PACRA Assigns Preliminary Rating to Pakistan Mobile Communications Limited | PP Sukuk | PKR 15bln

The ratings incorporate vigorous business profile of the Company, represented by its leading market share of ~37% with ~71mln cellular subscribers as of Jan‘24'. Cellular market is dominated by three large players and they collectively possess ~86% of market share, whereas ~61% of market is preliminary in the hands of two players Jazz & Telenor. Overall performance of telecom sector has recently been impacted due to rising inflation and interest rates which caused an unprecedented increase in cost of doing business, USD-based high spectrum and license fee further creates liquidity challenges. Despite all macroeconomic turbulence and sector-specific operational challenges, the topline of the Company posted ~19.2% revenue growth in IHCY23 due to better pricing strategy which helped in improved average revenue per user (ARPU). Jazz has expanded its 4G network with 1500 new 4G sites. Currently, there are 128mln 3G/4G subscribers and Jazz holds the position of market leader. Ratings draw comfort from formidable sponsors support and strong business volumes. VEON is committed to strengthening country’s digital ecosystem and establishing the largest tier-III certified data center “Jazz Digital Park”; developing the largest homegrown OTT platform, Tamasha, and various cloud platforms. Financial risk profile of the Company exhibits a stable outlook demonstrated by healthy cashflows, comfortable coverages, and working capital cycle. Capital structure is leveraged however the parent company reportedly has ample cashflows. Hence, there are no significant risks leading to continuity of operations.
The ratings are dependent upon the sustenance of a leading market position, robust revenue growth and profitability, and a sound financial matrix. As capital structure becomes leveraged, maintenance of sound financial discipline is imperative to hold.

About the Entity
Pakistan Mobile Communications Limited – brand name ‘Jazz’ commenced its operations in August 1994. VEON- one of the world’s leading Telecom group owns 100% shareholding of the Company, VEON is among the largest telecom operators in the world in terms of subscribers. It provides essential communications and digital services to ~200 million customers in Seven of the world’s most dynamic countries. The Company's BoD is mainly composed of representatives from VEON. Mr. Aamir Ibrahim (CEO) holds over two decades of diverse market experience.

About the Instrument
The Company intends to issue unsecured, privately placed sukuk. The issue amount shall be up to PKR 15,000mln (inclusive of a Green Shoe Option up to PKR 5,000mln) to be disbursed either in single or multiple tranches / issues. The funds will be utilized for general corporate purposes, including but not limited to capital expenditure and license related payments. The tenor shall be six (06) months from the Issue Date of each tranche. Similarly, principal to be redeemed as bullet payment six (06) months after the issue date. Profit rate is expected to set at Base Rate + [25 – 55] bps p.a. with a Floor of 5% & a Cap of 30%. Profit will be payable at Maturity of the Issue and will be calculated on a 365/366 -day year basis. The issuance of PP Sukuk is at advance stage.