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Fitch: European High-Grade Telecoms Maintain Good Liquidity

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Fitch Ratings says, in report published today, that European high grade telecom issuers have continued to maintain good liquidity and that their access to capital markets remained relatively healthy during the course of Q109.

"Despite continued broader market liquidity shortages, access to debt capital markets has remained healthy for the more highly rated European telecom issuers, albeit at increased pricing," says Apostolos Bantis, an Associate Director in Fitch's European TMT group. "Many telecom companies have been keen to take advantage of the open window by securing early refinancing flexibility even though financing costs have escalated."

Recent demand for telecom paper has remained strong as most of the new bond issues completed since the end of 2008 and during Q109 have been oversubscribed and seen a tightening in pricing guidance. European incumbents, Deutsche Telekom, Telefonica, Telecom Italia, KPN, and Portugal Telecom along with mobile operator Vodafone have successfully tapped the capital markets to refinance a total EUR13.5 billion of near-term maturities during the Q109.

A review of the most recent liquidity position of Fitch's European telecoms portfolio demonstrates that the liquidity profiles for the majority of Fitch's portfolio have improved over the past six months to April 2009. Most European telcos continue to maintain adequate undrawn committed lines in place which along with healthy cash balances should help meet near-term debt maturities if market conditions deteriorate. In addition, telecom operators have reacted by reducing their capex budgets, cutting dividend and share buyback payments and entering into infrastructure-sharing agreements in an effort to preserve cash.

Fitch believes that a combination of reasonable levels of balance sheet leverage and perceived defensive sector qualities should ensure better access to capital markets for telecom issuers during the remainder of 2009.

The 3-page report is available on the Fitch website (registration required).

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