PACRA Maintains Entity Ratings of Pakistan Mobile Communications Limited

The ratings incorporate the vigorous business profile of Pakistan Mobile Communications Ltd (“PMCL or the Company”) represented by its leading market share of ~37% with ~72 million cellular subscribers as of March 24. PMCL excels in pivotal areas of the digital ecosystem such as fintech, cloud services, and data analytics. Additionally, the company is expanding its revenue streams with the establishment of a new data center, aimed at delivering state-of-the-art data hosting services in Pakistan. In the current cellular market, three major players (Jazz, Zong, and Telenor) collectively hold 86% of the market share, with Jazz and Zong alone controlling 62%. Mobile teledensity now reached 80%, this reflects significant barriers for new entrants. Pakistan Telecommunication Company Limited (“PTCL”) and Telenor Pakistan B.V. (Telenor) have announced the merger of Telenor with PTCL- leading the road to revolutionize the telecom industry in Pakistan. The Telecom sector posted revenue growth during CY23 which is mainly due to price inflation, however, financial performance remained subdued due to macroeconomic challenges resulting in a high cost of doing business. During CY23 the topline of the company posted ~19.9% growth, due to a better pricing strategy which helped to improve average revenue per user (ARPU). However, margins posted a decline, mainly due to cost-push inflation, foreign exchange loss, and soaring borrowing costs. During the period under review, PMCL has expanded its 4G network with 1000 new 4G sites. Currently, there are 132 million 3G/4G subscribers and PMCL holds its position as a market leader in this segment as well. The rating takes comfort from formidable sponsors' support and strong business volumes. VEON is committed to strengthening country’s digital ecosystem and developed the largest homegrown OTT platform, JazzFi, Tamasha, and various cloud platforms. The Company's financial risk profile showed dilution, with modest cashflows and coverages. Capital structure is leveraged and comprises 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. The Company is a subsidiary of International Wireless Communications Pakistan Limited (incorporated in Malta) ("IWCPL") which, directly and indirectly (through Telecom Management Group Limited ("TMGL") holds 85% of the issued share capital in the Company. VEON Pakistan Holdings B.V (incorporated in Netherlands) ("VEON Pak") holds 15% of the issued share capital in the Company. The ultimate parent company is VEON Ltd with its headquarters in Amsterdam, The Netherlands (incorporated in Bermuda) ("VEON"). Both TMGL and VEON Pak are wholly owned subsidiaries of VEON Ltd. VEON is among the largest telecom operators in the world in terms of subscribers. VEON provides essential communications and digital services to 160 million customers in Six 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.