Moody's affirms Telmex

Moody's Investors Service said it affirmed Telefonos de Mexico, SAB de CV's (Telmex) A2 global local-currency issuer rating, A3 foreign-currency senior unsecured rating and Aaa.mx Mexican national scale rating following the announcement that the company plans to divide its current business into two separate companies. Its Latin American businesses and its Mexican yellow pages business will be spun off to a new holding company to be called Telmex Internacional.

The outlook is stable.

The affirmation and stable outlook are based on Moody's view that the company's continued strong market and financial position in Mexico will offset the reduction in business diversification and increase in financial leverage that will result from the spinoff.

However, the agency noted that Telmex's ratings could be pressured downward over the long term if, because of regulatory pressures in Mexico, it is not able to sustain its current operating margins and relatively conservative financial profile.

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