S&P upgrades Southern Telecommunications

Standard & Poor's said it raised its long-term corporate credit rating on Southern Telecommunications Co. to B- from CCC+ and its long-term Russia national scale rating to ruBBB from ruBB.

The outlook is stable.

The agency said the upgrade reflects the company's improving liquidity and increasing debt-protection measures. Southern Telecommunications continues to increase its positive free cash flows on the back of a drastically reduced investment program, a strong focus on cost control and sound operating profitability growth. The company's liquidity is improving, helped by favorable access to improving capital markets and the declining dominance of short-term debt in its maturity profile.

The ratings remain constrained by Southern Telecommunications' aggressive financial risk profile, with a heavy overall debt burden and constrained financial flexibility, S&P said. Limited revenue diversification, combined with the need to further improve operating efficiency, and uncertainty of further regulatory and industry reform, also weaken the company's credit profile. At June 30, total debt to annualized EBITDA was about 4x.

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