S&P ups ratings on Matav

The upgrade is in line with that of Matav's majority shareholder, Germany's dominant telecoms operator Deutsche Telekom AG (DT; A-/Stable/A-2; see Standard & Poor's media release "S&P Ups Deutsche Telekom LT Rtg To 'A-'; Outlk Stble," published earlier today).

"DT owns 59.2% of Matav, which creates significant rating linkage between the two companies," said Standard & Poor's credit analyst Michael O'Brien. "The rating on Matav will continue to factor in this ownership, and should move in step with the rating on DT for as long as the Hungarian company is considered a strategically important investment." The stable outlook on Matav continues to reflect primarily that on parent DT, which, in turn, is based on our expectations that the German operator will maintain solid business positions and operating measures in its core European markets, and that management will not fundamentally deviate from its objective of maintaining a sound, stable capitalization structure for the group.

As such, based on our discussion with DT's management, we expect the German operator to maintain credit ratios that are broadly within the year-end 2004 levels over the long term. While acquisitions may temporarily affect credit metrics, we would expect any deterioration to be limited in time and DT management's acquisition policy to be prudently conducted, thereby avoiding any aggressive debt-funded acquisitions. DT's ratings do not factor in any share buybacks in 2005, at least, in view of the current prefinancing cash flow forecast for the year.

"Given expectations of modest credit ratio improvement over 2005, DT management's somewhat imprecise credit ratio targets, and the challenges ahead in the dramatically consolidated U.S. mobile market, we do not see, at present, any further rating upside for DT--or therefore Matav--over the medium term," said Mr. O'Brien.

Source: Reuters