The investment made over the past three years in optical fiber has made Liquid Telecom one of the main broadband connectivity providers on the continent today. With more than 100,000 km of network to its credit, the company nevertheless faces certain challenges.
The pan-African telecom group Liquid Telecom saw its financial rating fall from B2 to B3 on Monday August 21 with negative outlook. The assessment prepared by Moody’s Investors Service reflects the rating agency’s concern about the ability of the telecom company to maintain its financial health over the next few years, given its current economic situation.
Liquid Telecom had $153 million of outstanding debt as of May 2023 under its $220 million rand-denominated amortizing term loan. Added to this are $620 million of senior secured notes with a coupon of 5.5%. The loan matures in February 2026 and the notes in September 2026. However, since the end of the 2020 financial year, the company’s profitability has lagged.
“ Earnings before interest, taxes, depreciation and amortization (EBITDA) outside of Zimbabwe barely increased despite ongoing high capital expenditure. This increases refinancing risk if the company’s debt level remains high and the interest rate environment is high over the next few years ,” Moody’s said.
| Year | EBITDA | Annual revenue |
| 2020 | $247.4 million | $694.9 million |
| 2021 | $241 million | $651.9 million |
| 2022 | $299.5 million | $711.7 million |
| February 2023 | $237.9 million | $622.5 million |
Source: Liquid Telecom
For the agency, which remains optimistic, hence its B3 rating, Liquid Telecom still has the ability to find solutions to mitigate its refinancing risk and the fact that its liquidity risk remains manageable over the next 12 to 18 months.
Liquid Telecom is also currently studying operational improvements and a reduction in capital expenditure through the sale of assets. Moody’s believes that both solutions ” could contribute to deleveraging and improving access to finance and thus maintain sustainable debt service”, but also expresses uncertainty about the success of the execution of these measures.
With interest rates of approximately 11.5% for the $220 million amortizing term loan and 5.5% for the $620 million senior secured notes, Liquid Telecom has an obligation to generate sufficiently high cash flow over the next few years to deleverage, improve its future access to financing and consolidate its financial credibility.