Telstra's decision to review its capital allocation strategy has raised concerns at ratings agency Standard & Poor's.
S&P has downgraded its outlook on Telstra to negative from stable, but affirmed its A/A-1 corporate credit and issue ratings, a day after the telco announced the review and a new cost savings target of $1 billion-plus.
S&P credit analyst Graeme Ferguson said the downgrade reflects the risks associated with Telstra's review, which will consider the structure and allocation of NBN payments; balance sheet settings, dividend policy and long-term investment plans.
"Changes to the structure or allocation of high-quality NBN payments could dilute Telstra's strong business risk profile as earnings growth shifts to more competitive products and services," Mr Ferguson said.
The review comes as the rollout of the national broadband network is "fundamentally reshaping" the competitive fixed line market, amid mounting competition among mobile companies, he said.
S&P will assess the business and financial risk impacts within the context of broader market conditions following the conclusion of Telstra's review, which is expected to take between six and 12 months.
Telstra shares were up six cents, or 1.2 per cent, at $4.90 at 1440 AEDT, after a rise of 2.5 per cent on Thursday.
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