Research Update: AT&T Inc. Outlook Revised To Negative From Stable Following Increase In Leverage From Auction; Ratings Affirmed

U.S.-based telecommunications provider AT&T Inc. will spend $23.4 billion in the recently completed C-band auction and, we estimate, another $4 billion for satellite relocation expense and incentive payments. S&P Global Ratings expects that AT&T's adjusted debt to EBITDA will increase to over 4x in 2021, which is above our downgrade threshold of 3.75x, from about 3.65x at year-end 2020. We are therefore revising the outlook on AT&T to negative from stable and affirming the 'BBB' issuer-credit rating, and all other ratings, on the company. The negative outlook reflects the heighted risk that AT&T could underperform our current base-case forecast, which includes a 3%-5% EBITDA decline in 2021 followed by modest earnings growth in 2022, leading to leverage declining to 3.75x

...- U.S.-based telecommunications provider AT&T Inc. will spend $23.4 billion in the recently completed C-band auction and, we estimate, another $4 billion for satellite relocation expense and incentive payments. - S&P Global Ratings expects that AT&T's adjusted debt to EBITDA will increase to over 4x in 2021, which is above our downgrade threshold of 3.75x, from about 3.65x at year-end 2020. - We are therefore revising the outlook on AT&T to negative from stable and affirming the '###' issuer-credit rating, and all other ratings, on the company. - The negative outlook reflects the heighted risk that AT&T could underperform our current base-case forecast, which includes a 3%-5% EBITDA decline in 2021 followed by modest earnings growth in 2022, leading to leverage declining to 3.75x in 2022. However, ongoing declines in business wireline and video due to secular and macroeconomic pressures, coupled with investments in HBO Max and potentially weak advertising trends at WarnerMedia in 2021,...

Research Update