MARKET TALK: Telefonica Rtg Likely Affirmed At A- Neg - RBC

8th Jun 2010 16:09

1509 GMT [Dow Jones] Telefonica's (TEF.MC) rating is likely to be affirmed at A- with a Negative Outlook by S&P, says RBC's Roger Appleyard. Comes after S&P put Telefonica's rating on watch negative following an increased offer for Portugal Telecom's (PT) 50% stake in the two companies' Brazilian joint-venture to EUR6.5B. Applyard says S&P is reacting harshly to a small leverage increase, adding the decision puts S&P in opposition to Moody's who said the bid is net positive despite higher financial debt due to the improved business profile a merger would bring. Adds that it makes scant difference as spreads are being driven by sovereign risk. "Telefonica trades wide to KPN (KPN.AE) and not far off BT (BT) in euros and is wide of the BBB curve in sterling," he says. "As long as the Spanish discount is applied, fundamentals take a back seat." ([email protected]) Contact us in London. +44-20-7842-9464 [email protected] (END) Dow Jones Newswires June 08, 2010 11:09 ET (15:09 GMT)