Modest Credit Effects for U.S. Wireless Operators Following 700 MHz Auction

Fitch Ratings says that it expects the recent 700 MHz auction will have only modest credit implications for wireless operators. Verizon Communications and AT&T have significant capacity and financial flexibility to absorb the approximately $18.5 billion of 700 MHz spectrum purchased by the two companies. Other well-capitalized, smaller operators, with strong balance sheets and good free cash flow prospects, should be in a good position to fund future build-outs.

This could enable important future revenue growth opportunities, as these smaller companies have faced significant competitive operational pressures in the past due to access line erosion.

The Federal Communications Commission (FCC) Auction 73 concluded on Mar. 18, 2008, with overall bidding much greater than Fitch's initial expectations. Fitch views the acquisition of 700 MHz spectrum as a key strategy for operators, as trends in broadband mobility and the changing state of how people use their mobile devices are spurring innovative applications and services that should drive future growth in wireless broadband data.

The full report is available on the Fitch website (registration required).

Posted to the site on 2nd April 2008