Fitch IBCA Ratings - Press Releases - Ratings Assigned To TPSA Senior Notes By Fitch IBCA

Ratings Assigned To TPSA Senior Notes By Fitch IBCA

Fitch IBCA-London-3 December 1998: Fitch IBCA, the international rating agency, has assigned a rating of 'BBB+' to both tranches of the Senior Notes issued by TPSA Finance B.V. and irrevocably and unconditionally guaranteed by Telekomunikacja Polska S.A. One issue of USD200 mln matures 10 December 2003 and the second issue of USD800 mln matures 10 December 2008.

TPSA, the Polish national telephone company, offers fixed, wireless and data transmission services. It has a monopoly to provide international services until January 2003, but will probably relinquish its monopoly for domestic long distance calls during 1999. There are a number of alternative local network operators whose licence areas cover half the Polish population, but at present, they provide only very rudimentary competition to TPSA in the local market and further consolidation will have to occur before they pose a material threat.

The proceeds from the issue are to be used to refinance existing borrowing, to fund TPSA's programme of expanding its fixed line network and to make capital contributions to PTK-Centertel to fund growth in its mobile telephony operations. The company intends raising further debt in the future to address the fact that, by European standards, Poland has a relatively under-developed telephone network, requiring substantial investment expenditure to improve coverage.

The ability to generate sufficient cash to fund investment and debt servicing is largely dependent on TPSA's business position. Liberalisation of the Polish telecoms market will result in a loss of market share, but this will be compensated by the general growth in traffic volumes and Fitch IBCA expects a very positive demand for telephone services. No specific telecoms regulatory body will be established until after the new Telecommunications Act is passed, probably in 2001, so that TPSA has some protection from downward pressure on its interconnect charges. Even with these advantages, TPSA faces the challenges of successfully reorganising a cumbersome corporate structure (on the basis of function rather than geography) and improving its focus on customers to mitigate the competitive threats.

As the national telecoms operator, TPSA has a strategic importance and a solid business and financial position that is unlikely to be eroded in the short term. In November 1998, a successful public offering was held with 13.8% of TPSA's share capital sold in an issue that was over-subscribed despite adverse market conditions. It is still the intention to offer between 25% and 35% of the company to a strategic investor during 1999, although there is no intention that the state should reduce its holding below 50%.

Contact: David Beardsall, London Tel: +44 (0)171 417 4222

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