Axtel S.A.B. de C.V. 'BB' Issuer Credit And Issue-Level Ratings Affirmed; Outlook Remains Stable

  • Mexico-based information and communication technology (TIC) services provider, Axtel S.A.B. de C.V., improved its capital structure following the divestment of 82% of its mass market business segment.
  • MEXICO CITY (S&P Global Ratings) Jan. 31, 2019--S&P Global Ratings affirmed its long-term 'BB' issuer and issue-level credit ratings on Axtel.
  • The stable outlook reflects our expectation that during the next 12-18 months, the company will continue to deleverage with debt to EBITDA slightly below 4.0x, thanks to its new operational focus on its TIC segment. We also expect free operating cash flow (FOCF) to debt to remain around 4.5% because the industry is capital-intensive.
The ratings affirmation follows Axtel's plan to focus on more profitable 
business lines, concentrating on enterprise and government customers, which 
have steady EBITDA margins of around 40%. We believe that the company will 
concentrate on gaining operational efficiencies and establishing potential 
alliances with industry peers for cost synergies. In addition, Axtel has 
completed its debt restructuring strategy that included reducing its foreign 
currency debt exposure and extending its debt maturity schedule, while also 
improving leverage metrics. We expect the company will have a debt-to-EBITDA 
ratio slightly below 4.0x, funds from operations (FFO) to debt close to 20% 
and FOCF to debt around 5%, in the following two years.
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