Trilogy International Partners LLC #B# Ratings Outlook Remains Stable

Stocks and Financial Services Press Releases Thursday April 26, 2018 09:53
MEXICO CITY--26 Apr--S&P Global Ratings

MEXICO CITY (S&P Global Ratings) April 25, 2018--S&P Global Ratings affirmed its long-term corporate credit rating on Trilogy International Partners LLC (Trilogy) at 'B'. At the same time, we affirmed the 'B' rating on the company's $350 senior secured notes due 2022. The outlook remains stable.

Trilogy's profitability dropped in 2017 due to problems at its new operating support system (OSS) that prevented the customer base in New Zealand from increasing and to lower data consumption following modifications to a popular social media app in Bolivia. As a result, Trilogy's credit metrics for that year improved slower than we had expected, although they continue to do so due to a $100 million debt reduction in 2017. In addition, we believe that Trilogy is well positioned to capture the benefits from its network in the next few years, given that the LTE deployment in New Zealand will be about 97% and about 90% in Bolivia by the end of 2018. In our opinion, improved telecom infrastructure will result in higher data consumption among the company's customer base and will gradually improve its profitability and credit metrics.

Moreover, we believe that Trilogy will continue to encourage the customer migration to postpaid from prepaid, which should also improve its overall blended ARPU. Despite these enhancements, Trilogy remains the third-largest telecom player in Bolivia with about 23% of the subscriber market share, behind Empresa Nacional de Telecomunicaciones S.A. (Entel) and Telefonica Celular de Bolivia (Tigo Bolivia). In addition, the company's subsidiary, 2degrees, holds 24% of New Zealand's telecom market, behind Spark New Zealand Ltd (A-/Stable/A-2) and Vodafone New Zealand Ltd.

In our opinion, the company's market shares in both countries aren't likely to change significantly in the short term. This, along with Trilogy's somewhat limited pricing power, is likely to result in lower profitability than those of its peers. In our opinion, Trilogy will continue to deleverage through higher EBITDA generation and moderate need for debt. Therefore, its debt to EBITDA will drop below 4.0x over the next few quarters, in our opinion. In addition, Trilogy's lower interest burden as a result of the 2017 refinancing of senior secured notes and cost stabilization, given about $7 million in extra costs due to OSS issues past year, will help the company use its cash flows to fund working capital needs, capital expenditures (capex), and the spectrum license renewal in Bolivia for next 12-18 months. Likewise, we expect the company's free operating cash flow (FOCF) to debt to improve by the end of 2018.


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