Fitch Rates AT&T's EUR1.25B Offering 'A'; Outlook Stable

CHICAGO--(Business Wire)--
Fitch Ratings has assigned an 'A' rating to AT&T Inc.'s
(AT&T)(NYSE:T) offering of EUR1.25 billion 6.125% notes due April 2,
2015. Proceeds from the offering are expected to be used for general
corporate purposes. The Rating Outlook is Stable.

The ratings incorporate Fitch's expectations that AT&T has the
financial flexibility to maintain leverage in a range appropriate for
the current rating category. Fitch expects AT&T to maintain
credit-protection metrics, in the form of debt-to-EBITDA, of 1.5 times
(x) or lower over Fitch's rating horizon.

While AT&T's free cash flow is expected to be strong in 2008 (at
levels comparable to the $7.6 billion after dividends in 2007), Fitch
had previously noted that AT&T would have borrowing needs in 2008,
owing to the $2.5 billion spectrum purchase from Aloha Partners, L.P.,
for the acquisition of spectrum in the Federal Communications
Commission spectrum auction, to complete other acquisitions, and to
make further share repurchases. With regard to the recently completed
FCC spectrum auction, AT&T's winning bids totaled approximately $6.6
billion.

AT&T's ratings also reflect its diversified revenue mix, its
significant size and economies of scale as the largest wireline,
wireless and enterprise services operator in the United States, as
well as Fitch's expectation that AT&T will benefit from continued
growth in wireless operating cash flows. AT&T's revenue mix is
diversified among three key lines of business. In 2007, wireless
segment revenues grew 13.7% while generating approximately 35% of
total segment revenues and enterprise line of business, which returned
to growth in 2007, produced more than 15% of total segment revenues.
Both the wireless segment and the enterprise line of business are
expected to continue to grow revenues in 2008. The consumer segment,
facing rising competition from cable operators, continued wireless
substitution and a weakening economic environment, approximated 18% of
total segment revenues in 2007.

Fitch believes in-region consumer revenues should remain stable in
2008, if not grow modestly, due to continued deployment of video and
broadband services. Revenues are also derived from in-region business
(small and medium-sized business), wholesale services, national mass
markets (which are declining rapidly), as well as the advertising and
publishing businesses. The 2006 BellSouth Corp. (BellSouth) and 2005
AT&T Corp. mergers have provided increased scale, as AT&T achieved
approximately $4 billion in synergies in 2007 (approximately 75%
expense and 25% capital), and Fitch expects additional synergies in
2008 and 2009 as it continues integration. By 2010, expense
synergies--plus additional operational cost initiatives--are expected
to reach $7 billion.

Issues to monitor regarding AT&T's ratings include:

--Competition in the consumer segment;

--The execution risk posed by the integration of BellSouth's
operations into AT&T's business; and

--The effect of AT&T's stock-repurchase activities on debt levels.

To offset the effects of competition on cash flow, AT&T must
continue to be successful in controlling costs, achieve merger-related
synergies and successfully implement its network-based video strategy.

At the end of 2007, AT&T had $64.1 billion in debt outstanding and
cash amounted to $2 billion. AT&T's liquidity is strong. To back its
commercial paper program, AT&T currently has a five-year credit
facility that expires in July 2011 with $10 billion of availability.
AT&T has an option to increase the $10 billion amount to $12 billion,
with agreement by the lending banks. The principal financial covenant
requires debt-to-EBITDA, as defined in the agreement, to be no more
than 3x. In 2007, AT&T produced $7.6 billion in free cash flow, and
Fitch believes free cash flow could be at a similar level in 2008,
given potential additional merger synergies and continued growth in
wireless and enterprise service revenues.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, Chicago
John Culver, CFA, 312-368-3216
Bill Densmore, 312-368-3125
or
Media Relations:
Brian Bertsch, 212-908-0549, New York

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