TEXT-S&P: AT&T upgrade plan will not affect ratings
Nov 7 - Standard & Poor's Ratings Services said today that its ratings and outlook on Dallas-based telecommunications provider AT&T Inc. (A-/Stable/A-2) are not affected by the company's announcement that it plans to invest about $14 billion over the next three years to expand and upgrade its wireless and wireline networks to support the growing demand for data by consumers and businesses. As a result of these growth initiatives, management increased its target net leverage to 1.8x from 1.5x. We estimate that our adjusted leverage will rise to around 2.8x during this period from the mid-2x area, which is still supportive of an "intermediate" financial risk profile, albeit at the higher end of the maximum leverage parameter. Our leverage calculation includes AT&T's proposed contribution of $9.5 billion to its employee pension fund in the form of AT&T Mobility II LLC preferred equity. The company also expects that capital expenditures will increase by about $3 billion, to $22 billion in 2013 through 2015, which could constrain free operating cash flow (FOCF) during that period, although our rating assumes that most of AT&T's FOCF will be consumed by its dividend and ongoing share repurchases. Notwithstanding the potential for modestly higher leverage and lower FOCF in the near-term, Standard & Poor's believes that these investments will likely improve the company's longer-term business position, including its profitability. We currently view AT&T's business risk profile as "strong," bolstered by its wireless business. The company plans to invest around $8 billion in the wireless segment, which it will use to expand 4G Long Term Evolution (LTE) coverage to 300 million population equivalents (POPs) by 2014 from an expected 150 million at the end of 2012. Additionally, it will invest in small cell technology, Ethernet backhaul, and distributed antenna systems to improve spectral efficiency, density, and the operating efficiency of its wireless network, which provides the potential for improved wireless EBITDA service margins, from 41% as of Sept. 30, 2012. AT&T also plans to invest about $6 billion in its wireline business, about half of which it will allocate to the expansion its U-Verse product to about 8.5 million addressable homes, or to 43% of its footprint from the current 32%. It will also increasingly deploy fiber to improve its consumer and business broadband services, and will eventually decommission its traditional circuit switched wireline properties, which we expect will result in some improvement in its wireline EBITDA margins, which are currently about 32%.
- Canada's parliament attacked, soldier fatally shot nearby |
- NOAA employee charged with stealing U.S. dam information
- Sweden gets two new sightings, as hunt for undersea intruder goes on
- Special Report: Traffickers use abductions, prison ships to feed Asian slave trade
- Autopsy of slain Missouri teen shows close-range gunshot