(MENAFN - The Peninsula)
Moody's Investors Service (Moody's') yesterday affirmed the A2 long-term issuer rating of Ooredoo Q.P.S.C. (Ooredoo), as well as the A2 backed senior unsecured ratings on Ooredoo International Finance Limited, and the (P)A2 backed senior unsecured Medium-Term Note Program rating under Ooredoo Tamweel Limited. The outlook on all the ratings is stable. The affirmation of the ratings reflects Ooredoo's resilient performance in 2020 despite the impact of the COVID outbreak. In 2020, revenue and EBITDA declined by 4 percent and 6 percent respectively compared to 2019. This was mainly due to a revenue reduction in the prepaid segment as well as a significant decrease in revenues from roaming services. The weakness in Ooredoo's operations in oil exporting countries — such as Qatar, Kuwait, Oman and Algeria, has been partially offset by an improving performance in other markets such as Indonesia. 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 action also reflects Ooredoo's healthy, albeit declining EBITDA margins when compared to peers. Ooredoo's EBITDA margin declined to 44 percent in 2020 from 45.3 percent in 2019.
The rating agency expects Ooredoo's EBITDA margin to improve to levels around 45 percent over the course of the next couple of years as the company will benefit from the efficient rollout of future cost optimization programs. While Ooredoo's leverage and cash flow metrics have weakened slightly in 2020 compared to 2019, Ooredoo's ratings remain well positioned within its baa2 Baseline Credit Assessment (BCA) and A2 long-term issuer rating. Ooredoo's leverage (debt to EBITDA) and cash flow (retained cash flow to debt) metrics have deteriorated slightly to 3.0x and 23.4 percent in 2020 (including the prefunding of the $1bn bond maturing in February 2021 from 2.8x and 26 percent in 2019 and the rating agency expects those metrics to recover to 2019 levels over the course of the next couple of years as the company repays some of the debt maturing in 2021 and 2022 and EBITDA margins improve.
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 largescale Indonesian market; and 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; its presence in countries facing geopolitical risks such as Iraq (Caa1 stable) or macro-economic challenges such as Oman (Ba3 negative), which can create volatility in EBITDA; and a structural trend of data revenue, which makes up around 50 percent of the company's revenue, replacing voice revenue.
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 of Qatar (Aa3 stable). Moody's support a s s u m p t i o n s r e m a i n unchanged. The stable outlook reflects Moody's expectation of sustained operating performance in next 12-18 months and a gradual deleveraging within Moody's guidance for rating.
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