Softbank’s acquisition of rival Japanese operator eAccess will not affect its credit rating, Standard & Poor’s said today.
The ratings agency said the impact on Softbank's financial standing following the proposed merger between Japan’s third- and fourth-placed operators would be “limited.” It currently rates Softbank at BBB and eAccess at BB+.
Softbank is to acquire JPY180.2 billion (US$2.3 billion) of stock in eAccess, and will take on roughly the same amount in debt.
However, S&P said that eAccess' debt – JPY199 billion as of the end of June 2012 – is equivalent to just 30 percent of Softbank's cash and equivalents of JPY758 billion as of June 2012.
“We estimate that the newly merged entity's adjusted total debt to EBITDA at the end of March 2013 will likely be about 2.5x, which is below our downgrade trigger of 3.0x,” it said.
The firm was also upbeat on the potential cost savings and other benefits that the merger could deliver.
“If the merger proceeds as planned, eAccess' 1.7GHz core band for LTE will be an advantage for Softbank, in that it will increase the choice of bandwidths for LTE services with tethering functions and differentiate itself from its rivals in the growing mobile broadband market.”
“Despite the intensifying competition and potential threat of margin squeezes, the benefits from cost savings through the merger will enhance Softbank group's cost structure to some extent,” it added.