Moody’s lowers Entel Chile to Baa3

Moody's Investors Service said it downgraded to Baa3 from Baa2 Empresa Nacional de Telecomunicaciones SA's (Entel Chile) issuer rating and the ratings of its senior unsecured foreign currency debt issues.

The outlook on all ratings remains negative.

Moody’s said the downgrade was based on the company's shift in credit quality following its expansion into the Peruvian market and its limited capacity to significantly improve its credit profile within the next 24 months, as well as softer growth and stronger competition in both Chilean and Peruvian markets.

The deterioration is translated into increased leverage that reached 3.8x in the end of 2015, negative EBITDA generation in Peru that has tightened Entel Chile's consolidated margins to 30%, and negative free cash flow generation.

Moody’s estimates the EBITDA on its Peruvian operations to remain negative at least until 2018, which, combined with weaker financial flexibility to fund Capex and the aforementioned negative free cash flow, will lead to incremental debt requirements.

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