(BMP) Moody's affirms AT&T-related debt on acquisition of BellSo uth

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Moody's affirms AT&T-related debt on acquisition of BellSouth
2007-01-02 21:25:13.430 GMT

Toronto
New York
Donald S. Carter CFA
Mark Gray
Senior Vice President
Managing Director
Corporate Finance Group
Corporate Finance Group
Moody's Canada Inc.
Moody's Investors Service
(416) 214-1635
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms AT&T-related debt on acquisition of BellSouth; changes some subsidiary ratings
Approximately $47 billion of debt securities affected

New York, January 02, 2007 -- Moody's Investors Service affirmed the A2 senior unsecured ratings and P1 short term ratings of AT&T Inc. ("AT&T") and BellSouth Corporation ("BellSouth"), the Baa1 senior
unsecured rating for Cingular Wireless LLC "(Cingular"), the A2 senior unsecured rating of two debt
issues of Pacific Bell Telephone Co. ("PacBell"), one debt issue of Southwestern Bell Telephone Co. ("SW
Bell"), two debt issues of AT&T Corp. ("Corp"), the debt of Southern New England Telephone Co.
("SNET"), and upgraded the senior unsecured rating on two debt issues of New Cingular Wireless
Services Inc., now assumed by AT&T, to A2 from Baa1, and withdrew the senior unsecured ratings for all
other debt issues of PacBell. The outlook for the AT&T and BellSouth ratings remains stable while the
outlook for the Cingular rating remains positive.
These actions reflect AT&T's acquisition of BellSouth on December 29, 2006, in which AT&T assumed the
two New Cingular debt issues and unconditionally and irrevocably guaranteed one BellSouth debt issue.
The acquisition is subject to a number of consents by AT&T to the Federal Communications Commission
which Moody's believes will not materially impact AT&T's financial performance. As well, AT&T has
stated that it has no current plans to materially change the corporate structures of BellSouth and
Cingular, and Moody's therefore assumes BellSouth will continue to own 40% of Cingular as well as its
other existing assets.
The ratings on certain PacBell debt issues have been withdrawn pursuant to Moody's guidelines for the
withdrawal of ratings, as insufficient information is available to Moody's to assess their standalone
creditworthiness, and they are not unconditionally and irrevocably guaranteed by AT&T. Two PacBell
notes (7-1/8% issue due 2026 and the 6-5/8% issue due 2034) and the SW Bell debt (7% issue due 2015)
and four specific bonds of Corp are all fully guaranteed by AT&T and are therefore rated the same as the

parent. SNET continues to file financials with the state regulator, thereby enabling Moody's to form a
standalone credit opinion on that subsidiary in the absence of a full guarantee from AT&T.
The outlook for AT&T's rating is stable as Moody's continues to expect the company to manage its
capital structure towards a debt/EBITDA leverage ratio of 1.5X (after Moody's standard adjustments),
and also improve related metrics, by the end of 2008. Moody's expects the company to be able to
generate sufficient cash flow that would provide it the ability and the flexibility to manage to, and
achieve, its target capital structure. The outlook for Cingular's rating is positive because Moody's expects
the company's operating results to continue to improve over the next two years, achieving industryaverage margins by 2008, although execution risk remains. The outlook for BellSouth's rating is stable,
as Moody's expects the company's wireline business to remain relatively stable, although subject to
some erosion from cable telephony and wireless substitution, offset by the benefit of participating in
strongly improving cash flow at 40%-owned Cingular Wireless.
Withdrawals:
..Issuer: Pacific Bell
....Senior Unsecured Regular Bond/Debenture, Withdrawn, previously rated
A2
..7.375% Debentures due 15 July 2043, $300 million
..7.25% Debentures due 1 November 2027, $100 million
..6.625% Debentures due 1 November 2009, $150 million
..6.125% Debentures due 15 February 2008, $200 million
Upgrades:
..Issuer: New Cingular Wireless Services, Inc
....Senior Unsecured Regular Bond/Debenture, Upgraded to A2 from Baa1
..7.5% Global Notes due 1 May 2007, $750 million
..8.125% Global Notes due 1 May 2012, $2 billion
AT&T Inc. is a telecommunications company with headquarters in San Antonio, Texas. BellSouth
Corporation is also a telecommunications company, with headquarters in Atlanta, Georgia, and Cingular
Wireless LLC is a wireless operator, with headquarters in Atlanta, Georgia.

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