Standard & Poor's has placed Telecom's A long term credit rating on creditwatch and said it may be cut by one or two notches if the company separates its access network into a new standalone company.
Telecom confirmed yesterday that it will separate its fixed-line access network from its remaining businesses to participate in the Government's ultra fast broadband initiative.
In May the credit rating company assigned a negative outlook to the rating when Telecom said it was "fully assessing" a potential structural separation of its fixed-line access network.
Standard & Poor's credit analyst Paul Draffin said Telecom's proposal to Crown Fibre Holdings yesterday confirmed the terms on which Telecom would agree to a structural separation.
"In our view, this announcement increases the likelihood and advances the timeframe of a structural separation occurring."
Although details of Telecom's proposal are limited, a structural separation would achieve a key government objective of the ultra fast broadband network process.
The final rating outcome will depend on what assets remain with Telecom, the allocation of debt between the demerged access network company and the remaining businesses, and the outlook for the businesses.
