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Moody's upgrades KT's ratings to 'A3'
July 8, 2005
Moody's Investors Service has upgraded KT Corp.'s senior unsecured ratings to "A3" from "Baa1." The action reflects the stabilization evident in KT's financial and business risk profile as well as a significant decrease in refinancing risk since the end of 2004. This concludes the review for possible upgrade that commenced March 2, 2005.
The ratings outlook is stable. "The ratings reflect KT's leading position in the Korean telecommunications market. It is well positioned to benefit from growth in broadband techs," it said in a statement. Moody's believes that it would be difficult to dislodge KT's dominance of the fixed-line market without aggressive regulatory action. The rating also incorporates the company's stable financial profile, based on its solid operating margins and moderate re-investment requirements.
At the same time, the rating considers the growing migration of fixed-line voice traffic to mobile, a trend, which will gradually diminish the contribution of fixed-voice revenues. But this trend is mitigated by KT's interest in KTF.
For KT, the challenge is to successfully replace declining voice revenue from fixed line with data revenue from its broadband business. It must also continue building KTF as a hedge against the secular shift from fixed-line voice traffic, it said.
Moody's said that KT had in recent years stabilized its credit profile and overcome a number of challenges in the process. These included a shift in the regulatory environment with a number of asymmetrical measures introduced to bolster the weaker players, including a staggered approach to the launch of mobile number portability.