Fitch Ratings has placed the National Long-Term Rating of ‘A(lka)’ of Sri Lanka Telecom PLC (SLT) under Rating Watch Positive (RWP), reflecting the potential rating upside due to weakening linkages with the government of Sri Lanka (Long-Term Local-Currency Issuer Default Rating: CC), which plans to sell its 49.5% stake in the company.
Fitch stated that it will resolve the RWP after the proposed disposal becomes practically unconditional, which may take over half a year.
Under Fitch‘s Parent and Subsidiary Linkage (PSL) Rating Criteria, SLT’s ratings are presently restricted by its parent’s weak credit profile. SLT’s Standalone Credit Profile (SCP) is stronger than the state’s, indicating the company’s dominance in fixed-line services, the second-largest share in mobile, the ownership of an extensive optical fibre network, and a strong financial profile.
The extent of SLT’s rating upside, following the proposed disposal, will hinge on the credit profile of its new parent, the linkage strength with SLT according to PSL criteria, and the proposed funding structure.