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Moody's Raises Investment Rating for Sprint from Negative to Stable

Posted on: Monday, 16 June 2003, 06:00 CDT

Jun. 17--Moody's Investors Service on Monday raised its investment outlook for Sprint Corp. to stable from negative, citing the Overland Park company's improved cash flow and reduced debt.

Moody's also affirmed its long-term debt rating of Baa3, the lowest investment grade. The improved outlook made it less likely the firm would lower Sprint's debt rating to junk.

Sprint said it was pleased by Moody's action.

"Given the improvements we've made in the last year, we believe this action was warranted and we plan to continue to work on improving our credit rating," said Melinda Tiemeyer, a company spokeswoman.

In a news release, Moody's said its rating reflected "significant and stable cash flows" from the company's local phone business; expectations of continued revenue growth and margin improvement in Sprint's wireless unit; successful cost containment in the Global Markets division; continued debt reduction; and a "solid liquidity profile."

Moody's also said its rating reflected improvements in corporate governance implemented earlier this year and the expectation that Sprint would not take action to bail out its financially troubled wireless affiliates.

The firm acknowledged "fundamental challenges" facing Sprint, including the struggling long-distance industry and an "intensely competitive" wireless sector.

Moody's also said the board's decision to oust Chief Executive William T. Esrey and President Ronald T. LeMay created "a serious disruption to the strategic operations of the company." The legal battle the company had to wage to hire Gary Forsee, Esrey's replacement, away from BellSouth Corp. intensified the situation, Moody's said.

The firm expressed optimism about the corporate governance reforms Sprint had adopted in recent months but said it would withhold judgment until it saw "demonstrated and sustained progress." Of particular concern to investors, Moody's said, is the company's response to "areas of significant investor concern, such as executive compensation and auditor independence."

Shares of FON, which tracks Sprint's land-line local and long-distance operations, closed at $14.34 Monday, up 37 cents. PCS, which tracks Sprint's wireless business, closed at $5.77, up 14 cents.

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(c) 2003, The Kansas City Star, Mo. Distributed by Knight Ridder/Tribune Business News.

FON, PCS,

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