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Moody’s warns of threat to Telstra, Optus ratings

John McDuling (via AFR) | April 18, 2013
Moody’s has warned that Telstra and Optus’ credit ratings could be placed under pressure by large purchases of digital spectrum licences at key government run auctions next week.

Moody’s warns of threat to Telstra, Optus ratings

Telstra CFO Andy Penn has said the company will fully fund any spectrum purchases using debt, but that it will operate with balance sheet settings consistent with a single A credit rating. Photo: Louise Kennerley

Moody's has warned that Telstra and Optus' credit ratings could be placed under pressure by large purchases of digital spectrum licences at key government run auctions next week.

"The financial profiles of Telstra and SingTel Optus will come under pressure, depending on the degree to which the spectrum purchases are debt funded and the amount of spectrum purchased at government auctions in April," the ratings agency said in a report released on Thursday.

The government expects to raise a minimum of about $2.8 billion next week at crucial auctions for airspace freed up from the closure of analog television broadcasts.

This so-called "digital dividend" spectrum, often labelled the waterfront property of the wireless world, is considered essential for the next phase of superfast 4G mobile services.

Moody's expects Telstra to bid for the maximum amount allowed under the auction rules - slightly over half the spectrum on offer - with Optus to bid for a lesser amount.

"The acquisition of new spectrum will be essential to maintain strong operating profiles for both major rated carriers Telstra and SingTel Optus as mobile revenues become of increasing importance to both carriers, offseting the decline of traditional revenue streams such as fixed-line earnings," said Moody's.

"It will be critical, in our view, for the telco giants to invest in additional spectrum well ahead of anticipated demand in order to compete effectively."

Telstra CFO Andy Penn has said the company will fully fund any spectrum purchases using debt, but that it will operate with balance sheet settings consistent with a single A credit rating.

Telstra is rated "A2" by Moody's, with a "stable" outlook, while SingTel Optus is rated "Aa3" with a negative outlook.

 

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