Fitch Ratings has downgraded JSC Silknet's (Silknet) Long-Term Issuer Default Rating (IDR) to 'B' from 'B+'. The Outlook is Stable – according to the news release issued by the Fitch Ratings.
Fitch Ratings explains that the downgrade reflects a considerable increase in funds from operations (FFO) net leverage above our downgrade sensitivity of 3.0x in 2020 and its expectation that the leverage is likely to remain above this threshold for the next two years. It also factors in ongoing corporate governance risk, as evident in significant property transactions with related parties in 2019-2020.
Silknet is the incumbent telecoms operator in Georgia with an extensive backbone and last-mile infrastructure across the country. The company holds sustainably strong market shares above 30% in fixed-voice, fixed-broadband (FBB), and pay-tv segments, but is only the second-largest after Magticom, its key rival.
“Acquisition of Geocell, the second-largest mobile operator in Georgia, in 2018 has turned Silknet into a diversified telecom services provider and more than doubled its revenue and EBITDA. However, the company's small absolute size remains a strategic weakness. We expect the company's Fitch-defined EBITDA to be about USD56 million in 2020 (using GEL/USD rate of 3.3)” – reads the statement.
