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Fri 25 Nov 2011 10:20 AM

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Batelco credit ratings seen as prelude to M&A

Telco's chief exec says ratings will enhance ability to diversify sources for future funding

Batelco credit ratings seen as prelude to M&A
Batelco saw net profit fall by 14 percent in the first nine months of 2011

Bahrain Telecommunications (Batelco) has said it had received its first public credit ratings, paving the way for the former monopoly to issue investment-grade bonds.

Fitch has given Batelco an issuer default rating of "BBB-" and a stable outlook, while Standard & Poor's has assigned "BBB-" long-term and an "A-3" short-term foreign and local currency ratings and a negative outlook.

"These ratings will further enhance our ability to diversify our sources of funding should we seek to secure future financing from debt or capital markets," Batelco chief executive Shaikh Mohamed bin Isa al-Khalifa said in an emailed statement.

Debt-free Batelco had a cash and bank balance of $230m as of September 30.

"The only reason to issue bonds would be for an acquisition," said Nishit Lakhotia, telecoms analyst at Securities & Investment Co (SICO) in Bahrain.

"That doesn't mean Batelco will soon be coming out with a bond issue - telecoms acquisitions in this region take a long time and there's no guarantee they will succeed."

In September, Batelco and Kingdom Holding scrapped their joint $950m bid for a quarter-stake in telco Zain Saudi more than six months after initial terms were agreed due to disagreements over the latter's debt guarantees.

Batelco had a 37 percent of Bahrain's mobile subscribers in 2010 and fierce domestic competition from units of Kuwait's Zain and Saudi Telecom Co is pushing the Bahraini operator to look abroad for growth.

Batelco also has interests in Egypt, Jordan, Kuwait, India, Yemen and Saudi Arabia, with these providing about a third of revenue in the first nine months of 2011, while it has reported declining profits for six straight quarters.

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