Fitch downgrades Cingular debt

Fitch Ratings has changed its rating outlook on Cingular Wireless to “negative” from stable. The rating applies to Cingular’s senior unsecured debt rating of “A.”

Fitch said the rating was partially determined by the wireless company's parents weakening financial performances. Both BellSouth and SBC are also on a negative outlook. But Cingular is also impacted by lower subscriber growth and customer migration to lower priced plans. Cingular’s new large bucket plans that include roaming and long-distance services have contributed to a 44% increase in minutes of use during the last six months. This trend is putting pressure on margins, Fitch noted.

Fitch said Cingular has responded to this through several operational changes, including reducing its capital expenditure guidance by about $1 billion and a reduction in head count. Cingular also has increased certain pricing plans to strengthen the company’s margins and improve revenue growth.

“Nevertheless, these changes only partially offset the negative growth trends, and Fitch expects continued pressure on ARPU, churn and subscriber growth levels over the near-term,” the firm said in a statement.

Fitch said it expects Cingular to be at a cash-neutral position for 2002, but pressure on top-line growth and eroding margin levels mean Cingular’s leverage will only modestly increase by the end of 2002.