Click here to close now.




















Welcome!

News Feed Item

Fitch Affirms Telemovil's IDRs at 'BB'; Outlook Stable

Fitch Ratings has affirmed the foreign- and local-currency Issuer Default Ratings (IDRs) of Telemovil El Salvador, S.A. (Telemovil) and Telemovil Finance Co. Ltd (TF) at 'BB'. The Rating Outlook is Stable. Fitch has also affirmed USD310.6 million senior notes due 2017 issued by TF at 'BB'.

At the same time, Fitch has withdrawn the IDRs of TF as the entity is not considered analytically meaningful for the credit quality of the notes which have been issued out of it and fully guaranteed by Telemovil.

Telemovil's ratings reflect its diversified service offering, leading positions in the mobile and pay television segments in El Salvador, strong brand recognition, extensive network coverage, and moderate leverage for the rating category. The company's credit quality is tempered by a persistently high level of competition which continues to weigh on its market share and cash flow generation.

The ratings also factor in Telemovil's strong linkage with its parent, Millicom International Cellular S.A. (MIC) (rated 'BB+' by Fitch), which helps Telemovil to achieve synergies related to the larger scale of the parent and provides expertise in management. It also considers the payment of dividends and royalties to MIC and Telemovil's limited geographic diversification.

ARPU Decline Continues:

Telemovil's revenue growth is likely to remain weak in 2014 and 2015, following a 1% contraction in 2013, due to the continued erosion in mobile ARPU against the backdrop of the intense competition and mature industry conditions, as the penetration rate was approximately 120% at the end of June 2014. The company's mobile strategy is centered on mobile data revenue growth which is expected to offset further possible declines in voice revenues. In addition, aggressive tariff-based strategies from competitors could prevent any meaningful recovery in Telemovil's market share; market share has fallen to 36% at the end of second quarter 2014 (2Q'14) from 40% in 2013.

Margin Erosion:

Fitch forecasts Telemovil's EBITDA margin will trend down below 30% over the medium term due to continued pressures from competitors. The revenue mix will become even more unfavorable as the lucrative mobile voice revenues gradually decline while marketing costs, including handset subsidies, continue to increase, and the contribution from the lower margin fixed-line businesses grow. Telemovil's EBITDA margin fell to 31% during 2013 from 36% in 2013, as calculated by Fitch.

Strong Growth in Other Segments:

Positively, Telemovil's non-mobile segments, including pay-TV, broadband, and B2B solutions, which together accounted for 32% of total revenues in 2013, continued to grow strongly and this trend should continue over the medium term given the still low penetration of these types of services. Telemovil's offering of bundled services, with the newly launched Direct-To-Home TV, should help ward off the competitive threats to a certain extent and mitigate negative growth in the mobile business.

By 2017, Fitch expects the company's non-mobile segment is expected to account for almost 40% of total sales. Mobile finance solutions will remain the fastest growing segment in the company, with double-digit annual revenue growth, yet its earnings contribution will still be small over the medium term.

Positive Pre-Dividend FCF:

Telemovil should be able to maintain its positive pre-dividend free cash flow (FCF) generation over the medium term despite the increasing capex amid weak EBITDA growth. The company plans to increase capex by approximately 20-30% from the 2013 level, which will represent about 14%-15% of revenues during the period, primarily for 3G/Long Term Evolution (LTE) coverage and capacity, as well as for pay-TV and fixed-line services. The increase in capex should be covered by the cash flow from operations (CFFO) before dividends over the medium term.

In addition, dividend payment has decreased significantly, by about 75% from the 2010-2012 levels. Any significant increase in the shareholder distribution over the medium term should be limited given the company's large investment plans. In Fitch's view, Telemovil's upstream payment to the parent, aside from the regular royalty fees, could be flexible depending on its financial condition and the operational outlook.

Increased Leverage

Telemovil's financial net leverage, measured by adjusted net debt-to-EBTIDAR, is forecast to remain above 2.5x over the medium term as EBITDAR in absolute terms will be relatively stable. This figure compares with 2.3x and 1.9x at the end of 2013 and 2012, respectively. Excluding the lease adjustment, the company's net debt-to-EBITDA was 1.7x at end-2013.

The company's gross leverage will decrease to close to 3.0x during 2014 from 3.7x at the end of 2013 as the company has successfully completed its partial tender offer of USD139 million on its USD450 million bond due 2017 in April 2014.

The company's liquidity profile is good as it does not face any debt maturities until 2017. Telemovil held USD206 million of readily available cash as of March 31, 2014.

Rating Sensitivities

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

--Deterioration in the company's EBITDA and FCF generation along with weak revenue growth due to competitive pressures and such. factors as material loss in mobile market share, ARPU erosion, and substantial increase in marketing expenses;

--Worse-than-expected negative impact of the introduction of number portability and higher-than-expected auction prices for 4G spectrums;

--Change in MIC's financial policy, including larger cash upstreams from its subsidiaries, or any significant deterioration in the parent's credit profile.

Adjusted net debt-to-EBITDAR above 3.0x in conjunction with a weak liquidity profile on a sustained basis.

