OREANDA-NEWS. Fitch Ratings has assigned LLC T2 RTK Holding (T2R) a Long-Term Issuer Default Rating (IDR) of 'B+' with a Stable Outlook. At the same time, Fitch has affirmed and simultaneously withdrawn Tele2 Russia Holding AB's ratings.

T2R is the operating successor entity to Tele2 Russia Holding AB following a merger with Rostelecom's mobile assets. Fitch has also affirmed the 'B+'/'A(rus)'/'RR4' ratings of the bonds issued by OJSC Saint-Petersburg Telecom. T2R issued an irrevocable undertaking for the benefit of bondholders making the bonds recourse to this entity, similar to the undertaking that was earlier made by Tele2 Russia Holding AB. A full list of rating actions is at the end of this rating action commentary.

T2R is a successful regional mobile-only operator in Russia with a lean and efficient business model. It is uniquely positioned as a mild price discounter. The merger with Rostelecom's mobile assets significantly expanded its territory of operations, subscriber base and network/spectrum capacity, but also exposed the company to notable integration risks. The company is undertaking an ambitious expansion project rolling out operations in new regions and upgrading its network to 3G/4G. This will lead to a significant increase in capex, putting pressure on cash flows and leverage.

RATING SENSITIVITIES
Negative: Future developments that may result in negative rating action:
-A sustained rise in FFO adjusted net leverage to above 4.5x and net debt/EBITDA to above 3.5x.
- Significant weakness in cash flow generation driven by operating underperformance and insufficient growth from the expansion programme.

Positive: Future developments that may result in positive rating action:
-Successful operating development and leverage stabilising at below 4x FFO adjusted net leverage and 3x net debt/EBITDA on a sustained basis.