Outlook Cut

Mar 03, 2009 (LBO) – Fitch Ratings has cut the credit outlook of Sri Lanka Telecom (SLT), the island's largest fixed access operator, to 'negative' from 'stable' after the sovereign rating outlook was lowered last week. Fitch said SLT's long-term foreign currency rating of 'B+' and local currency rating of 'BB-' were unchanged.

Its domestic long-term rating of 'AAA(lka)' was confirmed with a 'stable' outlook. The rating on SLT's senior unsecured notes due in 2009 has been confirmed at 'B+' based on a recovery rating of 'RR4'.

Fitch said the foreign currency issuer default rating (IDR) was constrained by the government's rating of 'B+', whose outlook was lowered to 'negative' from 'stable'.

"Fitch has rated SLT one notch higher than the sovereign on the local currency scale since April 2008 when the sovereign was downgraded to 'B+' from 'BB-'," the rating agency said.

"Although SLT is majority-owned by the Government of Sri Lanka (GoSL), this was viewed as appropriate given SLT's strong stand-alone financial profile."

Fitch says risks to SLT's financial profile could increase if the government's financial profile continues to deteriorate, triggering the 'negative' outlook on the local currenc