Tuesday, 08 December 2020 11:38

S&P revises Optus outlook to negative, A- rating affirmed Featured

S&P revises Optus outlook to negative, A- rating affirmed Supplied

Global ratings agency S&P Global Ratings has downgraded its outlook for telco Optus to negative, following a similar rating action on its parent, Singapore Telecommunications.

In a statement, the ratings agency said it expected Optus' financial performance to deteriorate significantly in 2021.

"We anticipate adjusted EBITDA to decline by about 20% to 30%, due to persistent price competition, cautious business and consumer sentiment exacerbated by COVID-19, slow recovery of international travel, as well as margin dilution caused by the national broadband network," S&P said.

Due to these factors, adjusted leverage was likely to exceed 3x in fiscal 2021 and that would be above the current stand-alone credit profile of 2.75x. The profile had been revised down to bbb- from bbb.

"On 7 December, S&P Global Ratings revised its outlook to negative from stable on Optus, following the same action on the company's Singapore-based parent, Singtel," the statement said. "At the same time, we affirmed the 'A-' issuer credit and issue-level ratings on Optus.

"The negative outlook on Optus mirrors that on its parent company because we continue to view Optus as a core subsidiary to the group. The issuer credit rating on Optus does not factor in any extraordinary support from the government of Singapore, unlike our credit rating on Singtel."

S&P said it expected Optus to maintain its second position in the Australian telecommunications market. "Optus holds about 27% retail market share by revenue for mobile phone services in Australia and 15.5% of wholesale market share for NBN services," the ratings agency said.

"Recently, Optus announced its $250 million acquisition of amaysim, Australia's largest mobile virtual network operator with a customer base of nearly 1.2 million subscribers.

"We view the acquisition as a defensive investment that should help reinforce Optus' market position with a dual-brand strategy as well as secure its wholesale revenues.

"Moreover, the acquisition removes a key market disruptor, which should promote a more stable market environment among Australia's three mobile network operators. The Australian Competition and Consumer Commission is reportedly not planning to oppose the acquisition."

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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