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Fitch Places Sprint Local Subsidiaries on Rating Watch Negative

Posted on: Wednesday, 15 December 2004, 12:00 CST

Fitch has placed the ratings for the following local subsidiaries of Sprint Corporation on Rating Watch Negative:

Carolina Telephone and Telegraph Company (CTT)

-- Senior unsecured 'BBB+'.

United Telephone Company of Ohio (UTOH)

-- First mortgage bonds 'A-'.

Sprint Florida, Inc. (SFL)

-- First mortgage bonds 'A-'

Fitch's action follows the announcement by Sprint Corporation and Nextel Communications, Inc. of their intent to combine in a merger of equals. Each of CTT, UTOH, and SFL are indirect, wholly owned subsidiaries of Sprint Corporation.

Following the completion of the merger, Sprint Nextel intends to spin off Sprint's local telephone division (LTD) structured as a tax free dividend to the shareholders of Sprint Nextel and to add leverage to the spun off entity. Fitch's rating action reflects our expectation that the capitalization structure and credit protection metrics of the new local telecommunications business will not be consistent with the current ratings of CTT, UTOH, and SFL.

Sprint's LTD business generated approximately $6.0 billion of revenues and $2.9 billion of EBITDA during the LTM period ended Sept. 30, 2004. Fitch anticipates that the spun off local telecommunications entity will enter into agreements with Sprint Nextel related to mobile and long-distance network services and certain transition and corporate support functions.

In resolving the Rating Watch, Fitch will consider the final capital structure and the prospective operating performance of the new local telecommunications company.

Source: Business Wire

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