Fitch ups XL Axiata’s investment rating; financing needs and cash flow expected to improve

28 Jan 2013

Fitch Ratings has upgraded the credit rating of Indonesian mobile operator XL Axiata, reflecting it says, the agency’s assessment that the cellco’s Malaysia-based parent, Axiata Group, can support its ongoing financing needs and that the carrier’s cash flow is ‘expected to improve’. It is understood that Fitch upgraded XL Axiata’s long-term foreign- and local-currency issuer default ratings to ‘BBB’ from ‘BB+’, and assessed the outlook on the rating as ‘stable’, the Jakarta Globe writes. XL Axiata is Indonesia’s third largest mobile network operator with a total of 42.3 million users as at 30 September 2012. It reported net income of IDR2.19 trillion (USD228.6 million) in the January-September period, little changed from IDR2.18 trillion in the same period a year earlier, due to a weak local currency, the rupiah. However, it is Fitch’s view that XL Axiata’s rating be more closely aligned to that of its 66.7% owner, due to ‘strengthening links between the two companies’. The ratings agency also notes that XL is the Axiata Group’s fastest growing subsidiary, with ‘double-digit revenue growth’.

In its report, Fitch maintains that the improved tie-up between the pair: ‘Should allow XL to return to positive free cash flow this year after recording negative free cash flow in 2012 … Fitch believes that XL’s decision to invest more in 2012 than the country’s second largest telco, PT Indosat, could benefit its profitability and reduce customer churn.’

Indonesia, Axiata, XL Axiata