BT's credit ratings have been cut at Moody's Investors Service to Baa2 from Baa1. The downgrade also affects its mobile unit EE. The outlook for the ratings is stable.
Moody's said the downgrade is based on the expectation that BT's credit metrics will remain weak due to a deterioration in its underlying operating performance trends, a significant capital spending risk, and the sustained large pension deficit. This will further weaken the company's cash flow generation and delay the company's deleveraging.
BT's adjusted debt to EBITDA ratio is expected to remain at around 3.1x-3.2x over the next two years, which is "well above" the 2.8x required to maintain the Baa1 rating. Moody's expects that BT's revenues will decline by around 1 percent per annum, with broadly stable EBITDA until 2020.
