The credit rating of PJSC Rostelecom (hereinafter, Rostelecom, or the Company) is based on the government support and the Company’s very strong operational risk profile, including the strong market position and the very strong business profile and geographic diversification. ACRA assesses the Company’s corporate governance level as very high. The financial risk profile takes into account the Company’s very large business size, high profitability, and very high liquidity assessment. The Agency notes the growth of FFO before fixed charges and the low leverage of the Company. Interest payments that increased in 2024 compared to the previous year negatively affected the debt coverage indicator, while the growing capex and dividend payments have put pressure on the Company’s cash flow.
Rostelecom is the largest provider of digital services and solutions across all market segments in Russia. The Company provides mobile communication services, broadband Internet access, and pay TV services; it is a provider of innovative solutions in e-government services, cybersecurity, regional digitalization, healthcare, biometrics, education, housing and utility services, cloud computing, data center services, etc. Rostelecom is also engaged in import substitution, including software development and telecommunications equipment manufacture.
KEY ASSESSMENT FACTORS
Very strong operational risk profile. Rostelecom maintains its leading position in the broadband market for individuals and corporates, the inter-operator services market, as well as in the segment of digital services for government and businesses. The Company remains the leader in the Collocation and cloud services markets. The share of t2 in the mobile communications segment continues to grow in terms of both revenue and the number of subscribers, while the Wink platform is among the top three Russian online cinemas.
The share of mobile communications in 2024 revenues is 34%, digital services — 23%, and fixed-line broadband communications — 14%, while the share of fixed-line voice communications continues to decline amid the fast-growing online voice technologies and products. Rostelecom successfully operates the clusters Data Center and Cloud Services, Information Security, Digital Regions, Government Digital Services, and Digital Medicine. In addition, in 2024, the X-tech and Zdorovye clusters were formed, and the creation of a commercial IT cluster and a production cluster for the development and production of ICT equipment by the Company began in order to ensure technological sovereignty.
The Company’s revenue and customer base are very well diversified by region. Its own backbone digital communication network with an 83 Tbit/s capacity allows the Company to cover the entire territory of the Russian Federation (the share of network coverage in the regions of presence exceeds 95%). Rostelecom’s data centers are located in Moscow, Kazan, Yekaterinburg, Novosibirsk, Khabarovsk, Kaliningrad, Stavropol and Adler.
The Agency has a very high opinion of the consistent and successful implementation of the corporate development strategy, robust risk management system, and the management structure. In 2024, certain changes were made in the composition of the Company’s board of directors. In April this year, a new dividend policy was approved that will apply to dividends for 2025–2027. This year, the board of directors is expected to adopt a new development strategy for the next five years.
High profitability and very large business size. By the end of 2024, the number of Rostelecom’s mobile subscribers grew by 1.7% to 48.9 million. In the forecast period, ACRA does not expect significant growth in the Company’s customer base. The FFO before fixed charges and taxes margin in 2024 amounted to 37% vs. 39% in 2023, while the weighted average indicator for 2022–2027 is estimated at 39%. The FFO before fixed charges and taxes averaged for 2022–2027 is RUB 314.5 bln, which, according to ACRA’s methodology, indicates a very large business size.
Low debt coverage and low leverage. The ratio of total debt adjusted for operating lease to FFO before fixed charges grew to 2.9x in 2024 vs. 2.7x in 2023. The weighted average leverage for 2022–2027 is 2.5x. Rostelecom attributes the increase in its debt last year to a recovery in investment activity, M&A transactions, and increased financial costs due to the key rate hikes. The medium size of the debt and the very high quality assessment of the leverage determine the overall assessment of the Leverage sub-factor as low as per ACRA’s methodology.
The shares of floating and fixed interest rates are equally distributed in the loan portfolio. The attraction of new debt financing at fixed and floating market rates led to a significant increase in interest payments in 2024. The ratio of FFO before fixed charges to fixed charges declined from 3.4x in 2023 to 2.5x in 2024. In case the key rate remains high, the amount of the Company’s interest payments may grow even higher in 2025, and the debt coverage indicator may fall to 2.0x. The 2022–2027 weighted average coverage is estimated at 2.4x.
Very strong liquidity and limited cash flow. Rostelecom's liquidity is assessed as very high due to the presence of large amounts of undrawn loans and diversified sources of funding.
According to ACRA’s calculations, the share of capex in revenue increased from 18% in 2023 to 22% in 2024 as the investment program recovered after a period of slowdown two years earlier due to certain restrictions on equipment supplies and the need to build new logistics chains. In the forecast period, Rostelecom is expected to invest in projects with high financial returns (information security, cloud business, mobile communications development), as well as in mandatory costs to maintain business stability and increase operational efficiency. In view of the Company’s announcements about investment optimization, the ratio of capex (including government subsidies) to revenue may decrease to 17% in 2025. In 2024, the Company paid about RUB 28 bln in dividends. In the forecast period, the Agency assumes the amount of dividends in accordance with the newly approved dividend policy.
KEY ASSUMPTIONS
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Capex and dividend payments in the forecast period in line with the Company’s projections.
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Annual average key rate of the Bank of Russia at 20% in 2025, 14.5% in 2026, and 10% in 2027.
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Maintaining a substantial amount of undrawn credit lines.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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Weighted average ratio of debt adjusted for operating lease to FFO before fixed charges declining below 1.0x;
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Weighted average ratio of FFO before fixed charges to fixed charges exceeding 2.5x;
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Weighted average FCF margin exceeding 2%.
