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RAM Ratings reaffirms AAA ratings of Telekom Malaysia’s sukuk issuances

IM Press Release
By IM Press Release
8 years ago
RAM Ratings reaffirms AAA ratings of Telekom Malaysia’s sukuk issuances

Islam, Mal, Sukuk

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  1. Media Release RAM Ratings reaffirms AAA 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. TM’s issue ratings are anchored by the Group’s solid business position as the national fixed-line telephony company and dominant fixed-broadband provider, as well as a steady financial performance that came within our expectations. A high likelihood of extraordinary government support for the Group is also a positive under our methodology for government-linked entities. As at end-2015, TM commanded almost 97% of the fixed-line subscriber base, with 3.40 million subscribers. The Group further boasted 2.34 million fixed-broadband users, 839,000 of which were highspeed broadband (HSBB) users, registering a 44% take-up rate. Meanwhile, the Group’s profitability has been steadily declining over the past 2 years as a result of P1’s operational losses, underpinned by the accelerated depreciation of its WiMAX equipments. With its entry into the mobility space through P1 – now rebranded as mobile digital services provider Webe – TM is moving closer to providing full converged services that cover every area of the customer’s digital communication lifestyle. The Group is poised to promote its latest mobile services by bundling these with its current products, including fixed-line, broadband and HyppTV offerings. Although the mobile segment is seeing intense price competition, we believe Webe’s success in the initiative hinges on service and network quality as well as the speed and pricing of its offerings in the saturated local mobile landscape. Meanwhile, TM is at an inflection point, with a few large-scale undertakings slated for the next few years including the rollout of the P1 Long-Term Evolution programme and the HSBB2, suburban broadband and Sistem Kabel Rakyat 1 Malaysia projects. As such, we have assumed an elevated capex-to-revenue ratio of 30% in the next 2 years. Assuming a further drawdown of RM2 billion in the same period, the Group’s gearing ratio is anticipated to moderate to between 1.15 times and 1.27 times, while its FFODC remains strong at 0.38 times to 0.40 times. Contingent on the pricing of its impending converged services, we do not discount potential margin erosion in the longer term.
  2. 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 Rating(s) Reaffirmed AAA/Stable/P1 Reaffirmed AAA/Stable/P1 Reaffirmed AAA/Stable Media contact Ong Ju Laine (603) 7628 1183 julaine@ram.com.my Date of release: 12 May 2016 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. 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 2016 by RAM Rating Services Berhad