Fitch revises Batelco's rating outlook
Manama, February 5, 2014
Fitch Ratings has revised the outlook on Bahrain's leading telecom firm Batelco's long-term foreign currency Issuer Default Rating (IDR) to negative from stable and affirmed the IDR at 'BBB-'.
Fitch has also affirmed the unsecured rating of Batelco International Finance No 1 Limited at 'BBB-'.
The revision of the outlook to negative is mainly driven by Fitch's concern about the uncertainty in regulation that could have a further impact on the operating environment in Bahrain and consequently Batelco's domestic operations and credit profile.
These include decisions about the future of the national broadband network project, existing bundling restrictions on the incumbent, as well as potential cuts in roaming rates, said Fitch in its statement.
Fitch has revised its rating approach regarding the assessment of parent and subsidiary linkage from top-down to bottom-up.
Batelco's credit profile is now determined on a standalone basis and then notched up based on Fitch's assessment of legal, operational and strategic ties with the government of Bahrain, in accordance with the agency's criteria 'Parent and Subsidiary Rating Linkage, dated 5 August 2013, stated Fitch.
This approach better reflects our view of the potential for reduced rating linkage between the sovereign and Batelco due to a significant market share losses incurred over the past three to four years making the asset less strategic from the government's perspective; and the tough local regulatory regime; and the limited rating differential between Batelco and Bahrain.
Fitch considers Batelco's standalone rating profile is 'BB+'. The long-term IDR is notched up by one notch to 'BBB-' to reflect Fitch's view of prospective support for Batelco from the Bahrain government in case of ultimate need, it stated.
"Although the company's financial profile remains strong for the current standalone rating, the rating also takes into account our view that Batelco's business risk profile is no longer commensurate with an investment grade profile due to the deterioration of its domestic market position, increased competitive pressures and unfavourable regulatory framework for the incumbent operator in Bahrain (e.g. restrictions on bundling), said Fitch in its review.-TradeArabia News Service