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Fitch Ratings Affirms ALLTEL's 'A' Rating

Posted on: Friday, 18 November 2005, 15:00 CST

Fitch Ratings affirms the 'A' rating assigned to ALLTEL's debt and the 'F1' rating to ALLTEL's commercial paper following the announcement that ALLTEL has reached an agreement to purchase approximately 400,000 wireless subscribers from Midwest Wireless for $1.075 billion in cash. The Rating Outlook is Stable.

The affirmation reflects the strong free cash flow, the expected $1.7 billion in net proceeds from international asset sales and financial discipline following past acquisitions. Fitch expects ALLTEL to receive approximately $500 million in after tax proceeds from the sale of the Ireland wireless operations during the fourth quarter of 2005 and $1.2 billion in after tax proceeds from the sale of the Austria wireless operations during the first quarter of 2006 to finance the transaction. ALLTEL expects this transaction to close during the first half of 2006. Debt-to-EBITDA for the last 12 months (LTM) was 1.7 times (x). Credit protection measures should improve in 2006 and thereafter due to ALLTEL's significant cash generation abilities.

In acquiring Midwest Wireless, ALLTEL will gain approximately 400,000 wireless subscribers, primarily postpaid, in three mid-western states that are adjacent to existing ALLTEL wireless properties. Midwest Wireless' covers approximately 1.9 million POPs, and the company holds PCS licenses for 2 million additional POPs, including some overlap of Midwest's existing 850 MHz network. This transaction also incrementally improves ALLTEL's position and scale as a leading roaming partner for each of the nations' top four wireless carriers since the national carriers do not have much economic incentive to build out in sparsely populated rural markets and are more likely to devote their capital to high-speed wireless data deployment in urban areas.

Fitch believes ALLTEL will continue to focus on pursuing additional wireless acquisitions in tier two and tier three markets over time. Fitch believes ALLTEL's record of pursuing built-out wireless operations versus start-up greenfield deployments and its healthy FCF prospects mitigate the acquisition risk for moderately sized transactions. Furthermore, the company has effectively managed its balance sheet risk in recent years by integrating over $12 billion of acquisitions without affecting its credit profile.

ALLTEL maintains a $1.5 billion bank credit facility that matures in 2009 and on Aug. 1, 2005, ALLTEL entered into an additional $700 million, 364-day revolving credit agreement that expires on July 31, 2006. As of Sept. 30, 2005, ALLTEL had $928 million outstanding under its commercial paper (CP) program. ALLTEL also has approximately $138 million in current maturities of long-term debt. Last 12 months FCF was $775 million.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Source: Business Wire

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