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Silknet Eurobond Call In April 2022 Highly Likely

Natia Taktakishvili
11.10.21 11:00
Silknet’s performance improved considerably in 2Q21, boosted by faster than expected recovery of Georgian economy and gradual revival of tourism. The company generated GEL 197.8mn (+6.9% y/y) in revenue and GEL 100mn (+4.5% y/y) EBITDA in 1H21 (excluding IFRS 16).

Mobile data continues to drive the growth in 1H21, however favourable results are also seen in other segments. Namely, fixed broadband revenue was up 1.5% y/y, while pay-TV revenue was up 5.0% y/y on the back of increased ARPUs. Notably, Silknet lags behind Magticom in new customer acquisitions in fixed broadband and pay TV segments, explained by Magticom’s aggressive strategy to penetrate rural areas.

Despite strong performance in terms of revenue the company’s profitability margins slightly deteriorated in 1H21, with adjusted EBITDA margin at 53.9% in 1H21 vs 55.2% in 1H20. This decline stems from increased electricity tariffs, FX-related increases in operating expenses and higher salaries. On a positive note, Silknet’s leverage declined from 2.98x as of Dec-2020 to 2.83x by end June 2021, supported by GEL’s appreciation against USD. Notably, from 1st of July the retail price regulation has been abolished, giving flexibility to the existing mobile operators to adjust tariffs when needed.

Silknet’s US$ 200mn Eurobond, which is callable from 2 April 2022 (at 105.5%), was trading at 109.06% of par for an YTM of 7.0% as of Sep-21. At this pricing level, it is highly likely that Silknet will recall its Eurobonds in 2Q22.

Source: G&T

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