KUALA LUMPUR: Moody’s Investor Services has affirmed Telekom Malaysia Bhd’s A3 local currency issuer rating and A3 senior unsecured foreign currency rating.The outlook on both ratings is stable, Moody’s said in a statement yesterday.

It said the affirmation followed Telekom Malaysia’s recent announcement that it planned to launch a tender offer of up to US$150 million to buy back some of its outstanding 2010 and 2014 US dollar bonds. The tender offer will be funded from a mixture of cash and hand and Malaysian ringgit bank financing and its offer will be at the prevailing market price.

Moody’s vice president and senior credit officer Laura Acres said the size of the tender offer is small in the context of Telekom Malaysia’s outstanding debt, therefore the improvement on leverage metrics is immaterial in the context of the rating.

Acres, who is also Moody’s lead analyst for Telekom Malaysia, said additional benefits will accrue as a result of reduced interest costs and lower exposure to forex translation gains and losses although these will be partially mitigated in the short term by the premium paid to prepay the debt.

An upgrade in Malaysia’s foreign currency ceiling would trigger an upgrade of Telekom Malaysia’s senior unsecured bond rating, she said.

Downward pressure could arise should competition emerge in the sector such that Telekom Malaysia’s dominance starts to erode, although Moody’s considered this to be unlikely in the short to medium term.

Moody’s also said that it would be concerned for the rating should the terms of the nationwide High-Speed Broadband (HSBB) project change such that Telekom Malaysia was to shoulder an increased contribution or the timing of its payments were accelerated. — Bernama