S&P puts VolgaTelecom on watch

Standard & Poor's said it placed the global scale BB- long-term corporate credit and ruAA- Russia national scale ratings on VolgaTelecom OJSC on CreditWatch with developing implications.

The watch placement reflects the uncertainties triggered by the company's decision to reorganize in order to be merged into OJSC Rostelecom, which has BB ratings and a stable outlook, S&P said.

The agency said it is concerned about the potential impact of reorganization on the company's liquidity position which, if it deteriorates, could put downward pressure on the ratings, the agency said.

The agency said it would view as positive for the ratings a merger of VolgaTelecom into the larger Rostelecom entity, assuming the absence of any technical or actual liquidity concerns coming out of the

reorganization process.

The ratings are constrained by the company's exposure to Russia's weak capital markets, a weakening domestic economy and intense competition in the mobile telephone segment, S&P said.

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