Uncertainty over 2018 Budget tower tax on telcos: Fitch
View(s):Uncertainty surrounds the implementation of the tower tax on telcos announced in the 2018 Budget, according to a rating report.
The Government had then announced that it proposes to tax mobile operators Rs. 200,000 per tower each month.
“However, we believe there is a high level of uncertainty about the implementation of the taxes and we have not therefore factored these into our base case.
Nevertheless, we would expect Dialog’s ratings to remain unaffected, even if the taxes were implemented, given the high ratings headroom,” Fitch Ratings said in a report this week.
The agency Dialog Axiata PLC’s National Long Term Rating at ‘AAA (lka)’ and said the “Outlook is Stable”.
The report pointed out that Dialog’s standalone credit profile of ‘AAA (lka)’ is underpinned by its market leadership in the growing mobile and pay-TV industry segments. “We believe the company is in a position to gain revenue market share from smaller telcos, with its superior 3G/4G networks capability.”
It said that barring the proposed tower taxes, Dialog’s operating EBITDAR margin is forecast to remain stable around 35-37 per cent as larger economies of scale in the data segment will support falling profitability on the voice and text segments. Strong data growth is supported by the proliferation of smartphones, with over half of new smartphones activated on Dialog’s network being 4G-enabled.
Referring to debt-funded mergers and acquisitions, Fitch said some industry consolidation is likely, with ongoing intense competition in the mobile segment where smaller telcos are unprofitable and face high investment requirements. “We believe Dialog and Sri Lanka Telecom could acquire smaller telcos to strengthen their market position and consolidate spectrum assets. Dialog’s ratings have sufficient headroom for a debt-funded acquisition of a smaller telco for around Rs. 10 billion-12 billion,” it said.