Fitch affirms Emirates Telecom at 'A+'; outlook stable

The state-owned company's Long-term IDR continues to reflect Fitch's view of the UAE government's creditworthiness, given the company's strong operational and strategic ties with the UAE. The agency's rating approach, and top-down methodology, continues to take into account the assumed government support in line with Fitch's parent and subsidiary rating linkage criteria.

However, the agency has concerns regarding the increasing demands on the sovereign's relatively small fiscal resources to support UAE banks and, potentially, other entities during the current period of economic stress. Fitch notes that negative pressure may affect Etisalat's rating if it becomes clearer over the next few months that the strength of the sovereign linkage factored into the rating is weakening due to implied support actions for other UAE entities.

Etisalat's current ratings are also underpinned by the strong operating performance and financial standing of the company which would justify a comfortable investment grade rating level on a stand-alone basis. The company`s liquidity remains strong with a cash position of Dhs13.5bn at H109 compared with short-term financial debt and amounts payable on new investments and licenses of Dhs0.6bn and Dhs2.5bn respectively.

Etisalat`s long-term financial debt of Dhs1.9bn is also mainly concentrated in 1 to 3 years and Fitch still expects the company to record a consolidated net cash to Ebitda ratio of 0.5x at YE09 due to underlying revenue growth. The agency is also confident that management will maintain a conservative financial policy, with a maximum gross debt/Ebitda ratio of 2.5x under a worst case scenario.