Moody's downgrades Telecom due to grim economy

Moody's downgrades Telecom due to grim economy

Due to hiked competition, tight regulations and economic problems, the ratings service Moody's downgrade Telecom's senior and unsecured short term commercial paper ratings.

The outlook is stable and the ratings have gone down from A2/P-1 to A3/P-2.

With the rating action, the ongoing pressure on Telecom is quite well reflected. According to Moody's vice president and senior analyst, Ian Lewis, the pressure would continue given challenging operating conditions.

He added, "Telecom faced the combined effects of increased competition, tighter regulatory requirements and weak economic conditions."

He further added, "Compared with its major rated global telco peers which have greater scale, better profitability and, at this time, more developed product technology, Telecom is better positioned at the A3 level."

It is also expected by Moody's vice president and senior analyst that a negative free cash flow and rising debt over at least the next one to two years would be initiated by Telecom's capital transformation programme, started in April 2008, as well as a continuation of high dividends.

As of now the outlook is stable, pointing a degree of flexibility to withstand increased operating and/or financial pressures, within the A3 rating.

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