Spending on telecoms has shown some correlation to the economy

Fitch Affirms Turkcell at ‘BBB

The Outlook on the IDR is Negative. TCELL has a stronger underlying business, operating and financial profile than reflected in its ‘BBB ‘ rating. Constraints include potential further material FX depreciation, and expectations of moncler coats for women leverage rising to management’s stated upper threshold (barring M of net debt/EBITDA of 1.5x. With the majority of cash flows produced by domestic operations, TCELL’s ratings are constrained by Turkey’s Country Ceiling which was revised to ‘BBB ‘ on 27 January 2017. Spending on telecoms has shown some correlation to the economy in other countries. TCELL’s domestic operations have though remained resilient. A protracted slowdown in the economy, higher interest rates and inflationary pressures could ultimately have an impact on results, leading to the Negative Outlook on the IDR. KEY RATING DRIVERS Domestic Concentration: Ninety per cent of TCELL’s revenues and a higher share of cash flows come from domestic operations. A sharp slowdown in Turkey’s economy as forecast by Fitch could affect results, although the business is so far proving resilient: TCELL upgraded 2016 guidance in December to reflect the current strength of performance. Further material FX depreciation could impact leverage, while corporate access to capital and funding costs could ultimately be affected by ongoing geopolitical risks and sovereign pressure. However, these are mitigated by conservative leverage, a healthy cash balance (helped by shareholder disagreement over dividends), an even debt maturity profile, FX hedging and strong international banking relationships. While Fitch has loosened previous guidance regarding sovereign cheap moncler coats for women correlation, the Negative Outlook reflects the risk of economic pressures affecting performance the longer security and geopolitical risks remain. Strong Underlying Domestic Business: TCELL exhibits a resilient business profile underpinned by its leading mobile market share and buy moncler jackets toronto strong challenger position in fixed. Fitch regards Turkey as a market with sophisticated communications consumption habits, with significant potential moncler outlet mall for further data usage growth in both mobile and fixed. Its mobile position is underpinned by its leading position in post paid moncler jackets for women (around 52% of its base at 3Q16 (excluding connected devices)), the quality of its spectrum portfolio and solid data offer, along with scope in the market for further smartphone penetration (reported at 62% at end 3Q16) and data usage. Fixed Line Investment: Its investment in fibre underpins solid fixed metrics and convergence capabilities. Ignoring domicile factors, moncler outlet uk the company’s operating profile would support a higher rating. Solid Financials: For 9M16, TCELL reported revenue growth of 9%, EBITDA moncler outlet growth of 5% and an EBITDA margin of 31.7%. The latter was affected by the impact of free emergency communications packages imposed following the attempted coup in Turkey in July 2016; the EBITDA cheap moncler jackets outlet margin excluding this effect would be 34.4%. FFO net leverage at end 3Q16 is estimated at 1.3x. Fitch regards financial performance as strong for the ratings. In its revised 2016 guidance revenues are expected to be ahead by at least 10% and EBITDA guidance tightened to a margin of 32% 33% (previously: 31% 33%). Shareholder Impasse: An ongoing shareholder moncler jackets kids dispute remains unresolved despite ongoing legal challenges and court rulings. Dividend payments once again remain blocked, following a back payment of dividends in 2015 covering the previous four years. An ongoing impasse will lead to a build up of balance sheet cash; this provides near term balance sheet support, which in Fitch’s view obscures the intended underlying leverage in the business and obstructs management’s ambitions with Moncler Factory Outlet respect to an optimal capital structure. The composition of the board and management structure appears to be cheap moncler jackets working effectively; therefore, shareholder issues are not an overriding constraint. International Ambition: Management has stated that it wishes to increase international revenues to around 40% of the group total (under 10% in 2015). A binding offer to Telia, for mobile operations in four Eurasian markets in which TCELL is already the leading minority investor, made at the beginning of 2016, did not proceed; Fitch believes this was due to a disagreement on cheap moncler jackets wholesale valuation. Telia has since announced that it is seeking a joint exit from these markets alongside TCELL. Fitch considers the assets may yet be of strategic interest to TCELL and that management remains committed to investing outside of Turkey. FX Leverage: Ongoing depreciation of the Turkish lira (which has lost around 18% against the USD from July 2016 to end 2016) and management’s desire to leverage the balance sheet up to 1.5x net debt/EBITDA (1.5x 2.0x in the event of M 0.6x at end 3Q16) provide scope for a relatively material increase in leverage. Target leverage nonetheless remains in line with