The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Upgrades Entity Ratings of Pakistan Mobile Communications Limited

Rating Type Entity
(26-May-21 )
(29-Jun-20 )
Action Upgrade Maintain
Long Term AA AA-
Short Term A1 A1
Outlook Stable Positive
Rating Watch - -

The ratings incorporate the robust business profile of the company, represented by its leading market share of ~38% with ~69 million cellular subscribers as at March 21. Cellular market is dominated by three large players and they collectively possess 85% of market share, whereas 65% of market is preliminary in the hands of two players Jazz & Telenor. Teledensity has now reached up to 85% and significant barriers for new entrants are now in place; the market may experience consolidation in future. The outbreak of COVID-19 pandemic has intensified the usage of high speed 3G/4G data technology, currently there are 98 million 3G/4G subscribers and Jazz holds the position of market leader and was able to achieve remarkable growth in 4G subscribers (61%) during CY20. Overall market dimension remained positive in CY20 with respect to penetration level in 3G/4G subscribers which is now reached up to ~44%. Rating takes comfort from formidable sponsors support and strong business volumes/margins. Additionally, the company is pursuing digitalization as a long-term strategy and vision. The Company's financial risk profile exhibits a stable outlook demonstrated by eased working capital strategies, comfortable coverages and moderate leveraging (Dec'20). 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. Jazz made partial payment for renewal of 2G license USD~270mln as under protest fee (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 CY20.
The ratings are dependent upon the sustenance of leading market position, robust revenue growth and profitability, and vigorous 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 now 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 214 million customers in nine 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.