Mar 04, Colombo: Fitch Ratings has affirmed Sri Lanka Telecom PLC's (SLT) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BB-'. The agency also affirmed SLT's National Long-Term Rating at 'AAA(lka)'. The Outlook is Stable.
A key rating driver was SLT's potential debt-funded acquisition of Hutchison Telecommunications Lanka (Pvt) Ltd. (Hutchison Lanka) which could increase its leverage over 1.5x and would lead to a downgrade of its National Long-Term Rating to 'AA+(lka)'.
Fitch Ratings said the acquisition would be negative for SLT's credit profile as it would double its net debt and dilute operating EBITDAR margin because Hutchison Lanka has EBITDA losses.
However, SLT will gain 800,000 subscribers and key spectrum assets in 900MHz/1800MHz, and will save on capital expenses in 2014/15 following the acquisition.
The full rating release issued by Fitch can be found here.