NEW YORK-Citing potential bank covenants and increased roaming revenue pressure following the pending merger between Cingular Wireless L.L.C. and AT&T Wireless Services Inc., Standard & Poor’s Ratings Services placed its ratings for Dobson Communications Corp. and American Cellular Corp. on CreditWatch with negative implications.
S&P noted that Dobson’s lower than anticipated fourth quarter 2003 roaming revenues comprised 25 percent of the carriers total revenues and were adversely effected by slower growth in roaming minutes of use from its largest roaming partners AWS. Dobson is also expected to see its roaming yield drop “significantly” this year from the 20 cents per minute average last year due to step-downs in the existing roaming contracts.
The ratings agency added that the lower roaming revenues impacted Dobson’s EBITDA margin, which declined from 43 percent during the fourth quarter of 2002 to 38 percent last year, and that the carrier reduced its EBITDA guidance for 2004 that could result in a breach of its consolidated debt leverage covenant under its current bank credit facility before the end of the year.
Dobson’s stock has dropped more than 40 percent since the carrier reported weaker than expected fourth quarter results last month.
