S&P downgrades True
International credit-rating firm Standard & Poor's has downgraded its corporate credit rating for True Corp from BB- to B+, with a negative outlook, due to low earnings visibility and the risk of higher regulatory costs related to a pending interconnection settlement and access charges of its cellular subsidiary True Move.
The agency said the rating could be lowered further if the group was unable to address its near-term liquidity issues and if its financial ratios continued to weaken materially. However, the outlook could be changed to stable if the company improved its gearing position and turned around its profitability and cash-flow measures with no deterioration in its business profile. True Corp continued to book net recurring losses in the first three months of this year, S&P said. Profitability pressure in the fixed-line and wireless segments was expected to persist amid intense competition and regulatory uncertainties in the domestic telecom market. "These factors have resulted in a slower-than-anticipated de-leveraging program," said S&P credit analyst Yasmin Wirjawan. True Corp's corporate credit rating reflects its high leverage position and weak cash-flow protection measures, the highly competitive environment and regulatory uncertainties. These risks are offset by its strong position in the domestic fixed-line, broadband, and pay-TV markets, its growing presence in the cellular market and the diversified services it provides. Yasmin said there was about a one-in-three chance that the group, with its high leverage position in a challenging operating environment, would breach agreements for debt repayment to certain creditors due after September.
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