Standard & Poor's: Uralsvyazinform Upgraded To 'BB-' from 'B+' On Improved Financial Profile; Off Credit Watch Developing; Outlook Positive
November 30, 2010 Standard & Poor's
MOSCOW (Standard & Poor's) Nov. 30, 2010--Standard & Poor's Ratings Services said today that it had raised its long-term corporate credit ratings on Russian telecommunications operator Uralsvyazinform OJSC to 'BB-' from 'B+'. The ratings were removed from CreditWatch, where they were placed with developing implications on June 24, 2010. The outlook is positive.
"The rating action mainly reflects an improvement in Uralsvyazinform's financial profile," said Standard & Poor's credit analyst Alexander Griaznov.
"We have raised our assessment of Uralsvyazinform's liquidity to "adequate" from "weak", as the company has managed to decrease its reliance on short-term debt in the course of 2010," Mr. Griaznov said.
"In addition, the risk of early repayment claims from creditors, which we previously saw as a possible near-term risk, has now been eliminated, as the window for such claims is now closed," he added.
Uralsvyazinform's debt leverage has declined significantly over the past 12 months. On June 30, 2010, the company's ratio of debt to EBITDA stood at 1x, a significant improvement from 1.9x a year earlier. The company's cash flow generation profile remains robust; its ratio of funds from operations to debt was 82.4% for the 12 months ended June 30, 2010.
The ratings are constrained by the company's exposure to Russia's weak capital markets; the need to control rising costs and preserve operating profitability; intense competition in the Urals region mobile market; and a track record of aggressive liquidity management.
The ratings are supported by Uralsvyazinform's "fair" business profile, which reflects its dominant position in the Urals region fixed-line segment, resilient market share in mobile telephony, and rapidly growing broadband segment.
The positive outlook reflects the possibility that we could raise the ratings if Uralsvyazinform continues to strengthen its stand-alone credit profile, particularly by further improving its liquidity.
A lack of willingness to improve liquidity or an increasingly aggressive financial policy could limit potential ratings upside.
We will withdraw the ratings on Uralsvyazinform when the company's planned reorganization in the form of a merger with Rostelecom is finalized, as Uralsvyazinform will cease to exist as a separate legal entity once the transaction closes.
Company — Rostelecom - Ural
Full nameRostelecom - Ural