RAM reaffirms ratings of Digi’s sukuk
KUALA LUMPUR: RAM Ratings has reaffirmed the AAA/Stable/P1 ratings of Digi Telecommunications Sdn Bhd’s (Digi or the company) RM5 billion Islamic Medium Term Notes Programme (2017-2032) and RM1 billion Islamic Commercial Papers (2017-2024), both of which are subject to a combined limit of RM5 billion.
The reaffirmation of the issue ratings reflected Digi’s wellestablished position in the mobile industry, underpinned by its sturdy performance and financial profile.
The ratings took account of Digi’s close relationship with its indirect shareholder, Telenor ASA (Telenor or the group), a Norwaybased telecommunication services provider.
“Accordingly, support from Telenor is deemed highly likely and is anticipated to be readily extended if and when required,” RAM Ratings said.
“Moreover, Digi’s relationship with Telenor enables the company to enjoy economies of scale through coordinated corporate procurement.
“Digi also benefits from the transfer of technical know-how from Telenor, especially in the areas of operational performance, development of services and technological convergence.”
The ratings firm added that Digi is considered a key long-term investment of Telenor, given that the company accounted for about 9.7 per cent and 11.1 per cent of the group’s revenue and operating profit before depreciation, interest and tax (OPBDIT), respectively, in 9M 2017.
RAM Ratings highlighted that amid the saturated mobile market and aggressive price competition, Digi is the sole mobile operator to increase its subscriber market share in the last three quarters.
The ratings firm noted that as at the third quarter of 2017 (3Q17), the company retained its pole position as the largest mobile operator (since 2016), with 36.3 per cent of subscriber market share or 11.9 million subscribers.
“Additionally, the company possesses a strong revenue and cash-generating aptitude,” it said.
It further noted that Digi’s revenue market share remained resilient, while the company’s adjusted operating profit before depreciation, interest and taxes (OPBDIT) margin of 51.23 per cent in the first nine months of 2017 (9M17) is still one of the highest among local and Asean peers.
“Meanwhile, the company’s debt is expected to peak at RM3.2 billion over the next three years, pushing its gearing ratio to 6.08 times from five times currently.
“Nonetheless, its funds from operations debt coverage will stay robust, hovering between 0.67 and 0.69 times over the same period.”
RAM Ratings pointed out that in view of the high concentration of migrants in Digi’s subscriber base, the company is also exposed to forex risk. It said that as the cost of international direct dialing - to which migrants are attracted - is paid in foreign currencies, mainly US dollars, any depreciation of the ringgit will crimp the company’s OPBDIT margin.