In an internal memo distributed to the staff earlier this week, Jazz CEO Aamir Ibrahim expressed his concern about the nation’s economic prospects and its negative repercussions on Jazz’s operations on Tuesday.
Profit was able to receive an official message from the Telco Chief that stated, “I am increasing the level of this problem to critical as we begin into some difficult but essential decisions.”
The current predicament of telecom businesses is further highlighted by the addition of this news to the chain of events. Due to high inflation rates and rising energy prices, the industry is confronted with rising operational expenses. Telcos Energy Concerns: Needless Whining or a Real Issue? By Profit has additional information on this.
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.
To read our blog on “‘The soul of our organization is to empower lives and livelihoods of women through tech’: Jazz CEO,” click here.