Telkom gets revised credit rating

S&P Global has revised the credit rating outlook of Telkom to negative, from stable, following its decision to junk South Africa’s foreign currency rating on Friday last week.

The telco’s rating has been affirmed at BBB-, one level above sub-investment grade.

S&P Global noted that the rating review reflects its view of potentially weakening economic conditions as well as political and institutional uncertainty in the country in the next year, which could in turn affect Telkom’s creditworthiness.

“The agency however notes Telkom’s market leadership position as the incumbent telecom provider in the fixed-line voice market in the country as well as its growth prospects in its mobile, broadband and ICT solutions business which offsets the declining trend in fixed-line voice revenues,” Telkom said.

Telkom said that its conservative capital structure combined with an expectation for single-digit net revenue growth and an average EBITDA margin of about 24% is what S&P cited as the primary reasons for maintaining the operator’s current rating position.

“The negative outlook of Telkom by S&P reflects the possibility of a downgrade over the next year if the sovereign rating falls further and thereby impacting Telkom,” it said.

Telkom said that the ratings agency limited the differential to one notch after it conducted a stress test to assess the company’s resilience under a hypothetical sovereign default scenario which includes stress on earnings and a devaluation of the South African rand.

Read: Telkom could list separate unit on the stock market – report

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Telkom gets revised credit rating