Financial Times

SLT ratings outlook revised to stable from negative
Standard & Poor's Ratings Services has announced that it has revised its outlook on Sri Lanka Telecom Ltd. (SLT) to stable from negative following the sovereign rating it gave Sri Lanka.

At the same time, S&P has affirmed its 'B+' foreign currency and 'BB-' local currency corporate credit ratings on SLT. The outlook revision comes after Standard & Poor's assignment of its foreign and local currency ratings on Sri Lanka.

These were foreign currency B+/Stable/B and local currency BB-/Stable/B. “SLT’s previous negative outlook reflected heightened sovereign risk,” the ratings agency said in a statement. "The rating on SLT factors in its dominant position in the fixed-line business, expected growth in the wireless market, and adequate cash flow protection measures,” said Standard & Poor's credit analyst Cheow Hon Lee. "Nevertheless, the rating is constrained by intense competition, weak market position in the wireless business, regulatory uncertainties, and large capital expenditure requirements.”

The stable outlook on SLT’s rating is based on the expectation of continued robust growth in wireless revenues, given the low penetration. “A significant improvement in its competitive market position in its increasingly important wireless segment, without any material adverse impact on its financial profile, accompanied by a moderate reduction in sovereign risk would be positive on the rating,” S&P said.

“Conversely, the rating may be negatively affected if there is a slowdown in demand growth for wireless services, which could weaken the financial profile, particularly because of build-up of capacity.”

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