Pakistan Telecommunication Company Limited (PTCL) has been assigned initial long term entity rating of ‘AAA’ (Triple A) and short term rating of ‘A-1+’ (A-One Plus) by JCR-VIS Credit Rating Company Limited (JCR-VIS). The assigned ratings reflect PTCL’s leading market position, extensive network infrastructure, strong financial risk profile and adequate business risk profile.
Long term rating of AAA signifies highest credit quality with negligible risk factors being only slightly more than those for risk-free GoP’s debt. Short term rating of A-1+ signifies highest certainty of timely payment, healthy short term liquidity including internal operating factors and/or access to alternative sources of funds, and is below risk free GoP’s short term obligations. Outlook on the assigned ratings is ‘Stable’.
PTCL continues to enjoy market leadership position in most business segments that it operates. PTCL has a market share of 80% in the documented broadband segment, around 90% in the fixed line voice segment and around 30% in the wireless data segment. PTCL’s share in the IP Bandwidth market stands at around 60%. Despite risk of product substitution from CMOs (for fixed line voice segment) and competition from OTT apps (for international business), business risk profile is supported by healthy growth outlook for broadband and corporate services segment. The ratings incorporate PTCL’s debt free balance sheet and abundant liquidity, important elements that provide the company with financial flexibility and support its rating.
According to JCR-VIS, revenues of the telecom sector in Pakistan have grown at a CAGR of 2.4% over the last 5 years. Moreover, with increase in number of subscribers, tele density has increased to 73% while broadband penetration stood at 29% leaving room for significant demand growth.
Furthermore, JCR-VIS recent findings conclude that four Cellular mobile operators (CMOs) currently continue to dominate the market in Pakistan and generate around four-fifth of the total revenues. Data business remained the main driver of growth after voice business stagnation. CMOs continue to face pricing challenges in a competitive market as reflected by low average revenue per user (ARPU) vis-à-vis regional peers. The remaining one-fifth of the revenues is generated through Local Loop, Long Distance International and Wireless Local Loop segment.
JCR-VIS further validates that the Wire line broadband segment has significant room for growth given that only 5% of the household having access to Wire line broadband vis-à-vis 48.1% average in Asia and 18% in Africa. Given the focus on improving service quality and strengthening in network infrastructure through the network transformation project (NTP), PTCL is well positioned to benefit from growth potential in the broadband segment.