NEW YORK—Citing plans by TeleCorp PCS Inc. to deploy a “GSM overlay network in the near future” at the same time as its cash flow growth has slowed, Moody’s Investors Service Inc. reaffirmed the speculative grade rating of B2 on the carrier’s $2.92 billion in debt but also changed the outlook to negative from stable.
TeleCorp PCS, headquartered in Arlington, Va., is the parent and holding company for two merged AT&T Wireless’ affiliates, TeleCorp Wireless, which has $1.55 billion in outstanding debt, and Tritel PCS Inc., which owes $1.37 billion. With 800,000 subscribers as of June 30, TeleCorp PCS is the largest affiliate of AT&T Wireless, which is a 23 percent owner.
The affiliate’s association with AT&T Wireless and ownership of nearly 30 MHz of spectrum in all its markets are factors that make the rating agency “comfortable” in affirming TeleCorp PCS’ existing debt rating, said Pamela Stumpp, senior vice president, and Marcus C. Jones, senior analyst, of Moody’s corporate finance group.
However, TeleCorp’s plans for a GSM overlay, coupled with growth slower than Moody’s expected in earnings before interest, taxes, depreciation and amortization, a cash flow measure, have raised a caution flag to the rating agency. For this reason, it downgraded the rating outlook.
“These two factors serve to increase the capital requirements of both issuers (TeleCorp and Tritel), a portion of which TeleCorp may fund with additional debt,” the Moody’s analysts said.
“Offsetting these capital requirements is the remaining $325 million commitment from Lucent Technologies Inc. to purchase subordinated discount notes of TeleCorp PCS.”
