VIS reaffirms entity ratings of Pak Telecom Mobile Ltd

November 23, 2023 (MLN): The VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Pak Telecom Mobile Limited (PTML) at ‘AA-’ for long-term and ‘A-1’ for short term with a stable future outlook, the latest press release issued by VIS showed.

The medium to long-term rating of ‘AA-’ denotes high credit quality coupled with strong protection factors.

The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors.

The previous rating action was announced on July 14, 2022.

The ratings assigned to PTML derive strength from its strong sponsor profile with the company being wholly owned by Pakistan Telecommunication Company Limited (PTCL).

PTCL is assigned "AAA/A-1+" ratings by VIS, and Etisalat is given "AA-" and "Aa3" ratings by S&P Global and Moody's respectively.

Further, the ratings drive comfort from the low business risk profile of the sector owing to the non-cyclical nature of the industry and high barriers to entry.

Post 4G Spectrum acquisition in September 2021, the company’s top line and ARPU levels have improved; however, the financial risk profile remains weak marked by a dip in margins, persistent incurrence of losses, inadequate cash coverages, and highly leveraged capital structure.

In order to address the issue, the management has introduced cost-cutting strategies including technological optimization and vendor negotiation coupled with revenue diversification and an increase in prices.

The aforementioned initiatives are projected to enhance gross margins while maintaining service quality and financial stability.

As per the management, to support the financial risk profile, any financial assistance in the foreseeable future will be in the form of equity injection as no additional long-term debt from commercial banks is planned to be obtained further.

The ratings are underpinned by strong sponsors' support by way of equity injection and will remain dependent on the restoration of profitability position coupled with improvement in liquidity and gearing indicators in the medium term.

Copyright Mettis Link News