KUALA LUMPUR (Dec 9): Moody's Investors Service, which announced the completion of a periodic review of the rating of Axiata Group Bhd and other ratings that are associated with the same analytical unit, said the telecommunication group's baseline credit assessment (BCA) is constrained due to its commitment to shareholder returns and high level of capital spending, which will eat into its free cash flows.

In a statement, Moody’s said Axiata’s Baa2 rating is supported by the company's BCA of Baa3, and the likelihood that the Malaysian government, which has an A3 rating, will provide "extraordinary support" in a distress situation results in a one-notch uplift to the BCA.

"Axiata's BCA is underpinned by its earnings from diversified revenue sources and the strong market positions of its key subsidiaries, including Celcom Axiata Bhd in Malaysia and XL Axiata Tbk (PT) (Baa3) in Indonesia, which together contributed around 57% of the company's consolidated revenue for the nine months ended Sept 30, 2020," it explained.

However, the impingement of its BCA demonstrates emerging market risk and the possibility of providing financial support to overseas subsidiaries, although they currently raise debt mostly on a non-recourse basis.

“Axiata's BCA also considers its holding company status and reliance on dividends from subsidiaries to service its debt obligations,” it added.

At 11.40am, Axiata’s share price was down one sen or 0.26% to RM3.77, valuing the group at RM34.66 billion.