RAM Ratings Reaffirms AAA/P1 Ratings of Telekom Malaysia's Sukuk Issuances

Transcription

1. Media Release RAM Ratings reaffirms AAA /P1 ratings of Telekom Malaysia’s sukuk issuances RAM Ratings has reaffirmed the AAA/Stable/P1 ratings of Telekom Malaysia Berhad’s (TM or the Group) Sukuk Programmes as well as the AAA/Stable rating of Hijrah Pertama Berhad’s Sukuk (listed below). The ratings continue to reflect the Group’s strong position as the national fixed-line telephony company and dominant fixed-broadband provider as well as its continued robust financial performance. Given its critical role to the nation and strong relationship with the Government, extraordinary support from the latter is highly likely, based on RAM’s rating methodology for government-linked entities. As expected, the internet segment became the Group’s largest revenue contributor, thanks to progressive take-ups and the upselling of its fixed-broadband offerings. As at end-March 2017, TM boasted 3.18 million fixed-line subscribers or a 97%subscriber share, of which 2.37 million were fixed-broadband users. The launching of its mobile service via webe enabled the Group to offer a converged quad-play package (fixed voice, fixed broadband, IPTV and mobile service). Elsewhere, the expansion of its network via the deployment of the High-Speed Broadband 2 (HSBB2) and suburban broadband (SUBB) projects will allow TM to tap into a wider pool of potential customers, which may support its stable subscriber-base accretion. That said, TM’s earnings face pricing uncertainty in view of provisions of Budget 2017 that push for affordable and accessible broadband coverage. Furthermore, increased LTE coverage by mobile incumbents and the ubiquity of smart phones amid faster-speed connections have led to a consumer preference for higher onthe-go bandwidth, resulting in immense competitive pressure on the Group from wireless-broadband and mobile service providers alike. Meanwhile, the ratings continued to be moderated by the Group’s hefty capex requirements. As TM continues to deploy large-scale projects, its capex will remain elevated in 2017, with a capex-to-revenue ratio of 30% before easing from 2018 onwards. As such, we have assumed that the Group will meet its funding requirements via a further debt drawdown, which may weaken its leverage indicators. While TM’s earnings continue to be susceptible to broadband pricing uncertainty and its mobile arm stays loss making, the Group’s financial metrics are
2. expected to remain intact , sustained by the healthy take-up of its fixed-broadband offerings. Instrument Telekom Malaysia Berhad Islamic Commercial Papers Programme (2013/2020) and Islamic MediumTerm Notes Programme (2013/2033) with a combined nominal value of up to RM3 billion Islamic Commercial Papers Programme and Islamic Medium-Term Notes Programme with a combined aggregate nominal value of up to RM2 billion (2011/2026) Hijrah Pertama Berhad RM2,925 million Islamic Stapled Income Securities (2007/2018) Rating Action Ratings Reaffirmed AAA/Stable/P1 Reaffirmed AAA/Stable/P1 Reaffirmed AAA/Stable Analytical contact Nurhayati Sulaiman (603) 7628 1040 yati@ram.com.my Media contact Padthma Subbiah (603) 7628 1162 padthma@ram.com.my Date of release: 1 June 2017 The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations. RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications. Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant. Published by RAM Rating Services Berhad  Copyright 2017 by RAM Rating Services Berhad