Vodafone Share News (VOD)

The following is a press release from Standard & Poor's: LONDON (Standard & Poor's) July 20, 2010--Operating performance among rated investment-grade telecommunications companies in Europe, the Middle East, and Africa (EMEA) has proved resilient in the first half of 2010, according to a report published by Standard & Poor's Ratings Services titled "EMEA Investment-Grade Telecoms Companies Show Resilient Performance While Searching For A Return To Revenue Growth." What's more, this resilience comes in spite of a sluggish macroeconomic environment and substantial capital requirements. "The resilience of our portfolio of rated investment-grade telecoms operators is borne out by the maintenance of our forecasts for robust free cash flow for the full year," said Standard & Poor's credit analyst Michael O'Brian. "So far this year, there has been a notable absence of operating underperformance-induced negative rating actions on companies where we consider ratings headroom to be tight. "Barring the event of a double-dip recession, or further unforeseen macroeconomic or financial shocks, we anticipate flat or even modest positive growth in revenues through 2010 and early 2011." As the report points out, besides grappling with difficult macroeconomic conditions and ongoing regulatory factors--including cuts to mobile roaming rates in the EU from July 2010--telecoms operators are having to contend with market-specific capital requirements that continue to pressurize EBITDA. Investments in fixed-line network speed and coverage, as well as in the data connectivity and capacity of mobile networks, will also continue to affect profitability, in our view. Particularly significant is the heavy usage of network capacity for data by smart-phone users and via laptop computer dongles. Partially because of these investment requirements, we think that reducing leverage at Vodafone Group PLC (A-/Negative/A-2), Portugal Telecom SGPS S.A. (BBB/Watchneg/A-2), and Telecom Italia SpA (BBB/Stable/A-2) may prove challenging, or take longer than anticipated. We note that rating pressures may arise, however, because many companies are neglecting financial flexibility in favor of increasing dividends in 2010. For certain players, such as Vodafone, TeliaSonera AB (A-/Stable/A-2), and Telenor ASA (A-/Negative/A-2), this leaves limited headroom for material mergers and acquisitions. That said, we believe that the relative resilience of margins across the sector points to remaining opportunities for operating cost reductions. T-Mobile Germany (a division of Deutsche Telekom AG; BBB+/Stable/A-2), for example, posted an 8.8% improvement in EBITDA in the first quarter of 2010 thanks to cost savings. The report is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. 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Primary Credit Analyst: Michael O'Brien, London (44) 20-7176-3561; michael_obrien@standardandpoors.com Secondary Credit Analyst: Guy Deslondes, Milan (39) 02-72111-213; guy_deslondes@standardandpoors.com Additional Contact: Industrial Ratings Europe; CorporateFinanceEurope@standardandpoors.com No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. 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