Fitch affirms Qtel ‘A+’ credit rating with outlook stable

Fitch Ratings has affirmed Qtel’s long-term foreign currency Issuer Default Rating (IDR) and senior unsecured ratings at ‘A+’ respectively. Fitch has simultaneously affirmed Qtel International Finance Limited’s global medium-term note programme (GMTN), guaranteed by Qtel, at ‘A+’.

Additionally, Standard & Poor’s rating service reassigned its ‘A-’ long-term and ‘A-2’ short term corporate credit ratings, while Moodys is currently rating Qtel with A1. The outlook on all ratings is stable.

Fitch’s rating affirmation reflects its assessment of the sovereign’s creditworthiness, given Qtel’s strong operational and strategic ties with the State of Qatar. The State of Qatar owns a 55 per cent stake in Qtel which is held directly and via the Qatar Holding. Therefore the agency’s approach takes into account the operator’s government backing.

Chief executive of Qtel, Dr Nasser Marafih believed the ratings were a continued validation of the Qatari operator’s compelling strategy, professional management and sound financial structure.

“It also reflects the extraordinary strength of the Qatari economy despite wider global economic issues and the strong and continuous support of our shareholders. Our investment grade credit ratings will ensure that we have continued excellent access to global investors and that we can revisit the markets to finance our growth," Marafih stated.

Fitch estimates that Qtel’s leverage (net debt to EBITDA) will increase slightly to 2.25x at YE09 compared with 2.1x at YE08 due to the tender call on Indosat shares at Q109. The agency is confident the company will maintain a conservative financial policy and will not test the maximum leverage tolerance set by the board at a debt/EBITDA ratio of 3.5x.

The agency also notes that, as expected, over 80 per cent of consolidated EBITDA originated from four core markets during Q309: Qatar, Indonesia, Kuwait and Iraq. Fitch would also view any potential acquisition as an event risk, in line with its rating methodology.

Almost all of Qtel’s operating subsidiaries are currently self-funded, with limited support from the parent company. Fitch notes that the company’s consolidated free cash flow (FCF) generation capability will be affected by increasing investment needs in Indonesia and Iraq in 2009 and 2010, but Qtel is expected to generate strong FCF in 2011 in line with the expected fall in capex needs.

The Qtel Group is a diversified telecommunications group providing consumer telephony, consumer broadband and corporate managed services. Over the past three years, Qtel has expanded its geographic footprint from two to 17 countries within the Middle East and Asia, with more than 52 million customers.