On October 30, 2017, Standard&Poor’s raised its long-term foreign- and local-currency corporate credit ratings on Kazakhtelecom JSC to ‘BB+’ from ‘BB’ with stable outlook.
According to S&P Global Rating, “The outlook revision reflects higher than expected results of Kazakhtelecom operations in 2017”.
The agency anticipates that the company will continue showing the conservative balance sheet ratio, they expect that “its adjusted debt-to-EBITDA ratio will remain below 1.5x” in 2017-2019 even after fulfilling the obligation on the 49% share in the Tele2 joint venture call/put option”. They also say that “the operational business perspectives will remain stable in 2018-2019 and the company will likely continue to show the stable balance sheet ratio”.
However, the essential thing in this rating revision, in our opinion, is not the positive assessment of the financial position and the business-perspectives of a Kazakhstan national company but the definition of Halyk Bank as a structure controlled by the state. Here is a quote (bolding ours – Kazakhstan 2.0).
“At the same time, we are mindful of the fact Kazakhtelecom’s structure of the monetary funds and deposits is rather diverse and, in the previous years, the company had no problem accessing the resources on its bank accounts. Note that a very significant portion of Kazakhtelecom’s monetary deposits is located at the state-controlled Halyk Bank (BB/Negavive/B) whose credit quality is much higher than that of the other banks where Kazakhtelecom also keeps is funds”.
If it is not a slip of the pen but the official standing of the rating agency, it seems S&P acknowledges the existence of a direct connection between Halyk Bank and the state of Kazakhstan.
Here is a possible logical chain: the bank belongs to Timur and Dinara Kulibayevs (President Nazarbayev’s daughter and son-in-law) and since the president, being in complete control of the state vertical including the three branches of power, is inextricably connected to the republic, it means that the bank is also controlled by the state.
However, if we look at it differently, we will see that Kazakhstan controls Halyk Bank through its state official called Nursultan Nazarbayev who is using his family relations to do so.
Something like that is certainly not stipulated either in the Constitution or in the other legislative documents even though it is a common practice for Kazakhstan. However, the public acknowledgement of this fact by the rating agency whose products are freely distributed among the unlimited circle of investors casts a long shadow on Kazakhstan’s reputation as a state with a market economy and a democratic political system.