HKT to see debt drop over stake sale: S&P Global

Demand in mobile roaming and growth in broadband and local data services to drive profits.

Hong Kong Telecom will see its debts reduce after the sale of its wireline network and will have a moderate profit and cash flow growth this year as demand for mobile roaming, broadband, and local data services this year rises.

The credit rating agency said that with the estimated 0.5x leverage benefit from the announced stake sale in the wireline network, HKT Trust and HKT Ltd.'s (HKT Trust) pro forma leverage is likely to fall to 3.3x-3.4x in 2024 and 2025.

S&P Global also said the sale will also bring down HKT's parent, PCCW Group to be reduced but will remain under long-term pressure due to an annual cash flow deficit, after considering shareholder returns, of over $3b.

In 2023, PCCW spent roughly $3b on capital expenditure at its level and paid out $2.9b in cash dividends.

"We assume PCCW will continue to pass through substantially all dividends from HKT to its shareholders, and its capex will remain largely steady. In the absence of a change in dividend policy and additional asset sales, annual cash outflow will result in gradual leverage creep at PCCW group," S&P said.