S&P Affirms Hong Kong Telecommunications' Ratings on Fairly Stable Operations, Debt Leverage

MT Newswires Live07-03

S&P Global Ratings kept Hong Kong Telecommunications' BBB long-term issuer credit rating and BBB long-term issue rating on its guaranteed unsecured debt.

The affirmation was driven by the "fairly stable business operations" and "debt leverage" of the company along with its parent HKT Trust and HKT (HKG:6823), according to a Wednesday note from the rating agency.

S&P said significant changes in the competitive landscape for Hong Kong Telecommunications are unlikely, with further expansion in mobile roaming demand as well as broadband and local data services supporting moderate growth in profitability and cash flow.

The sale of the telco's 40% stake in its wireline network will not have a material impact on its business operation, S&P said, adding that the transaction is expected to decrease the company's debt leverage to a pro forma 3.3x-3.4x in 2024 from 3.9x in 2023.

The company's rating has a stable outlook, as S&P forecasts GDP-aligned top line growth with modest EBITDA margin increases over the next 24 months.

S&P said it could lower Hong Kong Telecommunications's rating if HKT Trust's parent PCCW's (HKG:0008) debt-to-EBITDA ratio goes above 5.5x or if HKT Trust's leverage significantly increases above 4x.

A potential upgrade action is limited for the company, the rating agency said.

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