Fitch affirms City Telecom

Fitch Ratings said it affirmed City Telecom Ltd.'s long-term foreign- and local-currency issuer default ratings at BB.

The outlook is stable.

The ratings reflect the company's solid financial profile and its position as the second-largest broadband service provider in Hong Kong, Fitch said, offset partially by an increased risk profile with its free-TV production startup.

The agency said it believes that City Telecom will gain additional market share on its well-established fiber-to-the home network, given that the penetration of the network in Hong Kong is low at just 35%.

On the other hand, Fitch said it expects City Telecom's operating margins and cash flow generation to weaken over the next 12 to 18 months as the company enters the free-TV production business.

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