The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Usman

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PACRA Maintains Entity Ratings of Pakistan Mobile Communications Limited

Rating Type Entity
(08-Nov-19 )
(10-May-19 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1 A1
Outlook Positive Positive
Rating Watch - -

The ratings incorporate a robust business profile of the company, represented by its leading market share of ~37% with ~59 million cellular subscribers as at End-Sep’19. This strong share has been achieved with both organic and inorganic growth. The company enjoys synergies related to operational and technical networks, reflected into better earnings for the merged entity. Optimizing on its single brand "Jazz", the company commands solid volumes and strong margins. Additionally, in collaboration with Mobilink Microfinance Bank, an associated entity, the company is establishing a strong digital banking platform. Overall market dimensions remain positive with respect to mobile data services, as penetration level in 3G/4G subscribers stands at ~34% as at End-Sep’19, depicting sufficient room for growth. The re-imposition of tax on mobile services (May'19 onwards) will normalize the revenue level going forward. The company's financial risk profile exhibits a strong outlook demonstrated by prudent working capital strategies, comfortable coverages and moderate leveraging (June'19). Debt profile majorly comprises long term borrowings, including foreign currency exposure. Following 1HCY19, payments for renewal of 2G license (USD~225mln) necessitated additional external capital dependence, which has leveraged the company's capital structure, more than the current standing.
The ratings are dependent upon the sustenance of robust revenue growth and profitability. Positive outlook captures the leading market position of the company and its strong performance indicators. As capital structure becomes leveraged, maintenance of sound financial discipline is imperative to uphold the positive outlook.

About the Entity
Pakistan Mobile Communications Limited (PMCL) – brand name ‘Jazz’ commenced its operations in August 1994. International Wireless Communications Pakistan Limited – which is majority-owned by one of the world’s leading telecom group – VEON (formerly VimpelCom), owns ~85% shareholding of the company. Rest ~15% lies with Abu Dhabi Group through the share swap transaction of PMCL-Warid merger. VEON is among the largest telecom operators in the world in terms of subscribers. VEON provides essential communications and digital services to 212 million customers in ten of the world’s most dynamic countries. The company's seven-member Board of Directors (BoD) is mainly composed of representatives from VEON. His Highness Sheikh Nahayan Mabarak Al Nahayan chairs the board. Mr. Aamir Ibrahim, the CEO, has over two decades of experience in the local and international markets.

About the Instrument
The company had issued a Sukuk of PKR 6,900mln in two parts; PKR 3,000mln on Dec 22, 2014, and PKR 3,900mln on Sep 3, 2015. The profit is payable quarterly at three-month KIBOR plus 35bps. The first principal payment was made on Mar 22, 2017. The last outstanding principal amount of PKR 575mln will be paid during December, as the instrument will be matured on December 22, 2019. The Sukuk has been provided a partial credit guarantee of PKR 966mln by GuarantCo, rated AAA by PACRA.

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.