NEW YORK, Dec 10 (Reuters) - Moody's debt rating agency said on Wednesday that it had downgraded Sprint Nextel Corp S.N debt to junk status to reflect the No. 3 U.S. mobile provider's weakened market position.
Moody’s said the downgrade related to Sprint’s “continuing challenges in turning around its wireless operations amid intense competition and weak economic conditions” and its opinion that efforts to stem customer losses would take longer than expected.
As a result, Moody’s said it expects Sprint’s operating cash flows and subscriber counts to deteriorate until the second half of 2009, after which it expects the market share and wireless operating cash flow to stabilize.
Sprint, which has about $23 billion in debt, had said on Tuesday that it hoped the company could turn around its subscriber losses in late 2009 and into 2010.
Spokesman James Fisher declined comment on the downgrade.
Moody’s also said it also changed its outlook on the company to “negative” from “under review” and said “downward rating pressure will persist until the company is able to stem the erosion of its competitive position.”
However, it rated Sprint’s liquidity as “very good liquidity” over the next twelve months citing its cash balance.
Sprint says it has a cash balance of about $4 billion and that it would plan to stay around these levels for the next two years. It also has about $3 billion debt due to be paid in the next two years.
Shares of the company closed down almost 5 percent at $2.42 on the New York Stock Exchange.
Our Standards: The Thomson Reuters Trust Principles.