Mubasher: Moody’s Investors Service downgraded the credit rating of Oman Telecommunications Company (Omantel) to Baa1 from A3, with a stable outlook.
According to Moody’s report, the rating follows the downgrade of the Government of Oman's long-term issuer rating to Baa1 from A3 with a stable outlook on 14 May 2016.
The downgrade to Baa1 “reflects the absence of rating uplift from the government of Oman following its downgrade to Baa1. The sovereign is now rated at the same level as Omantel's baseline credit assessment (BCA) of baa1, which is a measure of the company's fundamental credit quality,” the report stated.
Despite Omantel's strong standalone financial profile and strong fundamental credit quality, Moody's does not see the telecom operator as being rated above the Omani government going forward, given the company's total reliance on cash flow generation from operations in Oman.
Omantel continues to be rated on a par with its single largest shareholder, the government of Oman, for several reasons, the report said, explaining that these factors include the company's very strong standalone financial profile, evidenced by net debt/EBITDA of 0.1x, retained cash flow/debt of 161.7% and its industry leading EBITDA margins exceeding 50%. Omantel’s strongly positioned BCA of baa1, “which factors in headroom for acquisitions that it will likely choose not pursue, therein providing an additional buffer,” as well as its ability to function largely independently of the Omani government in terms of day-to-day operations and financial decisions.
