Fitch Ratings has affirmed Sri Lanka-based telecom company Dialog Axiata PLC’s National Long-Term Rating at ‘AAA(lka)’. The Outlook is Stable.
In affirming the rating, Fitch said Dialog’s standalone credit profile of ‘AAA(lka)’ is underpinned by its market leadership in the growing mobile and pay-TV industry segments.
“We believe the company is in a position to gain revenue market share from smaller telcos, with its superior 3G/4G networks capability. It has a solid financial profile with a revenue growth of 8%-9%, stable operating EBITDAR margin of around 35%-37%, and low Fitch-forecast 2018 FFO adjusted net leverage of 1.2x.”
Fitch believes Dialog would receive support from its 83%-parent, Axiata Group Berhad (Axiata) of Malaysia, if its standalone credit profile were to weaken. Dialog and its parent continue to have moderate linkages, which include sharing key management personnel, a common name and common creditors, which could result in reputational risk to Axiata should Dialog fail.
Dialog’s rating is unaffected by the acquisition of Colombo Trust Finance PLC (CTF), a small non-bank financial institution, for Rs. 1.3 billion completed in November 2017. Dialog is likely to use it to expand its digital financial services strategy and supplement its payment settlement platform. Dialog is likely to infuse equity of Rs. 2.05 billion in CTF during 2018-2020 in order to meet an enhanced minimum regulatory capital requirement of Rs. 2.5 billion by 1 January 2021. CTF’s capital structure should then be strong enough to prevent becoming a cash drain on Dialog over the rating horizon.
Fitch has fully deconsolidated CTF’s debt (which is mainly in the form of deposits) and EBITDA from Dialog in its analysis.
