Standard&Poor's Ratings Services' ratings on Los Angeles-based competitive local exchange carrier (CLEC) U.S. TelePacific Holdings Corp. (TelePacific) reflect a highly leveraged financial risk profile and a high degree of business risk stemming from substantial competition from larger and better capitalized incumbent telephone companies. The ratings also reflect pricing pressure, a lack of sustainable competitive advantages, low barriers to entry, and market concentration. Tempering factors include the company's solid EBITDA margins relative to its peer group and access-line growth because of low penetration levels and improving churn. TelePacific has a "vulnerable" business risk profile. The company provides integrated telecommunications services to about 37,000 small and midsized business (SMB) customers with around 1.2 million lines. It competes primarily with AT&T
