S&P downgrades Vodafone to BBB+

Standard & Poor's said it lowered its long-term corporate and issue credit ratings on Vodafone Group plc to BBB+ from A-.

The outlook is stable and the A-2 short-term rating was affirmed.

S&P said the downgrade reflects its view that Vodafone currently faces tough business conditions in key markets, owing to strong sustained competition, consolidation in the U.K. market that will likely leave Vodafone as the No. 3 player, and prospects for increasing fixed-to-mobile convergence (integration of fixed and wireless telecom networks and products).

Such prospects could put Vodafone at a competitive disadvantage, particularly versus incumbent operators with a head start on converged fixed-line and mobile offerings.

As a result, the agency revised down its forecasts for Vodafone, namely including weaker profitability than previously anticipated and an S&P-adjusted ratio of debt to EBITDA rising above 2.5 times for at least two years, but remaining below 3 times.

The weaker debt to EBITDA also stems in part from higher spectrum costs in India, combined with elevated capital expenditures for project Spring into 2016, the agency said.

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