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Karachi, VIS Credit Rating Company Limited has assigned a preliminary rating of ‘A-1+’ to the proposed Rs. 5.0b Short-Term Sukuk (STS) of Pakistan Telecommunication Company Limited (PTCL). This rating, which indicates the highest certainty of timely payment, positions PTCL’s STS among the most secure short-term obligations, just below the risk-free short-term obligations of the Government of Pakistan (GoP). The outlook on the assigned long-term rating is stable.
According to VIS Credit Rating Company Limited, the rating reflects PTCL’s strong position as Pakistan’s leading Integrated Information Communication Technology Company, boasting the largest fixed-line network and a 71% market share. The rating also considers the strong sponsor profile, with significant shareholding by the GoP (62%) and management control and a 26% equity stake by Etisalat Group. The financial soundness and management acumen of Etisalat Group, rated AA- and Aa3 by S and P and Moody’s respectively, also contribute to this rating.
The ratings take into account PTCL’s low business risk profile in the non-cyclical telecom sector, reliance by other operators on PTCL’s infrastructure, and low sensitivity to inflationary pressures. The telecom sector’s capital-intensive and highly regulated nature, serving as a high barrier to entry for new entrants, is also factored into the ratings. PTCL’s subsidiaries, including Pak Telecom Mobile Limited (UFONE) and U-Microfinance Bank Limited, further solidify its market position.
Financially, PTCL is marked by positive revenue momentum, sizable margins, profitability indicators, adequate liquidity profile, and substantial debt-service coverages. Despite incremental long-term borrowings for capital expenditure and support of PTML, the company’s gearing remains manageable and aligned with the assigned ratings. PTCL’s plans for further equity injection into PTML for capital expenditure are expected to increase gearing indicators, offset by positive profitability metrics and an asset monetization strategy.
PTCL intends to offer a rated, unlisted, privately placed STS of Rs. 5.0b to eligible investors, arranged by a leading commercial bank with a maturity of up to six months. The proceeds will finance PTCL’s working capital requirements. The Sukuk issue, based on Shirkat-ul-Aqd, will have a profit rate of 6M KIBOR+20bps. The rating will depend on PTCL’s retention and improvement in market share, alongside maintenance of capitalization and liquidity indicators.
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