NEW YORK-Moody’s Investor Services downgraded its senior unsecured long-term debt ratings of Verizon Communications Inc. from A1 to A2 and the long-term debt ratings of Verizon Wireless Inc. from A2 to A3, but upgraded its outlook from negative to stable.
The ratings agency cited concerns over rapidly expanding competition and technology substitution eroding the free cash flow capacity of both Verizon and Verizon Wireless for the downgrades.
Moody’s also noted Verizon Wireless would eventually need to acquire additional spectrum in some of its larger markets to continue to support growth, though it acknowledged the carrier’s use of CDMA-based technology on its network would prove more spectrally and cost efficient compared with the TDMA to GSM network upgrade paths some of Verizon Wireless’ competitors are currently implementing.
Verizon said it was disappointed with the downgrade, but noted the revised long-term stable outlook and continued A rating reflected on its recent debt reduction plans and the eliminated exposure to the NextWave Telecom Inc. spectrum licenses.
