May 30, 2012 / 8:48 AM / in 5 years

TEXT-S&P assigns 'bb' rating to Protelindo; outlook stable

(The following statement was released by the rating agency)

May 30 -

Overview

-- Protelindo, an Indonesia-based independent telecom tower company, has an “aggressive” financial risk profile and a “fair” business risk profile.

-- We are assigning our ‘BB’ long-term corporate credit rating to the company.

-- The stable outlook reflects our expectation that the company can maintain its operating efficiency and stable cash flows.

Rating Action

On May 30, 2012, Standard & Poor’s Ratings Services assigned its ‘BB’ long-term corporate credit rating to Indonesia-based independent telecom tower company PT Profesional Telekomunikasi Indonesia (Protelindo). The outlook is stable. We also assigned our ‘axBBB-’ ASEAN regional scale rating to the company.

Rationale

The rating on Protelindo reflects our expectation that the company’s leverage will remain high. The rating also reflects the weak market position of its key customer, PT Hutchison CP Telecommunications (HCPT; not rated). Protelindo’s strong operating efficiency, stable cash flow and strong margins from long-term tower leases, and good market position temper these weaknesses.

Protelindo has an “aggressive” financial risk profile. Our view reflects our expectation that the company’s leverage would remain high due to the scope for potentially large debt-funded acquisitions in its tower portfolio. We expect Protelindo to continue to invest in built-to-suit towers for companies such as PT XL Axiata Tbk. (not rated) and PT Telekomunikasi Selular (BBB-/Stable/--). We estimate that the company’s debt-to-EBITDA ratio will remain about 4x and the ratio of funds from operations (FFO) to debt will remain about 15% over the next two years. Protelindo is also exposed to exchange rate fluctuations because about 70% of its debt and about 40% of its revenue are denominated in foreign currency.

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