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Press Release
08 Jan | Monday
RAM Ratings reaffirms AAA/Stable/P1 rating of Digi’s sukuk
RAM Ratings has reaffirmed the AAA/Stable/P1 ratings of Digi Telecommunications Sdn Bhd’s (Digi or the Company) RM5 billion Islamic Medium Term Notes Programme (2017/2032) and RM1 billion Islamic Commercial Papers (2017/2024), both of which are subject to a combined limit of RM5 billion. The reaffirmation of the issue ratings reflects Digi’s well-established position in the mobile industry, underpinned by its sturdy performance and financial profile.
 
The ratings take account of Digi’s close relationship with its indirect shareholder, Telenor ASA (Telenor or the Group), a Norway-based telecommunication services provider. Accordingly, support from Telenor is deemed highly likely and is anticipated to be readily extended if and when required. Moreover, Digi’s relationship with Telenor enables the Company to enjoy economies of scale through coordinated corporate procurement. Digi also benefits from the transfer of technical know-how from Telenor, especially in the areas of operational performance, development of services and technological convergence. Digi is considered a key long-term investment of Telenor, given that the Company accounted for about 9.7% and 11.1% of the Group’s revenue and operating profit before depreciation, interest and tax (OPBDIT), respectively, in 9M 2017.
 
Amid the saturated mobile market and aggressive price competition, Digi is the sole mobile operator to increase its subscriber market share in the last 3 quarters. As at 3Q 2017, the Company retained its pole position as the largest mobile operator (since 2016), with 36.3% of subscriber market share or 11.9 million subscribers. Additionally, the Company possesses a strong revenue and cash-generating aptitude. Digi’s revenue market share remained resilient, while its adjusted OPBDIT margin of 51.23% in 9M 2017 is still one of the highest among local and ASEAN peers. Meanwhile, the Company’s debt is expected to peak at RM3.2 billion over the next 3 years, pushing its gearing ratio to 6.08 times from 5.00 times currently. Nonetheless, its funds from operations debt coverage will stay robust, hovering between 0.67 and 0.69 times over the same period.
 
In view of the high concentration of migrants in its subscriber base, the Company is also exposed to forex risk. As the cost of international direct dialing – to which migrants are attracted – is paid in foreign currencies, mainly US dollars, any depreciation of the ringgit will crimp the Company’s OPBDIT margin. 

Analytical contact
Lim Yu Cheng, CFA
(603) 7628 1188
yucheng@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

Date of release: 8 January 2018

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2018 by RAM Rating Services Berhad’s

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