Moody's drops Entel to Baa2

Moody's Investors Service said it downgraded Empresa Nacional de Telecomunicaciones SA (Entel) issuer rating to Baa2 from Baa1.

The outlook is stable.

Moody's said the downgrade was based primarily on Entel's higher debt leverage, caused primarily by the acquisition of Nextel Peru for $400 million.

In addition, there will be negative pressure on cash flows from higher capex in Peru, as well as from investments related to home fiber optics project, antennas and a datacenter expansion in Chile.

Moody's said it believes that Entel's announced lower dividend payout rate for the next couple of years to 50% from 80% of net profit will not be sufficient to improve credit metrics in the medium term, given Nextel Peru's current negative EBITDA and competitive pressures in that market as well as in Chile.

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