MARC has assigned the ratings of MARC-1ID/AAID to Cellular Structures Sdn. Bhd. (CSSB) RM184.0 million Senior MUNIF/IMTN under a RM192.0 million MUNIF/IMTN and IMTN Facility (Facility).  The ratings reflect the exclusive rights given to Konsortium Jaringan Selangor Sdn. Bhd. (KJS) to construct and manage the telecommunication towers and structures in the State of Selangor; the licensing agreement entered into with creditworthy telcos, namely, Maxis Broadband Sdn. Bhd. (Maxis), Celcom (Malaysia) Berhad (Celcom) and DiGi Telecommunications Sdn. Bhd. (DiGi); protective issue structure with drawdown of MUNIF/IMTNs subject to completion of construction of towers; and, strong cash flow protection during tenure of the Facility. The RM8.0 million Junior IMTN under the Facility is a non-rated piece.

Cellular Structures Sdn. Bhd. (CSSB), is a wholly owned subsidiary of Konsortium Jaringan Sdn. Bhd (KJS) incorporated solely for the purpose of issuing the Facility; funding the construction of telecommunication towers or infrastructures (towers) undertaken by KJS; and, collecting periodic lease payments from telecommunication companies or operators (telcos) as consideration for use of the towers on a sharing basis.

KJS’s was appointed as the management services company for the State of Selangor (Selangor) via a Management Services Agreement signed with the Selangor State Government (SSG) in December 1999.  The main objectives of KJS as a management services company include, amongst others, planning and designing a long term strategy for the rationalisation of integrated infrastructure works for all telcos operating in Selangor; facilitating the process for telcos in respect of site acquisition and supervision, planning, design and engineering services and obtaining approvals from relevant authorities; and obtaining full cooperation from local authorities/councils and government bodies or agencies and telcos to enable the proper planning, implementation and maintenance of integrated telecommunications infrastructure works for the benefit of Selangor.

With the advantage of non-competition from other entities, KJS entered into a licensing agreement with Celcom, Maxis and Digi in April 2005 covering a period of ten years stipulating, amongst others, KJS’s responsibilities and obligations which include serving appropriate sites, commissioning the construction of towers and granting telcos the right to use the towers on a sharing basis.

Under the transaction, the drawdown of the MUNIF/IMTN will be carried out only upon completion of construction works of towers by KJS, i.e. upon issuance of Certificate of Acceptance (COA), thus mitigating construction risk.  The lease rental payments from telcos (Maxis, Celcom and Digi) which forms the source of principal and profit repayment for the MUNIF/IMTN will be assigned from KJS to CCSB, mitigating risk of payments from telcos commingling with other funds of KJS.  In addition, the transaction structure requires approximately 60% of the monies from the collection account to be paid into the sinking fund account specifically earmarked for payment of principal and profit of the MUNIF/IMTN.

Maintenance risk is considered minimal as the towers require minimal maintenance work with replacement of antennas or other equipments being the responsibility of the telcos.

The forecasted cashflow is reasonably strong exhibiting ability to withstand the delay in rental receipts, cost overruns and changes in number of telcos using the towers with average and minimum debt service cover ratio at 2.66 times and 1.66 times respectively.