"Standard & Poor's Ratings Services raised its long-term corporate credit rating on Golden Telecom Inc. (GT), a leading alternative telecommunications operator in Russia and the Commonwealth of Independent States (CIS), to 'BB' from 'BB-', reflecting the company's strengthened business profile and prudent financial risk management. The outlook is stable," S&P said on its Web site.
"The upgrade reflects the company's strengthened business profile, with strong market shares and a leading consolidator position in Russia's corporate fixed-line market," said Standard & Poor's credit analyst Lorenzo Sliusarev.
"GT's credit profile also benefits from fairly resilient operating profitability, expanding cash flow generation, and prudently managed financial risk, along with the steadily improving industry and regulatory environment in Russia.
"The ratings remain constrained, however, by the uncertainty of further industry reforms in both Russia and the CIS and by intensifying competition in GT's core markets. The company's expansion into new, evolving business segments, marked by increasing capital spending and acquisition activity that result in negative free cash flows and increasing debt, also constrains the ratings," S&P said.
"Standard & Poor's expects that GT's improving business operations will help it face the uncertainties associated with aggressive expansion into new segments and the continuing evolution of the market and regulatory environment, enhanced by positive economic and industry dynamics," Sliusarev added.
"The company's manageable financial policy should further support its credit profile.
"GT is expected to increase its focus on regional expansion, participation in the liberalized long-distance market, and penetration of broader mass markets with broadband and value-added services. We also expect the company to limit its likely increasing exposure to financial leverage at moderate levels, with total debt staying within 30% of total capitalization and 1x EBITDA.
"Meaningful improvements in GT's operating environment -- with a continued strengthening of the company's business operations, and without sizable deterioration of its financial position --could benefit the ratings or outlook.
"Conversely, any adverse developments in market reform or a material weakening of GT's financial profile in light of its expanding business model could put pressure on the company's current credit profile," S&P said.
