S&P Upgrades BT Credit Rating

LONDON -- Standard & Poor's Ratings Services said today it revised its outlook on leading U.K. telecommunications operator BT Group PLC and related entities to positive from stable.

At the same time, Standard & Poor's affirmed all its ratings on BT and related entities, including its 'A-/A-2' corporate credit ratings on the group.

"The outlook revision follows BT's statement of a new conservative financial policy that includes a new net debt target of £7 billion, which is not seen as incompatible with increased distributions to shareholders through dividends and share buybacks within the parameters announced," said Standard & Poor's credit analyst Simon Redmond.

The new net debt target is expected to result in lower gross debt, thereby reducing financial risk over time--notwithstanding the group's material exposure to defined-benefit pension schemes. The group's cash generation is not expected to deteriorate materially in the near term. This lower financial risk should mitigate increasing pressures on BT's business position. BT reported gross debt of £14.9 billion ($23.8 billion) at Sept. 30, 2003.

Standard & Poor's considers that upside rating potential will be driven by sustained debt reduction, provided BT maintains a strong business risk profile and manages share buybacks prudently.Standard & Poor's will monitor both BT's reported and analytically adjusted metrics to determine the sustainability of any improvement. The group is expected to pursue a controlled and conservative strategy.

Standard & Poor’s

British Telecommunications plc (BT)