Vodafone Cut to BBB+ by S&P on Outlook for Competition, Credit

Vodafone Group Plc got its debt rating lowered by Standard & Poor’s because of a slower return to growth and the prospect of more spending to shore up spectrum licenses, the airwaves carriers must lease from governments to carry voice and data signals.

The second-largest wireless company’s long-term rating was reduced by one level to BBB+, the third-lowest investment grade, from A-, with a stable outlook.

“The downgrade reflects our view that Vodafone currently faces tough business conditions in key markets, owing to strong sustained competition” and consolidation in the U.K., S&P said in a statement. Vodafone also faced a slower stabilization of credit ratios, it said.

Vodafone is already rated the third-lowest investment grade with a stable outlook at Moody’s and Fitch. The two firms downgraded Vodafone last year after it agreed to spend 7.2 billion euros ($7.9 billion) to buy Spanish cable operator Grupo Corporativo Ono SA and 7.7 billion euros to purchase Kabel Deutschland Holding AG.

While annual service revenue returned to growth for the first time in almost three years, earnings for the year ending March 2016 will be in a range of 11.5 billion pounds ($17.6 billion) to 12 billion pounds, stripping out interest, taxes, depreciation and amortization, Vodafone said last week. That may miss the 11.9 billion pounds analysts had predicted on average, according to data compiled by Bloomberg.

Matt Morgan, a Vodafone spokesman, declined to comment on the downgrade.

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