Dutch telecoms company KPN, which has a 21 per cent stake in Eircom, yesterday had its credit rating downgraded by Standard & Poor's, making it the first European telecom operator to have its rating cut because of an inability to reduce debt with equity market proceeds.

Standard & Poor's rating agency cut KPN's long-term debt rating to BBB plus. "Negative market sentiment toward all telecom operators contributed to KPN raising a materially lower level of proceeds from its share offering in November," said Mr Peter Kernan, associate director at S&P. KPN raised €5.5 billion in the equity and convertible bond market last year at a heavily discounted price.

"Every time equity valuations reduce it becomes more difficult for the telecom operators to meet debt reduction targets," Mr Kernan said.