S&P downgrades Sprint and WorldCom

Standard & Poor’s has downgraded the debt ratings of both WorldCom and Sprint.

The long-term corporate credit rating of Sprint was lowered from triple B plus to triple B minus, one notch above junk status, and its short-term credit rating was lowered from A-3 to A-2. Sprint’s outlook is stable.

In lowering the ratings, S&P cited increased competition, especially in wireless; a high number of sub-prime customers; and risks related to the deployment of third generation services.

In addition, S&P said there is a long-term risk from weak Sprint PCS affiliates and that weakness in the long-distance market is expected to continue.

In fact according to Rosmarie Kalinowski, an analyst with S&P, the entire communications sector will remain fragile for several months.

“Over the next 18 to 24 months, I don’t see any positives on the horizon for this industry,” she said.

In a similar move, S&P lowered the rating for WorldCom from double B to single B plus. S&P’s outlook for WorldCom remains negative.

S&P said it lowered the ratings because of an anticipated delay in obtaining a $5 billion bank facility, increased refinancing risk associated with $9 billion in debt due over the next three years and continued weakness in the long-distance market.