Fitch Ratings has affirmed Telecom Namibia Limited’s (TN) Long-term local currency Issuer Default Rating (IDR) at ‘BB+’ and National Long-term rating at ‘A-(zaf)’. The Outlooks are Stable. All ratings have been removed from Rating Watch Negative (RWN).
The affirmation and resolution of the Rating Watch Negative reflected Fitch’s view that timely state support was forthcoming from the parent as Telecom Namibia faced a liquidity cliff in August 2015 as the bonds matured. In the financial year ending September 2015 (FY15), Telecom Namibia has received an equity injection of N$400 million from Namibia Post and Telecom Holdings Limited (NPTH), its 100% shareholder. The entire equity contribution has been applied to debt reduction. Telecom Namibia has strong operational and strategic links with the Namibian government.
These included a N$400 million equity injection received in Financial Year 2015, Telecom Namibia’s ownership links with West African Cable System’s (WACS) sub-sea cable landing rights and potential transfer of property from NPTH to Telecom Namibia in Financial Year 2017 and guarantee for an European Investment Bank loan, which was settled in Financial Year 2014, as well as providing important network links to local government departments, schools and hospitals.
Fitch viewed Telecom Namibia’s standalone operating profile in the ‘B’ category, but due to the liquidity risks, the standalone rating without government support is ‘CCC’. Telecom Namibia faces significant refinancing risk of its short-term debt.
Fitch believes Telecom Namibia’s management, the Namibia Post and Telecommunications Holdings Board and the Ministry of ICT have acknowledged the shortcomings of the company’s mobile strategy. Fitch expects that the turnaround strategy will be focused on the fixed line network and fibre backbone, and move away from an aggressive mobile coverage plan. This will entail Telecom Namibia improving mobile data services in major population centres and increasing the utilisation of the WACS cable.