Moody's downgrades Orange

Moody's Investors Service said it downgraded the long-term issuer and senior debt ratings of Orange (formerly France Telecom SA) to Baa1 from A3, affirmed the short-term rating at Prime-2 and changed the outlook to stable from negative.

"We are downgrading Orange's ratings to Baa1 mainly because the business risk in France continues to increase as a result of intensifying competition in the mobile market," Carlos Winzer, a Moody's senior vice president, said in an agency news release.

"In addition, we expect that Orange's financial ratios will remain weak for 2013 and 2014 with no prospects of recovery in the short term to levels commensurate with the previous A3 rating category."

The agency said Orange's Baa1 rating is supported by the group's scale and international diversification, which partially mitigates the exposure to the domestic market; management's commitment to conservative financial ratios and balanced cash distribution; its strategy to offset competition based on its strong Orange brand, the quality of its infrastructure and multi-brand strategy; strong liquidity and its continued effort to cut costs to preserve solid cash flow generation.

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