A negative rating action may be prompted by:
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Weighted average ratio of total debt adjusted for operating lease to FFO before fixed charges exceeding 5.0x;
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Weighted average ratio of FFO before fixed charges to fixed charges declining below 1.0x;
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Much worse liquidity profile.
RATING COMPONENTS
Standalone Creditworthiness Assessment (SCA): aa-.
Support: state.
ISSUE RATINGS
Bond of PJSC Rostelecom (RU000A0JWTN2), maturity date: September 10, 2026, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A0ZYG52), maturity date: November 9, 2027, issue volume: RUB 10 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A0ZYYE3), maturity date: March 3, 2028, issue volume: RUB 10 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A100881), maturity date: March 21, 2029, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A105LC6), maturity date: September 5, 2025, issue volume: RUB 10 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A108GR8), maturity date: May 20, 2027, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A108LF3), maturity date: September 2, 2027, issue volume: RUB 10 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A1095W4), maturity date: August 4, 2027, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A109916), maturity date: August 14, 2026, issue volume: RUB 10 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A109JS8), maturity date: September 13, 2027, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A109X29), maturity date: April 21, 2026, issue volume: RUB 13.5 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A10A3R1), maturity date: November 14, 2025, issue volume: RUB 20 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A10ASS2), maturity date: May 29, 2026, issue volume: RUB 18 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A10B214), maturity date: March 2, 2027, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A10BG13), maturity date: April 12, 2027, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A101541), maturity date: November 27, 2025, issue volume: RUB 10 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A101FG8), maturity date: February 10, 2027, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A1028G8), maturity date: October 8, 2025, issue volume: RUB 10 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A103EZ7), maturity date: July 17, 2026, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A104TD0), maturity date: May 8, 2026, issue volume: RUB 5 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A104VS4), maturity date: June 11, 2025, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A1051E5), maturity date: January 29, 2026, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A105UU9), maturity date: February 11, 2026, issue volume: RUB 10 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A106T93), maturity date: August 27, 2026, issue volume: RUB 10 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A1077Y8), maturity date: November 13, 2025, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A107910), maturity date: February 20, 2026, issue volume: RUB 15 bln — AA+(RU).
Bond of PJSC Rostelecom (RU000A1085D5), maturity date: April 01, 2026, issue volume: RUB 10 bln — AA+(RU).
Credit rating rationale. The above issues represent senior unsecured debt of Rostelecom. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them pari passu with other existing and future unsecured and unsubordinated debt obligations of the Company. According to ACRA’s methodology, given the high creditworthiness of the Company and the absence of secured debt, the Agency applies the simplified approach, so that the credit rating of the bonds is equivalent to that of Rostelecom, i.e. AA+(RU).
Regulatory disclosure
The credit ratings have been assigned to PJSC Rostelecom and the bonds (RU000A0JWTN2, RU000A0ZYG52, RU000A0ZYYE3, RU000A100881, RU000A105LC6, RU000A108GR8, RU000A108LF3, RU000A1095W4, RU000A109916, RU000A109JS8, RU000A109X29, RU000A10A3R1, RU000A10ASS2, RU000A10B214, RU000A10BG13, RU000A101541, RU000A101FG8, RU000A1028G8, RU000A103EZ7, RU000A104TD0, RU000A104VS4, RU000A1051E5, RU000A105UU9, RU000A106T93, RU000A1077Y8, RU000A107910, RU000A1085D5) of PJSC Rostelecom under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation, the Methodology for Assigning Credit Rating with External Support, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale of the Russian Federation was also applied to assign the credit rating to the above bond issues.
The credit ratings of PJSC Rostelecom and the bonds (RU000A0JWTN2, RU000A0ZYG52, RU000A0ZYYE3, RU000A100881, RU000A105LC6, RU000A108GR8, RU000A108LF3, RU000A1095W4, RU000A109916, RU000A109JS8, RU000A109X29, RU000A10A3R1, RU000A10ASS2, RU000A10B214, RU000A10BG13, RU000A101541, RU000A101FG8, RU000A1028G8, RU000A103EZ7, RU000A104TD0, RU000A104VS4, RU000A1051E5, RU000A105UU9, RU000A106T93, RU000A1077Y8, RU000A107910, RU000A1085D5) of PJSC Rostelecom were published by ACRA for the first time on July 14, 2017, September 25, 2024, November 21, 2017, March 16, 2018, April 3, 2019, December 9, 2022, May 23, 2024, June 6, 2024, August 7, 2024, August 16, 2024, September 16, 2024, October 28, 2024, November 19, 2024, February 3, 2025, March 12, 2025, April 22, 2025, December 5, 2019, February 19, 2020, October 14, 2020, July 23, 2021, May 13, 2022, June 15, 2022, August 4, 2022, February 15, 2023, August 31, 2023, November 16, 2023, November 24, 2023, and April 3, 2024, respectively. The credit rating of PJSC Rostelecom and its outlook as well as the credit ratings of the above bonds are expected to be revised within one year following the publication date of this press release.
The credit ratings are based on the data provided by PJSC Rostelecom information from publicly available sources, as well as ACRA’s own databases. The credit ratings are solicited, and PJSC Rostelecom participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided additional services to PJSC Rostelecom. No conflicts of interest were identified in the course of credit rating assignment.
