Fitch notes weak Globe performance
BusinessWorld | 06/06/2009 2:21 AM
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MANILA - Weakening financial indicators, including an increasing debt level in 2008 amid steep competition, have downgraded Globe Telecom, Inc.’s long term local currency issuer rating to 'BB+’ with a stable outlook, according to Fitch ratings in a statement on Friday.
"The downgrade� reflects the weakening of its key financial measures during (fiscal year 2008), and also management’s commitment to target a more leveraged profile," said Priya Gupta, director in Fitch’s Asia-Pacific telecommunications, media and technology group.
Fitch noted a significant rise in indebtedness, a decline in operating profitability and high shareholder payouts. Globe has yet to issue a statement on the rating.
Fitch sees a modest growth for the cellular business, a concern for Globe since 87% of its group revenues in 2008 came from cellular business.
Though Globe’s broadband business is growing strong off a small base, Fitch said this segment is yet to make a significant contribution to earnings and cash flow.
Also, the ratings take into account the prospect of increased competition with the increasingly aggressive positioning of third operator Digital Telecommunications Philippines, Inc. in terms of network expansion and promotional activity, as well as San Miguel Corp.’s planned entry into the telecommunications space in partnership with Qatar Telecom.
Fitch said Globe’s stable outlook shows it would maintain its position as the second largest telecommunication firm
But debt-funded acquisitions, capital management initiatives or a sharp deterioration in the company’s operating profile may undermine ratings.
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