OREANDA-NEWS. April 26, 2010. Fitch Ratings has upgraded Russia-based OJSC Far East Telecom (also known as OAO Dalsvyaz) and OAO Uralsvyazinform to Long-term Issuer Default Rating (IDR) 'BB' from 'BB-'. The Outlook is Stable. A full list of rating actions is detailed at the end of the commentary.

The upgrade of Far East Telecom reflects reduced refinancing risks following the extension of several undrawn revolving credit facilities with a domestic bank. This has substantially increased the company's liquidity which now fully covers its short-term maturities.

In addition, Far East Telecom is close to revising the repayment schedule for a substantial part of its debt from amortising to bullet, which will reduce short-term debt and lengthen the average maturity profile of its debt portfolio. As its debt is denominated in roubles the company is not exposed to foreign-currency risk.

The ratings continue to be supported by Far East Telecom's dominant market position in the fixed-line voice and broadband segments in its region, stable operating and financial performance, low leverage and positive free cash flow (FCF). Fitch expects FCF to remain positive in the medium term. At the same time, the agency notes that the company's FCF margin will largely depend on its control over capex.

The upgrade of Uralsvyazinform also reflects reduced refinancing risks after two bond put options, totalling RUB5bn, expired in March and April, respectively. In addition, the company has signed a new medium-term loan agreement with a domestic bank to refinance part of its debt. Fitch estimates that Uralsvyazinform's liquidity will now comfortably cover its short-term debt. The agency expects that the company's refinancing risk will remain modest in the short- to medium-term.

Fitch also positively notes that Uralsvyazinform's foreign-currency risk is low, as its debt is predominantly denominated in roubles.

The ratings are supported by Uralsvyazinform's strong market position in the fixed-line voice, internet services and mobile segments in its region, stable operating and financial performance, modest leverage and positive FCF. Fitch expects FCF to remain positive provided there is no material increase in capex.