Karachi August 30 2023: Pakistan Mobile Communications Limited, running under brand name ‘Jazz’ the largest mobile operator in the country, to Issue sukuk of PKR 15 billion to fund general corporate purposes, including but not limited to capital expenditure and license related payments.
Pakistan Mobile Communications Limited intends to issue unsecured, privately placed sukuk which may subsequently be listed pursuant to the Privately Placed Debt Securities Listing Regulations of the Pakistan Stock Exchange Limited (“DSLR”) at the option of the Issuer (the “ST Sukuk”) to be issued as redeemable capital under Section 66 of the Companies Act 2017. The issue amount shall be up to PKR 15,000mln (inclusive of a Green Shoe Option up to PKR 5,000mln) to be disbursed either in single or multiple tranches / issues.
The funds will be utilized for general corporate purposes, including but not limited to capital expenditure and license related payments. The tenor shall be six (06) months from the Issue Date of each tranche. Similarly, principal to be redeemed as bullet payment six (06) months after the issue date. Profit rate is expected to set at Base Rate + 55 bps p.a. with a Floor of 5% & a Cap of 30%. Profit will be payable at Maturity of the Issue and will be calculated on a 365/366 -day year basis.
Cellular market of Pakistan is dominated by three large players and they collectively possess ~87% of market share, whereas ~63% of market is preliminary in the hands of two players Jazz & Telenor.
Overall performance of telecom sector has recently been impacted due to rising inflation and interest rates which caused an unprecedented increase in cost of doing business, USD-based high spectrum and license fee further creates liquidity challenges.
Despite all macroeconomic turbulence and sector-specific operational challenges, the topline of the Company posted ~14.3% growth in CY22. Similarly, during first half of CY23, it reported ~19.2% revenue growth as better pricing strategy helped to improve average revenue per user (ARPU). Jazz has expanded its 4G network with 1500 new 4G sites. Currently, there are 125 million 3G/4G subscribers and Jazz holds the position of market leader. Ratings draw comfort from formidable sponsors support and strong business volumes.
VEON is committed to strengthening country’s digital ecosystem and establishing the largest tier-III certified data center “Jazz Digital Park”; developing the largest homegrown OTT platform, Tamasha, and various cloud platforms.
“Financial risk profile of the Company exhibits a stable outlook demonstrated by healthy cashflows, comfortable coverages, and working capital cycle. Capital structure is leveraged however the parent company reportedly has ample cashflows” PACRA states.
PACRA assign preliminary rating of AA with stable outlook for the instrument. The claims of the Sukuk holders will rank superior to the claims of ordinary shareholders. The Sukuk shall be rated, unsecured, and privately placed to be issued as redeemable capital under Section 66 of the Companies Act 2017.