International credit rating agency Moody's has affirmed the 'A2' long-term issuer rating of Ooredoo, as well as the 'A2' backed senior unsecured ratings on Ooredoo International Finance and the ‘(P)A2’ backed senior unsecured medium-term note programme rating under Ooredoo Tamweel.
The outlook on all the ratings is "stable", reflecting Moody's expectation of sustained operating performance in the next 12-18 months and a gradual deleveraging within its guidance for the rating. The outlook also factors in the company's shift away from capital-intensive international expansion and towards optimising existing operations.
The affirmation of the ratings reflects the Ooredoo's resilient performance in 2020 despite the impact of the Covid-19 outbreak. In 2020, revenue and EBITDA (earnings before interest taxes depreciation amortisation) declined by 4% and 6% respectively compared to 2019.
Moody's expects the negative trend to reverse in 2021, driven by a continued increase in revenue in Indonesia as well as a slight increase in revenue in Qatar, as the economy recovers.
The rating agency expects Ooredoo's EBITDA margin to improve to levels around 45% over the course of the next couple of years as the company will benefit from the efficient rollout of future cost optimisation programmes.
While Ooredoo's leverage and cash flow metrics have weakened slightly in 2020 compared to 2019, the telecom company’s ratings “remain well positioned” within its 'baa2' baseline credit assessment (BCA) and 'A2' long-term issuer rating.
Ooredoo's BCA and issuer ratings continue to benefit from the company's leading position in the high margin and resilient Qatari telecommunication services market where it holds a 75% market share and one of the top players in the large-scale Indonesian market.
Besides, Ooredoo has strong liquidity with a cash balance and undrawn committed credit facilities covering all group debt maturities for the next couple of years, despite high dividend payments.
The BCA also reflects Ooredoo's exposure to foreign-currency volatility; mitigated by the fact that operating subsidiary debt is substantially in local currency.
Ooredoo's ‘A2’ issuer rating reflects its standalone creditworthiness as expressed by a BCA of baa2, combined with a 'high' level of dependence and a 'high' level of support from the government. Moody's support assumptions remain unchanged.
Ooredoo has a strong liquidity profile. As of December 31, 2020, Ooredoo had QR14.6bn in group cash and undrawn committed dollar-denominated credit lines of QR637mn available at the Ooredoo level.
This, in addition to QR9.3bn of expected funds from operations in the next 12 months, would more than cover debt maturities (including lease liabilities) of QR6.3bn, the expected capital spending of QR5.3bn and the dividend payments of QR1.1bn during the same period, Moody's said.