|By Business Wire||
|February 8, 2013 11:23 AM EST||
Fitch Ratings has assigned an 'A' rating to AT&T Inc.'s (AT&T) offering of $2.25 billion of senior unsecured notes due 2016. The offering consists of $1 billion 0.9% fixed rate notes and $1.25 billion of floating rate notes. Proceeds are expected to be used for general corporate purposes. AT&T's Issuer Default rating (IDR) is 'A', and the Rating Outlook is Negative.
Key Rating Drivers
The rating is supported by:
--AT&T's financial flexibility;
--The company's diversified revenue mix;
--Its significant size and economies of scale as the largest telecommunications operator in the U.S.; and
--Fitch's expectation that AT&T will benefit from continued growth in wireless operating cash flows.
The following concern is embedded in the rating:
--The Negative Outlook reflects Fitch's expectation that AT&T's net leverage is likely to move up to a 1.8x upper boundary for leverage, which represents a notable increase from the 1.5x level over the past couple of years.
AT&T's increased leverage is expected to arise from the combined effects of a moderate increase in wireless and wireline capital spending and the continuation of the company's share repurchase program as announced in early November 2012. Prospective leverage expectations are subject to uncertainty caused by the rate of stock repurchases, actual capital expenditure levels, possible acquisitions (such as longer-term spectrum needs) and asset divestitures (of which there are none in Fitch's expectations).
In January 2013, AT&T announced two transactions to improve its wireless spectrum position. Subject to regulatory approval, AT&T will acquire certain rural wireless assets and spectrum from Atlantic Tele-Network, Inc. for $780 million in cash. Additionally, the company has a pending transaction to acquire certain B-block 700 MHz licenses from Verizon Wireless for $1.9 billion in cash and certain Advanced Wireless Services spectrum licenses in several markets. In Fitch's view, the proposed acquisitions are strategically sound as they are supportive of wireless growth. The transactions, if completed, are not currently expected to push the company's credit metrics above the 1.8x net leverage level.
For 2013, Fitch expects AT&T's gross leverage to approximate 1.7x, flat with 2012 (excluding the actuarial losses on its benefit plans). Net leverage in 2012 was 1.58x. Over the next few years, AT&T's continuation of stock repurchases will require some borrowing as repurchases will be above FCF levels. Leverage will rise, with net leverage expected to peak near a 1.8x upper boundary in 2014. Thereafter, leverage is expected to decline over time.
In Fitch's view, liquidity is strong and provided by the company's FCF; additional financial flexibility is provided by availability on the company's revolving credit facilities. At Dec. 31, 2012, total debt outstanding was approximately $69.8 billion, a $5 billion rise from the $64.8 billion outstanding at the end of 2011. Of the total amount outstanding, $3.5 billion consists of debt due within one year, including debt that can be put to the company. At Dec. 31, 2012, cash amounted to $4.9 billion, and for 2012, AT&T produced $9.2 billion in FCF (net cash provided by operating activities less capital expenditures and dividends), an amount short of the $12.8 billion in stock repurchases during the year. Fitch expects FCF to decline from $9.2 billion in 2012 to $4 billion annually, on average, over the next three years.
At end of 2012, the company did not have any drawings on its revolving credit facilities. The principal financial covenant for the 2016 and 2017 facilities requires debt to EBITDA, as defined, to be no more than 3x.
Relative to the company's expected free cash flows, upcoming debt maturities are manageable. In 2013, debt maturities approximate $3.4 billion, including approximately $1.6 billion in debt that may be put to the company. Maturities amount to $3.8 billion in 2014.
The Rating Outlook could be revised to Stable if:
--The company steadily manages net leverage down from Fitch's expected peak just under 1.8x in 2014;
--Fitch believes leverage will not reach peak levels as a result of the outcome of the following factors, including, but not limited to, stronger operating results, lower capital spending, and the effect of any acquisitions or divestitures that may occur.
A negative rating action could occur if:
--Net leverage remains above (or is expected to remain above) the 1.8x level for several quarters, including expected leverage resulting from a material transaction;
--Fitch believes management has weakened its commitment to returning to, or operating longer-term with, leverage at a level more reflective of the rating.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Rating Telecom Companies - Sector Credit Factors' (Aug. 9, 2012).
Applicable Criteria and Related Research:
Corporate Rating Methodology
Rating Telecom Companies
Why does developer experience matters, what makes for a great developer experience and what is the relationship between developer experience and the broader field of user experience? Software developers are gaining more influence over the purchase decisions of technologies with which they must build on and with which they must integrate. For example, the success of Amazon Web Services, Heroku and MongoDB has been driven primarily by individual software developers choosing to use these tools, ra...
May. 22, 2015 11:00 AM EDT Reads: 1,590
Software Defined Storage provides many benefits for customers including agility, flexibility, faster adoption of new technology and cost effectiveness. However, for IT organizations it can be challenging and complex to build your Enterprise Grade Storage from software. In his session at Cloud Expo, Paul Turner, CMO at Cloudian, looked at the new Original Design Manufacturer (ODM) market and how it is changing the storage world. Now Software Defined Storage companies can build Enterprise grade ...
May. 22, 2015 11:00 AM EDT Reads: 4,269
SYS-CON Events announced today that EnterpriseDB (EDB), the leading worldwide provider of enterprise-class Postgres products and database compatibility solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. EDB is the largest provider of Postgres software and services that provides enterprise-class performance and scalability and the open source freedom to divert budget from more costly traditiona...
