CHICAGO--(BUSINESS WIRE)--In a new special report, Fitch Ratings discusses the potential outcome of AT&T, Inc.'s (AT&T) review of its rural access line business, which is expected to be announced in November 2012. The retention or sale of these assets, in Fitch's opinion, is not expected to have an effect on AT&T's credit profile. However, until the outcome is known, event risk exists for carriers that could potentially acquire AT&T's lines such as CenturyLink, Frontier, and Windstream.
In early 2012, AT&T disclosed that it was reviewing its noncore and low-performing assets over a 12-24-month period, and that at the conclusion of the review certain assets could be sold or restructured.
In recent years, the company's rural access lines have underperformed, primarily due to the lack of a competitive broadband offering. Unlike the results in rural markets, AT&T has experienced stronger performance in urban and suburban areas which have been covered by its recently completed U-verse network. Over U-verse, AT&T has been able to offer voice, video and high speed data services, primarily in competition against cable operators.
An active market for rural local exchange properties in recent years could provide an avenue for AT&T to divest its rural wireline assets, but potential suitors are busy digesting previous acquisitions. In addition, Fitch believes the convergence over the next several years of lower cost broadband technologies, changes in regulation and modifications to labor agreements support a more likely outcome, which would involve a renewed but moderate investment in its rural assets to provide higher broadband speeds.
Additional information is available at 'www.fitchratings.com'.
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: AT&T Access-Line Sale Event Risk
Corporate Rating Methodology
Rating Telecom Companies