Telenor Takes NOK 2.5 Billion Impairment Charge in Pakistan; We Highlight High Uncertainty

Narrow-moat Telenor's second-quarter highlight was an impairment charge in its Pakistani business unit of NOK 2.5 billion (over a pre-impairment capital employed of around NOK 9 billion for this business unit). In May 2022, Telenor was forced to pay an increased price of NOK 1.7 billion to renew a spectrum license after a ruling from the Supreme Court of Pakistan. In addition, Pakistan’s macroeconomic environment has been deteriorating recently, with inflation hitting 21.3% in June 2022, according to Bloomberg and the Pakistani rupee having depreciated 25% against the Norwegian krone in the past 12 months. Other Asian currencies to which Telenor is exposed (Thailand, Bangladesh, Malaysia) have appreciated since last year or remained relatively stable. We highlight our High Uncertainty Rating on Telenor given it generates more than 50% of revenue and EBITDA in Asian countries with no fixed-line presence and volatile political and economic environments. As a reminder, Telenor fully impaired its Myanmar business unit in 2021 due to a military coup in the country.