MADRID Dec 20 Standard and Poor's affirmed
Telefonica's credit rating at two notches above junk on
the assumption the struggling Spanish telecoms group will make
more "aggressive" moves to cut debt.
S&P said on Thursday it affirmed a long-term BBB rating and
A-2 short term-rating with negative outlook for Telefonica,
which expects to end 2012 with 50 billion euros ($66 billion) of
debt compared with 56 billion at the end of September.
Maintaining its debt rating is a top priority for
Telefonica, which is racing to cut and refinance debt to
compensate for the sharp economic downturn in Spain, where it is
losing mobile customers in droves and shed 6 percent of its
pay-TV customers in the year to September.
The company scrapped its dividend in July for the first time
since the Spanish civil war in the 1930s in a move welcomed by
"We think the group's liquidity is likely to remain adequate
in the foreseeable future, assuming it continues to aggressively
complete debt refinancing measures, possibly complemented by
additional assets sales," S&P said in a statement.
Telefonica must raise between 7 billion and 9 billion euros
a year through 2015 to cover debt maturities. It issued seven
bonds in 2012.
"The negative outlook mainly reflects the risk of a
downgrade in 2013-2014 if the group failed to maintain
sufficient liquidity comfort ahead of continuously massive
annual debt maturities," S&P said in a statement.
The company has bonds worth 6.5 billion euros maturing in
2013 and 7.4 billion euros in 2014.
Telefonica has sold a number of assets this year, including
its stake in China Unicom and its call centre business
Atento to raise cash and hold on to its prized investment grade
rating. A downgrade would push up the firm's financing costs.
Telefonica also successfully listed part of its German unit
and is now expected to float its Latin American
The ratings agency also warned that Telefonica's ties to its
home market posed a danger, both in terms of a sovereign
downgrade for Spain and its flagging domestic business.