Global credit rating agency Moody's has said Qatar Telecom's (Qtel) proposed minority stake buyout in Wataniya is credit negative.

Although it will reduce Qtel’s liquidity headroom, given that this is the second significant minority buyout it announced within a month, Moody's said Qtel's 'A2' rating and stable outlook remain unchanged, and believes the company can absorb the initial negative cash impact pro-forma the combined effects of material upcoming and closed transactions.

The transaction, subject to various Kuwaiti regulatory approvals, will amount to about $ 1.9bn. This follows Qtel's announcement in early June that it is raising its stake in Iraq’s Asiacell to up to 60% for a total of $ 1.47bn, which makes Qtel's proposed offer for Wataniya the second sizable buyout of minorities within weeks.

Finding that both of these moves come months after Qtel announced a more conservative financial policy target and a fully subscribed rights issue with proceeds of $ 1.9bn, the rating agency said an additional rights issue by Qtel is 'very unlikely' over the next 18 to 24 months.

However, Moody's acknowledges that the Qatari government - through its sovereign wealth fund the Qatar Investment Authority, which owns 55% stake in Qtel - has the financial means to inject fresh funds into Qtel should the company require support for further strategic acquisitions.

As Wataniya in itself (Kuwait operations) is very lowly geared, it estimates that, pro-forma; the transaction will result in potential outflows totaling up to $ 3.4bn for the two acquisitions, an anticipated debt repayment of a $ 3bn facility in August and the proceeds from its rights issue.