Moody's downgrades Optus Finance rating to A1

MOODY'S Investors Service downgraded the senior unsecured long-term ratings of Optus Finance Pty Limited from Aa3 to A1 yesterday, but revised the firm's outlook from negative to stable.

Optus Finance is a wholly owned subsidiary of SingTel Optus Pty Ltd.

Optus's short term Prime-1 rating was unaffected by the agency's rating decision. Prime-1 is the best-ranked rating for a firm's ability to repay its short-term debt obligations.

"The downgrade reflects the weakening in Optus's credit profile at the previous rating level, with trend in elevated leverage, intensely competitive operating environment, and business profile that is comparatively weak compared to major telcos at that rating level," said Ian Lewis, a Moody's senior vice-president.

Optus's financial leverage is expected to increase as it funds its purchase of new spectrum, partially through additional debt, Mr Lewis added. The operating profile of the firm is also likely to weaken as the "vigorous competition in the mobile market continues to intensify", he noted.

In response, SingTel said yesterday: "Optus's credit rating continues to be strong among its peers in the global telecommunications industry. Optus remains financially disciplined in its approach to investments and is committed to maintaining an investment-grade credit rating."

SingTel's share price closed at $3.64, up four cents yesterday.