RAM Ratings reaffirms Digi’s AAA/Stable/P1 sukuk ratings

Published on 23 Nov 2021.

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RAM Ratings has reaffirmed the respective AAA/Stable and P1 ratings of Digi Telecommunications Sdn Bhd’s (Digi or the Company) RM5 bil Islamic Medium Term Notes Programme (2017/2032) and RM1 bil Islamic Commercial Paper (2017/2024), which are subject to a combined limit of RM5 bil. The ratings reflect Digi’s well-established position in the mobile services industry, superior profitability and continuous strong cashflow.

In addition to its own resilient credit profile, Digi’s current ratings are lifted by its close relationship with its ultimate shareholder Telenor ASA, which holds a 49% stake in the Company. As part of the Telenor Group that spans across eight countries and boasts 172 mil subscribers, Digi holds an advantage by yielding economies of scale through coordinated procurement arrangements and network modernisation efforts, coupled with sharing of best management practices. The Company is vital to Telenor as one of the main Asian investment, accounting for 12% of the Group’s revenue and 13% of its operating profit before depreciation, interest and tax in 9M FY Dec 2021. 

Following the announcement of the merger, Digi has entered into a conditional share purchase agreement with Axiata Group as part of the prior-announced proposed merger of telecommunications operations Celcom Axiata Berhad (“Celcom”) and Digi. Our current assessment has not considered the expected changes in the shareholding post-merger between Digi.Com Berhad and Celcom and how it will affect our assessment of the uplift benefit. While the merger would create the largest telco player in the market, merger details particularly in relation to the operational and financial synergies have also yet to be shared. We will reassess the merger’s impact on the ratings of Digi’s Sukuk once more information is available. 

Digi’s subscriber base contracted amid the coronavirus pandemic (-3% y-o-y as at end-September 2021) despite a sequential improvement in 3Q 2021, following positive adds in both its prepaid and postpaid subscriber base. Digi’s digitalisation efforts to modernize its operations, such as the IT process for incident management and customer billing systems have yielded an impressive 78% touch-free operations rate as of September 2021. Digi still holds the second highest share of industry OPBDIT despite experiencing revenue pressure, alongside a market-leading OPBDIT margin of 47.4% in 9M FY Dec 2021, reflecting its already lean operations and excellent cost management. 

Digi continued its postpaid expansion plan, managing a healthier 31:69 postpaid to prepaid mix as at end-September 2021 (end-September 2020: 28:72). Product bundling proposition has anchored this shift, such as home fibre packages or Phone Freedom 365 (a 24-month, interest-free device financing) with basic connectivity, further strengthening its convergence player status.

From a network reliability and quality standpoint, Digi was crowned the fastest network by Ookla in 2020 and again in the third quarter of 2021. When combined with its competitively priced products, Digi is envisaged to not only appeal to cost-conscious customers but also those who value high speed connectivity. 

As at end-September 2021, the Company’s debt declined slightly to RM5.1 bil led by the decline in loans but offset by the increase in lease liabilities. Capital expenditure (capex) remains manageable with capex-to-service revenue of 13.0% in 9M FY Dec 2021 and is expected to inch up slightly in the last quarter as operation normalises. Digi’s debt-to-OPBDIT ratio stayed stable at 1.71 times, while its funds from operations debt coverage received a boost, coming in at a sturdy 0.60 times. These figures remain supportive of its ratings. It also considers the expected increase in infrastructure spend in 2022 to account for spectrum related spending.

Overall, we anticipate Digi’s financial resilience and credit health to be preserved over the near-term, further boosted by potential recovery-related upside from the gradual lifting of movement restrictions and resumption of economic activity nationwide. For now, its network-related priorities will remain centered around increasing coverage and network performance in line with the Jendela initiative, while digitalisation and touch-free operations efforts continue for the Company.


Analytical contacts
Jack Kwan
(603) 3385 2532

Davinder Kaur Gill
(603) 3385 2525


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

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