S&P lowers Versatel

Standard & Poor's said it lowered its long-term corporate credit rating on Versatel AG to B+ from BB- and the ratings on its €525 million floating-rate notes due 2014 and on its €75 million super-priority revolving credit facility due 2012 to BB with a recovery rating of 1 from BB+.

The outlook is stable.

The agency said the downgrade reflects Versatel's EBITDA and free operating cash flow generation in 2007, which was significantly lower than S&P expected primarily because of much higher competitive pressures in the German telecoms market, including fierce price competition for broadband and voice telephony services offered to residential and business customers. What's more, S&P said it sees no reprieve in fierce competition through 2008 because growth potential for broadband services is slowing and the German fixed-line telecoms market is still crowded.

The ratings are still supported by the company's extensive proprietary high-density multi-local network - covering about 10 million households, or 25% of German homes - and a satisfactory digital subscriber line broadband market share of about 15% in its network coverage area, the agency said.

On Dec. 31, Versatel's lease-adjusted total debt-to-EBITDA ratio stood at 3.9 times.

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