The Pakistan Credit Rating Agency Limited (PACRA) has maintained the long-term and short-term entity ratings of Pakistan Mobile Communications Limited (PMCL) at AA- (Double A minus) and A1 (A one) respectively. The rating of the secured and listed TFC of PKR 2,000mln has been maintained at AA-, while a preliminary rating of AA has been assigned to proposed, listed, and secured Sukuk issue of PKR 6,900mln. These ratings denote a very strong capacity of timely payment of financial commitments.
The ratings reflect PMCL's sound business profile. The company, with largest operational network and a stable share in country's subscriber base, maintains leading market position. PMCL has fared well against increasing relative competitiveness of few of the peers. The company has optimized its technological infrastructure, limiting additional CAPEX requirements for existing operational scale. This has benefited PMCL's financial profile, as free cashflows are being directed to reduce debt obligations. PMCL has outsourced maintenance of its operational network. Although this is likely to positively benefit margins, managing the impact, if any, on quality of services and control environment would be important. PMCL has recently acquired 3G license. This being debt funded would push up the leveraging, which would rationalize along repayments. Existing and new cashflows are expected to keep coverages adequate. Meanwhile, discretion of the sponsor on receiving management fee and availability of supplier credit add comfort. Association of PMCL with one of the world's largest telecom operators - VimpelCom - remains a key rating factor.
The Company: PMCL is country's largest cellular telecommunication service provider, operating under the brand name of "Mobilink". PMCL commenced its operations in August 1994. PMCL is a wholly owned subsidiary of Global Telecom Holding (GTH), which in turn is majority owned by world's seventh largest telecom group - VimpelCom Limited. VimpelCom is rated Ba3 by Moody's.
The TFC: PMCL issued its third listed, secured TFC of PKR 2,000mln for a tenor of 4 years in April 2012. The mark up is payable quarterly at three month KIBOR plus 265bps. Consequent to a recent resolution by TFC holders, the rate has been revised down to K + 200bps. The principal redemption has started from 3rd month (Jul12) of issue and is following a staggered structure with 10%, 20%, 30%, and 40% in 1st, 2nd, 3rd, and 4th year (outsdanding principal: PKR 1,400mln).
Proposed Sukuk: The company intends to issue a Sukuk to fund part of its capex requirements. The instrument, amounting to PKR 6,900mln (including a green shoe option of PKR 2,100mln) would be listed. The profit is payable quarterly at three month KIBOR plus 210bps up to two years and a quarter and afterwards the margin over KIBOR will decline gradually on quarterly basis. The Sukuk has been provided a Partial Credit Guarantee of PKR 966mln. The guarantor is a foreign DFI "GuarantCO", owned by the governments of United Kingdom, Netherlands, Sweden and Switzerland.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
Analyst
Abdul Sami
(+92-42-35869504)
abdul.sami@pacra.com
www.pacra.com
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