October 14, 2019: 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 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 segment with 90% share, wireline broadband segment with 80% share, and wireless data segment with 30% share.
While the company’s voice and wireless data segments are expected to remain under pressure due to continued shift towards mobile data and strong competition from Cellular Mobile Operators (CMOs), the strengthening of infrastructure with the completion of Network Transformation Project (NTP) will underpin growth in broadband and IPTV business.
The ratings also factor in low financial risk profile of the company, as reflecting in healthy cash flows generation and debt-free balance sheet despite significant capital expenditure over the past three years.
Going forward, ratings are dependent on PTCL increasing revenues, maintaining EBITDA margins and sustaining prudent financial policies (including debt free balance sheet), while further strengthening its market positioning. Ratings are also subject to maintaining good liquidity while investing adequate levels of capex to strengthen its competitive capacity.
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