Standard & Poor

Issues Identified:

Standard & Poor (S&P) provided favourable ratings to the tobacco industry due to high cash generative nature of the tobacco industry. However, there were legal challenges, market restrictions, declining volumes, taxes, discounting and consolidation.

Although UST had maintained A-1 credit rating, as it raises long-term debt, it will increase its outstanding debt. It will also consider UST’s cash flow generation and payment obligations, financial policies, market position and brand name recognition, geography and product diversification. These could severely impact its cost recapitalization.

However, a number of analysts considering it to be a ‘neutral’ rated company. Although it has stabilized its market share, analysts remain concerned about the continued threat of price-value competitors and softening smokeless tobacco market. Unlike other tobacco companies, UST had no immediate opportunities for international expansion. Historically, lacklustre performance of non-core operations creates some concern that management might use funds to over invest in underperforming business. Additionally, public and political sentiment remains negative regarding tobacco industry.

The management of Global Connect is facing some issues that are hampering their growth. Their major concern is that their current process supports far fewer rate center turn-ups per month than what is required as per various contracts. Setting up physical infrastructure for a cable provider means that they had to set up ‘turning up rate centers’. They are needed to set up as many as 300 turn up rate centers. They take 176 days as of now to turn up a rate center. The penalties for the failure to meet the contractual deadlines can be as high as $100 million for Global Connect. Overtime working staff is also becoming a non-viable solution for the company.

Their functions as organization are