re: Cingular & Moody's
The perils of a technology "flip":
Construction risk is not so much of an issue, but Moody's says that marketing two levels of service will cause some confusion that competitors may have some success exploiting.
Moody's believes Cingular may purchase additional spectrum to complete its U.S. footprint and augment existing markets.
>> GSM Migration Hits Cingular's Debt Rating
Cellular News
December 3, 2001
Moody's Investors Service has lowered the USA based Cingular Wireless long term debt rating.
The primary issue relating to the change in rating is the company's decision to overlay its TDMA network with a GSM platform, substantially increasing projected capital expenditures and adding considerable execution risk.
Construction risk is not so much of an issue, but Moody's says that marketing two levels of service will cause some confusion that competitors may have some success exploiting.
Another recent negative development was the substantial reduction in net customer adds during the third quarter to 95,000 from more than 700,000 during the second quarter. Cingular's task of adding net new subscribers will remain challenging because, unlike its existing customer base which is primarily local or regional in its usage patterns, new wireless customers are comparing Cingular with the aggressive national plans of Sprint PCS, AT&T Wireless, and to some extent Verizon Wireless.
With its hybrid GSM and TDMA 2G platform and smaller footprint, Cingular may become less competitive on a national scale than some of its competitors.
While Cingular's pending acquisition of spectrum will help fill some important holes in its footprint, Moody's believes Cingular may purchase additional spectrum to complete its U.S. footprint and augment existing markets.
Moody's does not expect Cingular's parents, SBC or BellSouth to contribute any more capital to Cingular. Today, Cingular also awarded its initial GSM contracts to Nokia and Ericsson for the network migration. <<
- Eric - |
