Telcos’ credit ratings burn

Over three-quarters of US telecommunications and cable television companies have non-investment grade corporate credit ratings, according to a report released today by Standard & Poor's Ratings Services.

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By  Richard Brown Published  August 7, 2002

Of the 68 firms included in the report, 52 are rated 'BB+' or lower, while 16 are regarded as investment grade.

‘The US Telecom & Cable TV Ratings Report Card’ reveals the issues affecting credit quality across the industry and embraces cable TV companies, diversified telecommunications companies, wireless companies, competitive local exchange carriers (CLECs), and rural local exchange carriers (RLECs).

Standard & Poor's credit analyst Richard Siderman, managing director for telecommunications and cable, remarks: “The challenges faced by the telecommunications and cable TV industries are daunting, particularly with the fallout from problems experienced by WorldCom and Adelphia Communications further eroding investor confidence in these sectors. Standard & Poor's sees the outlook for the balance of the year as generally negative.”

Overall, in addition to the low percentage of investment grade ratings, 34 of the 68 issuers have negative ratings outlooks, while only two have positive outlooks, indicating further downward pressure on telecom and cable TV ratings.

Siderman adds: “However, it is important not to paint all issuers with the same brush. Many telecom companies maintain strong market positions in solid business segments despite the pessimism overhanging this industry. This is particularly true of the regional Bell operating companies, three of which are rated 'A+' or higher.”

Among the 16 issuers in the report with investment grade ratings, SBC Communications has the highest rating of 'AA-', indicating a very strong capacity to meet financial commitments. Four companies are rated 'A+', two are 'A', one is 'A-', two are 'BBB+', five are 'BBB', and one is 'BBB-'.

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