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July 17 (Reuters) - (The following statement was released by the rating agency)
This announcement replace the version published on June 21, 2013. Period for FFO-adjusted net leverage of 3.4x should be 2011, and not 2012 as statedpreviously.
Fitch Ratings has assigned a rating of National senior unsecured PT.Professional Telekomunikasi Indonesia Tbk (Protelindo) and also ranks IDR2 trillion of bonds to be issued by the company in 2013,respectively at 'AA-(idn)'.
Protelindo will use the proceeds from the issuance of bonds to pay off debtrupiah bank and for other general corporate needs. bonds ratedat the same level as the National Long-Term rating of Protelindo in'AA-(idn)' because it is a direct obligation, not conditional, and seniorunsecured from companies. Bonds to be issued will rankpari-passu with all unsecured obligations of the company.
Key Rating Drivers
Manageable financial leverage: Protelindo's funds flow from operations (FFO)-adjusted net leverage rose to 3.9x at end-March 2013 (2011:3.4x) due to an acquisition investment of IDR992bn (USD104m). Fitch expects Protelindo's leverage to remain below 4.0x in 2013 as internally generated cash should be sufficient to fund capex. The agency also derives comfort from management's commitment to keep net debt/quarterly annualised EBITDA at around 3.0x-3.5x.
The Solid Business Model: Protelindo have a steady cash flow and canpredicted from long-term contracts that can not be undone (10-12 years),which also included the annual price adjustment associated withthe rate of inflation. The company gained more than half the total revenueyearly in advance and has approximately USD2.7 billion (IDR25.6 trillion) revenueis contracted until the end of 2027 in March 2013. also rankedtake into account the strong EBITDA margin (2012: 83%) and the regulationsadvantageous in that telecommunications companies are encouraged to share towerscompared to building a new tower to be used alone.
Acquisitive strategy: Fitch believes that the leverage of Protelindo notwill drop below 3.0x due to acquisition growth strategy isnatural for telecom tower companies. In 2012, Protelindobuy 82 towers from PT Central Investindo and acquired 261 towers from Royal KPN NV (KPN, BBB-/Stable) based in the Netherlands and 38 towers ofPT Hutchison CP Telecommunications (HCPT, a subsidiary of Hutchison Whampoa Limited (HWL, A-/Stable)). Fitch forecasts take into account the budget forannual acquisition IDR1 trillion (USD105 million).
Tenants Remain Risk Composition: Composition tenant is rated investmentgrade rated tenants to non-investment grade improved in 2012 to 35:65of 30:70 in 2011. Bagaimanaupun Also, the high exposure to Protelindotelecom operators that do not generate risks remain a majorranking. Especially, PT Bakrie Telecom (BTEL, CC) and PT Smartfren (CC (idn)),which overall contribute to 15% of revenue in Protelindo1Q13 and facing liquidity problems due to the difficulty of developing a sharemarket and generate sufficient cash flow.
However, Fitch earned comfort from the fact that telecommunications operatorsusually assume duty as the senior of the tower rent paymentsdebt because its needs to continue to provide service to customers.
Negative: Future developments that could individually or collectively lead to negative rating actions include
-A debt-funded acquisition of another tower portfolio or lease defaults by weaker telcos leading to deterioration in FFO-adjusted net leverage to over 4.0x on a sustained basis
-Weakening of HWL's commitment to HCPT leading to HCPT not honouring its contractual commitments to Protelindo. HCPT contributed about 35.6% of Protelindo's revenues in Q113.
A positive rating action is not expected in the short term as the company is unlikely to deleverage significantly as it invests to maintain growth.