Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or minimum every six months in the case of sovereign, sub-sovereign and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key ratings assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Österreichischer Rundfunk Stiftung öffentlichen Rechts (ORF) (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AA-/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 3 July 2024.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

For the updated rating report, please see here.

Key rating factors

The AA- rating assigned to the ORF is driven by ORF’s high integration with the Republic of Austria (AA+/Stable), given close strategic, operational, and financial ties. Scope acknowledges the ORF’s high strategic relevance given its public mandate. Market leadership, a high level of trust, national representation for federal states, and established production and distribution structures make substitutability of ORF very difficult, and the continued existence and sufficient financial means of ORF are thus of high public interest.

The ORF relies on a financing model via ORF-levies from 2024, payable by households and businesses in Austria, which make up the majority of revenues. ORF-levies ensure a stable revenue base, enabling the ORF to fulfil its public mandate.

Scope deems the change in the ORF’s financing model via the ORF-levy from 1 January 2024, from formerly ORF license fees, to be broadly credit neutral. However, annual revenue from the levy is projected to fall around EUR 32m (or 4.5% in 2024) below budgeted levels until the end of 2026, due to around 180,000 fewer paying households than projected by the Austrian Federal Ministry of Finance when setting the levy until the end of 2026. The ORF is working with the authorities to improve the robustness of the household register to partially close the revenue gap, although the majority of missing households are assumed to be permanent. In response to the revenue gap, the ORF plans to use a dedicated reserve of EUR 40m, in line with §31 section 22 of the ORF-G, and implement further measures to safeguard its cash and capital positions.

Finally, the ratings take into account the ORF’s business and financial risk profiles, which Scope assesses as overall neutral. In addition to revenue underperformance due to lower-than-budgeted ORF-levies, main risks relate to i) continued pressure on advertisement revenues, especially for the TV segment and ii) longer-term risks relating to a dynamically changing usage of media, especially among younger viewers. Cost increases and the associated cost saving strategy of ORF are further challenges.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

The ratings/Outlooks could be upgraded if, individually or collectively: i) the Republic of Austria’s ratings and/or Outlooks were upgraded; ii) there were legislative changes leading to significantly stronger financial and/or operational linkages with the federal government; and/or iii) the business and/or financial risk profile improved significantly.

The ratings/Outlooks could be downgraded if, individually or collectively: i) the Republic of Austria’s ratings and/or Outlooks were downgraded; ii) there were legislative changes leading to significantly weaker financial and/or operational linkages with the federal government; and/or iii) the business and/or financial risk profile deteriorated significantly.
 
The methodology applicable for the reviewed ratings and/or rating Outlooks (Government Related Entities Rating Methodology, 13 July 2023) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Julian Zimmermann, Associate Director

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