April 04, 2008 (LBO) – Fitch Ratings has cut Sri Lanka Telecom’s foreign currency credit rating by one notch to ‘B+’ after the country’s sovereign rating was slashed a day earlier, saying the exit of Japan’s NTT from the firm was not a reason for the downgrade. SLT’s local ratings were based on its own financial strength despite a 49.5 percent ownership of the government, and a “significant influence” over the telco’s financial and operating policies through majority board control, the rating agency said.
Japan’s NTT sold a 35.2 percent stake in SLT to Malaysia’s UT group this week.
Fitch warned that any action by Sri Lanka’s government “which is detrimental to the financial profile of SLT” could trigger a downgrade.
Fitch said the outlook is ‘Stable’. SLT’s local currency international rating was confirmed at ‘BB-‘ and its domestic rating at ‘AAA(lka)’.
The rating on SLT’s senior-unsecured notes due in 2009 has been downgraded to ‘B+’ and a recovery rating ‘RR4’ has been assigned to the notes.
Fitch said the new shareholder and the Sri Lanka government are expected to decide on the make-up of the board of directors as well as management positions after a mandatory offer to buyout minority shareholders is completed. .