S&P ups VolgaTelecom

Standard & Poor's said it raised its long-term corporate credit rating on VolgaTelecom (OJSC), the incumbent fixed-line telecommunications operator in the Volga region of Russia, to B+ from B, reflecting the company's improved business position and stabilizing financial profile.

The outlook is stable.

At the same time, S&P raised its long-term Russia national scale rating on VolgaTelecom to ruA+ from ruA-.

S&P said the upgrade reflects VolgaTelecom's improved business position, marked by dominant market shares in key segments; noticeable progress in network buildout and modernization; positive trends in regulated tariffs and social benefits monetization; and improving diversification from growth in mobile, internet, and other services. Furthermore, VolgaTelecom's financial profile is beginning to stabilize after a period of relatively extensive capital expenditure, and the company benefits from moderate exposure to financial risk compared with peers.

The rating is constrained, however, by the continuing restructuring of the industry and regulatory environment, by the company's limited liquidity as a result of negative free cash flow generation and heavy reliance on short-term bank debt, and the need to improve its low fixed-line telephony penetration and somewhat lagging operating efficiency, S&P noted.

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