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Russian Regional Telecoms Operator Uralsvyazinform (OJSC) Affirmed At 'BB-'; Outlook Stable

January 22, 2008 | Cbonds

Standard & Poor's Ratings Services said today that it affirmed its 'BB-' long-term corporate credit rating on Russian regional telecoms operator Uralsvyazinform (OJSC). The outlook is stable.
"The rating is constrained by the company's financial risk profile, due to significant leverage and modest liquidity, with sizable short-term refinancing requirements," said Standard & Poor's credit analyst Alexander Griaznov.
Moderate profitability, intense competition in the mobile segment, and the possible risks associated with ongoing industry and regulatory reform also limit the rating.
The rating is supported by Uralsvyazinform's solid and improving market position in its service area, expanding business diversification, and superior network quality. Uralsvyazinform's strategic focus on improving efficiency and cost control, along with moderating investments, continues to translate into stronger profitability and cash flow generation. The rating also takes into account the positive dynamics in Russia's telecommunications industry--helped by robust growth of GDP and disposable incomes--and an improving regulatory framework.
At June 30, 2007, Uralsvyazinform's total adjusted debt amounted to Russian ruble 34 billion ($1.4 billion).
"We expect that Uralsvyazinform's improving business position, strengthening efficiency of operations, and increasing cash flow generation will enable the company to adequately manage its financial risk," said Mr. Griaznov. We expect the company to continue deleveraging on the back of moderating capital expenditures and a strong focus on cost control.
An inability to control financial risk-–reflected, among others, by persistent high exposure to short term funding or deterioration of profitability or cash flow generation--would pressure the rating. At present, the company maintains undrawn committed bank lines to cover its repayments for approximately the next six months, which limits financial risk in the short term.
We will closely monitor the company's progress in refinancing its debt in 2008. The rating could come under pressure if the company is unable to arrange the refinancing reasonably in advance.
Ratings upside potential would require Uralsvyazinform to decrease its leverage to at least 2.5x adjusted EBITDA, while meaningfully improving liquidity.

Company: Rostelecom - Ural

Full company nameRostelecom - Ural
Country of riskRussia
Country of registrationRussia


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