Jazz Grows its Data Revenue 28% YoY

Jazz continued to show positive growth despite the lockdown which led to the temporary closure of Jazz stores, lower business activity, and an overall economic slowdown.

The company remained focused on expanding its digital services to drive further growth. During Q2 2020, its data revenue increased significantly by 27.6% year on year.

Jazz said that data revenue growth was driven by an increase in 4G subscriber base of 72% YoY and continued increase in data usage through higher bundle penetration and network expansion.

However, it saw a decrease of 7.9% in total revenue during the second quarter as it was reported at Rs. 47.1 billion during Q2 2020 as compared to Rs. 51.1 billion.

Revenues were impacted by last year’s tax regime changes and the negative impact of lockdowns. Excluding the tax regime changes revenue would have increased by 0.5% YoY despite the pandemic.

Digital financial service revenue decreased by 14.9% YoY due to the lockdown which led to lower economic activity with the temporary removal of fees on money transfers by the State Bank of Pakistan, representing a significant drag on revenues.

However, the number of monthly active mobile wallets continued to increase reaching 8.1 million, a YoY increase of 41%. Jazz’s self-care app, Jazz World, has crossed 6 million monthly active users (MAUs), a YoY increase of 305% in Q2 2020, making it the largest telco app in Pakistan.

Jazz TV and content services are also seeing encouraging momentum with content services (Bajao & Deikho) showing encouraging progress.

Subscriber Base Increased by 5.6%

Jazz’s subscriber base increased during the second quarter by 5.6% YoY reaching 62.8 million, supported by multiple sales channel initiatives during the lockdown and lower churn. This increase was also supported by greater subscriber engagement and a higher number of data customers on the back of the continued expansion of the data network, resulting in a higher 4G subscriber penetration of 30.6%.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased year on year by 20.6%, mainly due to changes in the tax regime and the re-classification of amortization of the Ex-Warid license from below EBITDA to service costs (Rs. 0.8 billion). This relates to a payment made in the form of security (under protest) as per the options given in the PTA’s license renewal order.

Excluding tax regime changes in 2019 and the reclassification of license amortization in 2020, EBITDA would have decreased by 6.4% YoY. The EBITDA margin was 46.1%, decreasing by 7.4% YoY, impacted by the factors mentioned above. Increased investment in JazzCash was also a drag on margins.

In Q2 2020, CAPEX excluding licenses increased to Rs. 14.3 billion, mainly due to 4G capacity expansions, network rollout, and the adverse impact of foreign currency. At the end of Q2 2020, the population coverage of Jazz’s data network was more than 62%.

Below are the financial highlights for Q2 2020:

Ex-Warid License Renewal Decision

According to the details, the ex-Warid license renewal was due in May 2019. Pursuant to the directions from Islamabad High Court, Pakistan Telecommunication Authority (PTA) issued a license renewal decision on 22 July 2019 requiring payment of $39.5 million per MHz for 900 MHz spectrum and $29.5 million per MHz for 1800 MHz spectrum, equating to an aggregate price of approximately $450 million (excluding advance tax of 10%). On 17 August 2019, Jazz appealed PTA’s order to the Islamabad High Court.

On 21 August 2019, Islamabad High Court suspended PTA’s order pending the outcome of the appeal and subject to Jazz making payment in the form of security (under protest) as per the options given in the PTA’s order.

In September 2019, Jazz deposited approximately $225 million in order to maintain its appeal in the Islamabad High Court regarding PTA’s underlying decision on the license renewal.

There were no specific terms and conditions attached to the deposit. On May 18, 2020, Jazz had to deposit a further payment of $57.5 million (under protest) as security.

A hearing date before the Islamabad High Court was scheduled for 9 April 2020 but was adjourned in light of court closures due to COVID-19.