Fitch: Tiphone view to negative

Fitch Ratings said it affirmed PT Tiphone Mobile Indonesia Tbk.’s national long-term rating at A-(idn) and revised the outlook to negative from stable.

The agency also said it affirmed Tiphone's Rp 2 trillion bond program and Rp 500 billion bond issued under the program at A-(idn).

The negative outlook reflects the negative cash flow from operations in the last few years, which is likely to persist in the medium term, Fitch said.

The agency said it believes this will remain the major risk for the company because it is likely to impair the company's debt repayment capacity and access to funding.

The negative cash flows stem from the high working capital intensity of the business, which offsets the stable cash flow arising from the business of distributing prepaid vouchers for PT Telekomunikasi Selular (Telkomsel), Fitch said.

The ratings benefit from a 10-year relationship with Telkomsel, for which Tiphone is the largest distributor of prepaid vouchers and starter packs, the agency said.

Tiphone accounts for about 30% of Telkomsel's voucher sales, Fitch added.

Telkomsel is the leading mobile operator in Indonesia in terms of revenue, subscribers and network coverage. The dominance of prepaid users in the Indonesian market and Telkomsel's sustained market leadership will ensure cash flow stability for Tiphone, the agency said.

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