The Pakistan Credit Rating Agency Limited
Press Release


Iqra Toqeer

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

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

Rating Type Debt Instrument
(29-Aug-23 )
Action Preliminary
Long Term AA
Short Term A1
Outlook Stable
Rating Watch -

The ratings incorporate robust business profile of the Company, represented by its leading market share of ~38% with ~74mln cellular subscribers as of Mar'23. Cellular market is dominated by three large players and they collectively possess ~87% of market share, whereas ~63% 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 ~14.3% growth in CY22. Similarly, during first half of CY23, it reported ~19.2% revenue growth as better pricing strategy helped to improve average revenue per user (ARPU). Jazz has expanded its 4G network with 1500 new 4G sites. Currently, there are 125mln 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. Thus, 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 which may subsequently be listed pursuant to the Privately Placed Debt Securities Listing Regulations of the Pakistan Stock Exchange Limited (“DSLR”) at the option of the Issuer (the “ST Sukuk”) to be issued as redeemable capital under Section 66 of the Companies Act 2017. 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 + 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 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.