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18 Oct 2019
New York, October 18, 2019 -- Moody's Investors Service ("Moody's") assigned
a Ba1 corporate family rating (CFR) to Cable Onda, S.A.
("Cable Onda"). At the same time Moody's assigned a Ba1 rating
to the company's proposed up to USD600 million senior unsecured notes.
The rating outlook is stable.
This is the first time Moody's assigns a rating to Cable Onda.
The rating of the proposed notes assumes that the issuance will be successfully
completed and that the final transaction documents will not be materially
different from draft legal documentation reviewed by Moody's to date.
It also assumes that these agreements are legally valid, binding
Issuer: Cable Onda, S.A.
-Corporate Family Rating: Ba1
-Up to USD600 million Senior Unsecured Bond: Ba1
Issuer: Cable Onda, S.A.
-Outlook Assigned: Stable
Cable Onda S.A.'s (Cable Onda) Ba1 corporate family
rating reflects the company's strong competitive position in Panama
as the largest integrated telecommunications service provider, with
leading market shares in all the segments it operates, allowing
the company to offer competitive bundled services in the Panamanian market
to its customers, businesses and the government. The rating
also takes into consideration the stable operating environment in Panama's
fast-growing economy, with one of the largest GDPs per capita
in the region, offering good opportunity for growth in telecommunications
The company's close relationship with its controlling shareholder —
Millicom International Cellular S.A. (Millicom, Ba1
stable) — also supports the Ba1 rating, as do Millicom's
experience and good track record in integrating acquisitions. Moreover,
the cross-default and cross-acceleration provisions in Millicom's
debt instruments that would be triggered with a default of Cable Onda.
Given the importance of Cable Onda to Millicom operations, we expect
to see continued implicit support from the parent especially after the
significant investment made to acquire Cable Onda and Telefonica's
assets in Central America.
Cable Onda's ratings are constrained by its modest revenue size
compared with that of its global peers, its relatively high leverage
compared with that of other Millicom subsidiaries at the Ba1 rating level,
and the lack of track record operating in its post-merger format.
Although we see integration risks in the transformational merger between
Cable Onda and Telefonica Moviles Panama, S.A. (Telefonica
Panama), we believe they are small. Accordingly, Millicom
announced the successful closing of the acquisition of the Panamanian
operations in the end of August 2019 leaving behind a difficult part of
the business integration.
Millicom acquired an 80% stake in Cable Onda in October 2018.
The company is Panama's leading broadband internet, pay-TV,
fixed telephony and B2B telecommunications markets, serving more
than 500,000 customers, mostly through its hybrid fiber-cable
network, with an implied enterprise value of $1.46
billion. Later, in February 2019, Millicom announced
the acquisition of Telefonica Central America (Telefonica CAM) for a total
enterprise value of $1.65 billion. Telefonica CAM
is the mobile market leader in Panama and Nicaragua and the second-largest
mobile operator in Costa Rica, with a total of 8.7 million
clients. The transactions were debt-funded at the Millicom
The proceeds raised will be used for the reimbursement of a Millicom shareholder
loan of $420m that was used for the acquisition of Telefonica Panama,
reimbursement of local debt and general corporate purposes.
Cable Onda's small scale relative to its global peers is partly
mitigated by its solid positioning in the Panamanian telecommunications
market, being the largest competitor in the mobile and fixed markets.
It has good revenue diversification and access to Millicom's proven
expertise in acquiring assets across Latin America, supporting the
integration of its business, operations and growth. The consolidated
entity will generate around 36% of its revenue from the mobile
segment, 29% from fixed broadband, 25% from
pay-TV, 8% from fixed voice and 2% from other
services. With the integration of Telefonica's assets,
we expect Cable Onda to be able to deliver a full suite of services,
taking advantage of cost synergies and increasing revenue from the cross-selling
of services and new bundles including mobile services.
Despite the intense competition, especially with Liberty Latin America,
which is the only other integrated competitor in Panama, we expect
Cable Onda to have advantages of scale, being the isolated leader
in fixed services, with more than 50% market share in fixed
broadband, fixed voice and pay-TV. Accordingly,
we expect the consolidated company to be able to generate EBITDA margin
in the mid 40s% improving as synergies are extracted and converging
to the level of profitability of other Millicom subsidiaries in Latin
The stable outlook reflects our expectations that Cable Onda will maintain
its strong market shares and adequate liquidity while deleveraging through
the integration of the assets, top line growth and cash generation.
The stable outlook also incorporates the expectation that leverage measured
by total adjusted debt/EBITDA will quickly decline to around 3.5x
until year-end 2019.
Positive pressure on Cable Onda's rating could arise if the company
posts better than expected and sustained improvements in profitability
and revenue growth while successfully integrating its assets in Panama.
Quantitatively, an upgrade would be considered if the company reduces
leverage below 2.75 times while maintaining an EBITDA margin higher
than 45%, and positive free cash flow on a sustained basis.
The rating could be downgraded if the company is not able to achieve the
expected gains in revenue and profitability, with credit metrics
not improving as expected. Quantitatively ratings could be downgraded
if leverage increases to a level higher than 3.75 times beyond
2019. Higher-than-expected shareholder remuneration
that pressures liquidity and free cash flow generation, leaving
no room for gross debt reduction over time, would be also viewed
Cable Onda S.A. (Cable Onda) is the leading provider of
telecommunications services in Panama, serving more than 1.5
million clients across its business segments that include fixed broadband,
pay TV, mobile and fixed telephony. The company is also the
leading provider of services to businesses and the government, including
integrated communications, cloud data centers and security services.
The recent acquisition of Telefonica's assets in Panama will grant
the company the largest market share in the mobile segment and will enable
it to offer a complete set of bundled services in the country.
Pro forma for the acquisition of Telefonica Panama, Cable Onda had
$619 million in revenue and $277 million in EBITDA for the
12 months ended June 2019.
Millicom International Cellular S.A. (Millicom) is a global
telecommunications investor focused on emerging markets, with cellular
operations and licenses in 10 countries in Latin America and Africa.
The company has around 51 million mobile customers, and 3.3
million cable and broadband households. The company derives around
90% of its revenue from its Central and South American operations
in El Salvador, Guatemala, Honduras, Costa Rica,
Nicaragua, Colombia, Bolivia, Paraguay and Panama.
In Africa, Millicom operates in Tanzania, and through a joint
venture in Ghana. The company also offers cable and satellite TV
services in Central and South America. For the 12 months ended
June 2019, the company's consolidated revenue reached $4.2
billion. Millicom is incorporated in Luxembourg and publicly listed
on the Nasdaq Stock Market in New York and Nasdaq Stockholm.
The principal methodology used in these ratings was Telecommunications
Service Providers published in January 2017. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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
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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
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affected the rating. For further information please see the ratings
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For any affected securities or rated entities receiving direct credit
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VP - Senior Credit Officer
Corporate Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
JOURNALISTS: 0 800 891 2518
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Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 1 212 553 0376
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No Related Data.
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