Moody's reviews Swisscom for downgrade

Moody's Ratings said it placed on review for downgrade the A1 issuer rating of Swisscom AG. Concurrently, the agency also placed the A1 senior unsecured ratings and the a3 baseline credit assessment of Swisscom and Swisscom Finance BV's backed senior unsecured A1 rating on review for downgrade. Previously, the outlook was stable for both entities.

Swisscom’s agreement to buy the Italian unit of Vodafone Group plc for €8 billion triggered the review, the agency said. The company will fund the deal with debt.

"We have placed Swisscom's ratings on review for downgrade because the proposed debt-funded acquisition of Vodafone Italia will lead to a material deterioration in its credit metrics. The transaction also indicates a less conservative financial policy compared to the past," said Luigi Bucci, a Moody's assistant vice president, analyst and lead analyst for Swisscom, in a press release.

"At the same time, we acknowledge the merits of the transaction which will strengthen Swisscom's positioning in the Italian market, through a larger scale and a fully convergent proposition. The merger will lead to the creation of a stronger fixed-mobile converged operator," Bucci added.

The agency said it plans to complete the review upon transaction closing. Any downgrade of the rating will probably be limited to one notch.

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