Beyon’s outlook revised to negative by Fitch, IDR remains at ’B+’

Investing.com -- Fitch Ratings has revised its outlook for BEYON B.S.C., previously known as Bahrain Telecommunications Company BSC, from Stable to Negative. Despite this, the Long-Term Issuer Default Rating (IDR) for the company has been affirmed at ’B+’. This change in outlook follows a similar revision for Bahrain’s ’B+’ sovereign rating on February 24, 2025.

Beyon’s rating is limited by the sovereign rating of Bahrain, due to the company’s strong connections with the country’s government. The Bahraini government holds both direct and indirect ownership of 77% of Beyon.

However, Beyon’s Standalone Credit Profile (SCP) remains unchanged at ’bb+’, reflecting its robust financial profile and strong domestic market presence. More than half of its adjusted operating cash flows are driven by its domestic market. The company manages the political and economic risks of its operating markets through a conservative financial approach.

The company’s overall ties with the state are assessed as ’Strong’, with a support score of 20 out of a maximum 60, under Fitch’s Government-Related Entities (GRE) Rating Criteria. Due to Beyon’s SCP being higher than the sovereign IDR, the company’s IDR is constrained by the sovereign’s IDR.

In 2024, Beyon maintained its leadership in Bahrain’s telecoms markets with market shares of 73% in fixed broadband and 39% in mobile as of Q3 2024. Despite losing share in the fixed segment since 2020, the company’s well-invested fiber assets and continued network investments are expected to support its market positions.

Beyon’s leverage headroom for its SCP is healthy, with forecasted stable EBITDA net leverage at 1.3x-1.4x in 2025-2027. This reflects the company’s commitment to a conservative financial policy and is well below the negative leverage sensitivity of 4.0x for its SCP.

The company’s pre-dividend free cash flow (FCF) margin is expected to remain positive in the mid-single digits to low double digits in 2025-2027. This is due to strong profitability providing sufficient cash flows to service existing debt and capex.

Beyon’s largest international operations are in Jordan, the Maldives, Guernsey, Jersey, Isle of Man, South Atlantic and Diego Garcia. The company holds the largest or second largest market shares in most of these international markets, which allows it to generate strong cash flow.

Beyon is comparable in size to Oman Telecommunications Company S.A.O.G. (BB+/Positive) whose ratings are also capped by the sovereign rating.

Fitch’s key assumptions for the issuer include revenue growth of 3%-4% per year in 2025-2027, EBITDA margin at 36% in 2025-2027, capex at 25% of sales in 2025, before decreasing to 18% by 2027, and a dividend of BD60 million per year in 2025-2027.

As of the end of 2024, Beyon had BHD102 million in cash and cash equivalents and BHD286 million of bank loans with maturities between 2025-2033.

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