Moody's ups City Telecom view to positive

Moody's Investors Service said it affirmed its B2 corporate family rating and senior unsecured bond rating for City Telecom (HK) Ltd. and revised the company's outlook to positive from stable.

The positive outlook reflects the company's improved operating performance with EBITDA margin rising to 24% and debt-to-EBITDA improving to 3.5x in fiscal year 2006, Moody's said. This has been as a result of a change in its business strategy from building subscriber market share to capturing revenue market share, the agency said.

The rating continues to reflect City Telecom's position as the largest residential alternative wire-line provider and third largest broadband provider in Hong Kong, the agency said. It also takes into account the benefits derived from the company's advanced and self-owned network.

Moody's said the rating also reflects City Telecom's high financial leverage and weak credit metrics, which continue to constrain the rating. Nevertheless, Moody's said it believes that 2006 was a watershed year for the company and that its future outlook is positive.

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