Fitch: Ooredoo's Recently Awarded Myanmar License Credit Neutral
Published on: 2nd Jul 2013
By: Ian Mansfield
Fitch Ratings says that Ooredoo's (Qatar Telecom) newly awarded Myanmar's license should have no impact on its debt rating. Ooredoo has won one of the two licences made available to foreign operators in the Myanmar government's recent bid process to build and operate mobile networks in the country.
Fitch estimates that the new investment will require around USD2.5-3 billion of investments and capex over the next three years. As this is a greenfield network roll-out, they do not expect any material positive contribution to group EBITDA over the medium term. The new license is also much smaller in terms of scale than the recently withdrawn Maroc Telecom bid.
In Fitch's view, current estimates suggest this new investment has no implications on the implied support of or commitment from the State of Qatar, which directly and indirectly holds 68% ownership of Ooredoo, the main driver of the entity's ratings. Fitch continues to apply its parent and subsidiary rating linkage methodology in rating Ooreedoo. Ooredoo's rating reflects Fitch's assessment of the sovereign's creditworthiness due to Ooredoo's strong operational and strategic ties with the State of Qatar. This implied state support underpins the strong rating category and offsets risks associated with diversification into weaker rated emerging markets, slowing sector growth and M&A risk.
Fitch also expects that Ooredoo will continue to operate within its own leverage guidance, which is 1.5x to 2.5x net debt/EBITDA. We recognise that this ratio can fluctuate quite significantly within these limits depending upon any large scale M&A. Fitch draws comfort from its opinion that if the group breached these levels and struggled to deleverage within a short forecast period (12 months), equity support from the State of Qatar would be forthcoming to reduce the position and place leverage levels on a more stable footing.
As there is currently little detail on the structure, timing and size of the transaction, Fitch is not taking any rating action at this time. However, the agency will closely monitor the transaction's evolution and evaluate the impact of any changes to Ooredoo business and financial profile.