ISLAMIC BOND TAKES PAKISTAN MOBILE
Mobilink, Pakistan
Installing, operating and maintaining a countrywide mobile network in Pakistan
Background
Pakistan is currently the eighth largest mobile telecommunications market in
the world, with more than 120 million subscribers, but there is still room for
expansion. Pakistan Mobile Communications Ltd (Mobilink), the largest
telecoms operator in Pakistan, is leading the way in providing network
coverage to those living in remote parts of the country.
Research indicates that a 10% increase in broadband coverage can boost
GDP in a developing country by up to 1.4%12. With the government likely
to issue 3G licences in 2014, Mobilink wants to take advantage of this
opportunity to expand the coverage of its network.
In addition, Mobilink has developed partnerships to launch an SMS mobilebased literacy programme that is increasing literacy rates among women in
the rural areas of Pakistan. So far 6,000 women have benefitted from the
programme. GuarantCo has identified an opportunity to develop the
programme in an even more developmental direction by using TAF funding
to expand literacy support into the remotest and most challenging regions of
Pakistan.
The deal
CASE STUDY • Mobilink, Pakistan
PIDG IN DEVELOPMENT
The Private Infrastructure
Development Group (PIDG)
mobilises private sector investment
to assist developing countries in
providing infrastructure vital to
boosting their economic growth
and combating poverty.
For more information on our work,
go to www.pidg.org
Role of PIDG
To fund this capital expenditure, Mobilink decided to issue a local currency Sukuk (Islamic bond) of up to
US$75m in local currency. But given the limited size of the corporate bond market in Pakistan, existing
investors had reached their regulatory limits in terms of their exposure to Mobilink or to the telecoms
sector. Therefore Mobilink approached GuarantCo to support the transaction, the first time that a Sukuk
issue has been backed by a third-party guarantee in Pakistan. GuarantCo’s involvement helped existing
investors overcome their regulatory limits and also, by improving Mobilink’s local credit rating from AA- to
AA+ and developing an innovative Shariah compliant structure, enabled new, more conservative, Islamic
investors to participate. Over 60% of the issue was taken up by investors which had not previously supported
Mobilink, and the broadening of their investor base has had a positive impact on the cost of borrowing for
their subsequent financings, thus helping keep their mobile services affordable.
Of particular note was the leveraging that GuarantCo achieved. GuarantCo’s guarantee amounted to only
14% of the Sukuk proceeds, demonstrating how efficient guarantees can be in delivering a development
return for donors.
The involvement of GuarantCo in this Sukuk transaction required substantial legal work on behalf of
Mobilink and the Pakistani capital market regulator to adapt Sukuk rules to accommodate third party local
currency guarantees. TAF is assisting this project by partially covering the legal costs incurred by
Mobilink in resolving the legal and regulatory issues associated with the GuarantCo-supported transaction.
DEVELOPMENT IMPACT
Private Sector investment
Total investment commitments
US$658m
Fiscal benefits
US$456m during first five years of operation to government of Pakistan.
Job Creation
Short term
100 people
Long term
100 people
Additional Benefits
 Financial additionality
The Service Ijara was an innovative solution developed by GuarantCo to improve
Mobilink’s liquidity by enabling existing investors to overcome their regulatory
limits and by improving Mobilink’s current local credit rating thereby, attracting
new conservative investors to support the bond.
 Design additionality
GuarantCo plan to apply for a TAF grant to support the extension of a successful
joint UNESCO and Moblilink SMS-based literacy programme to include inaccessible
regions of north-west Pakistan. It will address gender gap in literacy rate by
supporting an additional 2,500 women and girls.
The Service Ijara is the first product of its kind in Pakistan and therefore helps to
build new products and capacity in the local capital markets.
 Demonstration effect
The Islamic Bond (Sukuk) was issued in line with GuarantCo’s mission to open up
domestic capital markets to support essential infrastructure finance. It demonstrates
to others a viable way to raise finance from financially conservative investors
through enhanced credit rating and therefore helps build new products and capacity
in the local capital markets. It also has potential for replication in some
African markets.
CASE STUDY • Mobilink, Pakistan