Etisalat boosted by S&P ratings upgrade

Agency confident following review of company's profile

Etisalat has received a boost from the Standard & Poor's ratings agency. S&P raised its long-term corporate credit rating on Etisalat to "AA minus" from "A plus" with a "stable" outlook. The agency raised its rating for the country's largest telecoms company after deciding that there was a "high" likelihood that the Federal Government would provide sufficient support to the company in the event of financial need.

"Following a review of Etisalat's stand-alone credit profile and level of expected support, we feel it is stronger than it was before," said Jan Willem Plantagie, the managing director for S&P in Dubai. The upgrade could strengthen Etisalat's ability to expand internationally and tap debt markets. S&P reviews credit ratings for government-related entities against two criteria: their own financial profile; and the extent to which government is likely to support it in times of financial difficulty.

"It is really down to the underlying quality of Etisalat, mostly due to their financial profile," Mr Plantagie said. Etisalat has a high likelihood of receiving government support in times of financial need, added Michael O'Brien, an S&P analyst. "Etisalat's leverage policy has been conservative and we anticipate that it will remain so over the medium term, absent [of] any company-transforming transactions," he said.

More than 787,000 Etisalat shares were traded on the Abu Dhabi Securities Exchange yesterday as they gained 0.4 per cent to Dh10.55. S&P recently affirmed the ratings of three other companies based in the emirate: Mubadala Development, IPIC and TDIC. The ratings agency considers Etisalat to have a minimal financial risk profile, with strong cash flows even as it sees increased competition from its UAE rival du in its domestic market.

Based on these assumptions, S&P sees a stable outlook for the telecommunications company. [e-mail]