S&P Ma'alot cuts Cellcom's debt rating

Nir Sztern Photo: Sivan Faraj

The Israeli telco's share price is down 56% this year on an erosion in business performamnce and rising debt.

S&P Ma'alot has cut the debt rating of Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) following the erosion in the Israeli telco's business performance and the rise in its debt. The debt rating has been cut from iIA+ to iIA. S&P Ma'a lot has maintained its negative outlook for Cellcom and sees the continued erosion of business performance and lower profitability due to the intensively competitive nature of the market in Israel in which the company operates.

S&P Ma'alot says that continued erosion of business performance in 2019 and 2020 will mean that Cellcom will exceed adequate coverage ratios for the previous rating, and perhaps even for the current rating. S&P Ma'alot said, "We believe that the company will present an adjusted ratio of debt to EBITDA of 4-5 in 2019 and 2020, alongside a very low free cash flow."

Cellcom's share price is currently down 6% on the NYSE at $2.67, giving a market cap of $316.5 million. The share price is down 56% since the start of 2019 and its bonds are traded at yields of up to 5.2%. Cellcom's debt to bondholders and financial institutions is NIS 3.5 billion.

S&P Ma'alot believes that acquiring 35% of the IBC fiber optic venture will benefit Cellcom in the long-term by decreasing its dependency on Bezeq's infrastructure.

Last week Cellcom's controlling shareholder Discount Investment Corporation (TASE: DISI) reported that it was writing down Cellcom's valuation by NIS 500-600 million to NIS 1.54-1.64 billion.

Cellcom's CEO is Nir Sztern.

Published by Globes, Israel business news - en.globes.co.il - on August 5, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Nir Sztern Photo: Sivan Faraj
Nir Sztern Photo: Sivan Faraj
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