Liquid Telecom gets poor credit rating from firm – Zim currency issues largely to blame


Moody’s -a risk assessment firm- recently affirmed Liquid Telecoms B1 Corporate family rating (CFR) to honour it’s obligations on a US$730 million senior secured notes offering. Ok, what does any of that even mean?

Senior secured notes are basically bonds – but they take precedence over other debts in the event that a company declares bankruptcy. The rating for a senior note is based on the creditworthiness of the issuer, including its ability to generate consistent earnings with which to finance debt payments.

What’s actually happening?

Moody’s Corporate Family Ratings (CFR) are opinions of a corporate family’s ability to honour all of its financial obligations. The B1 credit rating placed on Liquid reflects that the US$730 million obligations are “speculative and subject to high credit risk”. Moody’s has also placed a negative outlook on the ratings going forward.


Liquid Telecom’s rating was downgraded from Ba3 to B1 last year. The previous Ba3 rating isn’t significantly different from B1;

  • Ba3 – Judged to have speculative elements and a significant credit risk.
  • B1 – Judged as being speculative and a high credit risk.

Why was there a downgrade to begin with?

According to Moody’s, Liquid Telecom was exposed to foreign currency risks due to deterioration of the ZW$ (RTGS$ then);

The downgrade of Liquid Telecom’s CFR to B1 reflects the Group’s increased exposure to foreign currency risks as the RTGS$ currency in Zimbabwe is no longer at parity to the US dollar

Moody’s noted that the effects were “a large” currency mismatch between Liquid Telecom’s cash flows and dollar debt obligations. At the time, around 64% of Liquid’s EBIDTA was in local currencies (RTGS, Rands and other African countries).

Another factor informing the downgraded rating was the risk coming from the fact that Liquid had a “sizeable cash balance that is currently trapped in the country”.

Moodly’s expected Liquid to pursue growth opportunities away from Zimbabwe, making the group less reliant on local cash flows.

This year, Moody’s rating is similar despite the negative outlook last year. Moody’s attributes this to a ramp-up in revenues generated in South Africa. The reliance on Zim is waning. EBIDTA contribution from Zimbabwe fell from 32% to 14% and is expected to reduce towards 5% by 2021.

The rating also takes into account the following regarding Liquid Telecom;

  1. Liquid Telecom’s strong market position as the largest pan-African fibre network covering 13 countries across the central, eastern and southern African regions in addition to South Africa;
  2. Their valuable high-capacity long-haul fibre network assets spanning over 70,000 km’s;
  3. The company’s exposure to supportive industry dynamics, given the growing demand for carrier and enterprise broadband services across Africa;
  4. Prudently managed capital investment roll-out;
  5. Long-standing contractual relationships with a blue-chip customer base with moderate customer concentration;
  6. A track record of operating in African markets.

Regardless of all these factors, Moody’s still maintain there is a negative outlook. Why is this the case?

What informs the negative outlook?

Moody’s believes Liquid still has a big problem and that’s surrounding the Zimbabwean market (again);

The negative outlook reflects the uncertainty related to Liquid Telecom’s ability to fully pass on the less favorable foreign exchange rate to customers in Zimbabwe so that profitability does not materially weaken as well as the uncertainty around the ability to repatriate cash out of the country.

Interestingly, Liquid Telecom’s consumer facing entity ZOL, is now pricing internet packages using the official exchange rate. This might be one of the measures they are taking to improve that credit risk and the businesses cash flow position.

Quick NetOne, Telecel, Africom, And Econet Airtime Recharge

If anything goes wrong, chat with us using the chat feature at the bottom right of this screen

View Comments

  • “Interestingly, Liquid Telecom’s consumer facing entity ZOL, is now pricing internet packages using the official exchange rate. This might be one of the measures they are taking to improve that credit risk and the businesses cash flow position.” Unless they are immediately converting these RTGS to real dollars or other assets that can be converted to USD without loss of value then it’s still hapana hapana

    Cancel reply

    Leave a Reply

    Your email address will not be published.

Leave a Reply

Your email address will not be published.

Published by
Farai Mudzingwa

Recent Posts

Why you should consider starting your own podcast & what you’ll need to get the ball rolling

Podcasts are among my favourite forms of entertainment. They often fill in the gaps when…

October 30, 2020

SABC wants Netflix users to pay a TV licence because regulation is outdated

When we wrote about SABC's upcoming streaming service we touched on the fact that SABC…

October 30, 2020

Poor service delivery highlighted by SIVIO Institute local governance tracker

A couple of years ago SIVIO Institute launched ZimCitizensWatch which is a tool that tracks…

October 30, 2020

This Zim company is using blockchain tech to prevent use of fake vaccination certificates

At the main bus terminus in Harare, Zimbabwe’s capital, travellers heading to neighbouring Zambia can…

October 30, 2020

Meet Sika, the app to dial a barber or hairdresser from your home

Alistair Holmes spent a few months at home during that lockdown that left everyone who…

October 30, 2020

Upgrading to Android 11 will break your favourite apps

Google engineers are sometimes like your mother cleaning your room unsolicited. You swear you left…

October 30, 2020