collection of revenue and dues from customers and new shares issued to the government.

Annual financial performance

The Submarine Cables' annual revenue fell 27 per cent year-on-year to Tk 3.99 billion in FY24, while profit plummeted 27 per cent year-on-year to Tk 1.83 billion for the same reason.

Due to the lower profit, the company recommended a 40 per cent cash dividend for FY24, reduced from 51 per cent the year before.

Bangladesh Submarine Cable is the lone provider of submarine cable bandwidth services in the country and manages the country's submarine cable system. It is also an International Internet Gateway (IIG) service provider.

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