Moody's rates Swisscom A2

Moody's Investors Service said it assigned an A2 senior unsecured issuer rating to Swisscom AG.

The outlook is stable.

Given that the company is 54% owned by the government, Moody's said it applied its methodology for government-related issuers, which is based on joint default probability for companies with a substantial implicit support from governments.

The rating also takes account of Swisscom's announced intention to acquire 100% of the shares of Fastweb in Italy. If the acquisition is completed successfully and in line with the financing guidelines, Moody's said it could lower the baseline credit assessment to 8 from 7, but not the A2 rating.

The baseline credit assessment reflects Moody's expectation that Swisscom will remain the leading telecommunications operator in both wireline and wireless in Switzerland. While recognizing that Swisscom will face further challenges from increasing competition and regulatory pressure, Moody's said it believes the company will be able to offset the impact through a continued focus on efficiency improvements and differentiation through service quality.

Important rating factors are Swisscom's strong operating profile, strong financial profile, the quality of management and its determination to execute its strategy, the agency said.

The rating also reflects Moody's expectation that Swisscom will implement a moderate shareholder distribution policy and limited debt-financed acquisitions beyond the proposed transaction.

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