Qatar Telecom Has Room to Borrow as Moody’s Backs Debt Ratios

Qatar Telecom QSC (QTEL), which raised $1 billion in bonds this month, still has “substantial headroom” to borrow, Moody’s Investors Service said, six months after warning that more acquisitions could be “credit negative.”

“There is more capacity than we had anticipated in June,” Martin Kohlhase, Dubai-based vice president and senior analyst for Moody’s, said by phone yesterday. “We are comfortable with their position within their rating category.” The second- biggest Arab phone company by revenue known as Qtel is rated A2 at Moody’s, the sixth-highest investment grade.

Moody’s said in June that Qtel’s $1.8 billion investment in Kuwait’s National Mobile Telecommunication Co. (NMTC) would reduce the company’s “liquidity headroom.” The assessment was based on projections showing a higher ratio of debt to EBITDA, or earnings before interest, taxation, depreciation and amortization, than what later transpired, Kohlhase said. “Net debt was reduced faster” than projected, he said.

Qtel has spent $3.27 billion this year boosting its stakes in mobile phone operators in Kuwait and Iraq amid limited growth prospects in its home market of 1.8 million people. The Qatari company is now looking “very closely” at Morocco, where a majority stake France’s Vivendi SA (VIV) holds in Maroc Telecom (IAM) “might be in play,” Qtel’s Chief Strategy Officer Jeremy Sell said in a telephone interview on Oct. 7.

‘Equity Injection’

Qtel’s debt-to-EBITDA ratio was 1.1 times in September, below the 1.5 times to 2.5 times band that the ratings company is “comfortable” with, and in line with Qtel’s financial metric guidance, Kohlhase said. Still, Moody’s assumes that should Qtel acquire further stakes in other companies it would “go back to shareholders for a fresh equity injection” to stay within its debt-to-EBITDA band, Kohlhase said.

The yield on Qtel’s 3.375 percent dollar bonds due October 2016 has dropped eight basis points, or 0.08 percentage point, this month to 2.09 percent yesterday, according to data compiled by Bloomberg. The yield advanced 21 basis points in November, the biggest monthly climb since February 2011, the data show.

Saudi Telecom Co. (STC) is the Middle East’s largest phone business.

To contact the reporter on this story: Robert Tuttle in Doha at rtuttle@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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