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Rating Action:

MOODY'S PLACES SBC COMMUNICATIONS INC. LONG TERM RATINGS (SR. UNSEC Aa3) ON REVIEW FOR DOWNGRADE; SHORT-TERM P-1 RATING NOT ON REVIEW.

13 Aug 2002
MOODY'S PLACES SBC COMMUNICATIONS INC. LONG TERM RATINGS (SR. UNSEC Aa3) ON REVIEW FOR DOWNGRADE; SHORT-TERM P-1 RATING NOT ON REVIEW.

Approximately $21 Billion of Debt Affected.

New York, August 13, 2002 -- Moody's Investors Service placed the Aa3 senior unsecured long-term ratings of SBC Communications Inc. ("SBC") as well as the long-term ratings of all of its subsidiaries (listed below) on review for possible downgrade. The P-1 short-term ratings of SBC and SBC Communications International are not part of review and are confirmed.

Moody's placed SBC's long-term ratings on review for possible downgrade due to: 1) continued weak top line revenue and access line trends in core local wireline segment primarily attributable to the affects of wholesale network unbundling (UNE-P); and 2) Moody's view that the business risk profile for Regional Bell Operating Companies ("RBOCs") is increasing due to competitive threats from cable, wireless, and long distance operators in addition to the effects of an unfavorable regulatory pricing environment.

The review for downgrade will focus on the appropriate long-term rating level for SBC considering 1) the company's evolving competitive position in its home region ; 2) its balance sheet strength and liquidity; 3) regulatory pressure to improve service levels, particularly in the former Ameritech region; 4) potential funding needs at Cingular Wireless should Cingular encounter difficulty accessing the term debt or equity markets and 5) continued investment required to support the company's growth initiatives. Moody's indicated that any near-term rating action will be modest, reflecting the company's solid franchise value and good credit fundamentals.

While Moody's is concerned about long-term pressures on SBC's businesses, the rating agency emphasized that SBC continues to maintain a strong market position, fiscally conservative management, and a profitable base of largely unencumbered assets. The business diversification that exists at SBC has helped to insulate the company from the negative pressures in any one particular business segment. Outside of local wireline service, SBC's businesses also include long distance, high-speed DSL service, wireless service (through its 60% interest in Cingular Wireless, a joint venture with BellSouth Corp.), investments in international operations, and the highly profitable publishing business. This diversification has served SBC particularly well as customers choose against installing a second access line, deciding instead to install DSL Internet connection service. SBC is also partially hedged against the growing trend of wireless substitution through Cingular Wireless. Wireless, broadband and long distance data all represent high growth opportunities that could substantially offset slow or negative access line growth, but all these businesses require substantial upfront and ongoing investment. Therefore, SBC's business risk profile will shift over time as its asset base becomes weighted more toward highly competitive broadband, data, and wireless assets versus stable local access lines.

SBC Communications Inc. is a telecommunications company headquartered in San Antonio, TX.

The following ratings are placed on review for possible downgrade:

SBC Communications Inc. senior unsecured Aa3

Ameritech Corporation senior unsecured Aa3

Ameritech Capital Funding Corporation senior unsecured Aa3

Illinois Bell Telephone Co. senior unsecured Aa1

Indiana Bell Telephone Company, Inc. senior unsecured Aa2

Michigan Bell Telephone Co. senior unsecured Aa2

Ohio Bell Telephone Company senior unsecured Aa2

Wisconsin Bell, Inc. senior unsecured Aa2

Pacific Bell senior unsecured Aa3

Pacific Telephone & Telegraph senior unsecured Aa3

SBC Communications Capital Corporation senior unsecured Aa3

Southern New England Telecommunications Corp. senior unsecured Aa3

Southern New England Telephone Co. senior unsecured Aa2

Southwestern Bell Telephone Company senior unsecured Aa2

New York
James Veneau
Vice President - Senior Analyst
Corporate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Robert Konefal
Managing Director
Corporate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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