Subject: [NEXTEL-1] S&P raises Nextel Communications corp credit rating

From: [email-masked]
Date: Tue, 22 Jul 2003 15:04:52 -0400

http://biz.yahoo.com/rf/030721/telecoms_nextel_s_p_1.html

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Reuters

S&P raises Nextel Communications corp credit rating
Monday July 21, 5:13 pm ET

(The following statement was released by the rating agency)
NEW YORK, July 21 - Standard & Poor's Ratings Services
said today that it raised its corporate credit rating on
Reston, Va.-based wireless carrier Nextel Communications Inc.
to 'BB-' from 'B+'.

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In addition, Standard & Poor's assigned its 'B+' rating to
the company's proposed $1 billion senior serial redeemable
notes due 2015 to be publicly offered. The proposed new notes
are rated one notch below the corporate credit rating because
of the amount of material obligations that rank ahead of them.
Among these are about $4.5 billion of secured bank debt and
about $2.5 billion of current liabilities at various
subsidiaries. Proceeds from the proposed notes will be used to
retire the 10.65% senior redeemable discount notes due 2007
and redeem the 11.125% series E exchangeable preferred stock.
The outlook is stable. At the end of second quarter 2003,
Nextel had about $11.8 billion of debt.
"The upgrade reflects Standard & Poor's more favorable
assessment of the company's intermediate term competitiveness
and, secondarily, an improvement in financial leverage," said
credit analyst Michael Tsao.
Based on an assessment of Nextel's network and established
niche in the business sector, Standard & Poor's does not
expect Nextel to be materially challenged by competitors
through mid-2005. Nextel has a proven overbuild frame relay
network that is optimized for push-to-talk (PTT) calls. Because
competitors have networks that were not designed with PTT in
mind, competing PTT offerings are unlikely to initially match
Nextel's service quality in the areas of latency, reliability,
and multi-party calling capability.
Nextel's sizable subscriber base in several industries
(i.e., construction, services, and wholesale) also mitigates
the impact of competition. Subscribers in these industries
have for years used DirectConnect as a convenient and
cost-efficient way to keep in touch with each other. Because
switching to a competing service would entail loss of access to
this network, a Nextel subscriber may find it difficult to
justify switching to a competitor. With no effective
competition expected, any potentially negative impact from
wireless number portability also likely will be limited.
Given that some of Nextel's competitors are substantially
better capitalized and are working on PTT technology with the
cooperation of several major equipment vendors, Nextel could
face meaningful competition starting in late-2005 to
early-2006. Nextel also has strengthened its balance sheet in
the past year. The combination of solid EBITDA growth and
privately negotiated debt-for-equity exchanges helped the
company to lower debt-to-annualized EBITDA to about 2.9x in
second quarter 2003 from about 4.1x in the same quarter a year
ago. Given that Nextel is projected to perform solidly in the
next two years and that management remains committed to further
deleverage the balance sheet, Nextel's financial risk profile
could moderately improve.
Nextel had about $3.7 billion (about $2.4 billion of cash
and $1.3 billion of bank credit facility availability) of
liquidity at the end of second quarter 2003. This level of
liquidity, when combined with such factors as moderate free
cash flow prospect, no significant debt maturities until 2007,
and adequate headroom under bank covenants, should provide the
company with adequate financial flexibility through 2006.
Complete ratings information is available to subscribers of
RatingsDirect, Standard & Poor's Web-based credit analysis
system, at www.ratingsdirect.com. All ratings affected by this
rating action can be found on Standard & Poor's Web site at
www.standardandpoors.com; under Credit Ratings in the left
navigation bar, select Credit Ratings Actions.

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