Nokia Corp. (NYSE: NOK) and its creditors may have just been given one more confirmation that exiting the highly competitive handset business was the right thing to do. Moody’s Investors Service announced on Monday that it was  upgrading Nokia’s corporate family rating to Ba2 from B1. Moody’s also raised the rating on a probablity of default to Ba2-PD from B1-PD of Nokia Oyj. The outlook on the ratings is Stable.

Monday’s credit rating upgrade is on the heels of the company’s new strategy and capital structure optimization program, and upon the sale of its struggling mobile handset operations to Microsoft Corp. (NASDAQ: MSFT). Another boost is from the anticipated stabilization of its core Nokia Siemens Networks business – now renamed Networks.

Moody’s further said,

“Moody’s has also upgraded to Ba2 and (P)Ba2 from B1 and (P)B1 the ratings of Nokia’s senior unsecured notes and MTN programme ratings respectively, and to Ba2 from B1 the ratings of Nokia Solutions and Networks Finance B.V.’s EUR800 million of senior notes. Nokia’s and Nokia Finance International B.V.’s short-term senior unsecured ratings of NP/(P)NP were affirmed.”

Along with Monday’s upgrades, Moody’s also withdrew the B1 CFR and B1-PD PDR of Nokia Solutions and Networks B.V. (NSN).

So the question is what this means to investors. Outside of a better credit profile, and hopefully lower borrowing costs, Moody’s believes that Nokia will remain focused on its existing businesses and reduce its gross debt.

Monday’s upgrade also reflects the Moody’s view that the performance of the company’s core Networks business will stabilise in the next 12 months to 18 months. This is despite intense competition in the communication equipment industry. Moody’s now expects that Nokia’s leverage will improve to around 2-times on a Moody’s-adjusted basis over the same period, and that the company’s liquidity will remain solid upon completion of the plan.

This also factors in Nokia’s plan to return 3 billion euros to shareholders through 2015 through dividends and share repurchases. The group has no major debt maturities until a EUR750 million convertible bond matures in 2017.

Trading volume has lightened up now that the new Nokia is so much different from the old Nokia. Still, trading in New York ADSs had shares up 2.6% at $7.43 against a 52-week range of $3.39 to $8.20.

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