Standard & Poor’s Ratings Services has raised its long-term corporate credit rating on Russia-based fixed-line telecommunications service provider JSC Central Telecommunications Co (CTC) to ‘CCC+’ from ‘CCC’. The rating action reflects the net benefits of the merger of CTC with 16 other fixed-line incumbents in the region of
“Compared with the rated predecessor of the same name, the new company should benefit from its larger scale by receiving better terms from vendors of telecoms equipment and other economies of scale,” says Standard & Poor’s credit analyst Simon Redmond. “The merger will also give it a stronger market position that is less vulnerable to weaknesses in a particular area or customer segment, and further facilitate access to capital markets,” adds Redmond.
These gains are partly offset by the fact that the enlarged service area is weaker and will require integration work and additional investments to reconcile and improve network characteristics to a more uniform level across the whole area.
Standard & Poor’s believes the company’s network modernisation, management improvement, and structural reorganisation will prove difficult and costly. CTC’s credit quality could improve, however, if the company can meet these challenges while containing the increase in its debt burden.