S&P puts Telenor on watch

S&P said it placed Telenor ASA's A long-term and A-1 short-term issuer credit ratings on CreditWatch with negative implications.

Telenor plans to acquire a 54% stake in Finnish telecom operator DNA for €1.5 billion and finance the transaction with debt, S&P explained.

The agency said it considers that the acquisition will be slightly positive for Telenor, somewhat increasing the share of EBITDA generated by more stable markets and strengthening its position in the Nordic region.

Given the debt financing and the company's ongoing share buybacks, S&P said it expects Telenor's adjusted debt-to-EBITDA ratio will significantly increase to 2.2x to 2.3x through 2020, from around 1.5x to 1.7x in recent years, S&P said.

The transaction is considered slightly positive for an assessment of Telenor's business risk, the agency said.

S&P said it considers that it would offset the loss in diversity that followed Telenor's sale of its central European operations in 2017.

The agency said it intends to resolve the CreditWatch when the transaction closes.

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