Moody's Investor Service has affirmed the debt rating of Philippine Long Distance Telephone Co. (PLDT), ending a two-month rating review triggered by the telecom giant's P20-billion acquisition of a stake in the Manila Electric Co. (Meralco).

In a statement released Monday, the credit ratings agency maintained PLDT's local currency issuer rating at Baa2, with a stable outlook. It said it would keep the outlook as long as PLDT steers clear of any further investments in Meralco or other non-core risky businesses.

"The rating confirmation reflects PLDT's increased appetite for risk as a result of the recently announced Meralco acquisition, which, given funding plans will result in an increase in leverage and weakened cash flow metrics," Moody's Vice President Laura Acres said, adding that this will be counter-balanced by PLDT's solid financial profile.

"While Moody's is also concerned about the move into a non-core business, it does acknowledge that various operational synergies exist as well a potential defensive play which will ensure PLDT access to Meralco infrastructure," she explained.

Last March, Moody's placed PLDT's Baa2 local currency rating under review for a possible downgrade to reflect the impact of PLDT's purchase of a 20-percent stake in Meralco. It revised the rating’s status to "review with direction uncertain" from "review for possible upgrade."

PLDT, through Pilipino Telephone Corp., bought 223 million common shares of Meralco from the Lopezes' First Philippine Utilities Corp. for P90 apiece or a total of P20.07 billion in cash. This increased PLDT's ownership in Meralco to slightly over 30 percent.

"While the acquisition can largely be funded out of cash on hand and without any material adverse impact on PLDT's consolidated financial metrics, which remain strong for a Baa rating, it will reduce the company's liquidity reserves," Acres said.

Meanwhile, Moody's has affirmed its Ba2/positive rating on PLDT's foreign currency bond.

"Moody's affirmation of PLDT's Ba2 foreign currency bond rating reflects the fact that the rating is unlikely to rise without an improvement in the Philippines' foreign currency country ceiling," it said.