China Mobile Gets a Debt Ratings Upgrade

Moody's has upgraded China Mobile (Hong Kong) (CMHK) Baa2 debt rating rating outlook to positive - from stable, reflecting the company's well established and sound credit profile, moderating acquisition risk, and the diminishing likelihood, in Moody's view, of materially adverse regulatory developments. At the same time, Moody's affirmed CMHK's Baa2 senior unsecured foreign currency rating.

Moody's says that the rating upgrade reflects CMHK success at managing its rapid growth and simultaneously maintaining a strong operating and financial profile. Moody's expects the company to sustain this profile, notwithstanding the possibility of further acquisitions. Previous acquisitions have been funded with a relatively conservative mixture of debt and equity and Moody's expects this to continue. In addition, Moody notes the company has substantially completed the acquisition of its parent's operations, further diminishing the risk of future large debt-funded transactions.

A concern for CMHK, however, remains China's relatively undeveloped regulatory regime and uncertainty over how the telecommunications market will evolve structurally over the long term. As a condition of its WTO entry, China must progressively open its telecommunications market to foreign investment. By 2006, foreign investors, subject to a maximum ownership level of 49% in joint ventures, will be able to provide mobile voice and data services nationwide. Moody's accepts such developments as part of a necessary evolutionary process and, in time, greater price stability may be expected as the market matures. The ratings agency says that it is concerned, however, that the central government could still implement policies that serve perceived national interests, but are at the expense of CMHK's strong credit profile."

Posted to the site on 7th February 2003