KARACHI, June 28: As the US administration and regulators grapple with WorldCom’s financial fraud of 3.8 billion dollars — far bigger in money terms than Enron’s — analysts here are feverishly calculating the possible fallout on Pakistan Telecommunication Company Limited (PTCL).

The Wall Street has been in turmoil since Wednesday, after WorldCom — the second largest long-distance telephone operator in the US and the world’s largest provider of internet connections — revealed a $3.8-billion fraud in its accounts. The scandal centred on a book keeping gimmick, whereby the company improperly posted $3.85 billion as long-term investments, instead of showing them as ordinary expenses. Such “creative accounting” enabled the company to post profit of $1.38 billion during 2001, in place of a loss. The Bush administration has ordered investigations and the Russian President welcomed US President’s efforts to ‘secure the stock market’ and ward off implications on global economy. Securities and Exchange Commission (SEC) — the US watchdog — has been quick to pounce on WorldCom, charging it with fraud.

WorldCom’s survival is now understood to hinge on whether it can secure some $5 billion in fresh funding that would enable the telecom giant to cover its current expenses and interest payments.

Most analysts are already painting a doomsday scenario. The company has announced 17,000 redundancies and sacked its chief financial officer. The firm carries a huge $30 billion in total debts, which makes the accounting people wary of its ability to get the extra cash. The failure to do so, would then force the firm to file for bankruptcy protection. And it is here — the filing for bankruptcy protection — where the Pakistan’s telecom comes into picture.

Wasif Ijlal and Saad Hashemy of stock brokerage firm, IP Securities, explains how and why: International revenues generated by PTCL work out to around $350 million. Out of that, about 30-35 per cent are accounted from international call traffic from the US.

“This traffic comes via three companies, namely AT&T, MCI and Sprint,” say these analysts, adding that MCI was incidentally taken over by WorldCom in 1997. Out of those three companies, AT&T and MCI are the two companies on which PTCL has the major exposure in terms of international call traffic originating from the US. Analysts observe: “It also means that at any particular point in time, PTCL would have outstanding receivables against both AT&T and MCI.”

If WorldCom files for Chapter-11 bankruptcy — which the market believes it might be as early as the end of this week — the company would be protected from creditor actions.

All that would mean that WorldCom could delay settlement of its creditor’s claims. If the company does own sums of money to PTCL, it could have negative implications on the Pakistan telecom’s cash flows. But there is nothing for investor in PTCL stock to panic, for it is still unclear if revenue is outstanding against WorldCom. And at any rate, given that the call traffic to the US is a third of PTCL’s international revenue and is shared by several players, the adverse impact on PTCL’s bottom line is likely to be - if at all - minimal.