OREANDA-NEWS. On 09 June 2009 was announced, that Fitch Rating has affirmed its long-term issuer default rating (IDR) for VolgaTelecom at BB-, with a short-term outlook of B, and a long-term national rating of A+. The long-term IDR and long-term rating outlook is Stable.

Nikolai Lukashevich, senior director at Fitch covering the TMT sector, notes that “despite the economic downturn the indicators of VolgaTelecom’s operating and financial performance will likely remain stable”.  The report goes on to say that “management’s drive to dramatically downsize capital and investments and seriously reduce operating expenses should provide support to margins and raise free cash flows, as a result of which the bulk of planned long-term debt payments could be financed using in-house cash flows”. The company’s robust Q109 financial results show that the company’s management continues to implement its plans to raise the operating cash flow and begin deleveraging by the end of 2009.

VolgaTelecom continues to remain the most profitable and one of Russia’s least dependent telecom operators.  The company has virtually no foreign currency risk exposure since most of its debts are denominated in Russian rubles”, the rating agency notes in a report.

These ratings also take into account VolgaTelecom’s position as a major fixed-line operator.  The company controls most of the last mile and backbone infrastructure in its coverage territory, which gives VolgaTelecom considerable competitive advantages and also helps in cost cutting. VolgaTelecom holds strong positions in all major segments of the incumbent market, and its competitive threats are mainly a result of the long-term trend involving the replacement of fixed-line telecom with mobile telephony.

Fitch also pointed out that VolgaTelecom’s “financial exposure” is of a moderate nature for its rating category and it will gradually go down.