25 May 2011

Agency changes Telecom rating to negative

1:56 pm on 25 May 2011

Ratings agency Moody's Investors Service says the splitting of Telecom may prompt a downgrade in its credit-worthiness.

Moody's has changed Telecom's long term A3 rating and P-2 short term rating from stable to negative.

On Tueday, Telecom was selected as the builder of 70% of the ultra-fast broadband initiative, in which the Government will contribute $1.5 billion.

As part of the deal, Telecom must separate its network arm, Chorus, from its retail business, which Moody's says leaves the phone company with reduced earnings.

The ratings agency says there's also uncertainty over Telecom's capital structure and financial policy after separation and over the length of time it will take to split the business.