S&P ups AFK Sistema ratings

Standard & Poor's said it raised its long-term corporate credit ratings on Russia-based diversified holding group AFK Sistema to B from B-, reflecting an improvement in the group's liquidity and the solid performance of its telecommunications assets.

The outlook is stable.

At the same time, S&P raised its long-term foreign currency corporate credit rating on related entity Moscow City Telephone Network (JSC) (MGTS) to B from B- and assigned its B local currency corporate credit rating to the company. In addition, S&P raised its Russia national scale corporate credit and senior unsecured debt ratings on MGTS to ruA from ruBBB+.

Standard & Poor's also affirmed its B+ long-term corporate credit rating on related entity Mobile TeleSystems (OJSC) (MTS), the leading Russian mobile operator.

"The rating actions are primarily driven by the improvement in Sistema's medium-term liquidity, lowering of refinancing risk, and recent asset disposals," said S&P credit analyst Pavel Kochanov. "Sistema has retired its short-term bank debt and reduced its medium-term refinancing risk through its recent $350 million Eurobond issue and the sale of its oil business in January 2004, with net cash proceeds of about $153 million."

In addition, the solid performance and sharply increased market capitalization of Sistema's largest telecoms subsidiary, MTS, also offers improved credit protection to Sistema.

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