Fitch affirms XL at BBB, AAA(idn)

JAKARTA. Fitch Ratings has affirmed the long-term foreign and local currency issuer default ratings (IDR) of Indonesia-based mobile telecommunications operator PT XL Axiata Tbk’s (XL) at “BBB”.

Simultaneously, Fitch has also affirmed XL’s national long-term rating at “AAA(idn)”. The outlook is stable.

AAA national ratings denote the highest assigned by Fitch on its national rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country.

“XL’s BBB rating is closely aligned with its 66.5 percent parent Axiata Group Berhad’s [Axiata] credit strength. Fitch rates XL on a top-down basis according to its parent and subsidiary rating criteria dated Aug. 5, 2013, given its strategic and financial importance to its parent,” Fitch said in an official release on Friday.

XL is Axiata’s fastest-growing subsidiary and it accounted for 36 percent and 37 percent of Axiata’s revenue and earnings before interest, taxes, depreciation and amortization (EBITDA), respectively, during nine months ending in September 2013.

Fitch believes Axiata has sufficient credit strength to support XL with a cash injection should this be required, given its conservative credit profile and established, cash-generative Malaysian operations.

“The linkages were further strengthened in November 2013 when Axiata committed to extending a US$500 million shareholder loan to XL to partly fund the proposed acquisition of a 95 percent stake in PT Axis Telecom [Axis], Indonesia’s fifth-largest cell phone operator by revenue market share. XL is financing the $865 million acquisition via debt,” Fitch said.