Moody's cuts Singtel Optus, Optus Finance

Moody's Investors Service said it downgraded Singtel Optus Pty Ltd.'s issuer rating to A3 from A2 and Optus Finance Pty Ltd.'s backed senior unsecured rating to A3 from A2. Concurrently, Moody's changed the outlook to stable from negative. Singtel Optus owns and guarantees Optus Finance’s debt.

The downgrade reflects Singtel Optus' weakening credit profile over the fiscal year ending March 2020 and Moody's forecast of further deterioration in fiscal 2021.

“In particular, Optus faces industry headwinds such as lower retail fixed margins due to a higher mix of NBN customers, lower NBN migration payments, as well lower levels of equipment sales. Adding to this are the effects of the coronavirus pandemic, which have lowered mobile service revenue as customer growth, roaming and prepaid revenues were impacted by lockdowns and international border closures. Operating revenue was also affected by customer support measures, including late payment fee waivers for customers and free credits for healthcare workers,” Moody’s said in a press release.

The stable outlook reflects an expectation that debt/EBITDA will stay below 3.1x in fiscal 2021 and gradually reduce after providing a reasonable headroom relative to the rating threshold, the agency said.

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