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Rating Action:

Moody's affirms Ooredoo's A2 ratings reflecting rationalisation of operations; outlook stable

Global Credit Research - 15 Aug 2016

Madrid, August 15, 2016 -- Moody's Investors Service, ("Moody's") today affirmed Qatar domiciled telecommunication services provider Ooredoo Q.S.C.'s (Ooredoo) A2 long-term issuer rating reflecting EBITDA margin improvements post-implementation of its rationalisation strategy. As part of the rating action, Moody's also affirmed the A2 senior unsecured ratings of Ooredoo's wholly owned finance vehicle, Ooredoo International Finance Limited (OIF); and the A2 senior unsecured rating of Ooredoo Tamweel Limited. The outlook on all the ratings has been changed to stable from negative.

"The affirmations with a stable outlook reflect our view of Ooredoo's credit metrics being restored back to levels commensurate with its baa2 baseline credit assessment or standalone alone rating, which exclude any potential uplift from the Government of Qatar, its majority owner," said Douglas Rowlings, Assistant Vice President at Moody's.

"We expect with the traction being realised on Ooredoo's rationalisation strategy that EBITDA margins will be sustained above 45% and that net debt/EBITDA will trend below 2x over the next two years. Free cash flow will likely also improve as capital expenditure spend tapers off and cost savings are realised across the group," added Mr. Rowlings.

Moody's recognises that Ooredoo is entering the next phase in its development, shifting away from further international expansion and focusing its attention on a now well-established portfolio of operations. The rating agency expects that Ooredoo's credit profile will continue to strengthen as management executes further efficiency gains, additional centralising of group procurement, cash conservation and deleveraging delivery.

A complete list of affected companies and rating actions can be found at the end of this press release.

RATINGS RATIONALE

Moody's expects that capital expenditure will be limited to small ticket items going forward such as improving upon passive infrastructure, acquiring additional spectrum, and ongoing licence renewal fees. With lower capital expenditure related cash burn the rating agency forecasts that the company will be able to deliver deleveraging to its comfort level of around 2x net debt / EBITDA.

Over the past few years, Ooredoo has also successfully removed some of the currency volatility that had begun to feature in its credit profile, by matching debt funding raised at its operating subsidiaries to local currency cash generation. Around 70% of Ooredoo's bank debt at operating level is now denominated in local currency.

At the same time, the affirmation of the ratings with a stable outlook recognise the significant inroads that the company has made in delivering cost savings across the group. This has shored up margins, arrested EBITDA decline in absolute terms and alleviated pressures experienced by some of its underperforming operations in Algeria, Tunisia (Ba3 stable), and Iraq. Ooredoo has also profitably exited from some of its operations such as Pakistan (B3 stable) and the Philippines (Baa2 stable) as part of a sale of non-core assets.

Ooredoo's credit profile continues to benefit from the support and rating uplift offered by the Government of Qatar (Aa2 negative), which owns 68.6% of the company through direct and indirect holdings. Despite the backdrop of the low oil and gas price environment Qatar has a low fiscal break-even oil price projected by the IMF at $52.4/barrel in 2016 and $54.7/barrel in 2017. Additional oil price shock absorption capacity is afforded by the accumulation of significant external assets through the government owned Qatar Investment Authority estimated at $256 billion by the Sovereign Wealth Institute.

Moody's views favourably the demonstrated track record of willingness and capacity of the Qatari government to offer financial support to Ooredoo through (1) flexibility of dividend payments where the board continually manages this with respect to Ooredoo's cash and deleveraging requirements, with dividends per share cut recently to QAR3 ($0.82) from QAR 4 ($1.10); (2) subscription to right issues totalling $0.89 million (QAR 3.24 billion) in 2008 and $1.04 billion (QAR 3.79 billion) in 2012; and (3) deferral of royalties and dividends for the period 2006 to 2010 following the onset of the global financial crisis. At the time of the right issues the Government of Qatar held 55% directly in Ooredoo where it now holds 51.6%.

