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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: waitwatchwander who wrote (32723)	2/21/2003 3:15:30 PM
From: Cooters	Respond to of 197341

Fitch cuts Cingular Wireless ratings biz.yahoo.com Fitch cuts Cingular Wireless ratings Friday February 21, 12:05 pm ET (The following statement was released by the rating agency) NEW YORK, Feb 21 - Fitch Ratings (News) has lowered the rating on Cingular Wireless' senior unsecured long-term debt to 'A-' from 'A'. The short-term rating assigned to Cingular's commercial paper program has been downgraded to 'F2' from 'F1'. The Rating Outlook remains Negative. The rating downgrade is reflective of Fitch's concern over the deterioration associated with Cingular's wireless business due to several operational and strategic issues. While Cingular has offset some of the operational impacts through cost containment initiatives, given the challenges within the wireless industry and the deployment issues associated with the GSM/GPRS overlay, Fitch believes pressure will remain on revenue growth and EBITDA over the near term. However, the low senior debt leverage and the strong strategic ties to its highly rated parents, SBC Communications (SBC) and BellSouth (BLS), are important considerations, which lend support to the rating. On a stand-alone basis, Cingular's long-term rating would likely approximate 'BBB'. Cingular continues to struggle with issues stemming from the integration of SBC and BellSouth as well as competitive challenges over the last year, which led to the departure of Cingular's CEO last November. Cingular lost significant market momentum in the fourth quarter of 2002 with its share of gross additions among the top six nationwide operators falling from approximately 20% at the beginning of 2002 to 14% by year-end. New management is providing market regions with greater flexibility to target specific market requirements. Despite these initiatives, Fitch remains concerned whether Cingular might find it difficult to generate positive momentum in the fiercely competitive wireless marketplace. With postpaid digital net additions materially below expectations for the last two quarters, Cingular must improve postpaid additions close to past benchmark levels to ensure future profitable growth. Additionally, over the past six quarters, Cingular has struggled with net additions due specifically to two subscriber groups, the analog and reseller segment, which lost approximately one million subscribers in 2002. The reseller segment, particularly due to WorldCom's subscribers, was an incrementally profitable opportunity for Cingular due to negligible acquisition and customer service costs. In 2003, Fitch believes churn will likely remain higher than 2002 levels due to potential issues associated with the TDMA/GSM overlay, continued erosion of its 1.4 million analog subscriber base and higher customer churn associated with the reseller/prepaid segment. Targeted retention efforts should help in combating churn. Cingular's challenges are further exacerbated by declining industry fundamentals and a capital-intensive GSM overlay. The company is in the midst of deploying its next generation technology but is behind the other nationwide operators, which have materially completed their infrastructure upgrades. Margins will remain pressured as Cingular completes the technology migration. In order to see improved results in 2003 and beyond, Cingular must better capture the natural synergies associated with its parents and leverage the assets between the companies to capture lost sales opportunities. While Cingular's business operations are challenged, the company has several strengths that should be considered. Cingular is the second largest wireless operator in the U.S. with 22 million subscribers, which provides significant scale of operations and generates approximately $4.4 billion of EBITDA annually. The intercompany loans are subordinate to the senior debt giving Cingular financial flexibility and implying a senior leverage ratio of 0.7 times (x). Its parents are financially strong with Fitch rating SBC and BellSouth 'AA-'/Negative and 'A+'/Stable, respectively. Nevertheless, while SBC and BellSouth have taken steps to reduce their financial risk through debt reduction, the parents have not done so for Cingular even though its business and operational risk has increased materially over the past two years. Fitch notes that Cingular's credit metrics have remained relatively stable during this period despite heavy capital investment. The Rating Outlook remains Negative based on the recent trends in operating performance, technology platform concerns and competitive issues. If Cingular is not successful in stabilizing operational results and continued deterioration occurs in operating performance during 2003, a further downgrade is likely.