May. 22, 2015 11:00 AM EDT Reads: 1,298
Fundamentally, SDN is still mostly about network plumbing. While plumbing may be useful to tinker with, what you can do with your plumbing is far more intriguing. A rigid interpretation of SDN confines it to Layers 2 and 3, and that's reasonable. But SDN opens opportunities for novel constructions in Layers 4 to 7 that solve real operational problems in data centers. "Data center," in fact, might become anachronistic - data is everywhere, constantly on the move, seemingly always overflowing. Net...
May. 22, 2015 11:00 AM EDT Reads: 4,582
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, a...
May. 22, 2015 11:00 AM EDT Reads: 5,999
T-Mobile has been transforming the wireless industry with its “Uncarrier” initiatives. Today as T-Mobile’s IT organization works to transform itself in a like manner, technical foundations built over the last couple of years are now key to their drive for more Agile delivery practices. In his session at DevOps Summit, Martin Krienke, Sr Development Manager at T-Mobile, will discuss where they started their Continuous Delivery journey, where they are today, and where they are going in an effort ...
May. 22, 2015 10:30 AM EDT Reads: 778
Gartner predicts that the bulk of new IT spending by 2016 will be for cloud platforms and applications and that nearly half of large enterprises will have cloud deployments by the end of 2017. The benefits of the cloud may be clear for applications that can tolerate brief periods of downtime, but for critical applications like SQL Server, Oracle and SAP, companies need a strategy for HA and DR protection. While traditional SAN-based clusters are not possible in these environments, SANless cluste...
May. 22, 2015 10:15 AM EDT Reads: 1,240
In a recent research, analyst firm IDC found that the average cost of a critical application failure is $500,000 to $1 million per hour and the average total cost of unplanned application downtime is $1.25 billion to $2.5 billion per year for Fortune 1000 companies. In addition to the findings on the cost of the downtime, the research also highlighted best practices for development, testing, application support, infrastructure, and operations teams.
May. 22, 2015 10:01 AM EDT Reads: 311
The OpenStack cloud operating system includes Trove, a database abstraction layer. Rather than applications connecting directly to a specific type of database, they connect to Trove, which in turn connects to one or more specific databases. One target database is Postgres Plus Cloud Database, which includes its own RESTful API. Trove was originally developed around MySQL, whose interfaces are significantly less complicated than those of the Postgres cloud database. In his session at 16th Cloud...
May. 22, 2015 10:00 AM EDT Reads: 656
IoT is still a vague buzzword for many people. In his session at @ThingsExpo, Mike Kavis, Vice President & Principal Cloud Architect at Cloud Technology Partners, discussed the business value of IoT that goes far beyond the general public's perception that IoT is all about wearables and home consumer services. He also discussed how IoT is perceived by investors and how venture capitalist access this space. Other topics discussed were barriers to success, what is new, what is old, and what th...
May. 22, 2015 10:00 AM EDT Reads: 7,454
To manage complex web services with lots of calls to the cloud, many businesses have invested in Application Performance Management (APM) and Network Performance Management (NPM) tools. Together APM and NPM tools are essential aids in improving a business's infrastructure required to support an effective web experience... but they are missing a critical component - Internet visibility. Internet connectivity has always played a role in customer access to web presence, but in the past few years u...
May. 22, 2015 10:00 AM EDT Reads: 5,407
There's Big Data, then there's really Big Data from the Internet of Things. IoT is evolving to include many data possibilities like new types of event, log and network data. The volumes are enormous, generating tens of billions of logs per day, which raise data challenges. Early IoT deployments are relying heavily on both the cloud and managed service providers to navigate these challenges. In her session at Big Data Expo®, Hannah Smalltree, Director at Treasure Data, discussed how IoT, Big D...
May. 22, 2015 10:00 AM EDT Reads: 3,791
Buzzword alert: Microservices and IoT at a DevOps conference? What could possibly go wrong? In this Power Panel at DevOps Summit, moderated by Jason Bloomberg, the leading expert on architecting agility for the enterprise and president of Intellyx, panelists will peel away the buzz and discuss the important architectural principles behind implementing IoT solutions for the enterprise. As remote IoT devices and sensors become increasingly intelligent, they become part of our distributed cloud en...
May. 22, 2015 10:00 AM EDT Reads: 1,588
SYS-CON Events announced today that the "First Containers & Microservices Conference" will take place June 9-11, 2015, at the Javits Center in New York City. The “Second Containers & Microservices Conference” will take place November 3-5, 2015, at Santa Clara Convention Center, Santa Clara, CA. Containers and microservices have become topics of intense interest throughout the cloud developer and enterprise IT communities.
May. 22, 2015 10:00 AM EDT Reads: 1,688
Disruptive macro trends in technology are impacting and dramatically changing the "art of the possible" relative to supply chain management practices through the innovative use of IoT, cloud, machine learning and Big Data to enable connected ecosystems of engagement. Enterprise informatics can now move beyond point solutions that merely monitor the past and implement integrated enterprise fabrics that enable end-to-end supply chain visibility to improve customer service delivery and optimize sup...
May. 22, 2015 10:00 AM EDT Reads: 5,715