Sprint Nextel’s credit rating reduced to ‘junk’
Sprint Nextel yesterday saw its debt rating from Moody’s Investors reduced to “junk” status, adding another difficulty to the wireless carrier’s attempt to reverse its fortunes, which has seen the company lose millions of subscribers during the last couple of years, most of which have stopped using the iDEN push-to-talk network.
For public-safety agencies, iDEN traditionally has been a popular vehicle for non-mission-critical communications, but Sprint Nextel is facing unprecedented competition in this arena. Meanwhile, the global economic downturn and the strength of nationwide rivals such as AT&T Mobility and Verizon Wireless—both of which boast much healthier balance sheets—has made the turnaround effort much more difficult.
“[A credit rating of “junk”] certainly doesn’t make things any easier for them,” said Roger Entner, senior vice president of research for Nielsen. “It basically highlights for them that they have to be as judicious with their spending as possible.”
In an effort to cut costs, Sprint Nextel early this year announced 4000 layoffs and reportedly is considering another round of job cuts in January. In addition, the company has announced plans to close 20 call centers.
With a “junk” credit rating, Sprint Nextel’s ability to access the already tight capital markets is expected to be very limited. However, this is not expected to impact 800 MHz rebanding, which Sprint Nextel is funding. As part of the FCC order mandating rebanding, Sprint Nextel established a secured letter of credit that the 800 MHz Transition Administrator has deemed to be adequate to cover the remaining costs of the massive project.