The S&P Looks More Favorably on AT&T and Wireless Tower Operators

Includes: AMT, CCI, SBAC, T
by: Research Recap

Standard & Poor’s Ratings Services is warming to AT&T Inc.’s (NYSE:T) (A-/Stable/A-1) planned acquisition of wireless carrier T-Mobile USA and also is positive on US wireless tower operators.

In Credit FAQ: A Closer Look At AT&T’s $39B Deal To Acquire T-Mobile USA, Standard & Poor’s says that

although we expect AT&T’s financial risk profile to weaken modestly, including adjusted leverage increasing to about 2.9x from 2.5x because of the transaction, we now view the business risk profile more favorably given the potential benefits of combining the two entities.

We also believe that the acquisition will bolster AT&T’s wireless network infrastructure and spectrum position, the latter of which is particularly important because the company plans to deploy Long-Term Evolution (LTE) as its fourth-generation (4G) wireless technology over the next several years. - Standard & Poor’s credit analyst Allyn Arden.

Additionally, the fact that both carriers use the same wireless technology Global System for Mobile Communications [GSM] partially mitigates the potential for execution missteps during the integration process.

Booth Moody’s and Fitch Ratings say the deal is a credit negative of AT&T.

A related Credit FAQ Key Credit Issues For U.S. Wireless Tower Operators discusses American Tower Corp.(NYSE:AMT) (rated ‘BB+’ with a stable rating outlook), Crown Castle International Corp. (NYSE:CCI) (B+/Stable/–), SBA Communications Corp . (NASDAQ:SBAC) (B+/Stable/–), and TowerCo II Holdings LLC (B/Stable/–).

Our assessment of a strong business risk profile for three of the four rated communications tower operators reflects sector fundamentals, including long-term contracts with high renewal rates with large wireless carriers providing predictable cash flows...

said Standard & Poor’s credit analyst Catherine Cosentino.

All of the tower operators have aggressive financial policies that incorporate our expectation for ongoing significant levels of stock repurchases or shareholder cash distributions.