Fitch affirms Sri Lanka’s Dialog Axiata at ‘AAA(lka)’

Fitch Ratings has affirmed the National Long-Term Rating of Sri Lanka-based telecom company Dialog Axiata PLC at 'AAA(lka)' with the “Outlook as Stable”.

The affirmation and Stable Outlook reflect Fitch's view that Dialog will be able to maintain a credit profile commensurate with a 'AAA(lka)' rating in the next 12-18 months, despite lower demand for telecom services, escalating costs and a significant increase in the company's debt amid the Sri Lankan rupee's devaluation, the rating agency said in a statement.

Dialog's rating is driven by its Standalone Credit Profile (SCP) of 'aaa(lka)', which reflects its market leadership across mobile, pay-TV and home-broadband (HBB) segments, better execution and network capability and a solid financial profile, offset to an extent by the high exposure of its revenue to the weak Sri Lankan market.

Fitch said it expects Dialog's revenue growth to slow to around 10 per cent in 2023, from 25 per cent in 2022, amid weakening consumer spending. Consumers are increasingly prioritising essential needs, such as food and medicine, as real income has plunged following the currency depreciation and unprecedently high inflation.

Dialog faced pressure on subscriber numbers and usage minutes in 2022. Telecom operators raised voice and data tariffs by 20 per cent and pay-TV by 25 per cent in 2022 to pass through the escalating costs, reducing the services' affordability.

Fitch said it expects Dialog's revenue growth to slow to around 10 per cent in 2023, from 25 per cent in 2022, amid weakening consumer spending.