(MENAFN- Muscat Daily) Standard & Poor's Ratings Services (S&P) has revised its outlook on Oman Telecommunications Co (Omantel) to 'positive' from 'stable'. The global ratings agency at the same time affirmed its 'BBB' long-term and 'A-2' short-term corporate credit ratings on the telecom service provider.
S&P said the outlook revision follows its reassessment of Omantel's financial policy and appetite for mergers and acquisitions.
'We no longer consider a large debt-financed acquisition to be likely although smaller acquisitions in information communications technology may still occur. As a result we may remove the notch of negative adjustment that constrains the long-term rating due to our negative assessment of Omantel's financial policy. That said the company's operating performance remains robust with subscriber growth offsetting reductions in the average revenue per user' it said.
According to S&P Omantel's business risk profile is supported by its strong competitive position in Oman's fixed-line and mobile telephony markets solid operating performance and high profitability.
'Omantel is the leader in the domestic two-player mobile market which in our view supports its above-average profitability. The company also dominates the country's fixed-line market. However we expect fixed-line broadband business to be as competitive as mobile telephony in the near to medium term. Offsetting these strengths are Omantel's fairly small scale in the global market the evolving competitive and regulatory landscape for telecom operators in Oman and Omantel's exposure to country risk.'
S&P stated that Omantel's financial risk profile is supported by the company's net cash position and expectation that its credit metrics will remain robust despite relatively high capital expenditure and a possible increase in royalty fees to 12 per cent from seven per cent of revenue in Oman.
'Moreover we see a 'moderately high' likelihood of extraordinary government support for Omantel which we consider a government-related entity.'
S&P said it could raise Omantel's long-term rating by one notch if the company builds a consistent track record of maintaining a conservative financial policy.
'If we were to raise our sovereign credit rating on Oman by one notch we would take a corresponding rating action on Omantel. The likelihood of a two-notch upgrade is low' S&P added.
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