-- 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.
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.
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.
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
7549527&rev_id=1&sid=1020407&sind=A&", Sept. 18, 2012
July 23, 2012
May 30, 2012
May 16, 2012
7309815&rev_id=8&sid=1020407&sind=A&", May 10, 2012
May 9, 2012
6881137&rev_id=1&sid=1020407&sind=A&", Sept. 28, 2011
Ratings Placed On CreditWatch
NTELOS Holdings Corp.
Corporate Credit Rating BB-/Watch Neg/-- BB-/Stable/--
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