Jan 14, Colombo: Fitch Ratings has affirmed Sri Lanka Telecom PLC’s (SLT) National Long-Term Rating at ‘AA-(Ika)’. The Outlook is Stable. We have also affirmed the National Long-Term Rating on SLT’s senior unsecured debentures at ‘AA-(lka)’.
SLT’s ratings are constrained by the sovereign’s ratings (Long-Term Local-Currency IDR: CCC) under Fitch’s Government-Related Entities (GRE) Rating Criteria, as the Sri Lankan government holds a majority stake in SLT directly and indirectly, and exercises significant influence on its operating and financial profile.
SLT’s unconstrained standalone credit profile (SCP) is stronger than that of the state, reflecting the company’s market leadership in fixed-line services and second-largest share in mobile, its ownership of an extensive optical fibre network, and a strong financial profile.
KEY RATING DRIVERS
Constrained by Sovereign: SLT’s ratings are constrained by the sovereign’s, as the state holds a majority stake in SLT directly and indirectly, and exercises significant influence on its operating and financial profile. SLT’s second-biggest shareholder, Malaysia’s Usaha Tegas Sdn Bhd with a 44.9% stake, has no special provisions in its shareholder agreement to dilute the government’s significant influence over SLT.
Modest Growth in 2022: We expect SLT’s revenue to rise mid-single-digit percentages in 2022 (2021 estimate: 10%-11%), driven by rising mobile and broadband data usage and increased migration to fiber to the home (FTTH) network, from SLT’s own copper network. The FTTH network carries higher revenue per user. An increase in 4G smartphone penetration, supported by island-wide coverage and proliferation of cheaper China-made phones, should also drive growth in the medium term.