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Rating action

Scope Ratings GmbH (Scope) has today affirmed its BB-/Stable issuer rating on Georgia-based mobile operator Cellfie Mobile LLC (Cellfie). Scope has also affirmed the BB- rating on the company’s GEL 65m senior secured bond (ISIN: GE2700604608).

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

The issuer rating is driven by a standalone credit assessment of BB and a negative one-notch adjustment for peer group considerations.

Business risk profile: BB (unchanged). Cellfie’s business risk profile continues to benefit from steady demand for mobile services in the Georgian telecommunications sector as well as its reasonable share of subscribers. While the company has a market share of around 23% in terms of subscribers, its share of revenues is lower at roughly 17% (based on 2024 data), given its mobile-only operations compared to the integrated telecoms operations of its peers. Cellfie is the third-largest player in the Georgian mobile market and the smallest of the three companies that dominate the segment.

Cellfie's diversification remains weak, as it only operates in Georgia and in a single industry. Furthermore, unlike its two main competitors (MagtiCom and Silknet), it only offers mobile services and does not provide fixed broadband, fixed telephony or TV services.

On the positive side, Cellfie's profitability improved further in 2024, remaining robust with a Scope-adjusted EBITDA* margin of around 50% (compared to 45% and 43% in 2022/23 and 2020/21 respectively). In terms of adjusted EBITDA after leases, the margin was 42% in 2024, higher than that of most major European telecom operators. At the start of 2024, Cellfie began streamlining its product portfolio and reducing costs associated with unprofitable services, primarily relating to A2P transit SMS. Prices for several services were also increased. Alongside a focus on value-added services, these changes have helped the company achieve sustained improvements in ARPUs and bridge the gap with larger market players to some extent.

Financial risk profile: BB+ (+1 notch). Cellfie’s financial risk profile assessment has improved. This reflects the continued positive development of leverage metrics and a healthy interest coverage ratio, thanks to a strong operating performance, with EBITDA strengthening significantly in 2024. With improved revenues and margins, leverage declined to 1.3x in 2024 from 1.6x in 2023. Further, healthy profitability and a reduced refinancing rate (down 150 bps to 8.0% in 2024) supported a healthy EBITDA/interest coverage ratio of 6.7x in 2024. Scope believes that sustained growth in revenues and continued profitability are likely to keep interest coverage at around 7.0x in 2025 and 2026.

As of 31 December 2024, Cellfie’s debt comprised GEL 17.6m of bank borrowings from commercial banks (Bank of Georgia and TBC Bank), and GEL 64.5m of bonds. Following the conversion of shareholder loans into equity, Cellfie achieved positive equity for the first time at the end of 2023. Consequently, the debt/EBITDA ratio stood at 1.6x in 2023, significantly down from 11.0x in 2022. Scope forecasts that debt/EBITDA will remain below 1.5x and that funds from operations/debt will stay above 60% in the medium term. Scope expects the company’s growth strategy to benefit operating performance and support leverage and coverage metrics. At the same time, the rating agency anticipates that consistent, sizeable capital expenditure will constrain cash flow, as reflected in the negative cash flow coverage forecast for 2025/26. Cash flow coverage remains the weakest element of Cellfie’s financial risk profile, as the company is currently implementing a substantial capital expenditure programme to increase its market coverage and improve the capacity of its mobile network. This ongoing initiative includes the rollout of 5G, resulting in capital expenditures of approximately GEL 60–90m per annum in 2025–27, as well as an increase in operating lease obligations. Consequently, Scope anticipates that free operating cash flow (FOCF) will remain under pressure in the short to medium term, with a negative FOCF/debt ratio expected in 2025 and 2026.

Liquidity: adequate (unchanged). Cellfie’s liquidity remains adequate. Scope expects negative FOCF in light of sizeable capital expenditure plans and the maturity of the GEL 65m senior secured bond to weaken liquidity in 2026. At the same time, Scope does not anticipate any refinancing issues. This is due to the company’s well-established relationships with banks and financial institutions. Furthermore, existing leverage covenants set below 2.0x are expected to keep the company’s balance sheet healthy. However, Scope’s base case does not include the severe impact of any political issues in Georgia, which could lead to sanctions and significantly restrict international capital inflows. Scope will adjust its base case if such material risks arise.

Supplementary rating drivers: -1 notch (unchanged). The issuer rating incorporates a one-notch negative adjustment for peer group considerations, given that Cellfie is smaller and has a weaker market position than large European incumbent telecoms companies. For example, 4iG Nyrt, rated BB-/Stable by Scope, has a much larger scale and more diversified revenue stream.

Regarding parent support, Scope did not have access to the financial accounts of Cellfie’s parent companies, as they do not engage in financial reporting. However, Scope believes that any potential cash outflows from Cellfie are effectively safeguarded by restrictions on transactions involving ‘affiliated persons’, as per the terms of the debt.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation of sustained healthy profits and the absence of dividend payouts. Scope believes this will help Cellfie maintain comfortable leverage and coverage metrics despite significant capital expenditure plans. The Outlook also incorporates a scenario in which the company could use its substantial financial flexibility for additional capital expenditure and/or mergers and acquisitions, while maintaining a debt/EBITDA ratio of less than 2.0x.

The upside scenarios for the ratings and Outlook would require (collectively):

1. An improved business risk profile through enhanced scale of operations, strengthened market position and more diversified segmental and geographical presence (remote)
    
2. Debt/EBITDA sustained at around 1.0x and FOCF/debt of more than 5% on a sustained basis

The downside scenarios for the ratings and Outlook would require (individually):

1. An inability to roll over bonds maturing in 2026 in a timely manner
    
2. Debt/EBITDA exceeding 2.0x on a sustained basis

Debt rating

Cellfie’s GEL 65m senior secured corporate bond (ISIN: GE2700604608) is rated BB-, in line with the issuer rating, reflecting an average expected recovery on the bond in the hypothetical event of a company default. Scope’s recovery analysis is based on a hypothetical default scenario in 2026 and assumes that outstanding senior secured bank loans would rank senior to the bond. Although the bond’s recovery expectations indicate an excellent recovery, Scope has refrained from granting a rating uplift to the bond rating. This is due to emerging market risk and the possibility that the company could raise additional senior secured bank loans in the future.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

All rating actions and rated entities

Cellfie Mobile LLC

Issuer rating: BB-/Stable, affirmation

GEL 65m senior secured bond (ISIN:GE2700604608) rating: BB-, affirmation

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodology used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025), is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Nidhi Marwaha, Director
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Issuer Credit Rating/Outlook was first released by Scope Ratings on 4 December 2023. The Credit Rating/Outlook was last updated on 11 December 2024.
The GEL 65m senior secured bond final Credit Rating was first released by Scope Ratings on 11 December 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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