Technology

Fitch Confirms ‘A’ Rating For AT&T

For AT&T the past few weeks have not been the best, but yet not the worst. After being warned it will not succeed going over the FCC’s head to approve the deal with T-Mobile, AT&T had to put its weapons down and give up on its plans. As a result Fitch Ratings got worried investors might be affected, but confirms ‘A’ rating for AT&T.

Fitch Ratings has confirmed a stable outlook for AT&T and affirmed the ‘A’ Issuer Default Ratings (IDRs) and debt security ratings of the company. On March 21, 2011 the ratings have been previously placed under Rating Watch Negative after AT&T announced a definitive agreement to buy T-Mobile USA in a $39 billion transaction. However, recent events made AT&T reconsider the deal and it finally gave up.

On Thursday, the rating agency declared that the company’s failure to but T-Mobile USA could pose risks for bondholders. Fitch explains: “Without the benefits of the transaction synergies, AT&T could increase company stock buyback beyond moderate levels”.

In addition, the agency has a “negative view of uncertainty regarding AT&T’s next move to acquire wireless spectrum and of breakup fees. AT&T’s need to enhance its capacity could lead to a rise in capital spending”.

But despite the $4 billion breakup fee the company has to pay T-Mobile, as well as an unfavorable collaboration with the authorities, Fitch believes AT&T has enough financial flexibility to enable it to maintain leverage in a 1.5 times to 1.7x range appropriate for the current stable rating category. Analysts with Fitch also believe that the company can maintain its stable rating due to diversified revenue mix, significant size and economies of scale being the largest telecommunications operator in the U.S.

Analysts from Reuters say that AT&T may now look to Dish Network Corp or Clearwire Corp for its next deal. Seemingly Dish is expected to buy a large packet of airwaves, while Clearwire needs funding and holds unused amounts of spectrum.

UBS analyst, John Hodulik, points out: “Clearwire and DISH are likely to be seen as the main beneficiaries given their strong existing and prospective spectrum holdings”.

However, according to Fitch, AT&T has another two years before having to deal with the imperative need to broaden its spectrum.

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Eli Wads is one of our expert authors in technology and business fields.Currently living in San Marino, Eli has graduated at Southwestern Academy with a Bachelor Degree in business in 2008. Contact him by dropping him an e-mail at Eli.Wads@dailygossip.org

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