Sprint faces possible credit downgrade

Sprint Nextel was warned by Standard & Poor's Ratings Service that its junk credit rating is at risk of being downgraded because of deteriorating market performance. The move is the latest blow to the struggling carrier and an indication that pressure is mounting for the company to turn around its performance next year.

The ratings agency said that Sprint's credit rating of BB could fall if the company does not show potential for a turnaround in 2010. "While Sprint Nextel has made progress on growing its prepaid customer base and postpaid subscriber trends have shown some modest improvement from previous quarters, we remain concerned that the company may have difficulty in improving operating trends as industry conditions mature and competition intensifies," S&P analyst Allyn Arden said in a release. 

Sprint had a net loss of $478 million in the third quarter, up from $326 million in the year-ago quarter. The company continues to lose postpaid subscribers. In addition, earlier this week Sprint said that it may cut between 2,000 and 2,500 jobs to save $350 million annually. 

S&P said Sprint's liquidity was not an issue, despite the carrier's decision to give majority-owned Clearwire $1.176 billion in new financing, and its acquisitions of Virgin Mobile USA and iPCS. Nevertheless, the ratings agency said it would be looking at Sprint's ability to improve credit measures in 2010, its strategy to improve postpaid subscriber trends and decrease churn and its plans to continue to roll out mobile WiMAX as a wholesale partner of Clearwire. 

For more:
- see this Kansas City Business Journal article [1]
- see this Dow Jones Newswires article [2] (sub. req.)

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