The leading mobile network operators (MNO) had a relatively good year in 2022, despite the macroeconomic turbulence and sector-specific operational challenges. Veon, which is the parent company of Pakistan Mobile Communications Limited (‘Jazz’), released its CY22 financials last week, in which the report showed that the Jazz topline (total revenue) had grown by 14 percent year-on-year to Rs261 billion. Due to PKR depreciation, however, the USD-based returns were negatively impacted.

Jazz’s topline growth in CY22 looks better than that of other MNOs that have reported their financials publicly of late. Size matters – but in addition to scale, Jazz also seems to have a better strategy to grow its mobile broadband user base in double digits. It is a competitive market, where growth from data revenues has already slowed down. Organic growth in data subscriptions is hard to come by, as 4G network expansion has been slower in recent years, with just about half the country under 4G coverage.

At the end of December 2022, Jazz had 41.3 million 4G users on its network, an increase of 18 percent since December 2021. This, along with pricing, has helped the MNO to improve its average-revenue-per-user (ARPU) metric. The monthly ARPU stood at Rs300 in the latest quarter (Oct-Dec 2022), up by 22 percent year-on-year. During CY22, Jazz increased its data revenues by 22 percent year-on-year to Rs106 billion. Data revenues provided 41 percent of the Jazz overall topline during 2022 (CY21: 38%). This share could be improved.

Jazz delivered comparatively higher EBITDA (earnings before interest, taxes, depreciation and amortization) growth of 28 percent year-on-year, reaching Rs134 billion in CY22. It appears that cost-saving measures were taken to counter the rising cost of electricity, fuel and back-up power sources. EBITDA growth was also assisted by a favorable court ruling that reversed a prior provisioning. As a result, EBITDA margin (in terms of topline) rose to 51.2 percent, up from 45.7 percent in CY21.

Driving double-digit data revenue growth in the future depends on pumping higher capex billions into the 4G network. However, capital spending slowed down at Jazz during CY22, growing just 1 percent year-on-year to Rs52 billion. With diluted dollar-based return, elevated costs of borrowing, macroeconomic headwinds and heightened political uncertainty, the case for higher capex in this market (where revenue growth has been slow and regulatory challenges continue to exist) may take some convincing at the HQ. Let’s see what CY23 has in store for the leading operator.