OREANDA-NEWS. On 24 December 2008 Rostelecom (NYSE: ROS; RTS and MICEX: RTKM, RTKMP), Russia’s national long-distance telecommunications operator, announced that the company’s long-term credit rating has been upgraded from BB- to BB with a stable forecast.  This decision was adopted by the experts of Standard & Poor’s international rating agency.

As mentioned in the S&P report, the decision to upgrade Rostelecom’s credit rating was mainly due to improvements in the company’s operating results along with a stable financial position which is characterized by minimal leverage and a high level of liquidity.

A positive assessment was given of the company’s efforts aimed at cost-containment and to ensure growth in profit margins.  S&P experts also noted the operator’s concerted efforts to further expand its presence on markets of unregulated telecom services, which partially helps to offset Rostelecom’s decline in income from traditional DLD and ILD revenues against the backdrop of fierce competition.  Thus, according to S&P experts, the company’s higher stake in RTKomm.ru, up to 99.5% has significantly boosted Rostelecom’s positions on the backbone Internet access market. As a result of having completed some major investment projects, S&P notes, Rostelecom’s network could also become one of the main transit routes for traffic between Europe and Asia.

The stable outlook reflects Standard & Poor’s expectations that Rostelecom will be able to maintain its leadership positions in the DLD and ILD segments while continuing to diversify its earnings and EBITDA performance. Rostelecom maintains an effective capital structure, which gives additional flexibility to the company’s cash flow, and this allows it to acquire strategic assets without deterioration of creditworthiness.

“Today, when many Russian and foreign companies face the negative consequences of the world economic crisis, we are especially pleased to note that international financial experts are so upbeat about our efforts to further bolster the company’s financial stability.  As a matter of fact, Rostelecom has become the only Russian company in the industry which has received a long-term credit rating upgrade.  By assigning a positive outlook to the company’s business, S&P rating agency has expressed its confidence that Rostelecom will in future remain a leading player on the Russian telecommunications market”, said the general director of Rostelecom Konstantin Solodukhin.

According to the analysts of Standard & Poor’s rating agency, the company’s long-term credit rating could be raised if Rostelecom improves its business diversification by expanding into unregulated segments of the market, and also by acquiring additional business assets.