TEXT-S&P: Deutsche Telekom rtgs unchanged on link-up news
Oct 05 - Standard & Poor's Ratings Services today said that its ratings and outlook on German telecommunications operator Deutsche Telekom AG (DT; BBB+/Stable/A-2) remain unchanged following the announced merger of DT's subsidiary T-Mobile USA, and MetroPCS Communications Inc. (B+/Watch Pos/--), a U.S. listed wireless operator. We think at this stage that the impact on DT's adjusted credit metrics would only be marginally negative, including the dividend leakage that will result from its 74% ownership of the new combined entity. At the same, we think that, post merger, the new entity could have a somewhat improved business risk profile. Importantly, and notwithstanding the transaction, we still expect DT's financial risk profile to improve in 2013-2014, with a gradual reduction of the Standard & Poor's-adjusted debt-to-EBITDA ratio toward 3.1x and an improvement in the ratio of adjusted funds from operations to debt to the high 20s (in %). In addition, given that the merged U.S. entity will be listed, we think DT will have broader financial flexibility. Lastly, we think DT's liquidity will remain adequate, under our criteria, even assuming it would need to refinance some external debt at MetroPCS.
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