Welcome!

News Feed Item

Fitch Expects to Rate Empresa de Telecomunicaciones de Bogota's Proposed Notes 'BBB-(exp)'

Fitch Ratings expects to rate Empresa de Telecomunicaciones de Bogota S.A. E.S.P.'s (ETB) proposed senior unsecured notes due 2023 'BBB-(exp)'. The senior notes will be denominated in COP for the equivalent of USD300 million and will be payable in USD at the average exchange rate of the prior five days. Proceeds from the issuance are expected to be used to fund the company's capital expenditure plan. Fitch currently rates ETB foreign and local currency Issuer Default Ratings (IDRs) at 'BBB-' with a Stable Rating Outlook.

ETB's ratings are supported by the company's sound financial profile, consistent track record of cash from operations (CFO) generation and its leading positions in local and broadband services in Bogota. Conversely, the ratings are tempered by increased competition, mobile substitution, and limited geographical footprint and service revenue diversification. ETB's ratings take into account its plan to raise additional debt which proceeds are expected to fund its capital expenditure plan. The ratings incorporate company's strategy focused in strengthening its network and infrastructure in order to deliver convergent service offerings, which will increase leverage and will result in negative free cash flow (FCF) over the next three years.

ETB's 'BBB-' foreign currency rating (FC IDR) rated at the same level of District of Bogota, (rated 'BBB-' by Fitch) has historically recognized that the linkage between parent and subsidiary is weak and non-dependent. Although ETB is owned by the District of Bogota (the district), the company has an independent management and historically has maintained a conservative financial profile. ETB's dividend payment is not material for the district's finances. Fitch expects the relationship between the district and ETB will not affect the company's business risk and financial profile.

ETB benefits from its position as the incumbent fixed line operator in Bogota which historically has resulted in FCF generation. Bogota is the most important and competitive market in the country, which at the same time exposes it to strong competitive pressures. ETB has an estimated 71% of lines in service in Bogota, 43% of broadband accesses and an extensive network coverage which allows it to offer multiple services to the corporate segment located in Bogota as well as in other major cities. However, given the importance of this market many competitors participate in it and have gained market share at the expense of the company.

Fitch expects that in the next few years, revenues from internet, data and Pay-TV will represent about 70% of total revenues helping support EBITDA, which is tied to the ability of the company to increase its market share in a highly competitive environment with strong and aggressive participants. ETB's strategy aims to strength their competitive position by investing over the next six in upgrading its network infrastructure to diversify and offset revenue decline in the traditional local services. ETB's capex plan comprises mainly deploying fiber to the home (FTTH), the development of a Pay-TV offering and IT services for the corporate segment. ETB derives more than half of its operational generation from local and long distance services, which are expected to decrease over the medium term. Revenue growth from data and internet, including FTTH and other related businesses, are expected to offset the decrease in traditional revenues in the long term.

The company has managed to sustain its EBITDA generation and compensate the decline in traditional local fixed telephony and long distance revenues though the growth of internet and data revenues along with the reduction of expenses. For the 12 months ended Sept. 30, 2012, revenue was 4.1% lower than the same period of the previous year and EBITDA margin was 45.6% which still compares favorably with its peers. Fitch expects EBITDA margin continue declining during the next years, due to competitive pressures and changes in revenues mix, as newer services are introduced.

Fitch expects forthcoming years' negative FCF generation as a result of the capital expenditure plan which should be funded mainly with cash flow from operations and potential additional indebtedness. The company has some flexibility in their capex to the extent that approximately 30% is success based and can benefit FCF generation. This should give the company flexibility to maintain a stable capital structure with a manageable maturity profile. ETB has historically generated robust cash flow which has allowed them fund their investments and maintain a conservative financial profile. Company's cash flow generation remains strong and has covered company's capex and dividends, resulting in a positive free cash flow (FCF) generation.

The rating incorporates that leverage should remain moderate. Fitch expects ETB's FFO adjusted leverage and adjusted debt to EBITDAR to be close to 1.5x within the next five years. Leverage has maintain a downward trend in recent years and the decision of the company to fully fund their pensions and take this obligation out of its balance, allows to partially offset the expected increase in debt without a significant deterioration in its credit profile. For the 12 months ended Sept. 30, 2012, funds flow from operations(FFO) adjusted leverage and debt to EBITDA was 0.4x, respectively. By adjusting the debt for contingencies, lease of satellite frequencies, unfunded pension liabilities and guarantees to Colombia Movil, results in an adjusted leverage ratio of 1.3x EBITDAR.

The company's liquidity position is strong and is supported by high cash balances, low debt levels, a comfortable debt maturity profile and historical positive FCF generation. After the proposed transaction the company's debt will be entirely represented by the proposed US$300 million senior notes due in 2023. The company plans to prepaid current debt with cash balances. All debt will be denominated in COP, mitigating any currency risk. As of Sep. 30, 2012 cash balances amounted to COP539.4 billion, which positively balance against ETB's total debt of COP277.0 billion.

Key Rating Drivers

A positive rating action is unlikely at the moment given the increase in leverage and expectation of negative FCF over the next few years.

Future developments that may, individually or collectively, lead to a negative rating action include:

--Inability by ETB to compensate a decline in revenues and EBITDA that results in a sustained increase in adjusted (for contingencies, pension liabilities and leases) leverage over 2.0x.

