AT&T Credit Rating at Risk

S&P may lower AT&T’s credit rating, on the heels of Sprint-Nextel posting a widening loss.

“AT&T Inc. may not be able to achieve financial metrics fully supportive of the current rating within a reasonable time frame,” S&P said.

That might not mean much to most people, nor is it a user's responsibility to worry about the service provider's problems. But the potential downgrade is important because it illustrates the pressures the largest U.S. communication carriers now face. A lower credit rating means higher borrowing costs, and therefore less money available to fund network upgrades.

The potential move also illustrates a situation that gets too little attention from policymakers, who tend to act as though America's largest providers of communications services are "too big to fail."

In fact, any careful analysis would suggest there is huge risk in the communications business, and that the objective now is to avoid negative growth. Most of the revenue growth the biggest carriers now get simply replaces revenue being steadily lost from legacy lines of business. They are hardly "too big to fail."

AT&T’s ‘A’ corporate credit rating and the ‘A-1′ short-term and commercial paper ratings were put on CreditWatch with negative implications. “We expect that a potential downgrade of the corporate credit rating, if any, would be limited to one notch,” S&P noted.

AT&T Gets Slammed By S&P, ‘A’ Corporate Credit Rating In Doubt