Moody's cuts Sprint's credit rating

Moody's Investors Service reduced Sprint Nextel's credit rating on Friday, a further marker of concerns about the company's ability to turn around its struggling postpaid business. The action came a little more than a week after Standard & Poor's Ratings Service warned the company that its credit rating was at risk of being downgraded.

Moody's downgraded Sprint's rating to Ba2, down from Ba1, and indicated that the outlook on the rating was negative, meaning that Sprint could be cut again within the next 18 months.

"The downgrade of Sprint Nextel's rating reflects the company's continuing challenges in stabilizing its postpaid wireless operations, despite recognized improvements in customer service, amid intense competition and slowing industry growth," Moody's analyst Dennis Saputo said in a release announcing the downgrade.

The ratings service noted Sprint's strong liquidity, due to the carrier's ability to generate free cash flow, but said the downgrade reflected concerns over Sprint's ability "to stem the erosion of its competitive position and maintain market share." Both Verizon Wireless and AT&T Mobility have been steadily adding postpaid subscribers this year while Sprint has been unable to stop the defections.

Sprint's stock was up slightly in trading today after the news, to around $3.88 per share.

Sprint posted a net loss of $478 million in the third quarter, up from $326 million in the year-ago quarter. The company said earlier this month that it may cut between 2,000 and 2,500 jobs to save $350 million annually.

For more:
- see this Reuters article [1]
- see this Kansas City Business Journal article [2]

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