AT&T Corp will not do any good to its credit-worthiness with the absorption of McCaw Cellular Communication Inc, Standard & Poor’s Corp warns: it says that the addition of McCaw’s relatively volatile business to AT&T’s strong and stable core businesses marginally weakens the strength of AT&T’s overall business position with respect to credit quality. Similarly, McCaw’s $5,500m of debt and negative free cash flow are expected to dampen AT&T’s financial measures of creditworthiness over the short term; nevertheless the negative impact of the is offset by AT&T’s capacity to cut debt aggressively over the next few years, and AT&T may be able to realize some operating and marketing synergies from the merger, and the addition of McCaw’s rapidly growing cellular business should enhance AT&T’s revenue growth, the rating agency concluded.
