Reuters: Bankruptcy News: TEXT-Fitch affirms Indonesia's Telkomsel following bankruptcy verdict

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TEXT-Fitch affirms Indonesia's Telkomsel following bankruptcy verdict Sep 21st 2012, 07:27 Fri Sep 21, 2012 3:27am EDT (The following statement was released by the rating agency) Sept 21 - Fitch Ratings has affirmed Indonesia-based P.T. Telekomunikasi Selular's (Telkomsel) Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'BBB' and 'BBB+', respectively. Its National Long-Term Rating has been affirmed at 'AAA(idn)' and foreign currency senior unsecured rating at 'BBB'. The Outlook is Stable. The affirmation follows a recent verdict by Central Jakarta District Court to accept a bankruptcy petition against Telkomsel filed by PT Prima Jaya Informatika (Prima Jaya). Fitch has affirmed the ratings as the amounts in dispute are insignificant compared with Telkomsel's financial resources and the agency does not expect the company's funding banks to take any action. Telkomsel will appeal the court's verdict. Fitch notes that the bankruptcy verdict may hinder the company's operational flexibility. Nevertheless, the agency expects the dispute to be resolved in a manner which does not significantly impair the company's operating and financial profile. The court held that Telkomsel had failed to pay IDR5.3bn (USD558,000) to Prima Jaya. In June 2011 Prima Jaya signed a deal with Telkomsel to distribute prepaid credit and subscriber identity module (SIM) cards for two years. However, according to Prima Jaya, Telkomsel unilaterally terminated the agreement in June 2012, halting delivery of its cards and causing losses. Telkomsel is the leading mobile operator in Indonesia with 117 million subscribers and remains one of the strongest telecom companies in Asia with a conservative credit profile. The company's 2011 revenue and EBITDA were IDR48.7trn (USD5.6bn) and IDR27.5trn (USD3.1bn) respectively. As of end-December 2011, Telkomsel had IDR4.2trn (USD470m) in cash and equivalents. Telkomsel is 65%-owned by the Indonesian government-controlled fixed-line operator PT Telekomunikasi Indonesia Tbk (Telkom, 'BBB-'/Stable). Singapore Telecommunications Limited (SingTel, 'A+'/Stable), itself ultimately majority-owned by the government of Singapore ('AAA'/Stable), owns the 35% minority. What could trigger a rating action? Positive: Future developments that may, individually or collectively, lead to positive rating action include - positive changes in the sovereign rating and Indonesia's Country Ceiling may lead to a corresponding change in Telkomsel's Local-Currency IDR and Foreign Currency IDR respectively. Negative: Future developments that may, individually or collectively, lead to negative rating action include: -a downgrade of Indonesia's Country Ceiling would lead to a downgrade in the Foreign-Currency IDR, as the latter is constrained by the Country Ceiling - weakening of SingTel's influence over key decisions, through a sale of its stake or changes to the shareholders' agreement, leading to the IDRs being constrained at Telkom's 'BBB-' rating. - a significant increase in capex or shareholder payouts leading to negative free cash flow could lead to a negative rating action on the Local-Currency IDR Link this Share this Digg this Email Reprints

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