Ooredoo's overall rating of A2 can withstand up to a one notch downgrade of the Government of Qatar's Aa2 rating with no ratings impact.

RATIONALE FOR THE STABLE OUTLOOK

Ooredoo's shift away from capital-intensive international expansion towards optimising existing operations will likely ensure credit metrics remain comfortably in line with those set for the baa2 baseline credit assessment.

LIQUIDITY PROFILE

Ooredoo's liquidity position is excellent, with significant cash resources available together with robust cash flow generation expected to meet forecast cash uses for the next 18 months and upcoming maturities, with cash balances alone covering all group debt maturities to 2018.

At 30 June 2016, Ooredoo had around $5.34 billion (QAR 19.44 billion) in group cash ($3.89 billion or QAR 14.16 billion at the Ooredoo QSC level), and availability of committed credit lines of $824 billion (QAR 3 billion). Moody's forecasts free cash flow for the next 18 months at around $428 million (QAR 1.6 billion).

Ooredoo's liquidity profile further benefits from a long dated and staggered debt maturity ladder with over 90% of funding matched to operating cash supporting its repayment.

WHAT COULD CHANGE THE RATING - UP

Lower leverage, i.e., net debt/EBITDA of less than 2.5 times on a sustained basis -- in combination with RCF/debt trending towards 25% and EBITDA margins in excess of 50% could result in an upgrade.

WHAT COULD CHANGE THE RATING - DOWN

Ooredoo's rating could come under downward pressure if (1) EBITDA margins are not restored to above 45%; (2) Net debt/EBITDA is above 2.5 times for a prolonged period and; (3) the company records an RCF/debt ratio of less than 18%. Ratings could be lowered if government support assumptions were to be lowered.

List of affected ratings:

Affirmations:

..Issuer: Ooredoo Q.S.C.

.... Issuer Rating, Affirmed A2

..Issuer: Ooredoo International Finance Limited

....BACKED Senior Unsecured Medium-Term Note Program, Affirmed (P)A2

....BACKED Senior Unsecured Regular Bond/Debenture, Affirmed A2

..Issuer: Ooredoo Tamweel Limited

....Senior Unsecured Medium-Term Note Program, Affirmed (P)A2

....BACKED Senior Unsecured Regular Bond/Debenture, Affirmed A2

Outlook Actions:

..Issuer: Ooredoo Q.S.C.

....Outlook, Changed To Stable From Negative

..Issuer: Ooredoo International Finance Limited

....Outlook, Changed To Stable From Negative

..Issuer: Ooredoo Tamweel Limited

....Outlook, Changed To Stable From Negative

The principal methodology used in these ratings was Global Telecommunications Industry published in December 2010. Other methodologies used include the Government-Related Issuers methodology published in October 2014. Please see the Ratings Methodologies page on www.moodys.com for a copy of these methodologies.

The Local Market analyst for this rating is Douglas Rowlings, +971 (423) 795-43.

COMPANY PROFILE

Ooredoo Q.S.C., based in Doha, Qatar is an international telecommunications service provider, with activities in 15 markets across the MENA and Asia. Nearly 86% of its revenues are generated with wireless services and almost 75% of its revenues are derived from four markets: Qatar - where it is the incumbent integrated service provider; Indonesia (through its 65% holding in Indosat Ooredoo previously known as Indosat Tbk. (P.T.) (Ba1 positive); Iraq (64.1% in Asiacell Communications PJSC); and Algeria (74.4% in Ooredoo Algeria formally known as Wataniya Telecom Algerie S.P.A). For the last twelve months ended 30 June 2016 group revenues amounted to USD8.8 billion (QAR32billion) with EBITDA generated of USD4.1 billion (QAR14.8 billion).

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Carlos Winzer
Senior Vice President
Corporate Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

David G. Staples
MD - Corporate Finance
Corporate Finance Group
Telephone: 00971 4237 9536

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

No Related Data.
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