Philippine Long Distance Telephone Co. (PLDT) is set to earn another ratings upgrade if the company proves its eventual takeover of the Sun Cellular brand will improve its long-term growth prospects, according to debt watcher Fitch Ratings.
The ratings on the long-term foreign currency (LTFC) loans of PLDT, the country’s biggest phone firm, were upgraded Monday by Fitch.
Rating for the company’s LTLC loans, however, remained two notches higher than its foreign-denominated counterpart after being upgraded to “BBB+” from “BBB.” Fitch’s Ratings Positive Watch (RWP) on the peso loans was also kept, indicating a high possibility of an upgrade in the near future.
“The RWP reflects the potential benefits of PLDT’s proposed acquisition of a controlling interest in the Philippines’ third-largest telco—Digital Telecommunications Philippines Inc. (Digitel)—through an all-equity deal,” Fitch said in a statement.
“The acquisition would make the combined entity the country’s undisputed market leader while maintaining PLDT’s existing financial profile,” Fitch said.
Gaining a higher rating is usually a reflection on a company’s financial health. It will also give the company access to cheaper credit.
Fitch said PLDT’s upgrade would depend on the funding mix for the payout to minority shareholders, conditions of the payout debt (for minority shareholder payment) and receipt of all necessary approvals from government.
The National Telecommunications Commission (NTC) is still deliberating the PLDT-Digitel deal. Hearings will be held until the middle of July. This means PLDT’s and Digitel’s target date of June 30 to complete the P74.1-billion deal would not be met.
Fitch said its view on the financial strength of the combined entity and its future business plans would also be a main consideration for granting a further upgrade.
“If the acquisition meets with all necessary approvals, then PLDT’s LTLC is likely to be upgraded by one notch,” Fitch said.