Singtel's proposed investment no impact on credit rating, say rating agencies

SINGAPORE Telecommunications' proposed acquisitions will have no impact on its credit rating, said the three credit rating agencies.

In a note on Thursday, Standard & Poor's said that its ratings on Singtel are "not immediately affected" by the company's proposed investments in Intouch Holdings and Bharti Telecom. "We expect only a marginal decline in Singtel's credit profile because the purchase will be mostly equity funded," it said.

Singtel said on Thursday that it will spend about S$2.47 billion in cash to buy a 21 per cent stake in Thailand's Intouch Holdings PCL and a further 7.39 per cent stake in Bharti Telecom (BTL) from Temasek Holdings to deepen its foothold in the high-growth wireless markets of Thailand and India.

Intouch is the largest shareholder of Advanced Info Services (AIS), Thailand's biggest mobile operator, in which Singtel already has a 23.3 per cent stake. Bharti Telecom is the holding company of Bharti Airtel, India's largest telecoms firm and Singtel's existing associate.

Moody's had the same stand as S&P.

"Although the proposed transactions will prompt, in the case of Singtel, a modest uptick in net adjusted leverage to around 2.1 times in FY2017 from our previous expectation of 2.0 times, they are in line with the company's strategy of increasing its interests in valuable regional associates to support continued growth in its mobile business," said Annalisa DiChiara, a vice-president at Moody's.

Moody's also warned that a further deterioration in Singtel's leverage profile, or a prolonged period of leverage at the current high level would lead to downward pressure on its underlying credit quality.

Nevertheless, the firm's high leverage is offset by its stable earnings base in Singapore and Australia, a regionally diversified cash flow stream and excellent liquidity profile, it added.

Fitch Ratings affirmed the group's senior unsecured credit rating at "A+". It has also placed a "stable" outlook on the company, based on its view that Singtel will deleverage to 1.8-2 times gearing in FY18-FY19.

There might be negative rating action if the firm's gearing goes above two times, it warned.