Thursday, September 1, 2016

Fantastic good news for AT&T. Moody's changed their outlook from negative to stable. This was the one thing I was worried about but now everything is OK.

Rating Action:
Moody's affirms AT&T's Baa1 rating; changes outlook to stable
Global Credit Research - 29 Aug 2016

New York, August 29, 2016 -- Moody's Investors Service, ("Moody's") has affirmed the Baa1 senior unsecured rating and Prime-2 commercial paper rating of AT&T Inc. ("AT&T" or "the company") and changed the outlook to stable from negative based on its improved fundamental credit profile. The key drivers of the outlook change are AT&T's progress with and outlook for cost savings benefits and a more stable wireless subscriber base.

The stable outlook reflects Moody's view that AT&T will continue to grow EBITDA and improve margins such that leverage declines from 3.1x (Moody's adjusted) as of June 30 to below 3x within 12-18 months. Moody's projects AT&T's leverage will remain near or slightly above 3.0x (Moody's adjusted) for 2016, the limit identified for its Baa1 rating, but anticipates leverage to decline as synergies and cost savings initiatives become fully realized. AT&T's wireless subscriber base has stabilized as it continues to grow its Cricket prepaid brand faster than it loses post-paid feature phone subscribers. Branded phone subscribers have grown each of the last three quarters, despite intense competition. These positives are offset by Moody's belief that AT&T's cash flows will continue to be pressured as the company requires additional capital to support ongoing investments. But, the majority of the negative cash flow effect of equipment installment plans (EIPs) is behind AT&T and its current spectrum holdings allow it to be selective in the ongoing incentive auction.

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