VIS Reaffirms AAA Ratings of Pakistan Telecommunication Company Limited

Karachi, October 05, 2020 (PPI-OT): VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Pakistan Telecommunication Company Limited (PTCL) at ‘AAA/A-1+’ (Triple A/A-One Plus). The medium to long-term rating of ‘AAA’ denotes highest credit quality, with negligible risk factors, being only slightly more than for risk-free debt of Government of Pakistan. The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are outstanding and safety is just below risk free short-term obligations of Government of Pakistan. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on October 11, 2019.

PTCL is the leading Integrated Information Communication Technology (ICT) Company in Pakistan, having the largest fixed-line network in the country. The company’s products and services include voice services, high-speed broadband internet, CharJi wireless internet, Smart TV (IPTV) service, , Smart TV App and Touch App, digital-content streaming services like Netflix and enterprise-grade platforms like Smart Cloud, Tier-3 Certified Data Centers, Managed and Satellite Services. PTCL has wholly owned subsidiaries including Pak Telecom Mobile Limited (UFONE), which is a mobile service provider and a growing Microfinance Bank, U-Microfinance Bank Limited.

The assigned ratings take into account strong ownership structure of PTCL, as 62.2% shareholding is held by the Government of Pakistan (GoP) and 26% by Etisalat Group along with the management control. Etisalat Group currently carries AA-/Stable ratings from the S and P Global and Aa3/Stable ratings from Moody’s. The ratings draw comfort from PTCL’s leading market position in fixed-line voice, wire line broadband and wireless data segment. PTCL’s diversified product offerings, integrated operations and extensive network infrastructure are key rating drivers.

PTCL has the largest fiber optic and conventional data transmission network at the national level. Revenues have largely been maintained over the last few years with healthy growth from Corporate and Wholesale and Carrier business being offset by product substitution from Cellular Mobile Operators (CMOs) and competition from OTT apps. Growth in the Corporate and Wholesale and Carrier business is being driven by increasing demand for ICT services including Data Center and Cloud services.

Recently, the broadband segment which constitutes the largest revenue segment has witnessed an increase in Average Revenue Per User due to shift in customers towards higher bandwidth packages and strong growth in the FTTH segment. This along with healthy growth in the Enterprise segment (Corporate and Wholesale and Carrier business) and cost control initiatives will facilitate in sustaining EBITDA margins over the rating horizon.

The ratings incorporate PTCL’s strong debt free balance sheet and abundant liquidity, elements that provide the company with financial flexibility and support its rating. With the completion of first leg of the Network Transformation Plan, free cash flows are expected to improve given slowdown in capital expenditure during the ongoing year. Going forward, ratings are dependent on PTCL maintaining healthy financial profile and sustaining prudent financial policies while further strengthening its market position in key segments. Ratings are also subject to maintaining good liquidity while investing adequate levels of capex to strengthen its competitive capacity.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873