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I AGREE
12 Aug 2016
Hong Kong, August 12, 2016 -- Moody's Investors Service says that Hong Kong Telecommunications (HKT)
Limited's Baa2 issuer rating with a stable outlook is supported by the
steady 1H 2016 results posted by its indirect parent, HKT Limited
(unrated).
Hong Kong Telecommunications is HKT Limited's principal operating entity,
and a 100%-owned subsidiary. Moody's therefore assesses
HKT Limited's financial performance when considering Hong Kong Telecommunications'
financial profile.
"HKT Limited's performance remained stable in 1H 2016, despite
a soft economy in Hong Kong and continued competition in the fixed broadband
and mobile markets. Its reported EBITDA in 1H 2016 grew 2%
year on year to $752 million," says Gloria Tsuen,
a Moody's Vice President and Senior Analyst.
Revenue from telecommunications services (TSS), which contributed
around 60% of the company's total revenue in 1H 2016,
grew 2% yoy, and the segment's reported EBITDA margin
remained largely flat at around 36%.
At the same time, revenue from mobile, which contributed around
40% of the company's total revenue, grew 5%,
and the segment's reported EBITDA margin gained 0.5 percentage
point to 38.5%. The margin increase reflected continued
synergistic benefits from the acquisition of CSL New World Mobility Limited
(unrated) in 2014, as the mobile services margin improved 3.6
percentage points to 53.2% in 1H 2016.
Adjusted debt/EBITDA stayed flat, however, at 3.1x
as total debt rose only slightly, by approximately HKD100 million,
from end-2015 to HKD36.4 billion at end-June 2016.
Moody's expects leverage to remain fairly stable over the next 12
months.
HKT Limited's liquidity profile is excellent. It had $387
million in cash and $809 million in undrawn facilities at end-June
2016. It will have a $250 million spectrum payment due later
this year, but the funding of that has been addressed, facilitated
by the $750 million 10-year notes issued in July.
The company has no debt maturing until 2018.
At PCCW Limited (unrated) -- which owns a 63.07%
stake in HKT Limited -- revenue from its media business
grew 8% yoy in 1H 2016, helped by new OTT (over-the-top)
and free TV businesses which -- when combined -- more
than offset the 2% decline in its core pay-TV business.
However, PCCW's reported EBITDA margin in the media business
declined 11 percentage points yoy to 0.4%, due to
investments in content, branding, and new market launches
for new OTT and free TV businesses. Core pay-TV's
reported EBITDA margin also declined 1.3 percentage points to 13.2%,
due to a weakened advertising market, pricing incentives,
as well as higher content costs.
Revenue from PCCW's solutions business showed a solid 6% yoy growth
in 1H 2016, with recurring revenue representing 57% of the
segment's revenue. Reported EBITDA margin was flat at around
16%.
Moody's expects that PCCW's media business will remain pressured
this year, but will remain cash flow positive, while the solutions
business will maintain its growth.
The principal methodology used in this rating was Global Telecommunications
Industry published in December 2010. Please see the Ratings Methodologies
page on www.moodys.com for a copy of this methodology.
Hong Kong Telecommunications (HKT) Limited, the ex-incumbent
integrated telecommunications provider in Hong Kong, is wholly owned
by HKT Group Holdings Limited (unrated). HKT Group is in turn wholly
owned by HKT Limited, which is 63.07%-owned
by PCCW Limited.
HKT Group consolidates all of PCCW Limited's telecommunications-related
assets, including fixed-line voice, broadband international
telecommunications, and mobile services. These three businesses,
along with PCCW 's media business, form the quadruple-play
service.
This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Gloria Tsuen, CFA
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
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China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
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