Fitch cuts Singtel and Optus

Fitch Ratings said it downgraded Singapore Telecommunications Ltd.’s (Singtel) long-term foreign- and local-currency issuer default ratings and foreign-currency senior unsecured rating to A from A+. The agency also downgraded the long-term foreign-currency IDR and senior unsecured rating of Singtel’s wholly owned subsidiary, Singtel Optus Pty Ltd. (Optus), to A- from A. The outlook is stable.

The downgrade reflects weaker-than-expected growth prospects and capital expenditures pressure resulting in higher leverage than previously anticipated. Fitch said it now expects Singtel’s net leverage, defined as FFO adjusted net leverage, to rise to around 2.5x in the financial years ending March 2021 (fiscal year 2021) and fiscal year 2022.

“A prolonged period of low returns on 5G investments, coupled with the group’s shareholder-friendly policies, could delay the pace of deleveraging. Our projections also exclude any non-core assets sales, given the uncertainties associated with the timing and transaction value,” said Fitch in a press release.

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