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After scoring a record Rs229 billion topline in CY21 with double-digit growth, Pakistan’s mobile broadband leader has had a steady start in the early months of 2022. As per the latest financial results published by Veon, the parent company of Pakistan Mobile Communications Limited (‘Jazz’), total revenues at Jazz grew by 9 percent year-on-year to reach Rs60 billion (Rs5bn more) during 1QCY22.

Topline growth at Jazz would have been higher if it were not for the December 2021 mini-budget’s increase in WHT on pre-paid airtime recharge from 10 percent to 15 percent, as well as the regulatory body’s decision to reduce by about 30 percent the mobile termination rate to 50 paisa per call. Besides, the inflationary pressures may also be making a dent in folks’ connectivity-related spending.

The main indicator of ‘average revenue per user’ (ARPU) is on a steady decline, just as with rest of the industry. Jazz ARPU fell 1 percent year-on-year in the Jan-Mar 2022 quarter to Rs244 per month. This nominal decline is magnified in dollar terms amidst the double-digit PKR depreciation.

Just as in recent quarters, data revenues are providing the energy to the topline. During the quarter under review, Jazz data revenues increased 20 percent year-on-year to reach Rs25 billion, an increment of over Rs4 billion vis-à-vis 1QCY21. With over 51 million data customers, data revenues accounted for 42 percent of Jazz topline in 1QCY22, up roughly 2 percentage points over the same period last year.

Within data users, it is the 4G users that are showing exceptional growth (as 3G users seem to be on an accelerated decline). The top cellular carrier has been expanding its 4G network by adding hundreds of additional sites every quarter. Its 4G network coverage stood at 56 percent as of March end 2021. At the end of March 2022, Jazz had 37 million 4G users, up 28 percent (8mn more users) compared to March 2021. Data usage remains high at 5GB/user in the analysis period, up by 15 percent year-on-year.

Despite a tough operating environment marked by entrenched, broad-based inflation and taxation-related impacts on the topline, Jazz managed to grow its EBITDA out-of-proportion with the topline increase. The 1QCY22 EBITDA stood at Rs28 billion, higher by 14 percent year-on-year. TheEBITDA margin was raised to 47 percent of revenues in the quarter, up from 45 percent seen in the same period last year.

While Veon’s Jazz business is sound in Pakistan, it is facing group-level uncertainties in the wake of Russia’s war in Ukraine. Majority of Veon group revenues come from those two countries at war; and the group may have to book material impairment charges on its assets there. Veon’s credit rating has taken a hit lately. The situation is complicated by the fact that a prominentRussian oligarch’s firm holds sizable shares in Veon. He was sanctioned by the West recently and he had to step down from Veon board.

The Veon board noted in its latest report that the “ongoing conflict between Russia and Ukraine” and resulting Western sanctions as well as “responses by our service providers, partners, suppliers and other counterparties” will “continue to significantly impact our results and operations in Russia and Ukraine, and may significantly affect our results and operations in the other countries in which we operate”. Let’s see how situation unfolds in coming months for Veon and whether it has any impact on Jazz here at home.


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