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May 30 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed the Issuer Default Rating (IDR) Long-Term Foreign Currency from PT. Professional Telekomunikasi Indonesia Tbk (Protelindo) at 'BB' and National Long-term rating at 'AA-(idn)'. Prospects for both ratings is Stable.
Initiator Level Factors
The Controlled Financial Leverage: Funds flow from operations (FFO)-adjusted net leverage of Protelindo rose to 4.2x at the end of March 2013 (2012:3.4x) due to the acquisition of an investment of IDR992 billion (USD104 million).
However, Fitch believes that it will get better leverage from Protelindobelow 4.0x in 2013 due to internally generated cash will be sufficient tofinance capital expenditure. Fitch also derive comfort from the commitment ofmanagement to maintain the net debt / annualized quarterly EBITDA of approximately 3.0x-3.5x.The Solid Business Model: Protelindo have a steady cash flow and canpredicted from long-term contracts that can not be undone (10-12 years),in which there is an annual price increase associated with the level ofinflation. The company gained more than half of the total annual incomebeginning and has approximately USD2.7 billion (IDR25.6 trillion) of incomecontracted until the end of 2027 in March 2013. also rankedtake into account the strong EBITDA margin (2012: 83%) and the regulationsadvantageous in that telecommunications companies are encouraged to share towerscompared to building a new tower to be used alone.
Acquisition Strategy: Fitch believes that the leverage of Protelindo not befalls below 3.0x due to acquisition growth strategy isnatural for telecom tower companies. In 2012, Protelindobuy 82 towers from PT Central Investindo and acquired 261 towers from Royal KPN NV (KPN, BBB-/Stable) based in the Netherlands and 38 towers ofPT Hutchison CP Telecommunications (HCPT, a subsidiary of Hutchison Whampoa Limited (HWL, A-/Stable). Fitch forecasts take into account the budget forannual acquisition IDR1 trillion (USD105 million).
Concerns Against Tenants Composition: Protelindo managed to fixcomposition of tenants in 2012 with a composition greater than operatortelecommunications is rated investment grade from 30:70 to 35:65 in 2011.The main concern is to rank Protelindo its exposure toIndonesian telecommunications operators are small and not profitable. especially,PT Bakrie Telecom (BTEL, CC) and PT Smartfren (CC (idn)) - which isoverall contributing to 17% of revenue in 1Q13 and Protelindo facing liquidity problems due to the difficulty of developing market share and
Positive, telecom operator considers tower lease obligationsas senior to the payment of debts due to the need to continueproviding service to customers.
Negative the rating action could occur if: - Acquisition of the tower portfolio funded by debt or failure to payrental of telecommunication operators lead to the weakening of the weakFFO-adjusted net leverage above 4.0x on a sustainable basis. - The weakening of the commitment of HWL resulting HCPT HCPT nothonor contractual commitments to Protelindo can also causelowered ratings.
Positive actions that the rating is not expected in the medium term ascompany likely will not lower its leverage levels aresignificant because of its investment to maintain growth.