The Qatari telco Ooredoo has been put on CreditWatch Negative by the rating agency S&P Global Ratings, after it cut the country’s sovereign credit rating.
S&P trimmed Qatar’s long-term debt rating to AA- from AA last week, the first ratings agency to downgrade the country’s debt after the escalation of diplomatic and economic tensions between the country and its neighbours.
The agency has now placed Ooredoo, which operates in Qatar and 11 other countries, on notice for a possible ratings cut of its own.
“Ooredoo’s domestic operations, which account for 25 to 30 per cent of group’s revenues and Ebitda [earnings before interest, tax, depreciation and amortisation], will likely suffer from the departure of residents of the countries severing ties with Qatar that were working in Qatar,” said S&P in a note published late on Monday.
“The UAE, Saudi Arabia and Bahrain have given their nationals 14 days to leave Qatar, which may result in lower roaming revenues.”
S&P said it did not expect the impact to be material enough to affect the operator’s credit profile but noted that its ratings could be downgraded if the country’s sovereign rating is cut further.
The ratings agency also noted that Ooredoo’s Maldives-based subsidiary may suffer after that country also severed diplomatic ties with Qatar last week, but pointed out it contributed only 1 to 2 per cent of the company’s revenue and Ebitda.
“From Ooredoo’s perspective there is, presumably at least, some relief that the countries in the [Arabian] Gulf and wider Middle East in which it has significant international operations – Kuwait, Oman, Iraq, Algeria, and Tunisia – have not so far joined the action against Qatar,” said Matthew Reed, a Dubai-based analyst with the consultancy Ovum.
“If any of them were to do so that would no doubt create operational difficulties for Ooredoo.”
Qatar’s government is highly likely to provide support to the company in the event of significant financial distress, said S&P.
“Ooredoo represents a key part of Qatar’s communications infrastructure and is a flagship company for the state. It also contributes to the diversification of Qatar’s economy away from the oil and gas industry.”
Ooredoo is 69 per cent owned by the Qatar government, which is responsible for the appointment of board members and retains oversight of decision-making processes, particularly those related to prospective investments outside the country.
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