Global ratings firm Moody’s has affirmed Telkom’s rating of Baa3 with a negative outlook, in line with the government of South Africa’s bond rating.
The affirmation comes after a brief review of the telco, following the publishing of its annual results for the year.
In May 2016, Telkom reported a 10% increase in revenue to R41 billion for the 2016 financial year, and declared a dividend of 422 cents per share. Headline earnings per share (HEPS) grew 12.4%to 731.4 cents, though basic earnings per share (BEPS) declined 1.5% to 749.1 cents.
The latest review marks the second affirmation of Telkom’s rating after Moody’s stuck with its decision in June 2017, following the group’s downgrade of the South African sovereign that same month.
Telkom was one of four corporates to have their rating affirmed following the downgrade, while four others were downgraded along with the country.
According to Moody’s, Telkom’s Baa3 long-term issuer ratings takes into account Telkom’s strategic importance to the South African economy, resulting in its assessment of high default dependence and moderate support from the South African government putting it in line with the government of South Africa bond ratings and outlook.
Telkom’s rating continued to reflect the transformation process of its business model and the execution challenges faced through its strategies to increase adoption of information communication technology (ICT) among its business customers; customer service improvements; and network upgrades for its improved bundled offerings, the group said.
The rating is also based on Telkom’s low leverage and overall strong credit metrics for the rating category.