--Likewise additional investments that involve debt with lower than expected operational generation could trigger a downgrade.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Parent and Subsidiary Rating Linkage' (Aug. 9, 2012);

--'National Ratings Criteria' (Jan. 19, 2011);

--'Corporate Sector Credit Factor Guidelines-All Sector 2012'

(Nov.23, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Parent and Subsidiary Rating Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Corporate Sector Credit Factor Guidelines - All Sectors 2012
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695854

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
The taxi industry never saw Uber coming. Startups are a threat to incumbents like never before, and a major enabler for startups is that they are instantly “cloud ready.” If innovation moves at the pace of IT, then your company is in trouble. Why? Because your data center will not keep up with frenetic pace AWS, Microsoft and Google are rolling out new capabilities. In his session at 20th Cloud Expo, Don Browning, VP of Cloud Architecture at Turner, posited that disruption is inevitable for comp...
No hype cycles or predictions of zillions of things here. IoT is big. You get it. You know your business and have great ideas for a business transformation strategy. What comes next? Time to make it happen. In his session at @ThingsExpo, Jay Mason, Associate Partner at M&S Consulting, presented a step-by-step plan to develop your technology implementation strategy. He discussed the evaluation of communication standards and IoT messaging protocols, data analytics considerations, edge-to-cloud tec...
"When we talk about cloud without compromise what we're talking about is that when people think about 'I need the flexibility of the cloud' - it's the ability to create applications and run them in a cloud environment that's far more flexible,” explained Matthew Finnie, CTO of Interoute, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
Cloud applications are seeing a deluge of requests to support the exploding advanced analytics market. “Open analytics” is the emerging strategy to deliver that data through an open data access layer, in the cloud, to be directly consumed by external analytics tools and popular programming languages. An increasing number of data engineers and data scientists use a variety of platforms and advanced analytics languages such as SAS, R, Python and Java, as well as frameworks such as Hadoop and Spark...
"We are a monitoring company. We work with Salesforce, BBC, and quite a few other big logos. We basically provide monitoring for them, structure for their cloud services and we fit into the DevOps world" explained David Gildeh, Co-founder and CEO of Outlyer, in this SYS-CON.tv interview at DevOps Summit at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
Join us at Cloud Expo June 6-8 to find out how to securely connect your cloud app to any cloud or on-premises data source – without complex firewall changes. More users are demanding access to on-premises data from their cloud applications. It’s no longer a “nice-to-have” but an important differentiator that drives competitive advantages. It’s the new “must have” in the hybrid era. Users want capabilities that give them a unified view of the data to get closer to customers and grow business. The...
The Internet giants are fully embracing AI. All the services they offer to their customers are aimed at drawing a map of the world with the data they get. The AIs from these companies are used to build disruptive approaches that cannot be used by established enterprises, which are threatened by these disruptions. However, most leaders underestimate the effect this will have on their businesses. In his session at 21st Cloud Expo, Rene Buest, Director Market Research & Technology Evangelism at Ara...
SYS-CON Events announced today that Silicon India has been named “Media Sponsor” of SYS-CON's 21st International Cloud Expo, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Published in Silicon Valley, Silicon India magazine is the premiere platform for CIOs to discuss their innovative enterprise solutions and allows IT vendors to learn about new solutions that can help grow their business.
Amazon started as an online bookseller 20 years ago. Since then, it has evolved into a technology juggernaut that has disrupted multiple markets and industries and touches many aspects of our lives. It is a relentless technology and business model innovator driving disruption throughout numerous ecosystems. Amazon’s AWS revenues alone are approaching $16B a year making it one of the largest IT companies in the world. With dominant offerings in Cloud, IoT, eCommerce, Big Data, AI, Digital Assista...
The current age of digital transformation means that IT organizations must adapt their toolset to cover all digital experiences, beyond just the end users’. Today’s businesses can no longer focus solely on the digital interactions they manage with employees or customers; they must now contend with non-traditional factors. Whether it's the power of brand to make or break a company, the need to monitor across all locations 24/7, or the ability to proactively resolve issues, companies must adapt to...
"Loom is applying artificial intelligence and machine learning into the entire log analysis process, from start to finish and at the end you will get a human touch,” explained Sabo Taylor Diab, Vice President, Marketing at Loom Systems, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
@DevOpsSummit at Cloud Expo taking place Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center, Santa Clara, CA, is co-located with the 21st International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is ...
After more than five years of DevOps, definitions are evolving, boundaries are expanding, ‘unicorns’ are no longer rare, enterprises are on board, and pundits are moving on. Can we now look at an evolution of DevOps? Should we? Is the foundation of DevOps ‘done’, or is there still too much left to do? What is mature, and what is still missing? What does the next 5 years of DevOps look like? In this Power Panel at DevOps Summit, moderated by DevOps Summit Conference Chair Andi Mann, panelists loo...
Cloud applications are seeing a deluge of requests to support the exploding advanced analytics market. “Open analytics” is the emerging strategy to deliver that data through an open data access layer, in the cloud, to be directly consumed by external analytics tools and popular programming languages. An increasing number of data engineers and data scientists use a variety of platforms and advanced analytics languages such as SAS, R, Python and Java, as well as frameworks such as Hadoop and Spark...
"MobiDev is a Ukraine-based software development company. We do mobile development, and we're specialists in that. But we do full stack software development for entrepreneurs, for emerging companies, and for enterprise ventures," explained Alan Winters, U.S. Head of Business Development at MobiDev, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.