The American credit rating agency, S&P Global Ratings, revised the outlook of state-backed Bahrain Telecommunications Company Batelco to “stable” from “negative” following improved economic prospects in the Gulf state.
The rating agency also reaffirmed its “B+/B” long- and short-term issuer credit ratings on the company, whose 77 percent stake is owned by the government.
Batelco’s stand-alone credit profile remains at ‘bb+’, supported by solid operating performance, resilient margins, and a strong balance sheet. This is balanced by the group’s limited scale compared with global and regional peers, exposure to challenges including country risk in its international portfolio, and high capital expenditure and dividends.
Over the first nine months of 2021, Batelco reported 3.7 percent revenue growth, with a notable increase in the contribution from fixed-broadband revenue, and 3 percent subscriber base growth to 3.9 million.
The adjusted rolling 12 months Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin for the first nine months of 2021 was stable at 40.4 percent, and adjusted debt to EBITDA was low, as expected by S&P.
The revision follows a rating action on Bahrain on November 26, when S&P said the country’s outlook had been revised to “stable” from “negative” on the back of new fiscal reforms that seek to boost non-oil revenues.
“The stable outlook mirrors that on Bahrain, with any upside for Batelco dependent on a stronger sovereign rating. Our rating on Bahrain drives our long-term rating on Batelco because we view Batelco as a government-related entity, with a very strong link with the government,” the rating agency said.
The Gulf state has recently announced plans to spend more than $30 billion in various strategic projects, create 20,000 jobs for its citizens and increase the value-added tax (VAT) to 10 percent. According to S&P, the reforms are expected to improve the sovereign’s fiscal position.
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