Telecom downgrades accelerated in first quarter, Moody's says

By Peter Heap

New York, April 12 - The pace of ratings downgrades in the telecommunications sector accelerated in the first quarter, according to Moody's Investors Service.

The rating agency said it lowered its credit assessment on 25 companies during the three-month period, the largest number ever.

That figure also beat the 15 downgrades in the sector during the fourth quarter of 2001 and the quarterly average for 2001, also 15.

There were just four telecom upgrades in the first quarter, two of them the result of mergers and acquisitions, Moody's said.

The upgrades total was similar to the quarterly average of three during 2001.

In total since the third quarter of 2000, Moody's said, there have been 103 telecom downgrades and just 17 upgrades.

Moody's analyst John Puchalla commented in a report on the data: "Credit rating changes of telecommunications firms have taken a precipitous turn for the worse in conjunction with a slide in capacity utilization. Capacity utilization in the communications industry peaked at 85.3% in February 2000 and has since slumped to February 2002's meager 55%."

He noted that telecommunications companies had been doing better than general U.S. corporate credit quality. While downgrades began to exceed upgrades in the second quarter of 1998, telecoms saw upgrades beating downgrades until June 2000, helped by a large volume of merger and acquisition activity and easy access to new equity capital.

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