Karachi: The VIS Credit Rating Company Limited (VIS) has finalized the short-term rating for Pakistan Telecommunication Company Limited’s (PTCL) fifth Short Term Sukuk (STS-V) at 'A-1+', the highest rating for short-term financial instruments. This rating signifies a strong likelihood of timely payment and outstanding liquidity, only slightly less secure than the short-term obligations of the Government of Pakistan.

According to VIS Credit Rating Company Limited, the 'A-1+' rating reflects PTCL's robust market position and financial stability. PTCL, which transitioned from a state-owned entity to a public limited company in 1995, dominates Pakistan’s telecommunications sector with the largest fixed-line network, holding over 71% market share. The company has recently been active in expanding its operations, including the ongoing acquisition of Telenor Pakistan.

PTCL’s STS-V, valued at PKR 2.5 billion and arranged by a leading commercial bank, was issued on June 25, 2024, with a maturity of up to six months. The proceeds from this Sukuk, which complies with Shariah principles, are designated for financing the company’s working capital requirements. The profit rate of the STS-V is set at 6M KIBOR plus 20 basis points per annum.

The favorable rating also takes into account the strategic significance of PTCL’s shareholders. The Government of Pakistan retains a 62% share, while the Etisalat Group from the UAE holds a 26% stake along with management control. The strong financial and managerial backing from Etisalat Group, which itself holds high ratings from S and P and Moody’s, bolsters PTCL’s rating.

Moreover, the telecom sector's medium business risk profile, characterized by its capital-intensive and highly regulated nature, also supports the high rating. This structure acts as a significant barrier to new entrants and provides a stable operational base for PTCL, further underscoring the strength and stability of its financial practices.