x Abu Dhabi, UAESaturday 22 July 2017

Fitch lowers Etisalat's rating

The agency Fitch Ratings has cut its rating on Etisalat, the UAE's largest telecommunications company.

The agency Fitch Ratings has cut its rating on Etisalat, the UAE's largest telecommunications company, citing the weakening of the Emirate's credit profile. The ratings firm lowered its long-term issuer default rating on Etisalat by one notch to "A plus", or four notches below "AAA", its highest level. The company was removed from watch for downgrade and assigned a stable outlook.

"This is due to the increasing demands on the sovereign's relatively small fiscal resources to support UAE banks and, potentially, other entities during the current period of economic stress," Fitch said. While Etisalat maintains strong operational and strategic ties with the UAE Government, analysts said the downgrade was more of a UAE story than one that could affect Etisalat's operations. "Etisalat's cash flow is very strong," said Irfan Ellam, a telecoms analyst with Al Mal Capital. "Right now it can service all of its debt from its cash flow. If you look at its debt-to-Ebitda [earnings before interest, taxes, depreciation and amortisation] ratio, it's very low and one of the strongest telecoms operators in the region.

"It may be a little more expensive for Etisalat to raise debt but not by that much. Fitch's view is that the credit profile of the sovereign entity has weakened and there is uncertainty as to how any government support may be provided." An "A plus" level denotes Fitch's expectation of a low risk of defaulting on a company's debt. While the capacity for payment of its financial commitments remains strong, the agency's rating indicates Etisalat may be more vulnerable to adverse business or economic conditions.

Fitch noted that the downgrade is not related to Etisalat's operational performance or financial standing. @Email:dgeorgecosh@thenational.ae