Subject: [NEXTEL-1] Forbes.com TEXT-Moody's reports on U.S. wireless outlook

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Date: Wed, 11 Dec 2002 19:11:51 -0500

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TEXT-Moody's reports on U.S. wireless outlook
Reuters, 12.11.02, 11:41 AM ET

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(Full text of press release provided by Moody's Investors Service).

MOODY'S REPORTS: SLOWER-THAN-EXPECTED GROWTH AND TOUGH COMPETITION KEEP
U.S. WIRELESS OUTLOOK NEGATIVE

NEW YORK, Dec 11 - The recent slowdown in US wireless telecommunications
subscriber growth is an early sign that the US wireless industry is maturing
and approaching its maximum penetration rate, according to Moody's Investors
Service in a new report. As a result, wireless carriers in the US face the
prospect of having fewer total subscribers on their networks generating cash
flow than business plans originally projected. Moody's outlook for the US
wireless industry therefore remains negative. "With gross debt levels generally
exceeding revenues, EBITDA margins no higher than the mid 30%'s, and
capex-to-revenues not much lower, there is a thin margin left to service debt
for most carriers," observes Moody's Vice President/Senior Analyst James
Veneau. He says with large current maturities for most industry players looming
at a time when access to the bank and capital markets is limited, wireless
company performance over the next 12 to 18 months is critical. Moody's rates
all six US national wireless carriers. Ratings range from Verizon Wireless's A2
senior unsecured rating to Nextel's B3. These six carriers have approximately
$75 billion in rated debt outstanding. Net additional subscribers to the
industry declined year over year for the first time in 2001. Moody's fully
expects that the number of net additional subscribers in 2002 will again be
lower than the prior year. During the first nine months of 2002, wireless
carriers added approximately 9.2 million subscribers, versus the 14.9 million
added during the first nine months of 2001, a decline of 38%. As competition
increases and the carriers attempt to boost cash flows, Moody's expects them to
focus on obtaining and retaining better credit-quality subscribers, an approach
that could further retard subscriber growth. The sub-prime category, Moody's
notes, will likely remain under-served, except under more strict subscriber
agreements, at least until the industry can improve the economics of
penetrating this sector. "Penetration levels in the US will not match those of
Europe unless the cost of using wireless service becomes more affordable,
perhaps through the rollout of pre-paid services," says Veneau. Ultimately,
Moody's believes industry conditions are likely only to improve after an
industry restructuring that leaves fewer players. At the moment, barriers such
as regulatory issues, and continuing access to capital, are preventing
consolidation, Moody's says. "With the six national carriers, the wireless
industry in the United States is among the most competitive in world," says
Veneau. "Customer churn remains high, and could prove to be painful to some
operators in a slow growth environment." ***** NOTE TO JOURNALISTS: For a copy
of the report "U.S. Wireless Telecommunications Industry: 6 National Carriers
Equals Imperfect Competition," please contact New York Press Information
+1-212-553-0376; London Press Information +44-20-7772-5454;

Copyright 2002, Reuters News Service

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