OREANDA-NEWS. November 09, 2009. International Rating Agency Standard & Poor’s has revised the outlook of VolgaTelecom’s credit rating from Negative to Stable. At the same time the Agency has affirmed the Company’s Score (Russia National scale) at "ruAА-". The outlook Stable reflects the expectations that VolgaTelecom will retain dominant market position in key business segments and focus on the enhancement of efficiency and generation of free cash flow.

As stated in the Agency’s report ‘the rating action reflects the strengthening of VolgaTelecom’s financial profile, and basically the improvement of liquidity position and reduction in financial leverage”.

In September 2009 VolgaTelecom paid off the bonds to the amount of RUB 2 billion of the bonds’ issue of RUB 3 billion. Earlier the Company accumulated free cash flow to pay off this largest debt obligation maturing in 2009. This resulted in the reduction in financial leverage vs. similar period of the prior year.

The Agency’s report also states that “lately the Company’s liquidity has improved”. The Agency’s analysts expect that in the coming 12 months it will remain quite sufficient. They also expressed confidence that “the Company will be capable to service its debt obligations without refinancing”. As before VolgaTelecom’s strong position in the service area, generation of substantial free cash flow and revenue diversification increase have positive effect on the rating.

Standard & Poor's credit analysts expect that “VolgaTelecom will ensure adequate liquidity management and timely refinance short-term debt with the coming maturity dates. In 2010 and 2011 the Company’s free operating cash flow will in full cover its joint debt of about RUB 4 billion thus increasing VolgaTelecom’s financial flexibility”, states the Agency’s report.

At the same time VolgaTelecom’s rating is constrained by several factors; Standard & Poor's credit analysts note the following: the Company’s reliance on Russia’s capital market, worsening of economic conditions in Russia, strong competition in the mobile telephony segment, as well as potential risks related to the industry development and its regulation.