On March 25, 2005, Standard & Poor's placed long- and short-term credit ratings on TeliaSonera AB on CreditWatch with negative implications on deal to control Turkcell
- 2005-03-29 07:57 UTC
N.B. See below the attached research update from Standard & Poor’s.
Research Update: Nordic Telecom Provider TeliaSonera AB On CreditWatch
Negative On Deal To Control Turkcell
Publication date: 25-Mar-2005
Primary Credit Analyst(s): Leandro de Torres Zabala, London (44) 20-
Secondary Credit Analyst(s): Simon Redmond, London (44) 20-7176-3683;
Credit Rating: A/Watch Neg/A-1
On March 25, 2005, Standard & Poor's Ratings Services placed its 'A'
long-term and 'A-1' short-term corporate credit ratings on the largest
Nordic telecommunications services provider TeliaSonera AB on
CreditWatch with negative implications.
The CreditWatch placement follows TeliaSonera's announced agreement
today to acquire a 27% indirect stake in Turkey's top telecom provider
Turkcell Iletisim Hizmetleri A.S. (B/Watch Pos/--) from Turkey's
Çukurova group for a cash payment of $3.1 billion (Swedish kronor (Skr)
21.8 billion). TeliaSonera already owns a 37% share in Turkcell and will
consequently gain majority control of the company with a 64.3% stake.
The CreditWatch status is likely to be resolved within three months upon
completion of our review of the transaction's business and financial
repercussions for TeliaSonera. Key aspects to assess include the deal's
impact on TeliaSonera's credit ratios, the funding of the transaction
and Turkcell in the future (including any financial support from
TeliaSonera), the degree of operating and financial control that
TeliaSonera will be able to exercise on Turkcell, as well as
TeliaSonera's post-transaction financial policy and acquisition strategy
in emerging markets.
A downgrade, if any, of TeliaSonera stemming from increased exposure to
Turkcell and higher leverage would probably be limited to one notch.
TeliaSonera intends to finance the transaction, which should be
completed in the second quarter of 2005, with available cash and by
calling on capital markets. TeliaSonera will not make a public tender
offer for Turkcell, which will remain a listed company. Çukurova will
continue as local partner with a 13.5% stake in Turkcell. The
acquisition is subject to agreement on definitive documentation,
including a share purchase agreement, further due diligence on Turkcell,
and the receipt of all necessary regulatory approvals and third party
consents. In particular, the transaction will be conditioned on the
confirmation of an exemption from the mandatory tender offer requirement
from the Turkish Capital Markets Board.
TeliaSonera continues to boast strong positions in its very deregulated
and competitive core Nordic markets. The company improved its
performance and generated strong free cash flow during 2004. Although
its current debt is low, the company has increased dividend payouts in
2005 and has a share buyback program of Skr30 billion ($4.3 billion) for
the 2005-2007 period, of which Skr10 billion will be distributed in
2005. TeliaSonera also has significant exposure in other emerging
markets, including a 43.8% equity stake in Russia's third-largest mobile
operator OAO MegaFon and a 73.9% share in Fintur Holdings, a holding
company with interests in mobile companies in Azerbaijan, Georgia,
Kazakhstan, and Moldova. The stake in Fintur will increase as a result
of the proposed transaction, as Turkcell is also a shareholder in
Turkcell has 23.4 million subscribers, a strong business position, solid
operating performance, good cash generation, and adequate liquidity.
Turkcell has also benefited from the recent settlement of long-running
legal disputes with the Turkish Treasury and Türk Telekomünikasyon A.S.
(Turk Telecom). Offsetting these strengths are the company's exposure to
country–related risks in the Republic of Turkey (BB-/Stable/B) and
foreign currency-denominated debt, as well as uncertainty on its
strategy and ownership. Turkcell had total debt of $800 million at Sept.
30, 2004, or $1.9 billion including provisions relating to the legal
Short-term credit factors
The short-term rating on TeliaSonera reflects strong internal liquidity,
good cash flow generation capacity and visibility, and significant
access to capital markets.
The group's short-term rating is supported by:
Available cash and short-term investments of approximately Skr17.6
billion at Dec. 31, 2004; Strong free cash flow generation of about
Skr14.1 billion in 2004; and Undrawn committed bank credit facilities of
about €1 billion.
Corporate credit rating A/Watch Neg/A-1 A/Stable/A-1
Senior unsecured debt A/Watch Neg A/Stable
Commercial paper A-1/Watch Neg A-1/Stable
NB: This list does not include all ratings affected.
Ratings information is available to subscribers of RatingsDirect,
Standard & Poor's Web-based credit analysis system, at
www.ratingsdirect.com. It can also be found on Standard & Poor's public
Web site at www.standardandpoors.com; under Credit Ratings in the left
navigation bar, select Find a Rating, then Credit Ratings Search.
Alternatively, call one of the following Standard & Poor's numbers:
London Ratings Desk (44) 20-7176-7400; London Press Office Hotline (44)
20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225;
Stockholm (46) 8-440-5916; or Moscow (7) 095-783-4017. Members of the
media may also contact the European Press Office via e-mail on:
Group E-Mail Address
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.