The prospect held up by some Government officials that fixed-line tariffs may no longer be indexed to annual inflation will have a negative impact on the ILECs? credit ratings, according to Standard & Poor?s. In a release issued February 28, S&P said ?a clearly more interventionist stance by the Federal Government ? for example, a drastic change in tariff readjustment policy (or a freeze), or compulsory network expansion on a massive scale, which would be detrimental to the carriers? financial profile ? is not contemplated by their present ratings and would have a negative impact on both their ratings and outlook if it occurred?. On February 28 S&P changed the rating outlook for Brasil Telecom S.A. and Brasil Telecom Participações S.A. from negative to stable (both are rated brAA). The same change in outlook applied to Tele Norte Leste Participações S.A. (rated BB). The upgrade in outlook assumes that Anatel will remain independent despite gathering noises from Government officials about curbing regulatory powers, and that the annual round of tariff adjustments scheduled for June will recognize the full contractual index. However, officials have already warned that the full index (IGP-DI), which could exceed 30%, won?t be applied and telcos will have to negotiate. If that happens, S&P?s latest statement means it will downgrade BrT and other telcos.
Public tariffs
