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-Moody's lifts Telecom Corp of New Zealand outlook to "stable".

BANKING AND CREDIT NEWS-December 1, 2011--Moody's lifts Telecom Corp of New Zealand outlook to "stable"(C)2011 M2 COMMUNICATIONS

1 December 2011 -- Moody's raised Thursday the rating outlook on Telecom Corporation of New Zealand (NZE:TEL), or TCNZ, to "stable" from "negative", reflecting the completion of the spin-off of its access network division, Chorus Ltd (NZE:CNU).

The agency also reiterated TCNZ's A3 senior unsecured long-term rating and P-2 short term rating.

"The change in outlook to stable reflects the de-leveraging initiative post demerger through the transfer of debt to Chorus, and which will materially strengthen TCNZ's capital structure and debt coverage metrics. In our view, the benefit to the credit profile derived from the de-leveraging offsets the impact of lower earnings stream and higher business risk under TCNZ's new structure. At the same time, the effective loss of TCNZ's core monopoly asset - its copper access network - will materially weaken the earnings and cashflows of the telco. We expect TCNZ's new financial profile to be commensurate with its changed operating profile that now reflects an overall weakened business model, though counter-balanced to an extent, by a now significantly reduced regulatory impost which had been clouding TCNZ's credit profile," Moody's analyst Ian Lewis said.

According to Lewis, TCNZ's financial policies will be in line with the A3/P-2 ratings, amid competitive pressures, and will be adjusted in case of need. The certain degree of rating flexibility to deal with such strain is grounds for the "stable" outlook, Moody's noted.

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Publication:M2 Banking & Credit News (BCN)
Date:Dec 1, 2011
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