S&P affirms ratings of Kazakhtelecom, outlook revised to stable from positive
18.02.15 10:53
/Standard & Poor's, Moscow, February 16, 15, KASE heading/ Standard & Poor's
Ratings Services revised the outlook on Kazakhstan-based telecommunications
operator Kazakhtelecom to stable from positive. We affirmed the 'BB' long-term
foreign and local currency corporate credit rating and the 'kzA+' Kazakhstan
national scale rating.
The outlook revision on Kazakhtelecom reflects our view that a positive rating
action on the company will be unlikely in the next 12 to 18 months. The
affirmation of the ratings on Kazakhtelecom follows improvement in the
company's management and governance practices. In our opinion,
Kazakhtelecom is implementing its mobile business strategy in a more credible
and predictable way, and has secured a 10-year Kazakhstani tenge (KZT)37
billion (approximately $200 million) loan from the Kazakh Development Bank to
support the rollout of its nationwide 4G network, which will require meaningful
investment. We have therefore revised our management and governance
assessment on the company to "fair" from "weak" and, as a result, we are raising
our stand-alone credit profile (SACP) on Kazakhtelecom to 'bb' from 'bb-'.
We continue to view Kazakhtelecom as a government-related entity (GRE) and
view the likelihood of timely and sufficient extraordinary financial support
from the Kazakhstani government, if needed, as "moderate." Nevertheless,
following the lowering of the sovereign rating to 'BBB', we no longer confer a
one-notch uplift for state support into the long-term rating on Kazakhtelecom,
in accordance with our criteria.
The stable outlook reflects our expectation that Kazakhtelecom's credit metrics
will remain commensurate with the revised 'bb' SACP, including a ratio of
Standard & Poor's-adjusted debt to EBITDA of below 2x, and that its liquidity
will remain adequate. We could revise the outlook to negative if
Kazakhtelecom's leverage were to increase well above our base-case scenario
expectations as a result of higher investments or extraordinary dividend
distribution.
We see ratings upside as limited over the next 12 months because this would be
triggered by a one-notch upgrade of the sovereign. Such an upgrade is unlikely
because our outlook on the long-term rating is negative.
Primary Credit Analyst:
Svetlana Ashchepkova, Moscow +7 495 783-4014;
svetlana.ashchepkova@standardandpoors.com
Secondary Contacts:
Thierry Guermann, Stockholm (46) 8-440-5905;
thierry.guermann@standardandpoors.com
Alexander Griaznov, Moscow (7) 495-783-4109;
alexander.griaznov@standardandpoors.com
[2015-02-18]