Business Times

Fitch upgrades Dialog to 'AAA(lka)', outlook stable

Fitch Ratings on Friday upgraded Dialog Axiata PLC's (Dialog) National Long-term rating to 'AAA(lka)' from 'AA(lka)', and simultaneously revised the outlook to ‘Stable’ from ‘Negative’. The agency has upgraded the National Long-term rating on Dialog's outstanding Rs 2.5 billion redeemable preference shares to 'AA+(lka)' from 'AA-(lka)'.

While Dialog's ratings factor in support from its parent - Axiata Group Berhad in arriving at the final rating, the upgrade reflects the company's improved stand-alone credit profile, and liquidity position, Fitch said adding; “this is in turn a result of Dialog's successful cost rationalisation exercise, reduced tariff pressure within the local mobile industry at present (which is likely to allow further balance sheet improvements over the short-term), strong market share within the mobile industry amid improving economic conditions, and its improved operating cash flows.”

Dialog's profitability as measured by EBITDAR margin improved to 41% at 30 June 2010 (end-H110), from 26% at end-2008 (FYE08), largely due to the 'right sizing' of its operations since early-2009.
This included the centralisation of key administrative functions, better utilisation of network and office infrastructure, staff reductions, and network modernisation.

"We expect Dialog's healthy EBITDAR margin, combined with modest revenue growth and relatively low incremental capex, to generate strong pre-dividend free cash flow over the medium term" says Hasira De Silva, Associate Director with Fitch's Asia Pacific Corporates team.

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