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To: foundation who wrote (88147)	11/23/2000 9:50:16 AM
From: Cooters	Respond to of 152472

Telefonica Faces S&P Rating Downgrade as Mobile IPO Disappoints --From AOL.-- Cooters Madrid, Nov. 23 (Bloomberg) -- Telefonica SA may be the next European phone company to see its credit rating downgraded after a sale of shares in its wireless business failed to raise enough to pay for new mobile licenses and networks in Europe. Spain's largest telephone company raised about 3.3 billion euros ($2.8 billion) this week by selling shares in Telefonica Moviles SA, the Spanish-speaking world's biggest mobile phone company. That's about half what Telefonica expected six months ago, and below the 6 billion euros it has already committed for licenses in Germany, Spain, Italy and Austria. Standard & Poor's warned in September that it might cut the company's ``A+'' rating if the IPO failed to cover the costs of new licenses and networks. S&P has lowered its grades for France Telecom SA, Deutsche Telekom AG, British Telecommunications Plc and other European phone companies in the past four months. ``That is what we wrote,'' said Duncan Warwick-Champion, director of corporate ratings at S&P in London. ``We have some further meetings with Telefonica and we'll just have to see how those meetings progress.'' The Telefonica Moviles IPO ``didn't raise enough,'' said Johnny de Buysscher, who helps oversee 2.5 billion euros at Petercam Asset Management in Brussels. ``If they don't raise more, there could be a downgrade.'' Telefonica has agreed to pay more than 6 billion euros in licenses to offer high-speed Internet and video services via mobile phones in Germany, Spain, Italy and Austria. The company also plans to bid for so-called 3G licenses in other European countries including France and Poland. Ten-Year Investment To deploy the networks needed to offer third-generation wireless services in Europe, Telefonica plans to invest at least 15 billion euros in the next ten years. ``For the current ratings to be maintained, the costs related to the German 3G mobile license payment and network roll-out, as well as Telefonica's other European 3G investments, will have to be fully financed by the IPO of Telefonica's global mobile business,'' S&P said in a report published Sept. 4. Telefonica officials didn't return calls requesting comment. Telefonica's bonds have lost value in recent weeks. The company's 1 billion euros worth of five-year 8.125 percent bonds now yield about 86 basis points more than euro-11 government debt, up from 71 basis points when they were sold in September. The company's U.S. bonds have fared even worse, with the spread on Telefonica's $1.25 billion of five-year dollar bonds widening to 182 basis points. That's the biggest premium investors have demanded since the securities were sold at a spread of 144 basis points in September. The yield spread on the phone company's 30-year dollar bonds has widened 31 basis points this week. Petercam's de Buysscher said he expects Telefonica's spreads to widen further. ``That's one reason we don't hold those bonds in our portfolio,'' he said. Telefonica shares fell 0.01 euro to 18.49 euros. Nov/23/2000 9:47 ET