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11.07.2006
uaA credit rating assigned to "Ukrtelecom"
Today independent rating agency Credit-Rating announced the granting of a long-term uaA credit rating to OJSC Ukrtelecom (Kyiv). The companys main activity is communication services.
Factors supporting the credit rating's level:
- OJSC Ukrtelecom is a strategic enterprise and enjoys monopolistic position in Ukrainian market of stationary communication, forming about 80% (UAH 6.6 billion) of revenues from this kind of services in the country;
- high financial and economic performance in 2001-2005: all liquidity coefficients over the reporting period are rather high; financial independence coefficient is stable above 0.64; profitability of products was 28.5% in 2005, returns on sales about 8%;
- debt obligations of OJSC Ukrtelecom does not present a large burden on the companys incomes, in particular in 2005, the indices of covering of EBITDA expenses for servicing and discharge of debt were 19.8 times and 1.8 times respectively.
Factors restricting the credit rating's level:
- market position of OJSC Ukrtelecom tending to worsen over the past five years due to the increased competition on the part of mobile operators which resulted in the reduction of the companys profitability: net income in the first quarter 2006 dropped more than 5 times to UAH 28.8 million, year-over-year;
- high level of state regulation in telecommunication in Ukraine which might considerably change the conditions in this market in a short time;
- high operating risks of the companys activity and risks related to aggressive development strategy of OJSC Ukrtelecom in the future (realization of construction project of cell communication network of the third generation), which in particular might largely increase debt burden.
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