Karachi, October 14, 2021: 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 5, 2020.
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.
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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&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. In FY20, healthy growth from Corporate and Wholesale & Carrier business continued being offset by decreasing revenues in the Voice Services segment, while the largest segment i.e. Broadband & IPTV remained stable amidst a pandemic-induced slowdown in new user acquisition. On the contrary, shift in consumption patterns, translated in a contraction in gross margin of the company. Nevertheless, the company did post strong growth in and gross margin in 1H’2021, on the back of growth in high ARPU segments.
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The ratings incorporate PTCL’s minimal debt on PTCL’s balance sheet and abundant liquidity, elements that provide the company with financial flexibility and support its rating. Even after incorporating the off balance sheet debt and planned capital outflows, the company’s gearing remain adequately low. 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.
