TEXT-S&P: NTELOS Holdings 'BB-' rating on watch negative
Overview -- We are placing our ratings on NTELOS Holdings Corp., including the `BB-' corporate credit rating, on CreditWatch with negative implications. -- Softbank Corp. has a definitive agreement to purchase a majority stake in Sprint Nextel Corp. subject to regulatory approvals. -- The Softbank transaction could improve Sprint Nextel's liquidity and increase chances that Sprint Nextel might invest in its own network in NTELOS's footprint and not renew its wholesale carriage contract with NTELOS under favorable terms. Rating Action On Dec. 17, 2012, Standard & Poor's Ratings Services placed its 'BB-' corporate credit rating and 'BB-' issue level rating on Waynesboro, Va.-based regional wireless provider, NTELOS Holdings Corp., on CreditWatch with negative implications. NTELOS's current wholesale services agreement with Sprint Nextel's Spectrum L.P. unit has grown to account for around 40% of NTELOS's service revenues. The CreditWatch reflects our view that Japan's Softbank's (BBB/Watch Negative/--) pending acquisition of Sprint Nextel (B+/Watch Positive/--) could lessen prospects for NTELOS to renew its wholesale services agreement with Sprint Nextel, under favorable terms, when it ends in July 2015. Rationale The CreditWatch action reflects the possibility that Softbank's purchase of 70% of Sprint Nextel, if completed, could improve Sprint Nextel's liquidity and make it more likely to consider investing its own network in the NTELOS footprint instead of renewing its wholesale services agreement with NTELOS. Under its current agreement with Sprint Nextel, which runs through July 2015, NTELOS is the exclusive personal communication services (PCS) provider to Sprint Nextel's code-division multiple access (CDMA) customers in NTELOS's western Virginia and West Virginia service areas. NTELOS operates its own retail wireless business with more than 400,000 customers, but the Sprint Nextel wholesale segment has grown in importance. Sprint Nextel guarantees NTELOS minimum monthly revenues of $9 million under the current contract, but actual revenues have risen well above the guarantee level, now averaging roughly $14 million monthly and accounting for around 40% of NTELOS's total service revenues. Our current rating already cites as a material risk the potential that the Sprint Nextel wholesale contract might not be renegotiated, or might be renegotiated on considerably less favorable terms. The negative CreditWatch indicates that Softbank's acquisition of Sprint Nextel could increase that risk. NTELOS reported approximately $450 million of debt outstanding on Sept. 30, 2012. CreditWatch In resolving the CreditWatch, we will assess the improvement to Sprint Nextel's liquidity if Softbank closes on its acquisition of 70% of Sprint Nextel. That assessment will, in turn, reflect our view of credit support for Sprint Nextel, if any, from higher rated Softbank. We would downgrade NTELOS if we viewed the Softbank transaction as markedly improving Sprint Nextel's liquidity, thereby increasing the chance that Sprint Nextel might consider investing in its own network in the NTLEOS footprint and either not review its wholesale services agreement with NTELOS or enter into a new agreement, after the current one expires, under terms significantly less favorable to NTELOS. A downgrade based on that scenario would likely be limited to a single notch. However, if other developments suggested that there was a significant likelihood that the wholesale contract would not be renewed or would be renewed under materially less favorable terms, the magnitude of a downgrade could be greater. Related Criteria And Research -- "here 7549527&rev_id=1&sid=1020407&sind=A&", Sept. 18, 2012 -- "here 7415828&rev_id=10&sid=1020407&sind=A&""here gsdirect/showArticlePage.do?object_id=7415828&rev_id=10&sid=1020407&sind=A&", July 23, 2012 -- "here 7336287&rev_id=13&sid=1020407&sind=A&""here gsdirect/showArticlePage.do?object_id=7336287&rev_id=13&sid=1020407&sind=A&", May 30, 2012 -- "here 7329454&rev_id=3&sid=1020407&sind=A&""here sdirect/showArticlePage.do?object_id=7329454&rev_id=3&sid=1020407&sind=A&", May 16, 2012 -- "here 7309815&rev_id=8&sid=1020407&sind=A&", May 10, 2012 -- "here 7299963&rev_id=3&sid=1020407&sind=A&""here sdirect/showArticlePage.do?object_id=7299963&rev_id=3&sid=1020407&sind=A&", May 9, 2012 -- "here 6881137&rev_id=1&sid=1020407&sind=A&", Sept. 28, 2011 Ratings List Ratings Placed On CreditWatch To From NTELOS Holdings Corp. NTELOS Inc. Corporate Credit Rating BB-/Watch Neg/-- BB-/Stable/-- NTELOS Inc. Senior Secured BB-/Watch Neg BB- Recovery Rating 4 4 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.