Fitch downgrades Entel

Fitch Ratings said it downgraded the long-term foreign- and local-currency issuer default ratings of Empresa Nacional de Telecomunicaciones SA (Entel) to BBB from BBB+.

Fitch also said it downgraded the company’s $800 million senior unsecured notes to BBB from BBB+.

The agency also said it affirmed the company’s national long-term rating at AA-(cl).

The outlook remains negative.

The downgrades reflect Entel’s continued negative free cash flow generation and deterioration in its financial leverage during 2015, mainly driven by its aggressive marketing and network investments in Peru, Fitch said.

The agency said it does not forecast the company to reach an EBITDA breakeven point in Peru until the fourth quarter of 2017, which is worse than previous expectations, the agency said.

The ratings also consider its leading market position in the Chilean mobile telecommunications industry, fully integrated service portfolio and strong brand recognition, Fitch said.

The ratings are tempered by increasing industry maturity in Chile, the company’s aggressive growth strategy in Peru and increased leverage compared to its historical level, the agency said.

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