MARC Ratings affirms AA+IS rating on Celcom Networks RM5bil sukuk programme

KUALA LUMPUR: MARC Ratings has affirmed its AA+IS rating on Celcom Networks Sdn Bhd's (CNSB) RM5.0 billion Sukuk Murabahah Programme with a stable outlook. 

As of end-October 2022, the outstanding amount stood at RM1.15 billion.

In assessing CNSB, MARC Ratings considered the overall credit profile of the Celcom Axiata Bhd (Celcom) group.

The rating agency said this is premised on the strong operational and financial linkages between them and the undertaking by Celcom to maintain its 100 per cent direct or indirect ownership of CNSB throughout the sukuk tenure.

In November 2022, Celcom and Digi.com Bhd completed their merger to form Malaysia's largest mobile operator with an estimated subscriber market share of about 42 per cent. 

"We view the merger as broadly positive, which may support a higher rating," it said.

However, MARC said this would depend on its further assessment of the possible execution and integration risks from the merger, the strategic direction of the enlarged entity and its post-merger financial policies. 

The rating agency said both entities remain operationally and financially independent at this juncture.

"The rating affirmation reflects Celcom's strong position in the domestic telco industry, continued steady operating performance and strong cash flow generation, supported by broader profitability margins from cost optimisation. 

"A competitive environment and continued capex requirement, however, are moderating factors," it said. 

Celcom reported an increase in revenue of 6.5 per cent year on year (YoY) in 2021 and a further 2 per cent in the first half (1H) of 2022, as subscriber growth offset the drop in average revenue per user due to competitive pricing. 

MARC believes Celcom's strong business profile will continue to translate into robust operating margins, cash flow generation, and comfortable interest and debt coverages. 

"As regards borrowings, Celcom's total debt has eased from RM4.7 billion at the end of 2020 to RM4.0 billion at the end of October 2022 on the back of scheduled repayments of outstanding debt," it added.

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