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It pays to invest in building some scale. Despite a difficult operating environment, Pakistan’s telecom market leader posted quite an exceptional performance last year. Latest financial results published by Veon, which is the parent company of Pakistan Mobile Communications Limited (‘Jazz’), show that the topline at Jazz had increased by a solid 15 percent year-on-year to reach Rs229 billion in CY21, thanks mainly to strong growth in (mobile) data revenues amid rising investments in 4G network enhancement.

Data is the name of the game, and Jazz seems to be competing in this space better than other players. The operator has been pumping more and more investments into its 4G network expansion. Its overall capex reached a massive amount of Rs52 billion in CY21, higher by 29 percent year-on-year, as per Veon. At the end of 2021, Jazz 4G population coverage had reached 65 percent, up from 59 percent at the end of 2020. Last year, the operator added nearly 1,500 additional 4G network sites, as per Veon.

No wonder data revenues continue to soar. These proceeds clocked Rs87 billion in CY21, growing 26 percent year-on-year. Data revenues, which have more than doubled since 2018, equated 38 percent of overall Jazz topline in CY21 (CY20: 35%). The operator’s strategy helped it amass 51 million data users by the end of 2021, growing 16 percent year-on-year. About 69 percent of data users on Jazz network at the end of 2021 were 4G users, whereas the same ratio was 57 percent at the end of 2020.

Compared to Jazz data revenues that doubled in three years by CY21, its data users took a bit longer (five years) to double by CY21. This suggests that while market competition for data users is high, Jazz was able to monetize its 4G network better by attracting high-paying users. However, the leading operator needs to work on its ‘average revenue per user’ (ARPU). Monthly ARPU improved a bit in 2021, but it is yet to climb back to pre-pandemic level. Besides, in dollar terms, ARPU has lost much in recent quarters.

Jazz ARPU is stuck (despite impressive data revenue growth) below the Rs250 per month level. This is a sector-wide problem. It will remain a long fight for operators in this market to grow data revenue’s share in their topline, and Jazz also has more room to improve in that direction. The operators all require additional spectrum to significantly expand their 4G network coverage without compromising quality of service for existing users. And spectrum, well, it is an expensive purchase. Waiting for next auction date!

Despite the topline boost, growth in Jazz earnings was proportionally lower, as prices of utilities, fuel and other goods/services rose last year. Jazz EBITDA grew by 5 percent year-on-year in CY21 to fetch Rs105 billion – an all-time-high figure for the operator. As topline growth was much higher than that, the EBITDA margin dropped from 50 percent in CY20 to 46 percent in CY21. “EBITDA growth was impacted negatively by the ongoing investment into Mobilink Bank and JazzCash,” noted Veon in its latest report. Let’s see what 2022 has in store for Veon’s business in Pakistan.

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