|By Business Wire||
|November 28, 2012 05:24 PM EST||
Fitch Ratings has assigned an 'A' rating to AT&T Inc.'s (AT&T) offering of EUR1 billion 1.875% senior unsecured notes due 2020. Proceeds are expected to be used for general corporate purposes. The Rating Outlook is Negative.
The current 'A' 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 Negative Outlook reflects Fitch's expectation that AT&T's net leverage is likely to move up to its recently disclosed 1.8x upper boundary for leverage, which represents a notable increase from the 1.47x at the end of the third quarter of 2012 on a last 12-month (LTM) basis. The 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).
Fitch believes increased capital spending will strengthen the company's competitive position and is a positive rating factor. Over the next three years, Fitch believes capital spending will increase about 10%-12% over prior baseline levels to $22 billion annually and then revert to mid-teen historical levels. The investment program will expand the population covered by AT&T's 4G LTE network by approximately 20% to 300 million, and enable the company to provide higher broadband speeds over its wireline network in more rural areas. By comparison, the company's original capital spending guidance for 2012 was about $20 billion, although the company reduced guidance to the low end of a $19 billion to $20 billion range in October 2012.
Over the 2013-2015 period, AT&T will spend approximately $8 billion to increase its 4G LTE network coverage from 250 million to 300 million pops (persons of population). This coverage is expected to be completed by the end of 2014. In addition to increasing 4G LTE coverage, AT&T will be increasing capacity through the addition of 10,000 new macro cell sites, 1,000 distributed antenna systems and 40,000 small cells. Up to nearly 30MHz of new spectrum in the wireless communications spectrum (WCS) band will be deployed nationwide, with service to be commercial in 2015. Approximately $6 billion will be spent to upgrade the broadband speeds available to 75% of the customer locations in the company's wireline footprint. In the remaining 25% of the customer locations where it will not be economical to upgrade the wireline network to faster broadband speeds, the company will offer a 4G LTE solution. These customer locations are scattered across 65% of the company's geography.
In early 2012, AT&T started repurchasing common stock under a December 2010 authorization (the company did not repurchase stock while the T-Mobile USA transaction was under consideration in 2011). Through the first nine months of 2012, AT&T's strong free cash flow (FCF) and operating results have enabled the company to maintain its net leverage metric at around 1.5x even while repurchasing nearly $9 billion of common stock. Fitch expects FCF to decline from the $8 billion to $9 billion expected in 2012 to $4 billion annually, on average, over the next three years.
For 2012, Fitch expects AT&T's leverage to be flat with 2011, when gross leverage was 1.56x as adjusted for non-recurring items and the actuarial losses on its benefit plans. After 2012, AT&T's continuation of stock repurchases requiring some borrowing as repurchases will be above FCF levels, will push leverage up over time, 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 Sept. 30, 2012, total debt outstanding was approximately $63.7 billion, a moderate decline from the $64.8 billion outstanding at the end of 2011. Of the total, $3.4 billion consists of debt due within one year, including debt that can be put to the company. At Sept. 30, 2012, cash amounted to $2.2 billion, and for the LTM ending Sept. 30, 2012, AT&T produced $7 billion in FCF (net cash provided by operating activities less capital expenditures and dividends).
At end of the third quarter of 2012, the company did not have any drawings on its $5 billion revolving credit facility due 2015, nor on its $3 billion, 364-day facility due December 2012. The principal financial covenant for the 2015 facility requires debt to EBITDA, as defined in the agreement, to be no more than 3x. The identical financial covenant is only applicable in the 364-day facility if advances are converted into a term loan.
Relative to the company's expected free cash flows, upcoming debt maturities are manageable. There are no material debt maturities remaining in 2012. 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.
What Could Trigger A Rating Action
The Rating Outlook could be revised to Stable if:
--The company begins to manage 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
An IoT product’s log files speak volumes about what’s happening with your products in the field, pinpointing current and potential issues, and enabling you to predict failures and save millions of dollars in inventory. But until recently, no one knew how to listen. In his session at @ThingsExpo, Dan Gettens, Chief Research Officer at OnProcess, will discuss recent research by Massachusetts Institute of Technology and OnProcess Technology, where MIT created a new, breakthrough analytics model f...
