The ratings on Los Angeles-based competitive local exchange carrier (CLEC) U.S. TelePacific Holdings Corp. reflect a highly leveraged financial risk profile, including tight financial covenants and weak liquidity, and a high degree of business risk stemming from substantial competition from larger and better capitalized incumbent telephone companies. The rating also reflects increased churn, the lack of sustainable competitive advantages, low barriers to entry, and market concentration. Tempering factors include the company's solid EBITDA margins relative to its peers. TelePacific is the largest CLEC in California and Nevada, providing integrated telecommunications services to small and midsize businesses with average monthly telecom bills of around $800. The company has about 46,000 end-user business customers and around 1.1 million access-line equivalents. Its competition
