Standard & Poor Cuts Indonesian Operator Debt Ratings

Standard & Poor's Ratings Services said that it had lowered its corporate credit rating on Indonesia's wireless operator PT Mobile-8 Telecom Tbk to 'B-' from 'B' and placed it on CreditWatch with negative implications. The rating on the US$100 million 11.25% guaranteed senior notes due 2013 issued by the company's wholly owned special purpose vehicle, Mobile-8 Telecom Finance B.V., was also lowered to 'B-' from 'B' and placed on CreditWatch with negative implications.

"These rating actions follow the release of the company's first quarter results, which were substantially below expectations," said Standard & Poor's credit analyst Manuel Guerena. "These results add to the company's network expansion setback caused by delivery delays from equipment providers, also the reason behind 2007 capex amounting to only 40% of its original US$150 million plan. As competitors invested heavily to expand coverage, Mobile-8's market share declined. We understand that the company is looking to resume its network expansion in the second half of 2008."

The CreditWatch will be resolved within the next 90 days based on the company's liquidity standing and its near-term financial and operating cash obligations. "An improvement would require a favorable operating execution translating into higher cash flows and would depend on the outcome of its negotiations with Samsung, its former lead technology vendor, and on the likelihood of an equity injection to fund its capex plan by the exercise of existing warrants," added Mr. Guerena.

Mobile-8 is likely to require external funding to resume its network rollout. "This is especially true as the probability of the exercise of the company's 55 million equity warrants expiring on July 29, 2008, is weakening, particularly in the current credit environment," noted Mr. Guerena.

Posted to the site on 14th May 2008