Fitch Ratings has assigned a 'BBB-' rating to
Net proceeds from the notes will be used to finance eligible green and social projects and to refinance 2024 and 2026 Senior unsecured notes (BBB-). Fitch currently rates Entel's Foreign Currency and Local Currency Issuer Default Ratings (IDRs) 'BBB-'/Stable with a National Scale rating of 'A+(cl)'.
The ratings reflect Entel's growth and sustained profitability in
Key Rating Drivers
Profitable Growth in
Improvement in Chilean Performance: Entel's Chilean revenues grew yoy by 16% during the first half of 2021 and its EBITDA margin was 34%. The 17% increase in Entel's postpaid subscriber base in 2Q21 compared with 2Q20 and the 3% of increase in prepaid has demonstrated the customers migration to higher-value and recurring plans. This follows several years of declining revenues in the core Chilean mobile franchise, due to high level of competition. A mature
Reduction in Leverage Expected: Improvements in operating performance should contribute to a reduction in gross and net leverage metrics. Fitch expects debt/EBITDA and net debt/EBITDA at or below 2.5x over the rating horizon. These levels are in line with the positive sensitivity and are commensurate with a 'BBB' financial structure (debt/EBITDA of 2.8x). As of LTM
Investments to Pressure FCF: Fitch expects high investment requirements to fully consume cash flow from operations, driving negative FCF in the near term. Fitch also expects capital intensity of 26% of revenues in 2021, before declining to around 19% by 2023. These investment outlays are mainly due to the development of a new 5G infrastructure network and the 2021 payment of
Improving Geographic and Service Diversification: Entel's geographic diversification has improved as a result of the sustainable profitability of its Peruvian franchise. In
Derivation Summary
Entel has a leading mobile market position in
Entel's direct domestic competitor,
Entel's financial profile is slightly weaker than that of UNE EPM Telecomunicaciones (Tigo UNE; BBB-/Stable), which has net leverage of below 2.0x and EBITDA margins in the mid-20% range. Tigo UNE also has relatively more balanced cash flow diversification between mobile and fixed services, though Tigo UNE has a weaker competitive position. Compared with Peruvian competitor
Compared with Colombia Telecomunicaciones SA ESP (BBB-/Stable), Entel has similar profitability and net leverage. Entel benefits from its position as the leading mobile player in
Entel's ratings incorporate a weak linkage with
Key Assumptions
Chilean operational revenue with neutral growth in 2021-2023 period, while EBITDA margins decline to 33%;
EBITDA generation in
A dividends policy returning 30% of net income during 2021-2023;
Capital intensity of around 26% in 2021, assuming payments of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Stronger than expected cash flow generation in
Improving diversification, as Peruvian FCF improves.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Total debt/EBITDA sustained above 3.0x or net debt/EBITDA above 2.5x, due to a weakness in
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
New Issuance improved Financial Flexibility: The improved operational performance of Entel and its tower sale has improved its liquidity, which reached
Entel's financial debt reached
Issuer Profile
Entel is a Chilean telecommunications operator that provides mobile and fixed line services to consumers and businesses.
Summary of Financial Adjustments
Standard operating lease adjustments;
Operating income adjusted for non-recurring items like asset sales;
FX hedge adjustments made to debt.
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
RATING ACTIONSENTITY/DEBT RATING
senior unsecured
LT BBB- New Rating
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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