Global Telecommunications Industry

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DECEMBER 28, 2010

GLOBAL CORPORATE FINANCE

RATING METHODOLOGY

Global Telecommunications Industry
Summary
This rating methodology explains Moody’s approach to assessing credit risk for companies in the telecommunications industry. This publication is intended to provide a reference tool that can be used when evaluating credit profiles within the telecommunications industry, helping companies, investors, and other interested market participants understand how key qualitative and quantitative risk characteristics are likely to affect rating outcomes. This methodology does not include an exhaustive treatment of all factors that are reflected in Moody’s ratings but should enable the reader to understand the qualitative considerations and financial ratios that are usually most important for ratings in this sector. This rating methodology replaces the Global Telecommunications Methodology published in December 2007. While reflecting the same core principles as the December 2007 methodology, this updated framework incorporates refinements that better reflect the key credit fundamentals of the telecommunications industry. This report includes a detailed rating grid and illustrative mapping of a sample of companies against the factors in the grid. The purpose of the rating grid is to provide a reference tool that can be used to approximate credit profiles within the telecommunications sector. The grid provides summarized guidance for the factors that are generally most important in assigning ratings to telecommunications companies. The grid is a summary that does not include every rating consideration, the weights shown for each factor in the grid represent an approximation of their typical importance for rating decisions but actual importance may vary significantly, and our illustrative mapping uses historical results while our ratings consider forward-looking expectations. Accordingly, the grid-indicated rating is not expected to match the actual rating in most cases.

Table of Contents: SUMMARY 1 ABOUT THE RATED UNIVERSE 2 ABOUT THIS RATING METHODOLOGY 4 OTHER RATING CONSIDERATIONS 21 CONCLUSION: SUMMARY OF THE GRID-INDICATED RATING OUTCOMES 22 APPENDIX A: SAMPLE OF METHODOLOGY GRID-INDICATED RATINGS 23 APPENDIX B: OBSERVATIONS AND OUTLIERS FOR GRID MAPPING 25 APPENDIX C: TELECOMMUNICATIONS INDUSTRY OVERVIEW 27 APPENDIX D: KEY RATING ISSUES GOING INTO THE NEXT DECADE 28 Analyst Contacts: NEW YORK 1.212.553.1653

Dennis Saputo 1.212.553.1675 Senior Vice President Dennis.Saputo@moodys.com Mark Stodden 1.212.553.7718 Associate Analyst Mark.Stodden@moodys.com

GLOBAL CORPORATE FINANCE

The grid contains five key factors that are important in our assessments for ratings in the Telecommunications sector: 1. Scale and Business Model, Competitive Environment and Technological Positioning

2. Operating Environment 3. Financial Policy 4. Operating Performance 5. Financial Strength Each of these factors also encompasses a number of sub-factors or metrics, which we explain in detail. Since an issuer’s scoring on a particular grid factor often will not match its overall rating, in the Appendix we include a discussion of "outliers" – companies whose grid-indicated rating for a specific factor differs significantly from the actual rating. This rating methodology is not intended to be an exhaustive discussion of all factors that Moody’s analysts consider in ratings in this sector. We note that our analysis for ratings in this sector covers factors that are common across all industries (such as ownership, management, liquidity, legal structure in the corporate organization, corporate governance) as well as factors that can be meaningful on a company specific basis. Our ratings consider qualitative considerations and factors that do not lend themselves to a transparent presentation in a grid format. The grid represents a compromise between greater complexity that would result in grid-indicated ratings that map more closely to...
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