Economic headwinds may be strong, but the top cellular operator is proving up to the task. As per latest half-yearly financial results announced by its parent company Veon, Jazz showed a strong double-digit growth in nearly all business indicators for the six-month period ended June 30, 2019. As revenues went significantly up and costs were rather controlled, Veon received strong dollar returns from its Pakistani subsidiary, despite significant PKR depreciation in the period under review.

The Jazz top-line improved by 22 percent year-on-year in 1HCY19 to cross the 100 billion rupee milestone for the first time. This healthy organic growth was affected by a weaker rupee in the period and thus the dollar top-line went down by 3 percent year-on-year to $710 million. Still, rupee growth is well ahead of the inflation – something which will pay off in group financials if PKR gains some stability later this year.

The real growth in mobile revenues is driven by a number of factors. One, Jazz is aggressively adding customers to its subscriber base, which reached 59.5 million in total as of June 2019. Specifically, data users are growing by more than a million per month, reaching 37 million in June. Second, the operator is focusing on attracting high-value customers – that's also what the Warid acquisition in 2016 was about.

Third, and most important, Jazz has shown the initiative to raise prices of its packages so that it can recover some of the rising operational costs. No wonder, then, Jazz's monthly average revenue per user (ARPU) is up in double digits lately. Compared to Rs237 in Apr-Jun 2018, monthly ARPU shot up to Rs268 in 2QCY19 – growth is coming from both rising data uptake and data usage. In the most recent quarter, monthly data usage almost doubled to 1.8GB per user, as per the Veon 2Q report.

The top-line growth was supplemented by lower service and corporate costs to assist in improving Ebitda. In rupee terms, Ebitda grew in 1HCY19 by roughly a third to reach Rs53 billion. As this growth is more than proportionate to the top-line gain, Ebitda margin went up to 52 percent, from 48 percent in the year-ago period. Thanks to rupee growth also outdoing the rate of currency depreciation, Ebitda also improved by 5.5 percent in dollar terms to reach $369 million for the half year.

The half-yearly performance must have pleased the Veon HQ. Operationally Jazz looks set to weather the economic slowdown – however, the loss of service fees on account re-charge might hurt. Uncertainty is still looming over Warid license renewal, for which PTA has required $450 million (plus a 13% tax), as per Veon. Jazz, which has signed two seven-year term facilities totaling almost Rs60 billion in June, has until August 21 to appeal at the Islamabad High Court. Let's see which way the cookie crumbles.

Copyright Business Recorder, 2019