JAKARTA: Standard & Poor's Ratings Services said today that it had raised the long-term corporate credit rating on Indonesian cellular service provider PT XL Axiata Tbk (EXCL) to BB from BB-. The outlook is stable.
S&P raised the rating on XL to reflect the strengthening of the company's financial metrics stemming from strong earnings, improved profitability, and continued reduction of debt.
The rating agency estimates XL's gross debt-to-EBITDA ratio at 1.3x and its funds from operations (FFO) to debt at 73.6% for the 12 months ended September 30, 2010. This is a marked improvement from the gross debt-to-EBITDA ratio of 2.2x and FFO to debt of 47.1% that the company achieved for the 12 months ended December. 31, 2009."We attribute the significant improvement in XL's EBITDA this year to a strategy the company implemented in 2009 to clean up its telecommunication network distribution and improve the quality of its subscribers," said Standard & Poor's credit analyst Allan Redimerio, in a press statement today.As a result of this strategy, XL's earnings have been improving since the second half of 2009. The company was able to maintain the positive momentum in 2010 by introducing bundled service packages, where subscribers could avail free voice minutes, SMS, or data on achieving certain voice usage. "We expect XL to focus its capital spending on increasing capacity and improving network efficiency. And although we expect capital spending over the next couple of years to remain significant, it is likely to be lower than that in 2007 and 2008." (wiw)
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