KUALA LUMPUR (April 21): The recently announced tower acquisition by Axiata Group Bhd's 63%-owned tower company edotco an early mover advantage in the nascent and growing independent tower market in the Philippines, according to Moody's Investors Services as it affirmed the group's issuer Baa2 issuer rating, with outlook remaining stable.

It also afirmed the provisional (P)Baa2 senior unsecured ratings on the sukuk issuance programme established by Axiata SPV2 Bhd and the medium-term note programme established by Axiata SPV5 (Labuan) Ltd, as well as the Baa2 rating on all backed senior unsecured notes issued by the two wholly-owned subsidiaries of Axiata.

"The rating affirmation reflects Moody's view that Axiata's recently announced acquisition of 2,973 towers from PLDT Inc (Baa2 stable), for PHP42 billion (US$800 million) can be accommodated within its credit profile.

"However, the debt-funded acquisition comes close on the heels of Axiata's acquisition of Link Net and towers from Mindscape. As such, the acquisition of PLDT's towers will push the leverage higher to 2.7x-2.8x over the next 1-2 years, giving the company limited flexibility for further large debt-funded acquisitions at the current rating level," said Moody's vice president and senior analyst Nidhi Dhruv.

Having said that, Dhruv said the tower acquisition will give edotco a total holding of over 3,000 towers, making it the leading tower operator in the Philippines. Dhruv is also Moody's lead analyst for Axiata.

Moody's stable rating outlook for Axiata reflects Moody's expectation that Axiata will maintain its solid operating and financial profiles, given the increasing dividend contributions from its international subsidiaries. 

Recall that Axiata had, in June 2021, signed definitive transaction agreements for the merger of its Malaysian operations with Telenor ASA. The companies plan to merge Axiata's wholly-owned Celcom and Telenor's 49%-owned Digi.Com Bhd into Celcom Digi Bhd.

Moody's expects Axiata and Telenor to maximize dividend payouts from Celcom Digi. As such, Moody's expects dividends from Celcom Digi to broadly offset the loss of dividends from Celcom, and that Axiata will not guarantee any debt at the merged company.