S&P: Comstar United TeleSystems Still On CreditWatch Negative While Parent Sistema Remains On Watch
August 7, 2009 Standard & Poor's
-- Mobile TeleSystems OJSC is acquiring 51% of Comstar's shares.
-- The rating on Comstar remains on CreditWatch with negative implications pending finalization of the transaction.
-- The CreditWatch status reflects the remaining risks related to the acquisition and the associated impact on the credit profile of Comstar's existing and potential majority owners.
MOSCOW (Standard & Poor's) Aug. 7, 2009, Standard & Poor's Ratings said today that its 'BB' corporate credit ratings on Russian telecoms operator Comstar United TeleSystems (JSC) and its majority-owned subsidiary, Moscow City Telephone Network (JSC) (MGTS) remained on CreditWatch with negative implications, where they had been placed on April 1, 2009.
The ratings remain on CreditWatch with negative implications pending the resolution of CreditWatch on Comstar's parent company, Sistema (JSFC) (BB-/Watch Neg/--).
"Should the transfer of 51% of Comstar from Sistema to Mobile TeleSystems (OJSC) (MTS; BB/Watch Neg/--) be completed, we would likely equalize the rating on Comstar with that on MTS," said Standard & Poor's credit analyst Alexander Griaznov. "At the same time, we would likely not rate Comstar higher than Sistema by more than one notch."
Comstar's stand-alone credit profile is constrained by its ambitious growth strategy, strong competition in the residential broadband market, and a weakening liquidity position.
Supporting the rating are the company's strong position in the lucrative Moscow market; a resilient cash flow base, stemming from its ownership of existing infrastructure; favorable operating performance, and synergetic integration of its operating subsidiaries with Sistema's various telecom assets.
"We expect to resolve the CreditWatch placement following the resolution of the CreditWatch on Sistema and MTS when and if the transaction to purchase the 51% stake in Comstar takes place, including approval of the transaction by Sistema's shareholders," said Mr. Griaznov.
Company — Comstar UTS
Full nameComstar United TeleSystems