...Ratings Constrained by Sovereign: Sri Lanka Telecom PLC's (SLT) IDRs are constrained by the sovereign's IDRs of 'B+', as the state directly and indirectly holds a majority stake in SLT and exercises significant influence on its operating and financial profile. Therefore, the Outlook was revised to Stable from Negative in February 2017, following the revision of the sovereign Outlook to Stable. SLT's second-biggest shareholder, Malaysia's Usaha Tegas ¡ which owns 44.9% of SLT ¡ does not have any special provisions in its shareholder agreement that dilute the government's significant influence over SLT. Negative FCF, Large Capex: We expect SLT to have negative FCF in 2017-2018 (2016 estimated FCF deficit: LKR7bn-8bn), as cash flow from operations (CFO) will be insufficient to fund its large capex plan. We expect SLT to invest about LKR20bn-22bn, or 28%-30% of revenue, in capex each year to expand its optical fibre and 3G/4G mobile networks. Taxes Hinder Growth: We expect SLT's revenue growth...
