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S&P may raise debt rating for PCCW unit on cash flow

PCCW-HKT Telephone Ltd (電訊盈科), a unit of Hong Kong's largest phone company, may have its debt rating raised by Standard & Poor's, which cited improved cash flow.

The company, the operator of Hong Kong-based PCCW Ltd's fixed-line and Internet services, had its long-term corporate debt outlook raised to "positive" from "stable," Standard & Poor's said in a statement yesterday.

STEADY

"The outlook revision reflects the steady improvement in profitability of the TV and mobile businesses of its parent," S&P credit analyst Lawrence Lu wrote in the statement.

"The rating affirmations reflect PCCW-HKT's leading position in Hong Kong's fixed-line telecommunications market," he said.

The decision by Standard & Poor's may allow PCCW-HKT to cut borrowing costs. Standard & Poor's could raise its BBB credit rating on PCCW-HKT if "excess cash is used to further pay down its debt," the statement said. The BBB rating is two levels above non-investment, or junk, grade.

POSITIVE

The latest action taken by Standard & Poor's follows the decision by Moody's Investment Service on July 19 to increase PCCW-HKT's debt outlook to "positive" from "stable." Moody's has a credit rating of Baa2 for the company.

A US$1 billion bond by PCCW-HKT is repayable in 2011, and the unit has a further US$1.3 billion in credit facilities with banks that it has to repay by 2012, Moody's said.
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