KYIV

Fitch Ratings has affirmed Private Joint Stock Company VF Ukraine’s long-term foreign-currency Issuer Default Rating (IDR) at ‘B’. The outlook on the IDR is Positive.

VF Ukraine is the second-largest of Ukraine’s three mobile operators, accounting for around a 35 percent subscriber share.

Fitch views the competitive environment in Ukraine’s mobile market as rational. The positions of the market participants are well-defined, with the two largest operators accounting for a combined 80 percent share of the total mobile market. Prices do not differ significantly and the operators focus on average revenue per user (ARPU) growth rather than market share redistribution.

Fitch said that the ratings of VF Ukraine were constrained by Ukraine’s Country Ceiling of ‘B’.

“Its credit profile benefits from its solid market position, ownership of the company’s backbone infrastructure, high profitability and a moderately competitive environment. This is counterbalanced by high foreign exchange (FX) risks and the lack of product and geographical diversification,” Fitch said in a report.

“The Positive outlook corresponds to that of the sovereign rating, assuming that the Country Ceiling will move in line with a potential upgrade of Ukraine’s rating.”

VF Ukraine has invested heavily in its networks with capex (excluding spectrum) averaging 30 percent of revenue in 2017-2021. Ukraine was behind other countries in 4G implementation as operators started rolling out 4G networks only in 2018.

Fitch said it expected VF Ukraine’s cash capex to ease to around 20 percent of revenue after 2021, as major investments are near completion. The company’s 4G coverage reached 81 percent in 2020 versus 69 percent in 2019. It is planning to achieve 90 percent 4G population coverage by 2022.

VF Ukraine continued to see double-digit revenue growth at 13.5 percent in 2020 and at 13.2 percent in the first half of 2021, despite challenges from the coronavirus pandemic. Growth was supported by the migration of subscribers to 4G and increasing data consumption.

Fitch said it expected 4G-driven revenue growth to continue in the medium term, given 64 percent of the company’s subscribers were data users and only 38 percent were 4G users at the end of 2020.

“Nevertheless, we conservatively forecast growth to decelerate to mid-single digits post-2021 following recent rapid increases,” the agency said.

In August, Fitch Ratings has revised the outlook on Ukraine’s long-term foreign-currency Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at ‘B’.

It projected the country’s gross domestic product growth of 4.1 percent this year, helped by a pick-up in agriculture and 12.9 percent real wage growth year-on-year in June, with short lockdowns in January and April subtracting an estimated 0.6 percentage points from annual growth.