Telstra Corporation Ltd (ASX: TLS) has been downgraded by credit rating agency S&P Global Inc (S&P), due to "intense competition" and "weak profitability". The long-term rating has gone from A to A-, while the short-term rating is now A-2 from A-1. Despite the downgrade, S&P says the outlook remains stable for Telstra due to the size of the company's market share.
Telstra has gone from having a monopoly of the market to seeing vigorous mobile competition from Vodaphone and Optus. The competition looks to step up with TPG Telecom Ltd (ASX: TPM) entering the mobile market to become the fourth player.
The downgrade in the S&P rating may mean higher interest rates for Telstra when the company rolls over its debt. But, the rating is still investment grade so should propose a significant problem yet.
The share price is down 1% after a bounce on Friday following a buy recommendation by UBS.
Vocus Group Ltd's (ASX: VOC) share price is down nearly 4% today.
