KUALA LUMPUR: Standard & Poor's Ratings Services says its ratings on Axiata Group Bhd
(BBB+/Stable/--; axA+/--) are unaffected by the proposed acquisition of Nepal’s Ncell Private Ltd for US$1.365bil (RM5.907bil).
The ratings agency said on Tuesday the acquisition “will weaken Axiata's financial ratios but they will remain within our expectations” for the rating.
It noted the acquisition would improve Axiata's operating diversity because Ncell is Nepal's largest mobile operator in terms of revenue and subscriber market share.
“We estimate that the proposed acquisition will increase Axiata's pro forma debt-to-EBITDA to 1.9 times, from 1.6 times now. The ratio would remain below our downgrade trigger of over 2.0 times on a sustained basis,” it said.
S&P said Axiata would pay about US$1.4bil, net of cash, for the 80% stake in Ncell. Axiata plans to draw down on its US$1.5bil Sukuk medium-term note programme and a US$400mil bridge loan facility to fund the acquisition. The company expects to complete the acquisition by the first half of 2016.
“We believe Axiata will not materially increase its leverage from hereon. In addition, although not currently factored into our base case, the group should benefit from a proposed rights issue by its Indonesian subsidiary PT XL Axiata Tbk., the listing of its tower company Edotco Group, and the sale of towers by XL Axiata over the next 12-18 months,” it said.
Ncell has a 58% revenue market share in Nepal's mobile market, which is dominated by two players. Ncell will account for about 10% of Axiata's overall revenues. Ncell's stronger profitability compared with Axiata's existing operations will boost the group's EBITDA margins.
“At the same time, the proposed acquisition exposes Axiata to Nepal's above-average country and regulatory risk,” it said.
Subscribe or renew your subscriptions to win prizes worth up to RM68,000!
