Fitch affirms Sri Lanka’s Dialog Axiata at ’AAA(lka)’; Outlook Stable

Fitch Ratings on Tuesday affirmed the National Long-Term Rating on Sri Lanka-based telecoms company Dialog Axiata PLC at 'AAA(lka)'. The Outlook is Stable.

Mobile-Market Leader: Dialog's Standalone Credit Profile (SCP) of 'aaa(lka)' is underpinned by its market leadership in the expanding mobile and pay-TV segments. “We believe Dialog will continue to gain revenue market share, given its superior execution and mobile networks. The company has a solid financial profile, with consistent revenue growth, a stable operating EBITDA margin and a low Fitch-forecast 2021 FFO net leverage of 0.4x-0.5x (2020 estimate: 0.5x),” the rating agency said in a media release.

Strong Revenue Growth: Based on unaudited reported results, revenue and EBITDA rose by 3% and 6%, respectively in 2020, before the operating lease adjustment under Sri-Lankan financial reporting standard 16. Dialog's growth outperformed the GDP contraction of 5% in the nine months ending September 2020, amid the pandemic. Dialog increased its mobile subscribers by 9% yoy, its digital TV households by 12% yoy and home broadband subscribers by 45% yoy during 2020.

“We forecast 2021 revenue to grow by a mid-single-digit percentage and EBITDA margin to remain stable at 38%-40%, as larger economies of scale in the data segment and cost savings offset falling profits in the voice and text segments. Stronger profitability will be supported by robust growth of data traffic and a likely price hike in the digital TV segment in 2021,” it said.