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Rating Action:

MOODY'S UPGRADES LONG-TERM RATINGS OF SBC COMMUNICATIONS TO A1; RATINGS CONFIRMED AT AMERITECH, PACIFIC TELESIS, AND SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION

11 May 1998
MOODY'S UPGRADES LONG-TERM RATINGS OF SBC COMMUNICATIONS TO A1; RATINGS CONFIRMED AT AMERITECH, PACIFIC TELESIS, AND SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION New York, 05-11-98 -- Moody's Investors Service has raised the long-term debt ratings of SBC Communications, Inc. and its legally supported affiliate, SBC Communications Capital Corporation to A1 from A2 reflecting the likelihood of improved financial performance from the company's telephone affiliates and diversified investment base. Further Moody's believes that, should the proposed acquisition of Ameritech Corporation be approved in its current form, SBC's credit quality within the A1 rating category will be enhanced. The ratings of the SBC's operating affiliates and announced merger partners, Southern New England Telecommunications Corporation and Ameritech Corporation, and their respective affiliates are confirmed.

The ratings raised are:
SBC Communications Inc.'s senior unsecured debt, rated A1 from A2; shelf registrations, rated (P)A1 from (P)A2; and the company's counterparty rating to A1 from A2; and SBC Communications Capital Corporation's senior unsecured debt, rated A1 from A2; shelf registration, rated (P)A1 from (P)A2; and the company's counterparty rating to A1 from A2.

Additionally, the ratings of Pacific Telesis Financing I, II, III issued preferred stock, are raised to "a1" from "a2" and its preferred stock shelf registration, is raised to (P)"a1" from (P)"a2" to reflect the legal support that now flows from SBC Communications.

The ratings confirmed are:
SBC Communications Inc.'s Prime-1 commercial paper rating;
SBC Communications Capital Corporation's Prime-1 commercial paper rating; and
Southwestern Bell Telephone Company's senior unsecured debt rated Aa3.

Pacific Telesis Group's A2 counterparty rating;
Pacific Bell Telephone Company's senior unsecured debt, rated A1;
Pacific Telephone & Telegraph Company's senior unsecured debt, rated A1;

Southern New England Telecommunications Corporation's senior unsecured debt, rated A1; and Prime-1 commercial paper rating; and
Southern New England Telephone Company's senior unsecured debt, rated Aa3; and the company's Aa3 counterparty rating.

Ameritech Corporation Prime-1 rating for commercial paper and Aa3 counterparty rating;
Ameritech Capital Funding Corporation's senior unsecured debt issues rated Aa3; shelf registration of debt securities rated (P)Aa3; Aa3 counterparty rating and Prime-1 rating for commercial paper;
Ameritech New Zealand Funding Corporation's cumulative mandatory redeemable "aa3" preferred stock rating;
Ameritech Savings and Security Plan Trust for Non-Salaried Employees guaranteed LESOP loan rated Aa3; and
Ameritech Savings Plan Trust for Salaried Employees guaranteed LESOP loan rated Aa3.
Illinois Bell Telephone senior secured debt issues rated Aaa, and senior unsecured debt issues rated Aa1; and unsecured debt shelf registration rated (P)Aa1;
Indiana Bell Telephone Company senior unsecured debt issues rated Aaa and senior unsecured shelf registration rated (P)Aaa;
Michigan Bell Telephone Company senior unsecured debt issues rated Aa1 and senior unsecured shelf registration rated (P)Aa1;
Ohio Bell Telephone Company senior unsecured debt issues rated Aaa; and
Wisconsin Bell Telephone Company senior unsecured debt issues rated Aaa and senior unsecured shelf registration rated (P)Aaa.

Absent the effect of the special accounting charges taken to reflect the costs associated with the merger integration of Pacific Telesis Group, SBC Communications' financial performance continues to show steady improvement. The strong demand for core telecommunications services, both access lines and vertical services, increased penetration of the wireless market, and the development of new lines of business such as voice messaging and an internet access service have been the major financial drivers.

During the first quarter of 1998, Southwestern Bell's access lines grew at 5.4% while Pacific Bell achieved a 4.8% growth in access lines. As result revenue growth of 5.5% and 7.2% were recorded at the respective telephone companies. Wireless subscribers increased by 112,000 for the quarter aided by the increased penetration of the PCS offering in California and Nevada. Debt protection measures are expected to strengthen throughout the year as the benefits of the company's marketing programs and cost control efforts improve cash flows.

SBC Communications and Ameritech Corporation have agreed to a merger valued at $72 billion including assumption of debt. Ameritech shareholders will receive a fixed exchange ratio of 1.316 SBC shares for each share of Ameritech. The transaction will be a tax free, stock for stock exchange and will be accounted for as a pooling of interests. Should the transaction be approved by regulators, it is possible that SBC's position in the A1 rating category will be solidified. The company's acquisition of three large telephone holding companies in less than three years is unprecedented and it will be some time before the company's success in meeting the management challenges of this effort can be assessed. In the mean time we expect that current financial performance will be subject to some volatility as lines of business are more finely focused, operations consolidated, and employee levels rationalized.

SBC Communications is an international telecommunications company headquartered in San Antonio, Texas.

No Related Data.
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