KUALA LUMPUR (Sept 9): RAM Rating Services Bhd said today the amount payable for the spectrum assignment fee by Maxis Bhd has a minimal impact on its AA3 rating of BGSM Management Sdn Bhd's Islamic Medium Term Note (IMTN) Programme of up to RM10 billion.

Maxis has been offered 2 x 10 of 900 MHz and 2 x 20 of 1800 MHz by the Malaysian Communications and Multimedia Commission (MCMC).

The telco is required to pay a RM816.75 million spectrum assignment fee and spectrum maintenance fee of RM70.25 million per annum for the entire assignment period.

"The annual spectrum maintenance fee is anticipated to come up to less than 1% of Maxis' projected revenue," said RAM in a statement today.

It expects Maxis to raise additional debts to finance the said spectrum assignment fee with no change to its existing dividend payout, thereby allowing BGSM Management to meet its annual debt obligations.

The research outfit noted that the potential additional debt will minimally impact Maxis' debt profile, causing funds from operations debt coverage (FFODC) to narrow to 0.21 times to 0.25 times between fiscal 2016 and 2018, although still within our tolerance level for its current rating.

Nevertheless, RAM highlighted the possibility of additional debt-funded capital expenditure (capex) given the reduced spectrum holdings and stiffer competition between telcos may exert pressure on its credit profile.

According to RAM, Maxis is BGSM Management's key cashflow source and its debt load has increased over the years given hefty capex requirements and dividend payouts.

As at June 30, 2016, its adjusted gearing ratio stood at 2.08 times, while total debts of both Maxis and the group came up to RM14 billion.

"Hence, further excessive leveraging by Maxis could impact its credit metric," RAM said.