Moody’s Investors Service (Moody’s) yesterday upgraded Axtel, S.A.B. de C.V.’s corporate family rating to Ba3 from B3. The outlook is stable.

This action concludes the review for upgrade initiated on November 30, 2015. The upgrade reflects Axtel’s enhanced credit profile pro forma for the merger with Alestra, S. de R.L. de C.V. (unrated), subsidiary of Alfa S.A.B. de C.V. (Baa3, stable).

On February 15, 2016, Axtel announced completion of the planned merger with Onexa, S.A. de C.V., holding company of Alestra. Under the new structure, Alfa holds pproximately 51% of the combined entity and Alestra is a wholly owned subsidiary of Axtel. Axtel will continue to act as an operating and publicly traded company while being fully consolidated by Alfa.

Axtel’s credit profile and capital structure are strengthened by the integration with Alestra, which contributes stronger margins and a lighter debt profile. The larger size of the newly formed entity will also increase both companies’ competitive capacity in Mexico’s fragmented telecommunications industry, while benefiting from economies of scale and operational synergies. Furthermore, Axtel will benefit from Alfa’s stronger credit profile and will be governed under the group’s solid financial policies.

Axtel’s Ba3 rating is supported by its solid margins and strong customer base in the enterprise segment, pro-forma for the merger with Alestra. The company’s focus on the high-income residential segment and the long-term nature of its contracts with businesses and corporations promote operating stability. The rating reflects the company’s good liquidity, comfortable debt maturity profile and corporate governance under Alfa’s financial policies. On the other hand, the rating considers the company’s small size and limited market shares in Mexico’s highly competitive and fragmented telecom industry. The rating also incorporates execution risk arising from the merger, although this risk is partially mitigated by Alfa’s management track record in integrating acquisitions.

The stable outlook reflects Moody’s expectations for steady to increasing operating margins and cash flow generation for Axtel, while maintaining its market positioning. The outlook takes into consideration integration costs and negative free cash flow during the integration phase of the Axtel-Alestra merger. The outlook also assumes that the company will maintain good liquidity while investing adequate levels of capex to strengthen its competitive capacity.

The rating could be upgraded if Axtel is able to maintain adjusted EBITDA margin above 40% while maintaining leverage (adj. Debt/EBITDA) around 2.5 times and sustained positive free cash flow generation of at least 10% of total debt.

The rating could be downgraded if EBITDA margin falls below 30%, or adj. Debt/EBITDA rises above 3.5 times, while generating ongoing negative free cash flow. The rating could also be downgraded if the company’s market position or liquidity weaken.

Based in Monterrey, Mexico, Axtel is an integrated telecommunications company providing IT and telecom solutions to business customers and bundled voice, internet and video services to consumer customers within Mexico. During the last twelve months ended September 30, 2015, the company reported revenues of USD634 million.

The principal methodology used in this rating was Global Telecommunications Industry published in December 2010. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

 

SOBRE AXTEL

Axtel es una empresa mexicana de Tecnologías de la Información y Comunicación que atiende los mercados empresarial, de gobierno y masivo con una robusta oferta de soluciones a través de su marca Alestra (servicios empresariales y de gobierno) y su marca Axtel (servicios residenciales y para pequeños negocios).

Con una infraestructura de red de 40 mil kilómetros y más de 7,200 metros cuadrados de piso blanco que soportan su portafolio, Axtel habilita a las organizaciones a ser más productivas y acercar a las personas mejorando su calidad de vida.

A partir del 15 de febrero de 2016, Axtel es una compañía subsidiaria de ALFA, quien posee el 51% de su capital. La fusión entre Alestra y Axtel ha permitido crear una entidad con mayor capacidad de creación de valor para todos sus grupos de interés.

Axtel se adhirió en 2011 al Pacto Mundial de la ONU, la iniciativa de responsabilidad social más grande del mundo. Forma parte del IPC Sustentable de la BMV desde 2013, del Dow Jones Sustainability Index desde 2017 y ha recibido el reconocimiento por parte del CEMEFI como Empresa Socialmente Responsable desde 2008.

Las acciones de Axtel, representadas por Certificados de Participación Ordinaria (CPOs), cotizan desde 2005 en la Bolsa de Valores de México bajo el símbolo “AXTELCPO”.

Sitio en internet: axtelcorp.mx

Sitio en internet de su oferta para el mercado empresarial y de gobierno: alestra.mx

Sitio en internet de su oferta comercial para el mercado masivo: axtel.mx