Press Release

VIS Assigns Preliminary Short-Term Rating to Short-Term Sukuk X (STS-X) of Pakistan Telecommunication Company Limited (PTCL)

Karachi, January 10, 2025: VIS Credit Rating Company Limited (VIS) has assigned preliminary rating of ‘A1+ (plim)’ (A one plus preliminary) to PTCL’s proposed PKR 10 bn Short-Term Sukuk X (STS-X). The short-term rating of 'A1+ (plim)' denotes Strongest likelihood of timely repayment of short-term obligations with outstanding liquidity factors. The outstanding entity ratings of PTCL are ‘AAA/A1+’ with a ‘Stable’ outlook.

Pakistan Telecommunication Company Limited (PTCL), initially a state-owned entity, was incorporated as a public limited company on December 31, 1995 taking over the telecommunication business from Pakistan Telecommunication Corporation (PTC) as per the Pakistan Telecommunication (Re-organization) Act 1996. Listed on the Pakistan Stock Exchange Limited (PSX) with headquarter in Islamabad, PTCL provides a wide range of telecommunication services across Pakistan, including Azad Jammu and Kashmir and Gilgit Baltistan. PTCL also has wholly owned subsidiaries, which include Pak Telecom Mobile Limited (PTML) and U-Microfinance Bank Limited. In addition, PTCL is also in the process of acquiring Telenor Pakistan (Private) Limited.

PTCL plans to issue a rated, unsecured and privately placed, STS-X of PKR 10 bn, based on suitable Shariah-compliant mode of short-term Islamic Finance facility. The instrument being arranged by a leading commercial bank, will have a maturity of up to six months; the proceeds will be used to finance the working capital requirements of the Company. The profit rate on STS-X will be 3 Months KIBOR +0.05%.

The assigned ratings are underpinned by medium business risk profile of the telecom sector owing to the non-cyclical nature of the industry with low sensitivity to inflationary pressures on operations conducted. Moreover, business risk also factors in capital-intensive technological changes and highly regulated nature of the sector serving as natural high barrier to entry for new entrants.

Regarding the company's financial risk profile, revenue experienced positive momentum; however, the net margin faced slight pressure due to increased financing costs. PTCL's liquidity position has come under slight stress relative to its historical benchmark with the current ratio remaining below 1x and a prolonged working capital cycle. The company has been leveraging its financing to support expansionary capital expenditures and extend financial assistance to its subsidiaries, leading to increase in capitalization indicators, though they remain at manageable levels.

The assigned ratings draw comfort from PTCL's strategic market position as the country’s leading Integrated Information Communication Technology Company, having the largest fixed-line network. The ratings incorporate the issuer's strong sponsor profile, given that the GoP holds significant shareholding of 62% while Etisalat Group of UAE holds a 26% equity stake with management control. The ratings also consider the financial soundness and management acumen of Etisalat Group; rated AA- and Aa3 by S&P and Moody's, respectively.

For further information on this ratings announcement, please contact 021-35311861-64 or email at info@vis.com.pk.

Rating the Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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