The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Maintains Entity Ratings of Pakistan Mobile Communications Limited

Rating Type Entity
(19-May-23 )
(20-May-22 )
Action Maintain Maintain
Long Term AA AA
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings incorporate robust business profile of the company, represented by its leading market share of ~38% with ~74 million cellular subscribers as of March 23. Cellular market is dominated by three large players and they collectively possess 87% of the market share, whereas 63% of market is preliminary in the hands of two players Jazz & Telenor. Mobile teledensity has now reached up to 82% and significant barriers for new entrants are now in place; the market may experience consolidation in future. 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 & license fee further creates liquidity challenges. Despite all macroeconomic turbulence and sector-specific operational challenges, the topline of the company posted ~14.3% growth in CY22, better pricing strategy helped to improve average revenue per user (ARPU). During the period under review capital expenditure stood at PKR 52 billion. Jazz has expanded its 4G network with 1500 new 4G sites. Currently, there are 125 million 3G/4G subscribers and Jazz holds the position of market leader. Rating takes 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. As per the management’s representation Tower selling transaction is still underway and the parent company is close to selling its tower assets to a consortium, comprising TPL REIT Management and TASC Towers (UAE). The Company's financial risk profile exhibits a stable outlook demonstrated by healthy cashflows, comfortable coverages, and working capital cycle. Capital structure is leveraged and comprising of long-term borrowings. The parent company reportedly has ample cashflows and therefore there are no significant risks leading to its continued operations or any tickle-down effect on PMCL
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 (PMCL) – 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. VEON provides essential communications and digital services to 158.7 million customers in Seven of the world’s most dynamic countries. The company's Board of Directors (BoD) is mainly composed of representatives from VEON. Mr. Aamir Ibrahim, the CEO, has over two decades of experience in the local and international markets.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.