Fitch Ratings has upgraded the credit rating of Indonesian mobile operator XL Axiata, reflecting it says, the agency’s assessment that the cellco’s Malaysia-based parent, Axiata Group, can support its ongoing financing needs and that the carrier’s cash flow is ‘expected to improve’. It is understood that Fitch upgraded XL Axiata’s long-term foreign- and local-currency issuer default ratings to ‘BBB’ from ‘BB+’, and assessed the outlook on the rating as ‘stable’, the Jakarta Globe writes. XL Axiata is Indonesia’s third largest mobile network operator with a total of 42.3 million users as at 30 September 2012. It reported net income of IDR2.19 trillion (USD228.6 million) in the January-September period, little changed from IDR2.18 trillion in the same period a year earlier, due to a weak local currency, the rupiah. However, it is Fitch’s view that XL Axiata’s rating be more closely aligned to that of its 66.7% owner, due to ‘strengthening links between the two companies’. The ratings agency also notes that XL is the Axiata Group’s fastest growing subsidiary, with ‘double-digit revenue growth’.
In its report, Fitch maintains that the improved tie-up between the pair: ‘Should allow XL to return to positive free cash flow this year after recording negative free cash flow in 2012 … Fitch believes that XL’s decision to invest more in 2012 than the country’s second largest telco, PT Indosat, could benefit its profitability and reduce customer churn.’