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Ericsson leads charge of the telecom manufacturers

Ericsson was the first telecom equipment company to regain its investment grade status yesterday in what promises to be a rebound year for the sector.

Fitch Ratings upgraded the Swedish manufacturer from BB+ to BBB- based on the upturn in the telecoms industry and Ericsson's leading position within it. The rating agency also highlighted recent improvements in operating efficiency.

Although both other rating agencies have Ericsson on a positive outlook, making upgrades likely, there is diversity among them in ratings. Standard & Poor's has the company at the top of the speculative grade ratings on BB+, while Moody's ranks it one notch lower at Ba2.

But all three agencies agree that 2005 will be a bumper year for telecom equipment corporates such as Ericsson, Lucent Technologies (B) and Alcatel (BB). All those companies fell from their investment grade ratings (so-called fallen angels) during the recession in the telecoms market in 2001 and 2002, but are expected to benefit from a resurgence in telecoms this year.

Moody's has 95% of the telecoms operators it rates on positive or stable outlooks, an industry ratio only beaten by telecoms equipment itself, which has 100% on either positive or stable outlooks – and 58% of that positive.

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