Telstra's credit rating climbs

By Phil Boeyen, ShareChat Business News Editor

Thursday 20th December 2001

Ratings agency Standard & Poor's has raised Telstra's (NZSE: TLS) credit ratings due to a more conservative growth path and continued dominance of the Australian market.

The ratings agency has raised the Australian telco's corporate credit ratings on AA-/A-1+ from A+/A-1, and associated debt ratings to AA-/A-1+ from A+/A-1. The rating outlook is stable.

S&P says the upgrade reflects the company's emerging, more conservative approach toward expansion in the Asia-Pacific region and a solid business position in Australia that is unlikely to weaken in the short-to-medium term.

"Although Telstra aggressively invested in 1999 and 2000, the company has reacted appropriately to a rapid decline in telecommunication and information technology asset prices by taking a more conservative investment approach," says S&P associate, Andrew Lally.

Mr Lally says evidence of this conservatism is the acquisition of Clear Communications by TelstraSaturn and Reach's acquisition of Level 3 Communications Asian assets.

"Standard & Poor's now has greater confidence that future investments will be focused on short-term cash generation, as well as long-term growth, and will not materially weaken credit protection measures."

Mr Lally says Telstra's Australian business continues to underpin the rating, with Telstra holding a well above-average market share across most segments of the Australian telecommunications market.

"Although the Australian market is highly competitive, a general cutback in investment and greater focus on maximising returns by most operators is helping to stabilise prices across the sector, as evidenced by the reduction in mobile handset subsidies by Telstra and SingTel Optus.

S&P says that following the collapse of One.Tel Ltd., consumers are more focused on operator quality and long-term viability and Telstra is capitalising on the current environment by providing a flexible, full-service offering, helping to improve the stickiness of its customer base and reduce churn.

Comments from our readers

No comments yet