Sep. 27, 2016 08:00 AM EDT Reads: 1,973
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, wh...
Sep. 27, 2016 08:00 AM EDT Reads: 3,629
The Internet of Things will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform and how we integrate our thinking to solve complicated problems. In his session at 19th Cloud Expo, Craig Sproule, CEO of Metavine, will demonstrate how to move beyond today's coding paradigm ...
Sep. 27, 2016 07:45 AM EDT Reads: 3,227
Ask someone to architect an Internet of Things (IoT) solution and you are guaranteed to see a reference to the cloud. This would lead you to believe that IoT requires the cloud to exist. However, there are many IoT use cases where the cloud is not feasible or desirable. In his session at @ThingsExpo, Dave McCarthy, Director of Products at Bsquare Corporation, will discuss the strategies that exist to extend intelligence directly to IoT devices and sensors, freeing them from the constraints of ...
Sep. 27, 2016 07:45 AM EDT Reads: 2,470
From wearable activity trackers to fantasy e-sports, data and technology are transforming the way athletes train for the game and fans engage with their teams. In his session at @ThingsExpo, will present key data findings from leading sports organizations San Francisco 49ers, Orlando Magic NBA team. By utilizing data analytics these sports orgs have recognized new revenue streams, doubled its fan base and streamlined costs at its stadiums. John Paul is the CEO and Founder of VenueNext. Prior ...
Sep. 27, 2016 07:30 AM EDT Reads: 2,953
Technology vendors and analysts are eager to paint a rosy picture of how wonderful IoT is and why your deployment will be great with the use of their products and services. While it is easy to showcase successful IoT solutions, identifying IoT systems that missed the mark or failed can often provide more in the way of key lessons learned. In his session at @ThingsExpo, Peter Vanderminden, Principal Industry Analyst for IoT & Digital Supply Chain to Flatiron Strategies, will focus on how IoT de...
Sep. 27, 2016 07:15 AM EDT Reads: 1,114
IoT offers a value of almost $4 trillion to the manufacturing industry through platforms that can improve margins, optimize operations & drive high performance work teams. By using IoT technologies as a foundation, manufacturing customers are integrating worker safety with manufacturing systems, driving deep collaboration and utilizing analytics to exponentially increased per-unit margins. However, as Benoit Lheureux, the VP for Research at Gartner points out, “IoT project implementers often ...
Sep. 27, 2016 06:45 AM EDT Reads: 3,316
So, you bought into the current machine learning craze and went on to collect millions/billions of records from this promising new data source. Now, what do you do with them? Too often, the abundance of data quickly turns into an abundance of problems. How do you extract that "magic essence" from your data without falling into the common pitfalls? In her session at @ThingsExpo, Natalia Ponomareva, Software Engineer at Google, provided tips on how to be successful in large scale machine learning...
Sep. 27, 2016 06:30 AM EDT Reads: 1,829
In his general session at 18th Cloud Expo, Lee Atchison, Principal Cloud Architect and Advocate at New Relic, discussed cloud as a ‘better data center’ and how it adds new capacity (faster) and improves application availability (redundancy). The cloud is a ‘Dynamic Tool for Dynamic Apps’ and resource allocation is an integral part of your application architecture, so use only the resources you need and allocate /de-allocate resources on the fly.
Sep. 27, 2016 06:15 AM EDT Reads: 2,613
Information technology is an industry that has always experienced change, and the dramatic change sweeping across the industry today could not be truthfully described as the first time we've seen such widespread change impacting customer investments. However, the rate of the change, and the potential outcomes from today's digital transformation has the distinct potential to separate the industry into two camps: Organizations that see the change coming, embrace it, and successful leverage it; and...
Sep. 27, 2016 05:30 AM EDT Reads: 1,152
SYS-CON Events announced today that Roundee / LinearHub will exhibit at the WebRTC Summit at @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. LinearHub provides Roundee Service, a smart platform for enterprise video conferencing with enhanced features such as automatic recording and transcription service. Slack users can integrate Roundee to their team via Slack’s App Directory, and '/roundee' command lets your video conference ...
