Moody's downgrades ratings on key telcos in Aust

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    Moody's downgrades ratings on key telcos in Aust

    18/6/02:


    Moody's Investors Service has downgraded ratings or revised its ratings outlook on key telcos operating in Australia citing a difficult local environment.

    The international ratings agency on Monday revised the rating outlooks for Singapore Telecommunications Ltd (SingTel) and its Australian subsidiary Optus to negative from stable.

    Moody's also downgraded Telecom Corp of New Zealand, and Australian subsidiary AAPT, senior unsecured ratings to A2 from A1.

    The agency downgraded Telecom NZ's subordinated ratings to A3 from A2.

    The agency said the Singtel rating outlook revision reflected its concerns that SingTel may find it difficult to reduce debt to targeted levels in the current operating environment.

    At the same time Moody's affirmed SingTel's and Optus' senior unsecured ratings at A1 and A2 respectively, and their commercial paper ratings at Prime-1.

    It said SingTel's results for the period ended March 31, 2002 were slightly below expectations, particularly at the Optus level, with higher overall consolidated debt.

    "Moody's believes the Australian environment will continue to be problematic, particularly in the business and SME sectors, where a number of competitors are behaving irrationally in order to utilise invested infrastructure," it said.

    "The ongoing investment activities of SingTel may reduce its ability to pay down debt," it added.

    Moody's said Telecom NZ's revised ratings reflect its ongoing strong leading position in its home market balanced against the continued under-performance of its Australian operations.

    Moody's said it believed that recent industry developments in New Zealand would support Telecom NZ's profitability in the NZ market.

    But against that background of Telecom NZ's position, its Australian investments had been more problematic.

    It said AAPT continued to generate low operating margins with expectations of only gradual improvements in the medium term, given there is no clear indication of a significant step-change breakthrough.

    Moody's noted Telecom NZ had undertaken various initiatives to improve its Australian operating performance.

    "Progress has already been made, but Moody's remains cautious, particularly about the ability to achieve margin growth in the highly competitive business and SME markets," it said.

    Chief financial officer Marko Bogoievski said Telecom was disappointed that Moody's had assigned a rating with a negative outlook, as the group was confident of improving cash flow and credit fundamentals in the future.

    "Our drive for better performance, particularly in Australia, is producing significantly improved results," he said.

    He said the Moody's downgrade would have no material impact on the company's ability to raise capital in international debt markets.

 
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