S&P Afms BellSouth Corp., BellSouth Telecom AAA Rtgs
Standard & Poor's has affirmed the ratings on BellSouth Corp. (AAA/A-1+/Stable outlook), and local telephone subsidiary BellSouth Telecommunications (AAA/A-1+/Stable outlook). This follows the award of a cellular license for the city of Sao Paulo to a Brazilian consortium led by BellSouth for a total license fee of $2.5 billion. BellSouth has sufficient financial flexibility to support the estimated $1.4 billion in cash requirements for its 46% share of the license payment and infrastructure build-out. As such, while this investment represents a significant cash outlay, the company has the capacity to fully fund it from existing cash balances, coupled with expected proceeds of $740 million from the sale of its stake in Australian telecommunications company Optus Communications. On July 9, a consortium including BellSouth Corp. was awarded the Band B cellular license in Brazil for the Sao Paulo metro area, covering a population of some 18 million people. The group's TDMA-based cellular system is expected to be in service in about 12 months. S&P views BellSouth's investment in the Brazilian cellular market as consistent with its ongoing strategic expansion into Latin American wireless markets. While market penetration in the Sao Paulo cellular license region will represent a challenge to the BellSouth consortium in light of its late entry vis-a-vis incumbent provider Telesp, the region's fairly low landline teledensity, coupled with an improving local economy, suggests that this is an attractive market for telecommunications services.
Credit Analyst: | Catherine Cosentino, New York (1) 212-208-8198 |
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