Moody's has downgraded the credit ratings of Orange, citing the intensifying competition in the French mobile market. The debt rating was lowered to Baa1 from A3, and the outlook is stable. Orange's financial ratios are expected to remain weak in 2013 and 2014, with little prospect of recovery in the near term, Moody's said.
While Orange has taken measures to address the issue, such as cost reductions, asset sales, a more moderate shareholder remuneration policy and effective marketing, the ratings agency expects the operator's revenues to remain under pressure, dropping in the mid-single-digit percentage range this year, leading to reduced cash flow.
The competition and regulation in France, along with difficult economc conditions in several Orange markets, means that Orange's net debt-to-EBITDA is expected to deteriorate in 2013 and 2014 to around 2.7x. This ratio exceeds the maximum level 2.5x that Moody's had indicated for the previous rating category.
