Moody's ratings: SKT downgraded to A3

Don Sambandaraksa
16 Feb 2012
00:00
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SK Telecom

Credit rating agency Moody's has downgraded its bond rating for SK Telecom to A3 from A2, and has assigned a negative outlook.

The South Korean operator was put on review for a possible downgrade in November, after the company announced the 3.4 trillion won ($3.02 billion) acquisition of Hynix Semiconductor, in a deal which closed this week.

Explaining the downgrade, Moody's said it was concerned that the sizeable purchase price, the majority of which will be debt-funded, is expected to weaken SK Telecom's financial profile.

It also raises concerns that SK Telecom is becoming more tolerant to financial risks, “given the quantum of debt used to fund the acquisition of a highly volatile business with little synergies with its core businesses.”

Telstra

Telstra delivered 1H results that fell within Moody's expectations, but the agency has kept the Australian operator on review for a downgrade due to ongoing concerns about the impact of its structural separation.

separate its wholesale and retail operations

Moody's maintained its A2/P-1 rating for Telstra, but warned that Telstra will become increasingly reliant on the retail mobile and broadband segments for its earnings post-separation, and lose some of the key advantages that have contributed to its historic profitability.

Clearwire / Sprint Nextel

The US FCC's decision to reject LightSquared's plans to use satellite spectrum for a terrestrial 4G network is expected to benefit Clearwire, but adversely affect wireless operator Sprint Nextel.

Moody's believes that the removal of a potential wholesale LTE competitor will be positive for Clearwire's credit profile.

But Sprint Nextel had been one of LightSquared's primary partners, having agreed to build and operate the LightSquared network for $9 billion in payments and $4.5 billion in service credits. The plan falling through also means that Sprint will be more reliant on Clearwire for 4G bandwidth.

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