Fitch Rates AT&T's $3B Debt Offering 'A'; Outlook Stable

Fitch Ratings has assigned an 'A' rating to AT&T's $3 billion three-tranche debt offering. The proceeds from the offering are expected to be used for general corporate purposes. The Rating Outlook is Stable.

The rating incorporates Fitch's expectations that AT&T has the financial flexibility to maintain leverage in a range appropriate for the current rating category. Fitch expects AT&T to maintain credit-protection metrics, in the form of debt-to-EBITDA, of 1.5 times (x) or lower over Fitch's rating horizon. Leverage was slightly higher than this level at the end of the first quarter of 2008, but is expected to be within AT&T's target level by the end of the year through a combination of debt reduction and EBITDA growth.

Fitch had previously noted that AT&T would have borrowing needs in 2008, owing to payments in April 2008 associated with the Federal Communications Commission's recently completed 700 MHz spectrum auction where AT&T's winning bids totaled approximately $6.6 billion, the $2.5 billion spectrum purchase from Aloha Partners, L.P. in February 2008 for the acquisition of additional 700 MHz spectrum, and to make further share repurchases.

AT&T's ratings also reflect its diversified revenue mix, its significant size and economies of scale as the largest wireline, wireless and enterprise services operator in the United States, as well as Fitch's expectation that AT&T will benefit from continued growth in wireless operating cash flows. AT&T's revenue mix is diversified among three key lines of business. In the first quarter of 2008, wireless segment revenues grew 18.3% while generating approximately 38% of total segment revenues and the enterprise line of business, which returned to growth in 2007, produced more than 15% of total segment revenues. Both the wireless segment and the enterprise line of business are expected to continue to grow revenues in 2008. The consumer segment, facing rising competition from cable operators, continued wireless substitution and a weakening economic environment, approximated 18% of the company's total segment revenues in 2007.

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Posted to the site on 9th May 2008

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