Moody's rates LG Telecom notes

Moody's Investor Service said it has assigned a Ba2 senior unsecured rating to LG TeleCom Ltd.'s up to $300 million five-year issue. Moody's has also assigned a senior implied rating of Ba2 and an issuer rating of Ba2. The outlook is stable.

The note proceeds will mainly be used to refinance existing debt and fund capital expenditure.

Moody's said the ratings reflect a) LG TeleCom's expected revenue growth in 2004 due to adding new and higher average revenue per user subscribers as it takes advantage of the introduction of mobile number portability in the Korean market, b) LG TeleCom's exposure to an evolving regulatory environment, but the government's asymmetrical approach currently favors the company, c) the close relationship with and support from its major shareholder, the LG Group (unrated), d) continuing benefits of strong growth in demand for data service, e) LG TeleCom's improved network quality and distribution channels, which increase competitiveness, f) a moderate financial profile with retained cash flow-to-adjusted debt of 31% and total adjusted debt-to-EBITDAR of 3x in 2003.

At the same time, the ratings are tempered by a) LG TeleCom being a distant third in the Korean mobile telecom market, with smaller subscriber base and lower brand recognition than the other two larger and financially stronger players, b) operating in a competitive and highly penetrated market, and c) uncertainty in 2005 as to how mobile number portability will impact its own subscriber base and margins.

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