TELKOM SA SOC LIMITED - Telkom SA SOC Limiteds Revised Credit Rating By S&P Global Ratings
TL20 TLC01 TLC02 201704100041A
Telkom SA SOC Limited’s Revised Credit Rating By S&P Global Ratings
Telkom SA SOC Limited
Registration number 1991/005476/30)
(“Telkom” or “the Company”)
TL20: ZAG000021528
TLC01: ZAG000142696
TLC02: ZAG000142704
TELKOM SA SOC LIMITED’S REVISED CREDIT RATING BY S&P GLOBAL RATINGS
Due to the recent rating action taken by S&P Global Ratings (“S&P”
or “the agency”) on South Africa’s long-term foreign currency rating
from ‘BBB-‘ to ‘BB+’ and in accordance with paragraph 4.26 of the
JSE Debt Listings Requirements, noteholders are hereby advised of
the Company’s rating which has been affirmed at ‘BBB-‘. Furthermore,
the agency has changed its rating outlook to negative from stable on
the company.
S&P has further advised that the rating review reflects its view of
potentially weakening economic conditions as well as political and
institutional uncertainty in the country in the next year, which
could in turn affect Telkom’s creditworthiness.
The agency however notes Telkom’s market leadership position as the
incumbent telecom provider in the fixed-line voice market in the
country as well as its growth prospects in its mobile, broadband and
ICT solutions business which offsets the declining trend in fixed-
line voice revenues.
Telkom’s global scale rating is now one notch above the country’s
credit rating of BB+, negative. Telkom’s conservative capital
structure combined with an expectation for single-digit net revenue
growth and an average EBITDA margin of about 24% is what S&P cited
as the primary reasons for maintaining our current rating position.
This is a positive acknowledgement to the turnaround strategy that
the company embarked upon almost four years ago and the company will
continue to actively manage its costs, cash and use of capital in
the most efficient manner possible in the current difficult economic
environment.
The negative outlook of Telkom by S&P reflects the possibility of a
downgrade over the next year if the sovereign rating falls further
and thereby impacting Telkom. However, having conducted a stress
test to assess the company’s resilience under a hypothetical
sovereign default scenario which includes stress on earnings and a
devaluation of the South African rand, the agency limits the
differential to one notch.
The company’s rating outlook could, in future be revised to stable
if similar action on South Africa’s rating was revised, or if a
significant improvement in the company’s liquidity position and
ability to withstand a sovereign default with a substantially
greater cushion occurs.
Centurion
10 April 2017
Debt Sponsor
The Standard Bank of South Africa Limited
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