Fitch Ratings has assigned a long-term rating of ‘B’/’RR3’ to Telecom Argentina’s USD 100 million senior unsecured corporate bonds, citing the company’s continued strong performance in a weak operating environment.
This rating is constrained by Argentina’s “B-” country cap. “While Telecom Argentina’s refinancing risks are manageable, Argentina’s capital regulation risks will continue to constrain the company’s ratings,” the agency said in a note. “Fitch believes that the company’s default is most likely caused by transfer and conversion restrictions rather than a material deterioration in the company’s operating profile.”
Telecom Argentina has issued a US$100 million note to finance its bid for a 5G spectrum auction to be held on October 24, two days after the general election and amid the economic crisis.
In June, the telco issued a new USD 87 million dollar-linked bond, and in July it issued another USD 180 million dollar-linked local bond. A portion of the proceeds was used to redeem the 2025 class 5 notes.
The company was able to maintain “strong credit metrics” by increasing service prices to offset increased operating expenses, officials said. Fitch expects the company to continue to raise prices and maintain healthy EBITDA margins of nearly 30%.
Telecom Argentina’s investments in the first half of 2023 decreased by 15.8% year-on-year to USD 288 million due to import restrictions.
“Telecom Argentina’s financial structure is among the strongest of the region’s telecommunications companies rated by Fitch, due to the company’s conservative capital structure and positive cash flow,” the rating agency said. However, it added that the telco will need to refinance upcoming maturities in the medium term to keep its debt at around $2.2 billion.
Telecom Argentina reported first-half net income of 39.4 billion pesos (US$111 million). In comparison, net income for the first half of 2017 was P68.7 billion.
Sales amounted to P517 billion, a decrease of 9.3% excluding the impact of currency fluctuations. The company said that inflation exceeded 115%, making it difficult to maintain sales in real terms. Service revenue decreased by 10.2% to P479 billion.
The company reported mobile customers up 573,000 to 20.6 million, cable customers 3.1 million (down 161,000) and broadband subscribers down 144,000 to 4.1 million.