(The following statement was released by the rating agency)
Jan 25 - Ratings has upgraded the rating Long-Term Foreign Currency and Local Currency
Issuer Default Rating (IDR) PT. XL Axiata Tbk (XL) to 'BBB' from 'BB +'.
Simultaneously, the National Long-Term rating was also raised to 'AAA (idn)' from 'AA + (idn)'.
The prospect is Stable.
Fitch's ratings show a rise in the rankings XL should better reflect the closeness to the
credit profile of its parent company, Axiata Group Berhad (Axiata), which has
ownership of 66.7% due to a strong link between the two companies. In late September 2012, XL is
the largest subsidiary of Axiata, demonstrated by its contribution to 40% of revenue and 46%
EBITDA. This contribution is higher than the contribution of 34% revenue and 36% of EBITDA in
2009. XL is also a subsidiary of the fastest-growing with the growth of double-digit revenue.
Fitch argues that Axiata has a strong ability to support XL with extra cash when needed
because of the conservative credit profile and operations in Malaysia, which has run stable.
Fitch found that the stand-alone credit profile of XL in 2013 will improve as capital
spending has peaked in 2012 at IDR8.5 trillion, mostly for developing 3G infrastructure. This
allows XL to re-generate free cash flow (FCF) positive in 2013 after producing a negative FCF in
2012. Strong credit profile of XL also based on revenue growth above industry average and
EBITDAR margins were solid at 47% to be able to keep annual capital expenditure budget IDR7-8
trillion and dividend pay-out ratio of 30% of revenue net. Fitch believes XL are aggressively
investing in 2012 is higher than the second largest telecommunications company - PT Indosat Tbk
(Indosat, 'BBB' / Stable) will provide benefits to the level of profits and lower
consumer disconnection (customer churn). XL is the third largest telecommunications company with
a market that is slightly lower than the Indosat.
Fitch found that the three largest telecommunications companies will dominate the rapidly
growing market of data backed up with a strong position in the voice market and the ability to
invest in 3G infrastructure. Weaker telecom companies will find it difficult to increase market
share because they are still losing money EBITDA and balance sheet is not strong enough to
support the development of infrastructure investment data. In addition, the CDMA telecom
companies will find it difficult to continue to grow due to the loss of customers and therefore
will undertake infrastructure investment that is smaller than the GSM telecommunications
Ranking the positive actions can happen when:
- Improved ranking Axiata XL will benefit the international rankings. However, the increase
of the rank of Foreign Currency Long-Term S will depend on the increase in Indonesia Country
Ceiling. Foreign Currency Rating S XL currently at the same level with the Country Ceiling
Negative actions on the ratings could have occurred when:
- Decline of the Country Ceiling Indonesia will lead to lower ratings Long Term Foreign
Currency USD from XL.
- The weakening of ties with Axiata.
- Axiata downgrade.