Jan 17, 2011

Moody's lifts up Telkomsel to Baa1

Moody's Investors Service has upgraded to Baa1 from Baa2 its local currency issuer rating on PT Telekomunikasi Selular (Telkomsel). The rating outlook is stable. 
"The decision to upgrade Telkomsel's rating was prompted by an upgrade to the local currency ceiling for Indonesia to Baa1, under which it had been previously constrained," said Simon Wong, a Moody's Vice President and Senior Analyst. "The Baa1 rating also reflects Telkomsel's strong financial metrics and operating profile, derived from the company's well established and leading position in Indonesia's fast-growing mobile telecommunications industry and its ability to manage growth such that its financial profile, supported by strong liquidity, is of strong investment-grade quality," added Wong, also Moody's lead analyst for Telkomsel.  
The outlook is stable, reflecting Moody's expectation that Telkomsel will maintain its dominant market position and conservative financial profile. 
Upward rating pressure is unlikely given that the rating is constrained by the intense competitive environment, emerging market risk considerations, as well as the risk of interference from the Government of Indonesia (Ba1/stable), which could decide to change the company's financial and shareholder remuneration policies in a stress situation.
As such, any further upgrade in the local currency ceiling for Indonesia would not automatically result in an upgrade for Telkom. 
Telkomsel's credit metrics are strong for the rating level, and downward pressure is unlikely absent a material and precipitous change in its operating profile. 
Any negative action on the Baa1 local currency ceiling for Indonesia would automatically result in a similar rating action for Telkomsel. 
The principal methodology used in this rating was Moody's Global Telecommunications Industry published in December 2010. 
The last rating action on Telkomsel was taken on 19th May 2006 when Moody's affirmed its local currency issuer rating at Baa2 with a stable outlook. Headquartered in Jakarta, Indonesia, Telkomsel is the largest wireless telecommunications company in Indonesia. 
The company reported gross sales of approximately Rp45 trillion (US$4.9 billion) for the twelve months ending June 30, 2010. Telkomsel is 65% owned by PT Telekomunikasi Indonesia Tbk, which is in turn 52.47% owned by the Indonesian government. The remaining 35% minority share of Telkomsel is owned by Singapore Telecommunication Limited (Aa2.)

Disclosure: No position at the stock mentioned above.

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