Rating agency Moody's yesterday downgraded the senior unsecured bond ratings of NTL, the international telecoms and cable firm which delivers cable services to 370,000 customers in Ireland. Such downgrades make it more difficult for firms to raise money.
Moody's said the downgrade reflected continuing concerns over NTL's debt levels, challenges facing it as it attempts to improve revenue and cut costs to offer the prospect of adequately servicing debt over the next several years, and liquidity fears.
For the quarter ended June 30th, 2001, NTL's long-term debt was about $16.4 billion (€17.9 billion) and interest expenses amounted to about 37 per cent of revenues.
In a statement, Moody's said that while significant cash flow improvements over recent quarters had been encouraging, it believed NTL's growth targets remained ambitious. It added that NTL could face a substantial funding gap should it fall short of its projections.
Earlier this week, NTL's Irish operation applied to the telecoms regulator to raise cable prices. NTL is seeking a standard price of £136 per annum in each of its three cabled areas - Dublin, Galway and Waterford - where it delivers basic cable services.
The increases range from 15 per cent in Galway to 34 per cent in Dublin, with a 26 per cent rise in Waterford.
"NTL also recently put through price increases in the UK and that's where the majority of subscribers are," said Mr Ted Barac, an analyst with Moody's. "It's helpful if it doesn't have a materially adverse effect on customer churn or the ability for the company to add additional subscribers."
Moody's said NTL's ability to adequately service its debt obligations would depend on significant organic growth from current operations.
In its application for a price increase in Ireland, NTL said it was ready to introduce digital television services to 140,000 households before the end of September, and was committed to introducing services to an additional 10,000 households in Dublin between September 2001 and March 2002.
The firm plans to have 290,000 homes enabled for digital services by the end of next year.
