Moody's Investors Service warned yesterday it might cut the credit ratings of KPN, the Dutch telecommunications group that has a 21 per cent stake in Eircom, on concerns that debt levels will remain high next year.

The ratings agency said the company might have trouble reducing debt due to the difficulty of raising money in the equity markets.

The unexpected review by Moody's, which previously had a stable outlook on KPN's credit, reflects concern that proceeds from asset disposals and the initial public offering of KPN Mobile needed to reduce debt may be lower than expected.

Moody's forecasts KPN's debt will reach €21 billion (£26.7 billion) by the end of the year, and it needs to reduce this sharply next year to maintain its long-term debt rating of A3. The IPO and the sale of non-core assets, such as its stake in Eircom, are planned to raise cash.

"The execution risk of this cash-raising effort in such a short time period is high at a time when the equity markets are especially volatile," Moody's said.

The comments pushed the spread on KPN's bonds wider by about 10 basis points. KPN's benchmark dollar bonds with a 10-year maturity were yesterday trading at 320 basis points over US Treasuries.

KPN's ratings from Standard & Poor's already have a negative outlook.