Fitch Ratings has affirmed Sri Lanka Telecom PLC’s (SLT) Long-Term Foreign-and Local-Currency Issuer Default Ratings (IDRs) at ‘B’. The Outlook is Stable. The agency has simultaneously withdrawn the ratings for commercial reasons.
The ratings were withdrawn with the following reason For Commercial Purposes. Key Rating Drivers Ratings Constrained by Sovereign: Prior to the withdrawal, SLT’s IDRs were constrained by Sri Lanka’s IDRs of ‘B’ as per Fitch’s Government-Related Entities Rating Criteria, as the state holds a majority stake in SLT directly and indirectly, and exercises significant influence on its operating and financial profile. SLT’s second-biggest shareholder, Malaysia’s Usaha Tegas Sdn Bhd at 44.9%, has no special provisions in its shareholder agreement to dilute the government’s significant influence over SLT.
Strong State Linkages: Fitch sees SLT’s status, ownership and control by the Sri Lankan sovereign as ‘Strong’. The state’s ownership gives it significant influence over operating and financial policies. We view the support record and expectations for the likelihood of state support for SLT as ‘Strong’, given its strategic importance in expanding the country’s fibre infrastructure. Historically, SLT has not required tangible financial support due to its healthy financial profile.
State’s Incentive to Support: Fitch sees the socio-political implications of a default by SLT as ‘Moderate’ due to the presence of three other privately owned telcos. However, it could affect the fixed-line market because SLT acts as a policy company to invest in fibre networks across the island to support the government’s vision of fibre-based internet for all households. Fitch also sees the financial implications of a default as ‘Strong’, as a financial default by SLT may have an impact on the availability and cost of financing options for other government-related entities.
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