28 April 2004 04:29
MTS ratings raised to `BB-`; outlook stable
MOSCOW. April 28 (Interfax) -Standard & Poor's Ratings Services said today it raised its long-term corporate
credit rating on leading Russian mobile telecommunications operator OAO Mobile TeleSystems (MTS) to 'BB-' from
'B+', due to sustained leading market positions and solid growth of cash flow from operations. The outlook is
stable.
In addition, Standard & Poor's also raised its senior unsecured debt rating on related entity Mobile
TeleSystems Finance S.A. to 'BB-' from 'B+'.
AFK Sistema (B/Stable/--) is a diversified Russian holding
company whose 50.6% stake in MTS is a key strategic asset. The
"The upgrade reflects the proven ability of MTS to maintain leading market positions in the growing Russian and
Ukrainian mobile telecoms markets and deliver strong cash flow generation from operations in Russia and Ukraine despite
growing exposure to low-end subscribers," said Standard & Poor's credit analyst Pavel Kochanov. "The
upgrade was based on the company's expected future sustainable financial policy and continued degree of financial
separation from MTS' lower-rated major shareholder, Sistema."
separation mainly stems from a 25.1% stake held in MTS by T-Mobile, a subsidiary of Deutsche Telekom AG (BBB+/Watch
Pos/A-2), and the shareholders agreement stipulating a moderate dividend policy. A sustainable financial policy and
financial separation from Sistema are expected to be demonstrated by MTS through a noncredit-dilutive dividend policy
and continued moderate debt levels to fund its business development. Critically, it is assumed that MTS will not
participate in funding potential Sistema investments.
Standard & Poor's expects MTS to improve its operating cash flow after capital expenditures, acquisitions,
and dividends and turn it from the current substantially negative position to positive in 2005 even if moderate
additional investment in third-generation mobile technology is assumed. [RU EUROPE ASIA EEU EMRG AA TEL] rd <>
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