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S&P Downgrades Telstra, Shares Slide

S&P Global Ratings has downgraded Telstra (from A to A minus), asserting the power of Australia’s largest telco has “diminished” – news which has seen Telstra shares slide.

The agency has slashed its short term rating from A1 to A2, whilst dropping long term issuer and issue ratings from A to A minus.

S&P attributes the drop to intensifying market competition, coupled with weaknesses in Telstra’s core business.

“Competition has intensified across Telstra’s core businesses, and the company has had to accept lower margins as a means of protecting its dominant market share,” the agency claims.

“In our opinion, Telstra’s vulnerability to an erosion of its price premium and dominant market share has increased over the past few years despite elevated network investment.”

The downgrade adds to a recent string of bad news for Telstra. Analysts have voiced their concern over the telco’s ability to honour a 22 cent dividend, whilst warning of margin pressures.

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