Sep. 27, 2016 05:15 AM EDT Reads: 1,445
Digital transformation is too big and important for our future success to not understand the rules that apply to it. The first three rules for winning in this age of hyper-digital transformation are: Advantages in speed, analytics and operational tempos must be captured by implementing an optimized information logistics system (OILS) Real-time operational tempos (IT, people and business processes) must be achieved Businesses that can "analyze data and act and with speed" will dominate those t...
Sep. 27, 2016 04:45 AM EDT Reads: 1,152
The Jevons Paradox suggests that when technological advances increase efficiency of a resource, it results in an overall increase in consumption. Writing on the increased use of coal as a result of technological improvements, 19th-century economist William Stanley Jevons found that these improvements led to the development of new ways to utilize coal. In his session at 19th Cloud Expo, Mark Thiele, Chief Strategy Officer for Apcera, will compare the Jevons Paradox to modern-day enterprise IT, e...
Sep. 27, 2016 04:30 AM EDT Reads: 2,008
There are several IoTs: the Industrial Internet, Consumer Wearables, Wearables and Healthcare, Supply Chains, and the movement toward Smart Grids, Cities, Regions, and Nations. There are competing communications standards every step of the way, a bewildering array of sensors and devices, and an entire world of competing data analytics platforms. To some this appears to be chaos. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, Bradley Holt, Developer Advocate a...
Sep. 27, 2016 04:15 AM EDT Reads: 2,108
SYS-CON Events announced today that Bsquare has been named “Silver Sponsor” of SYS-CON's @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. For more than two decades, Bsquare has helped its customers extract business value from a broad array of physical assets by making them intelligent, connecting them, and using the data they generate to optimize business processes.
Sep. 27, 2016 03:00 AM EDT Reads: 2,780
There is growing need for data-driven applications and the need for digital platforms to build these apps. In his session at 19th Cloud Expo, Muddu Sudhakar, VP and GM of Security & IoT at Splunk, will cover different PaaS solutions and Big Data platforms that are available to build applications. In addition, AI and machine learning are creating new requirements that developers need in the building of next-gen apps. The next-generation digital platforms have some of the past platform needs a...
Sep. 27, 2016 03:00 AM EDT Reads: 1,806
SYS-CON Events announced today that ReadyTalk, a leading provider of online conferencing and webinar services, has been named Vendor Presentation Sponsor at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. ReadyTalk delivers audio and web conferencing services that inspire collaboration and enable the Future of Work for today’s increasingly digital and mobile workforce. By combining intuitive, innovative tec...
Sep. 27, 2016 03:00 AM EDT Reads: 2,942
Fact is, enterprises have significant legacy voice infrastructure that’s costly to replace with pure IP solutions. How can we bring this analog infrastructure into our shiny new cloud applications? There are proven methods to bind both legacy voice applications and traditional PSTN audio into cloud-based applications and services at a carrier scale. Some of the most successful implementations leverage WebRTC, WebSockets, SIP and other open source technologies. In his session at @ThingsExpo, Da...
Sep. 27, 2016 02:15 AM EDT Reads: 1,605
Cognitive Computing is becoming the foundation for a new generation of solutions that have the potential to transform business. Unlike traditional approaches to building solutions, a cognitive computing approach allows the data to help determine the way applications are designed. This contrasts with conventional software development that begins with defining logic based on the current way a business operates. In her session at 18th Cloud Expo, Judith S. Hurwitz, President and CEO of Hurwitz & ...
Sep. 27, 2016 02:15 AM EDT Reads: 3,054
Almost two-thirds of companies either have or soon will have IoT as the backbone of their business in 2016. However, IoT is far more complex than most firms expected. How can you not get trapped in the pitfalls? In his session at @ThingsExpo, Tony Shan, a renowned visionary and thought leader, will introduce a holistic method of IoTification, which is the process of IoTifying the existing technology and business models to adopt and leverage IoT. He will drill down to the components in this fra...
Sep. 27, 2016 02:00 AM EDT Reads: 1,735