The Pakistan Credit Rating Agency Limited
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Shazia Afzal

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PACRA Maintains Entity Ratings of Pakistan Mobile Communications Limited

Rating Type Entity
Action Maintain Maintain
Long Term AA- AA-
Short Term A1 A1
Outlook Positive Positive
Rating Watch - -

The ratings incorporate the robust business profile of the company, represented by its leading market share of ~36% with ~60 million cellular subscribers as at Dec’19 and formidable sponsor support. Optimizing on its exclusive brand "Jazz", the company commands solid volumes and strong margins. Additionally , the company is pursuing digitalization as a long term strategy and vision. Overall market dimensions remained positive in CY19 with respect to mobile data services, as penetration level in 3G/4G subscribers stood at ~35% as at Dec’19. Despite re-imposition of tax on mobile services (May'19 onwards), revenue recorded a sanguine growth in CY19. The recent outbreak of global pandemic, Covid-19, has impacted all economic sectors of the country at different levels. After initial minor impact ,Telecom sector, is back on growth track with data leading the way. The company's financial risk profile exhibits a strong outlook demonstrated by eased working capital strategies, comfortable coverages and moderate leveraging (Dec'19). Notable CAPEX is incurred by the company on a periodic and need basis, owing to the nature of the business. Debt profile majorly comprises long term borrowings, including foreign currency exposure. The partial payment for renewal of 2G license USD~270mln under protest till June 2020 (total payment demand by PTA is USD~450mln) necessitated additional external capital dependence. Total on-balance sheet debt level, however, continued to align with the previous trend, as some portion of the previous debt book retired in CY19.
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. ~85% shareholding of the company is owned by VEON-one of the worlds leading Telecom group and 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.

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.