MOODY'S CHANGES THE RATING OUTLOOK OF TELEKOMUNIKACJA POLSKA S.A. TO STABLE
Moody's Investors Services today changed the rating outlook of Telekomunikacja Polska SA (TPSA) from positive to stable. The change in outlook reflects the operating challenges and restructuring needs faced by the company in the medium term. In addition, the slowdown in the Polish economy has created a difficult operating environment, which has led to the levelling-off of the long-standing strong growth in the number of fixed-access lines.
Moody's expects TPSA to retain its leading position in fixed-line telephony in Poland even after the market is fully liberalised on 1 January 2003. The rating agency also believes that the company, through its mobile subsidiary PTK-Centertel, will continue to grow its market share in mobile telephony, which will increasingly become the engine for growth in the future.
Despite the challenges that lie ahead for TPSA, especially in the run-up to full liberalisation on 1 January 2003, Moody's believes that the company has the strategic focus and strength of management to successfully manage this process and transform the company from a network operator into a customer-oriented, efficient service provider. France Télécom's (FT) strategic support in this transition will be a supporting factor.
Moody's notes that TPSA's extremely strong position and market share in the Polish fixed-line market will be eroded as the market is fully liberalised. Local and domestic long-distance voice telephony as well as data services (including voice traffic over Internet Protocol) are already partially open to competition, but so far this has had limited impact on TPSA's position. Continuing liberalisation will however increase competition, with domestic long-distance and international telephony due to be fully liberalised on 1 January 2002 and 1 January 2003, respectively. However, Moody's anticipates that the company will rebalance tariffs and increase operating efficiency sufficiently to ensure that it maintains market leadership.
The change in rating outlook also takes into account the financial position of TPSA's strategic shareholder FT (rated Baa1). FT recently increased its stake (direct and indirect) in TPSA to 47.5% in September 2001 and has since strengthened its operating control of TPSA through the appointments of a new Chairman and Chief Financial Officer. Furthermore, FT together with its local partner Kulczyk Holding has the option to take a majority share - 50% plus one share - by 31 December 2002. However, as a result of FT's weaker financial position, Moody's does not expect that a potential increase in FT's stake to majority control will in itself have a positive impact on TPSA's rating.
TPSA is the principal provider of telecommunication services in Poland and offers a range of services, including fixed-line domestic and international telecommunications, leased lines, broadband data transmission, Internet and other value-added services. TPSA had 10.2 million fixed-line subscribers as at 31 December 2000 and retains exclusive rights to provide international voice telephony until 1 January 2003. TPSA has non-exclusive rights to provide local wireline services. It also owns 66% of the shareholding of PTK-Centertel, one of the three mobile companies in Poland, through which it has around 2.3 million subscribers as at 30 September 2001.
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