Fitch places Jordan Mobile Telephone Services on RWN

The RWN action follows the disclosure by the company that JMTS has provided guarantees for its controlling shareholder's funding requirements related to its expansion strategy. Zain, formerly Mobile Telecommunications Company K.S.C. (MTC), has a 96.6% stake in JMTS. MTCI, the Netherlands subsidiary of Zain, obtained a revolving financing facility with a limit of $4bn (KD1.58bn) from a consortium of local and foreign banks in H206. This facility is secured by a guarantee given by the parent company and JMTS.

The RWN status reflects concerns that MTC looks to the company to support its liquidity position, thereby increasing leverage at JMTS to a level that is considered high for the current rating. Nonetheless, Fitch believes that the underlying financial position and operational profitability of JMTS supports its 'BBB-' (BBB minus) rating. Fitch expects MTC's shareholders will participate in some form of recapitalisation to support the refinancing of the revolving financing by no later than H108, whereby JMTS will be released from its guarantee obligation and the rating watch will be resolved.

JMTS still holds a market leading position and continues to record strong operating numbers with EBITDA margins at 52.6% at FYE06 versus 50.3% at FYE05 despite increased competition which led to a decline in JMTS's market share from 66% at YE05 to 52% at YE06. On a stand-alone basis, the company has strong credit metrics. Liquidity for the current rating category is good with a net cash to EBITDA ratio of 0.5 at YE06. Total unutilised overdraft facilities contracted with various local banks is JD24.5m at YE06.