Moody's upgrades Vodafone

Moody's Investors Service said it upgraded the ratings of Vodafone Group plc to A3 from Baa1 and upgraded the ratings of Vodafone's subsidiaries by one notch.

In addition, Moody's affirmed Vodafone's Prime-2 short-term rating.

The outlook is stable.

"The rating upgrade to A3 reflects Vodafone's strengthened financial profile following the announcement of the dividend payment from Verizon Wireless in January 2012 and the fact that a material portion to be received by Vodafone will be retained for debt reduction," Ivan Palacios, a Moody's vice president, said in a statement.

"This announcement confirms the sound performance and increasing cash-flow generation of [Verizon], and evidences Vodafone's long-term efforts to realize the increasing value hidden in its 45% stake in the US mobile operator. This is the first dividend paid since it was suspended in 2005."

Vodafone's A3 rating reflects the benefits of its scale and geographical diversification, as well as its management's focus on preserving solid cash flow generation and a strong credit profile through a balanced approach between shareholder remuneration and bondholder protection, the agency said.

Verizon offsets some of the negative trends experienced in Vodafone's core Western European markets, including heightened competition, slowing growth, regulatory pressures and macroeconomic weakness, the agency noted.

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