Moody´s affirms long-term credit ratings on TeliaSonera AB and TeliaSonera Finland Oyj
Moody´s affirms long-term credit ratings on TeliaSonera AB and
TeliaSonera Finland Oyj
Rating agency Moody´s today affirmed its "A2" long-term rating of
TeliaSonera AB and changed the outlook to positive from negative. At the
same time Moody´s affirmed its "Baa1" long-term rating of TeliaSonera´s
Finnish subsidiary TeliaSonera Finland Oyj and changed the outlook to
positive from stable.
"We´re pleased that Moody´s today affirmed our ratings and thereby
confirmed the strong credit-position of the Group", says Kim Ignatius,
CFO, TeliaSonera AB.
N.B. See below the attached press releases from Moody´s.
MOODY'S CHANGES OUTLOOK ON TELIASONERA AB'S A2 RATING TO POSITIVE FROM
London, 24 May 2004 - Moody's Investors Service has today changed the
outlook on the A2 long-term rating of TeliaSonera to positive from
The outlook change reflects Moody's view that the integration risk from
the Telia/Sonera merger is significantly reduced, thanks to cost savings
and synergies having been rolled out ahead of schedule. In addition,
TeliaSonera has achieved a dramatic improvement in its financial risk
profile, with its ratio of adjusted retained cash flow to net adjusted
debt having improved to 75% as of end-2003 from 23% as of end-2002.
These positive developments have been somewhat offset by an increasing
business risk profile in TeliaSonera's home market, especially in the
Nordic area, due to heightened price competition from resellers. In
addition, Moody's outlook change factors in TeliaSonera's stated
interested in expanding through acquisition in not only its home market
(i.e., the Nordic and Baltic markets), but also through participating in
broader European consolidation. Moody's also takes account of
TeliaSonera's interest in gaining majority control of Turkcell (B2
stable), a 37%- owned associate.
TeliaSonera's reported net debt fell significantly during 2003 from
SEK38.1bn at year- end 2002 to SEK18.2bn at year-end 2003. The reduction
to net debt was a result of cost reductions as per identified merger
synergies, lower capex, and cash from divestitures including the sale of
Telia's Finnish mobile operations and the Swedish cable business in
accordance with regulatory requirements for the merger. Unlike other
European telecom operators, TeliaSonera has not engaged in a share
buyback programme and most of its free cash flow has therefore been
allocated to the reduction of debt.
However, Moody's notes that TeliaSonera's business risk profile has
weakened somewhat due to an increase in price competition in many of its
home markets, including its Swedish, Finnish and Norwegian mobile
markets. Swedish fixed line, which represents TeliaSonera's largest
business segment (accounting for 36% of group net sales and 42% of group
EBITDA excluding non-recurring items in Q1 2004) is also suffering from
both price competition and fixed-to-mobile substitution. In Q1 2004,
TeliaSonera experienced declining revenues and EBITDA as a result of the
heightened competitive environment. Although the company's growth area
is Eurasia, this market makes a relatively small contribution.
The positive outlook factors in the expectation that TeliaSonera will
pursue growth through acquisitions, based on its stated acquisition
strategy and the limited growth prospects in its home market. To date,
TeliaSonera has already announced an acquisition of the remaining shares
in Eesti Telekom (Estonia), which is expected to amount to SEK4.5bn.
However, Moody's would consider upgrading TeliaSonera by one notch if,
after taking into account such expected acquisition activity, the
company were to maintain an adjusted retained cash flow to adjusted net
debt within the range of 45 to 50%.
TeliaSonera debt affected are:
- EUR 5 billion EMTN Programme and all drawdowns under the programme
- SEK 12 billion FTN Programme and all drawdowns under the programme
TeliaSonera AB, is domiciled and headquartered in Stockholm. It is a
leading provider of fixed-line, mobile, Internet and data communication
services across the Nordic and Baltic regions. On 31 December 2003, the
company had 12.0 million controlled mobile subscribers, including 8.0
million in the Nordic region (operations in Sweden, Finland, Norway and
Denmark), 1.6 million in the Baltic region, and the remainder in Eurasia
(through TeliaSonera Finland's subsidiary Fintur). In fixed-line
telephony, TeliaSonera serves 8.1 million access lines, 7.2 million of
which are in the Nordic region and the remainder in the Baltic region.
