Fitch downgrades ratings for Singtel and Optus
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Fitch Ratings has downgraded Singtel's long-term foreign-and local-currency issuer default ratings (IDRs) and foreign-currency senior unsecured rating to A from A+.
It also lowered the long-term foreign-currency IDR and senior unsecured rating of the telco's wholly owned Australian subsidiary Singtel Optus to A-from A.
It has a stable outlook on the IDRs for both Singtel and Optus.
The ratings downgrade reflects weaker-than-expected growth prospects as well as capital expenditure pressure resulting in higher leverage than previously anticipated, Fitch said in a statement last Friday.
The agency expects Singtel's net leverage - defined as FFO (funds from operations) adjusted net leverage - to rise to around 2.5 times in the financial years ending March 2021 and March 2022.
"A prolonged period of low returns on 5G investments, coupled with the group's shareholder-friendly policies, could delay the pace of deleveraging," Fitch said.
Its projections exclude any sales of non-core assets.
Fitch noted domestic competition will intensify with TPG Telecom's entry as the fourth mobile network operator in Singapore, as well as TPG's merger with Vodafone Hutchison Australia.
In response to the ratings downgrade, a Singtel spokesman said: "Singtel and Optus' credit ratings are strong and we remain financially disciplined and committed to maintaining our investment-grade credit ratings."
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