our ‘BBB ‘ rating threshold. DERIVATION SUMMARY TCELL’s ratings are positioned well relative to its closest peer moncler outlet woodbury Turkish incumbent, Turk Telecom. Turk Telecom has a similar operating profile, although unlike TCELL, its strength stems from its incumbent fixed line operations. moncler jackets mens Turk Telecom has higher leverage (end 2015: FFO net leverage of 2.0x) and therefore faces greater potential rating pressure given FX debt exposure and risks relating to TRL depreciation. Outside of FX risk and associated sovereign pressures, TCELL has a similar or stronger rating profile both business and financial to similarly or higher rated western European telecom peers such as KPN (BBB/Stable), Telefonica Deutschland (BBB/Stable) and TDC (BBB /Stable). TCELL’s ratings are capped moncler chicago at moncler jackets outlet online the Country Ceiling. No parent/subsidiary or operating environment aspects impact the ratings. KEY ASSUMPTIONS Fitch’s key assumptions within our rating case for the issuer include: Revenue growth of 10% in 2016, slowing to 6.5% by 2020 EBITDA womens moncler jackets margin of 32% for the next three years CAPEX to sales (excluding spectrum) of 22% in 2016, slowing to 18% by 2019 Final spectrum payments relating to 4G auction of TRY1.5 billion in 2017 No dividend payments over the next three years given current shareholder impasse RATING SENSITIVITIES TCELL Future Developments That May, Individually or Collectively, Lead to Positive Rating Action include: Evidence that TCELL can minimise potential revenue slowdown, preserve deleveraging capability and maintain liquidity against the backdrop of higher Turkish inflation and further devaluation in the Turkish lira, which could result in the Outlook being changed to Stable. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action: Expectation that FFO adjusted moncler outlet kids net leverage will remain above 2.2x (which corresponds to net debt/EBITDA of around 1.5x) on a sustained basis; Material deterioration in TCELL’s operating conditions or competitive environment to the extent financial performance is expected to materially underperform Fitch’s rating case; Pre dividend free cash flow (FCF) margin below mid single digits on a sustained basis Re emergence of governance issues to the extent discount moncler outlet these affect management’s ability to remain within targeted financial policies or implement key business decisions, or result in the absorption of liabilities not currently considered within Fitch’s rating case A negative rating action on Turkey’s Country Ceiling Turkey sovereign rating The main factors that could, individually, or collectively, lead to negative rating action are: Heightened stresses stemming from external financing vulnerabilities; Weaker public finances reflected by a deterioration in the government debt/GDP ratio; Deterioration in the political or security situation. The main factors that could, individually, or collectively, lead to moncler coats outlet positive rating action are: Implementation of reforms that address structural deficiencies and reduce external vulnerabilities; A political moncler outlet location and security environment that supports a pronounced improvement in key macroeconomic data. LIQUIDITY Healthy Liquidity: TCELL reported cash moncler jackets toronto of TRY5.6 billion moncler coats for kids at end September 2016. The company has committed club loan facilities of USD500 million and EUR445 million (fully drawn at end 3Q16), along with facilities from China Development Bank (CDB) of which EUR500 million (fully drawn at end 3Q16) is available for refinancing existing loans, and EUR750 million available for infrastructure procurement (undrawn at end 3Q16). Maturities are well spread out and refinancing risk is manageable. The club facilities mature Official Moncler Outlet in 2020; the CDB facilities in 2025; its USD bond in 2025. FCF is moncler jacket online forecast to moncler coats cheap be negative during 2017 given exceptional capex and spectrum payments. However, as underlying FCF is positive and liquidity is sufficient, we expect TCELL to be FCF positive in 2018. For regulatory purposes in various jurisdictions, the supervisory analyst named above is deemed to be the primary analyst for this issuer; the principal analyst is deemed to be the secondary. Summary of Financial Statement Adjustments In line with Fitch’s approach to lease adjusted debt for companies operating in higher interest rate environments Fitch applies a 5x multiple to TCELL’s operating lease expense (compared with a standard 8x) in calculating lease adjusted debt. 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DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. moncler jackets on sale and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1 800 753 4824, (212) 908 0500. Fax: (212) 480 4435. Reproduction or retransmission in whole or in part is prohibited except by permission. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre existing third party verifications such moncler outlet store as audit moncler outlet online store reports, agreed upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. 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