Tokyo, September 29, 2020 -- Moody's Japan K.K. has affirmed NTT DOCOMO, INC.'s
long-term issuer and senior unsecured ratings of Aa3 and short-term
rating of P-1, and changed the outlook to negative from stable.
The negative outlook follows Nippon Telegraph and Telephone Corporation's
(NTT) announcement that it will buy out the 33.8% stake
it does not already own in its mobile subsidiary, NTT DOCOMO,
for about JPY4.3 trillion.
"The negative outlook reflects the even closer link that NTT DOCOMO will
have with NTT following the buyout," says Mariko Semetko,
a Moody's Vice President and Senior Credit Officer.
A full list of the affected ratings is provided at the end of this press
release.
RATINGS RATIONALE
NTT's buyout transaction itself will not affect NTT DOCOMO's
leverage metrics. NTT DOCOMO, NTT's largest and most
profitable subsidiary, has very low debt, with debt/EBITDA
of about 0.3x.
However, Moody's expects NTT DOCOMO's financial policies
will become more aligned with NTT's after the buyout. Moody's
will monitor NTT's policies on upstreaming NTT DOCOMO's free
cash flow and capitalizing it as a fully owned subsidiary.
NTT DOCOMO's Aa3 rating continues to reflect the company's strong
credit profile, supported by its position as Japan's largest operator
in the mobile telecommunications market and its very low debt leverage
metrics. The company's market position is backed by its leading
brand position, the high quality of its network and its nationwide
customer service franchise.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The outlook on NTT DOCOMO's ratings is negative, reflecting
the likelihood of dividend pressure on NTT DOCOMO to help service the
significant rise in NTT's buyout-related debt and uncertainties
around NTT DOCOMO's ultimate capital structure after the buyout.
An upgrade is unlikely, given that the company's ratings are
positioned one notch above Japan's sovereign rating.
Moody's could downgrade NTT DOCOMO's ratings if (1) the company
loses its leading market position or if its overall business risk increases
because of a change in its business activities or the competitive or regulatory
environment; (2) pricing pressures lead to a decline in operating
margin sustained below 17%; or (3) its debt/EBITDA rises above
1.0x.
Moody's could also downgrade NTT DOCOMO's ratings if Japan's sovereign
rating or NTT's ratings are downgraded.
The principal methodology used in these ratings was Telecommunications
Service Providers (Japanese) published in April 2017 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_194554.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Headquartered in Tokyo, NTT DOCOMO, INC. is a leading
provider of mobile telecommunications services in Japan.
LIST OF AFFECTED RATINGS
..Issuer: NTT DOCOMO, INC.
....Long-term Issuer Rating (Foreign
and Local Currency), Affirmed Aa3
....Senior Unsecured Regular Bond/Debenture
(Local Currency), Affirmed Aa3
....Senior Unsecured Shelf (Local Currency),
Affirmed (P)Aa3
....Commercial Paper (Local Currency),
Affirmed P-1
....Outlook, Changed to negative from
stable
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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
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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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.
Mariko Semetko
VP - Senior Credit Officer
Corporate Finance Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100
Mihoko Manabe
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100
Releasing Office:
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100