Jazz Urges Workers To Prepare For Consequences
July 27, 2022 / By Zunair Tahir / Pakistan News
In an internal message distributed earlier this week to the staff of the firm, Jazz CEO Aamir Ibrahim expressed his concern on the economic future of the nation and its negative impact on Jazz’s operations on Tuesday.
As we begin to make certain difficult but essential decisions, I am raising the degree of this problem to critical, according to the official message from the Telco Chief that Profit was able to receive.
CEO Warns Of Tough Times Ahead
This report continues the series of incidents that highlight the dire state of telecom firms in recent years. Rising operational expenses as a result of high inflation and rising energy prices are an issue for the business. (Read Profit’s article, Telcos Energy Concerns: Needless Whining or a Genuine Problem, for more information.)
Additionally, due to the high cost of capital and a declining rupee, the international players in the industry have reduced their expectations of profits from Pakistani operations. The benchmark rate used to determine how much value the cash flows generated in the future would have in comparison to the current day is the cost of capital. (E.g. A 250ml juice box was Rs15 a few years ago; today, the identical item costs Rs25. As a result, the Rs 15 is now worth less than it was a few years ago.)
High interest rates, risk premium—a presumed return for making investments in high-risk jurisdictions—and securities are the main causes of the cost of capital. Reputable economist Professor Aswath Damodaran has assessed Pakistan’s equity risk premium to be above 15%, greater than nations like India, Bangladesh, Egypt, and other African nations.
These changes have reduced the value of Telenor ASA’s local businesses, which are owned by Telenor Pakistan. The recoverable amount of its assets in Pakistan is now projected to be about $600 million, down from $850 million due to this impairment. (Read more about it in Profit’s piece Telenor Impairment: Has the group given up?)
Furthermore, PTCL reported a net loss of Rs 3 billion in its financial statements for the six months ended June 30, 2022, as a result of high operational costs brought on by the rise in energy prices and skyrocketing interest rates, which increased its finance costs.
In the corporate message, Jazz’s CEO also acknowledged the aforementioned difficulties, saying, “We have all individually been touched by the growing cost of products and services. Even jazz is not immune to the current economic downturn. In actuality, the interest rate increase and the dramatic increase in gasoline and energy prices have a significant impact on us.
In Pakistan, cellular mobile operators (CMO) are in constant need of a business strategy that would enable them to escape the vicious cycle of low average revenues, growing operational expenses, and consequently slim profit margins.
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