NEW YORK-Moody’s Investors Service Inc. has downgraded its long-term investment grade ratings
of AT&T Corp. debt and preferred stock while upgrading those of cable television company Tele-Communications
Inc., which AT&T has acquired.
The rating changes affect about $18 billion in securities issued by the two carriers,
with AT&T’s ratings dropping a peg to A1 from Aa3, and TCI’s rising by four notches to A2 from Baa3.
“The
downgrade of AT&T reflects the execution challenges facing the company as it attacks new market opportunities, the
sizable capital spending required to achieve its strategic goals, the significant increase in debt that will result from this
acquisition and a competitive environment that is increasing in intensity for each of its service offerings,” said
Robert Konefal, managing director, and Robert Ray, senior vice president, of Moody’s corporate finance
group.
They noted that AT&T’s debt load is expected to increase to more than $30 billion after it closes its TCI
purchase, but that AT&T also expects to repurchase about $10 billion of its common stock by the year’s
end.
“The rating also considers the significant cash generating capability of the combined enterprise, strategic
clarity embedded by its use of cable networks for access to the ‘last mile,’ the strong competitive positions of its long
distance, wireless and video units, the success of management in reinvigorating AT&T and achieving targets they’ve
[set] and the use of equity in [AT&T’s] acquisitions,” Konefal and Ray said.
