Subject: [NEXTEL-1] Yahoo! Finance Story - US CREDIT-Nextel may be due for a ratings upgrade

From: Yahoo! Finance <[email-masked]>
Date: Fri, 20 Feb 2004 03:21:50 PST

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US CREDIT-Nextel may be due for a ratings upgrade

http://biz.yahoo.com/rf/040219/markets_credit_1.html

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Reuters

US CREDIT-Nextel may be due for a ratings upgrade
Thursday February 19, 6:35 pm ET

By Eric Burroughs

NEW YORK, Feb 19 (Reuters) - Stockholders may not have been
thrilled by Nextel Communications'(NasdaqNM:NXTL - News) plans to beef up
spending on its network, but the wireless company's solid
fourth-quarter results may pave the way for more credit ratings
upgrades.
Revenue rose to $3.01 billion from $2.33 billion a year
earlier and added 553,000 new subscribers during the quarter,
surpassing its forecasts.
This year, it expects to add 1.8 million subscribers, while
customer turnover remains low and Nextel rakes in some of the
highest average sales per customer in the industry.
The major ratings agencies already are poised to nudge up
Nextel and have the company on a positive outlook. But both
Standard & Poor's and Moody's Investors Service (News - Websites) rank it at the
upper end of junk status, at BB-minus and Ba3, respectively.
After the earnings news on Thursday, independent ratings
agency Egan-Jones Ratings Co. pushed up Nextel higher into
investment-grade territory at triple-B with a stable outlook.
Yet in the credit derivatives market, Nextel's spreads have
not reached levels of telecommunications companies with lower
investment-grade ratings. Nextel's stock slid nearly 4 percent
on the news it was spending more than originally forecast to
expand its networks.
Egan-Jones said in a report that with little public debt
due until 2007 and its technological advances, "we would not be
surprised to see Nextel combine with one of the majors."
The credit profile of Nextel has improved noticeably, as
Egan-Jones pointed out. Operating income before depreciation
and amortization was up to $4.2 billion from $3.1 billion,
while interest expense was $844 million.
Nextel has also successfully cut down on leverage. From
March 2002 through December last year, Nextel's debt after
subtracting cash fell by more than $5 billion to $8 billion.
Default protection on Nextel over five years traded around
138 basis points, little changed during the session. That means
it costs $138,000 a year to purchase $10 million of default
protection on Nextel's debt.
But other telecom companies like Sprint Corp.(NYSE:FON - News), with
a Baa3 rating from Moody's -- the very bottom of
investment-grade -- with a stable outlook trade better than
Nextel in the default swaps market. Sprint's five-year spread
traders around 100 basis points, according to data from GFI
Group.

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