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Call it the taxman’s highhandedness or a telco’s intransigence, but the manner in which a lockdown was enforced on Pakistan Mobile Communications Limited (Jazz) HQ last week over a disputed tax liability does no favor to Pakistan’s dim FDI credentials. Veon, the parent company of Jazz, might be disappointed again, following the way license-renewal process has been handled. (For background, read this piece on telecom FDI published October 22). The HQ closure, which was reversed the following day by the IHC on October 29, happened shortly after Veon’s top leadership departed from a visit to Pakistan.

The day the operator’s Islamabad HQ was de-sealed, Veon was already scheduled to announce its group results for the third quarter. And its Pakistan subsidiary’s performance should lift the morale at the group HQ, albeit the spirit among Jazz employees is said to be down following the shocking developments last week. Jazz performance stands out among Veon subsidiaries, in part due to effective strategy, in part due to early resumption of normal order of economic activities in Jul-Sep, and in part due to the normalization in 3QCY20 of “administration fee reversal” in 3QCY19 that related to the apex court’s order last summer.

Operating revenues have grown by 12 percent year-on-year to reach Rs51 billion in the quarter ended September 30, 2020. And it comes after an 8 percent yearly decline in revenues for the corona quarter (Apr-Jun 2020). This is one of the strongest quarters for Jazz in recent past, buoyed by mobile service revenues. At work is the growth in the segment of mobile data, owing to strong expansion in 4G user base and new SIM sales in the quarter. Data usage among Jazz customers had nearly doubled in the quarter over last year to almost 4GB per user.

The key indicator of Average Revenue per User (ARPU) is in good spirits. ARPU stood at Rs242 per month in the quarter under review, up 3 percent from Rs234 a month in 3QCY19. ARPU has also shown recovery, of 5 percent, over the corona quarter. The indicator, however, is still way too low compared to the peak of Rs272 seen in 3QCY18. To further improve on this count, Jazz is focusing on acquiring and maintaining “higher quality of sales” – in other words, more high-end customers. Meanwhile, the DFS unit JazzCash continued to strengthen operationally by increasing its active user base.

The strong growth in Jazz Ebitda has helped Veon post better group earnings in the quarter. Jazz secured a 41 percent yearly growth in Ebitda, which stood at Rs31 billion in the quarter under review. This comes after a double-digit decline on this count in the Apr-Jun quarter. While some of the gains can be attributed to the reversal of Rs8.6 billion provisioning in the quarter, it appears that some level of cost-savings was also at work, which also took care of the Rs0.7 billion license-renewal payment in the quarter that has been treated as a “service cost” instead of “amortization cost”.

As a result, Ebitda margin surged to 62 percent in 3QCY20, compared to 45 percent in the same period last year and 46 percent in the preceding quarter. The operator spent way less on capex (excluding license fees) in the latest quarter (Rs4 bn), when lockdowns had been eased, compared to what it spent in the corona quarter (Rs14 bn), which was a period characterized by restrictions and lockdowns of varying intensity. Capex is lower on a yearly basis as well, by about a quarter. Jazz’s main focus is to enhance investments in its 4G network. Let’s see how recent events affect further capital spending.

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