January 17, 2006

Credit ratings firm Standard & Poor's (S&P) is turning a sharp eye on wireline companies and their wireless offspring, citing concerns about wireline businesses' ability to compete with Voice over Internet Protocol (VoIP) providers, particularly cable companies.

Verizon Communications Inc. and its related companies, including Verizon Wireless, saw their long-term credit rating from S&P slip by one notch last week.

Verizon Wireless also recently saw its credit rating from Moody's take one step down, although the change was due to a combination of increased competition and network-upgrade expenses.

S&P also said in a statement that five other telecommunications companies, including CenturyTel Inc., Verizon's Telecomunicaciones de Puetro Rico Inc., Cingular Wireless L.L.C. and both of its parent companies, AT&T Inc. and BellSouth Corp., were on its negative outlook, meaning that their credit ratings may be adjusted downward.

The companies were unlikely to see a downgrade greater than one level, S&P said.

The ratings agency referred specifically to doubts about the wireline companies' fitness to compete with plans by cable operators to actively market VoIP service in 2006 and 2007 as part of multiple-play offerings.

However, S&P also noted that as wired telecom companies begin to offer video service over their own networks, they may regain the upper hand in the long term.

Source: RCR