Moody’s downgrades Omantel to Baa3

Moody's Investors Service said it downgraded Oman Telecommunications Co. SAOG's (Omantel) long-term issuer rating to Baa3 from Baa2.

The outlook is stable.

This concludes the review for downgrade initiated on Oct. 30 following the announcement that Omantel signed a debt funded share purchase agreement to acquire 12.1% of Mobile Telecommunications Co. KSCP (Zain) for a total cash consideration of $1.35 billion (OMR 520 million). The settlement of shares was concluded on Nov. 15.

This transaction follows Omantel's acquisition of a 9.8% stake in Zain on Aug. 24 for $846.1 million, which was also fully debt-funded.

Moody's said it expects Omantel's adjusted debt/EBITDA to be around 3.5 times at financial year ended Dec. 31 from 0.3 times for the 12 months ended June 30, 2017. This is due to the addition of $2.2 billion in debt as part of its acquisition of the total 21.9% stake in Zain.

However, debt/EBITDA is expected to decline back within the agency’s Baa3 ratings guidance of below 2.75 times within 12 to 18 months.

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