Telefonica Debt Rating Cut by Moody’s on Spanish Economy

Telefonica SA, Spain’s largest phone company, had its credit rating cut by Moody’s Investors Service, which said it may be reduced further as Spanish consumers scale back spending and the government’s credit profile worsens.

Telefonica’s long-term debt rating was lowered one level to Baa2, the second-lowest investment grade, Moody’s said in a statement today. Spain’s economy will continue to hurt customer spending and Telefonica’s high dividend policy constrains free cash flow, it said. Standard & Poor’s cut Telefonica’s rating last month to BBB, the equivalent of the Moody’s grade.