Global credit rating agency Moody’s has affirmed ‘A2’ long-term issuer rating of telecommunication services provider Ooredoo as well as ‘A2’ senior unsecured ratings of Ooredoo International Finance (OIF), a wholly owned finance vehicle, and Ooredoo Tamweel, all with “stable” outlook.
“The affirmation of the A2 ratings with a stable outlook reflects Ooredoo’s robust standalone credit profile with around 70% of Ebitda (earnings before interest taxes depreciation amortisation) generated outside Qatar in 2016, as well as the company’s cash balances which are sufficient to meet debt obligations at the parent and group level for two years”, Douglas Rowlings, a vice president and senior analyst at Moody’s, said.
The ratings reflects Moody’s expectations that the standalone credit profile of Ooredoo would remain at levels commensurate with its ‘baa2’ baseline credit assessment (BCA), which excludes any potential uplift from the government, recognising the expected resiliency of the Qatari economy and the defensive nature of the telecommunications sector in Qatar given the non-discretionary characteristics of expenditure on telecommunication services.
Ooredoo’s ‘baa2’ standalone BCA further recognises Ooredoo’s shift away from expansionary investments and towards the optimisation of its existing portfolio of assets.
Moody’s expects that net debt/Ebitda would continue to fall, given its lower capital expenditure requirements, which would now be limited to smaller ticket items. At the same time, Ooredoo’s BCA factor in that most of the company’s debt funding is matched to the underlying currency of cash flow generation at its operating subsidiaries.
Ooredoo’s credit profile continues to benefit from the support and rating uplift offered by the government, which owns 68.6% of it through direct and indirect holdings. The capacity of the government to support Ooredoo remains high, despite the fiscal pressures associated with the low-oil price environment that is partially offset with a low fiscal breakeven oil price, Moody’s said.
Reasoning for the “stable” outlook on ratings, Moody’s said Ooredoo’s shift away from capital-intensive international expansion towards optimising existing operations would likely ensure credit metrics remain comfortably in line with those set for the ‘baa2’ BCA.
Ooredoo’s liquidity position is “excellent”, with “significant” cash resources available together with robust cash flow generation expected to meet forecast cash uses for the next 18 months and upcoming maturities, with cash balances alone covering all group debt maturities to 2018.
Expecting Ooredoo’s liquidity to further strengthen as capital expenditure are slated to be limited to small-ticket items going forward and cost savings are realised across the group, Moody’s said Ooredoo’s liquidity profile further benefits from a long-dated and staggered debt maturity ladder with over 90% of funding matched to operating cash supporting its repayment.