TeliaSonera also holds significant stakes (directly and indirectly) in
Turkcell (37.3%), the leading mobile operator in Turkey, and MegaFon
(43.8%), the third largest mobile operator in Russia.
MOODY'S CHANGES OUTLOOK ON TELIASONERA FINLAND'S Baa1 RATING TO POSITIVE
London, May 24, 2004 - Moody's Investors Service has today changed the
outlook on the Baa1 long-term rating of TeliaSonera Finland to positive
The outlook change reflects: (1) significant improvement in TeliaSonera
Finland's financial risk profile as free cash flow has both increased
and has been utilised in full to pay down debt; (2) a moderate increase
in business risk due to an increasingly competitive Finnish market; (3)
support from the parent, TeliaSonera AB, given that Finland is integral
to TeliaSonera AB's pan-Nordic strategy; and (4) potential for a
significant increase in business risk should TeliaSonera Finland gain
control of Turkcell (B2 stable), its 37.3% owned associate.
An upgrade would be considered should the risk of TeliaSonera Finland
gaining control of Turkcell be eliminated. TeliaSonera AB has publicly
expressed its interest in achieving majority control of Turkcell, which
is currently owned by TeliaSonera Finland through both a 47% stake in
Turkcell Holding (which in turn owns 51% of Turkcell) and a 13% direct
stake in Turkcell. If TeliaSonera Finland were to succeed in acquiring
control, such acquisition would have a negative impact on its current
rating given the relative size of the B2-rated Turkcell compared with
However, despite the potential negative impact from a possible Turkcell
transaction, today's rating action reflects the positive impact of an
improved financial risk profile and the benefit of parental support.
Moody's believes that the negative impact of a potential Turkcell
transaction is mitigated by two factors. Firstly, the path to control is
uncertain and depends largely on political factors which are difficult
to assess. Secondly, in Moody's view TeliaSonera Finland may continue to
streamline its operations as it has been doing since the Telia/Sonera
merger, by selling its non-Finnish operations internally, i.e. to
TeliaSonera AB and/or other group entities. TeliaSonera Finland may thus
sell its 37.3% stake in Turkcell to TeliaSonera AB or another group
company - as it did with various Baltic and carrier businesses during
2003 - such that a potential increase in Turkcell ownership would occur
at the group level rather than at TeliaSonera Finland.
Since the merger between Telia and Sonera which was announced at the end
of 2002, debt coverage ratios at TeliaSonera Finland have improved
significantly with the ratio of adjusted retained cash flow to adjusted
net debt improving to 48% at end-2003 from 23% at end-2002. This
significant improvement reflects increased free cash flow, as a result
of working capital improvements, which was fully allocated to the
reduction of external debt. Somewhat offsetting this strong improvement
in financial metrics is an increasingly competitive Finnish market in
both fixed line and mobile, where downward pricing pressure from
resellers is starting to have a negative impact on TeliaSonera Finland's
Although TeliaSonera Finland's debt does not benefit from a formal
guarantee from its parent, TeliaSonera AB, Moody's factors into the
rating a degree of implicit support. TeliaSonera AB's financial policy
is to allow the subsidiary debt to roll off, replacing it with inter-
company funding. TeliaSonera has adequate funds to meet its liquidity
needs on a stand-alone basis in 2004. However, Moody's assumes that the
EUR 915 million bond maturing in 2005 will be met in part through inter-
TeliaSonera Finland debt affected:
- EUR 3 billion EMTN Programme and all drawdowns under the programme
TeliaSonera Finland Oyj, headquartered in Helsinki (Finland), is
responsible for the Finnish operations of the TeliaSonera Group and owns
international subsidiaries and associates including Fintur and a 37.3%
stake in Turkcell. In Finland, TeliaSonera Finland operates under the
Sonera brand and is a leading provider of telecommunications services.
Sonera is the leader in mobile, broadband and corporate data services
and one of the three largest operators in fixed voice services.
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454
Vice President - Senior Analyst
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454
For further information journalists can contact:
TeliaSonera´s Press Office, +46-(0)8-713 58 30
Statements made in the press release relating to future status or
circumstances, including future performance and other trend projections
are forward-looking statements. By their nature, forward-looking
statements involve risk and uncertainty because they relate to events
and depend on circumstances that will occur in the future. There can be
no assurance that actual results will not differ materially from those
expressed or implied by these forward-looking statements due to many
factors, many of which are outside the control of TeliaSonera.
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