Standard & Poor’s Ratings Services has raised its long-term corporate credit ratings on Rostelecom – which is the primary provider of international and domestic long-distance telecoms services in Russia – to ‘B’ from ‘B-‘, following the company’s successful restructuring of liabilities to the Russian ministry of finance and an improved interconnection regime. The outlook is positive.
“The rating action primarily reflects Rostelecom’s gradual debt reduction; the effects of the recent change in the Russian interconnection regime; and, importantly, recent restructuring and elimination of uncertainties in respect of the company’s Yen-denominated debt to the Russian ministry of finance, through the conversion into promissory notes issued to Alfa Bank,” says Standard & Poor’s credit analyst Pavel Kochanov.
Furthermore, the expected sale of previously consolidated leasing company RTC-Leasing is likely to further improve Rostelecom’s balance sheet given the increasing debt and operations of RTC-Leasing related to third parties.
Close collaboration with the regulator has also allowed the company to increase transparency of interconnection arrangements with regional incumbent telecoms operators (RTOs) by introducing separate incoming and outgoing interconnection settlement rates. The overall strong growth of the Russian telecoms market and tangible results of management’s efforts in cost reduction and securing Rostelecom’s dominant market position have further contributed to the improved credit standing of the company.
Rostelecom is expected to further improve its capital structure thanks to positive cash flow generation and the sale of RTC-Leasing. The company is also expected to reach revenue growth above inflation, based on improving interconnection arrangements and active protection of its market position in the major telecoms market of Moscow. An observed improvement in Rostelecom’s operating performance and liquidity position might lead to a further improvement of the rating.