Positive: While ratings upgrades are not likely in the short- to medium-term due to the competitive operating environment, future developments that may, individually or collectively, lead to a positive rating action include:

--Reductions in net leverage below 2.0x on a sustained basis, driven by improved service diversification, enhanced market position, positive change in the competitive/regulatory environment, and/or explicit support from its parent MIC.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology', May 28, 2014

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=850835

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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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
Puppet Labs has announced the next major update to its flagship product: Puppet Enterprise 2015.2. This release includes new features providing DevOps teams with clarity, simplicity and additional management capabilities, including an all-new user interface, an interactive graph for visualizing infrastructure code, a new unified agent and broader infrastructure support.
WebRTC has had a real tough three or four years, and so have those working with it. Only a few short years ago, the development world were excited about WebRTC and proclaiming how awesome it was. You might have played with the technology a couple of years ago, only to find the extra infrastructure requirements were painful to implement and poorly documented. This probably left a bitter taste in your mouth, especially when things went wrong.
SYS-CON Events announced today that HPM Networks will exhibit at the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. For 20 years, HPM Networks has been integrating technology solutions that solve complex business challenges. HPM Networks has designed solutions for both SMB and enterprise customers throughout the San Francisco Bay Area.
Red Hat is investing in Tesora, the number one contributor to OpenStack Trove Database as a Service (DBaaS) also ranked among the top 20 companies contributing to OpenStack overall. Tesora, the company bringing OpenStack Trove Database as a Service (DBaaS) to the enterprise, has announced that Red Hat and others have invested in the company as a part of Tesora's latest funding round. The funding agreement expands on the ongoing collaboration between Tesora and Red Hat, which dates back to Febr...
As more and more data is generated from a variety of connected devices, the need to get insights from this data and predict future behavior and trends is increasingly essential for businesses. Real-time stream processing is needed in a variety of different industries such as Manufacturing, Oil and Gas, Automobile, Finance, Online Retail, Smart Grids, and Healthcare. Azure Stream Analytics is a fully managed distributed stream computation service that provides low latency, scalable processing of ...
Too often with compelling new technologies market participants become overly enamored with that attractiveness of the technology and neglect underlying business drivers. This tendency, what some call the “newest shiny object syndrome,” is understandable given that virtually all of us are heavily engaged in technology. But it is also mistaken. Without concrete business cases driving its deployment, IoT, like many other technologies before it, will fade into obscurity.
With the proliferation of connected devices underpinning new Internet of Things systems, Brandon Schulz, Director of Luxoft IoT – Retail, will be looking at the transformation of the retail customer experience in brick and mortar stores in his session at @ThingsExpo. Questions he will address include: Will beacons drop to the wayside like QR codes, or be a proximity-based profit driver? How will the customer experience change in stores of all types when everything can be instrumented and a...
Consumer IoT applications provide data about the user that just doesn’t exist in traditional PC or mobile web applications. This rich data, or “context,” enables the highly personalized consumer experiences that characterize many consumer IoT apps. This same data is also providing brands with unprecedented insight into how their connected products are being used, while, at the same time, powering highly targeted engagement and marketing opportunities. In his session at @ThingsExpo, Nathan Trel...
Cloud and datacenter migration innovator AppZero has joined the Microsoft Enterprise Cloud Alliance Program. AppZero is a fast, flexible way to move Windows Server applications from any source machine – physical or virtual – to any destination server, in any cloud or datacenter, using its patented container technology. AppZero’s container is also called a Virtual Application Appliance (VAA). To facilitate Microsoft Azure onboarding, AppZero has two purpose-built offerings: AppZero SP for Azure,...
WSM International, the pioneer and leader in server migration services, has announced an agreement with WHOA.com, a leader in providing secure public, private and hybrid cloud computing services. Under terms of the agreement, WSM will provide migration services to WHOA.com customers to relocate some or all of their applications, digital assets, and other computing workloads to WHOA.com enterprise-class, secure cloud infrastructure. The migration services include detailed evaluation and planning...
SYS-CON Events announced today that G2G3 will exhibit at SYS-CON's @DevOpsSummit Silicon Valley, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Based on a collective appreciation for user experience, design, and technology, G2G3 is uniquely qualified and motivated to redefine how organizations and people engage in an increasingly digital world.
A producer of the first smartphones and tablets, presenter Lee M. Williams will talk about how he is now applying his experience in mobile technology to the design and development of the next generation of Environmental and Sustainability Services at ETwater. In his session at @ThingsExpo, Lee Williams, COO of ETwater, will talk about how he is now applying his experience in mobile technology to the design and development of the next generation of Environmental and Sustainability Services at ET...
SYS-CON Events announced today the Containers & Microservices Bootcamp, being held November 3-4, 2015, in conjunction with 17th Cloud Expo, @ThingsExpo, and @DevOpsSummit at the Santa Clara Convention Center in Santa Clara, CA. This is your chance to get started with the latest technology in the industry. Combined with real-world scenarios and use cases, the Containers and Microservices Bootcamp, led by Janakiram MSV, a Microsoft Regional Director, will include presentations as well as hands-on...
SYS-CON Events announced today that Micron Technology, Inc., a global leader in advanced semiconductor systems, will exhibit at the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Micron’s broad portfolio of high-performance memory technologies – including DRAM, NAND and NOR Flash – is the basis for solid state drives, modules, multichip packages and other system solutions. Backed by more than 35 years of tech...
This Enterprise Strategy Group lab validation report of the NEC Express5800/R320 server with Intel® Xeon® processor presents the benefits of 99.999% uptime NEC fault-tolerant servers that lower overall virtualized server total cost of ownership. This report also includes survey data on the significant costs associated with system outages impacting enterprise and web applications. Click Here to Download Report Now!