S&P holds Telecom rating steady, says cut likely
Credit ratings agency Standard and Poor's has maintained its ‘A' long-term and ‘A-1' short-term ratings on Telecom New Zealand, on CreditWatch with negative implications.
Credit ratings agency Standard and Poor’s has maintained its ‘A’ long-term and ‘A-1’ short-term ratings on Telecom New Zealand, on CreditWatch with negative implications - where it was placed on August 4 last year.
Announcing the review, S&P said Telecom continues to progress the proposed demerger of its fixed-line telecommunications access network, Chorus.
"We believe a demerger will weaken Telecom's strong business risk profile. Accordingly, the ratings on Telecom remain on CreditWatch with negative implications, pending shareholder and various other approvals of the demerger. We are likely to lower the long-term rating on TCNZ by at least one notch."
S&P said Telecom's annual result came in above expectations but that if shareholders approve the demerger of Chorus, it will likely result, in a lowering of the long-term rating on Telecom by at least one notch.
"In our view, however, a rating outcome of 'A-' is possible for Telecom if the group maintains an appropriately conservative capital structure and financial policies following the demerger. Furthermore, the group has publicly stated its intention to target a rating in the 'A' rating category following the demerger," S&P said.
The ratings agency said the final rating would depend on Telecoms initial capital structure and financial policy objectives; the outlook for revenue and market share for the group's mobile business; revenue and margin expectations for the fixed-line retailing business; and the group's strategy regarding its ancillary businesses, particularly its ICT and Australian operations.
NBR staff
Tue, 23 Aug 2011
Tue, 23 Aug 2011
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
S&P holds Telecom rating steady, says cut likely
16538