S&P: Embarq outlook stable

Standard & Poor's said it revised Embarq Corp.'s outlook to stable from negative and affirmed its ratings, including the BBB- corporate credit rating.

The outlook revision reflects progress made by Embarq in reducing debt since its May 2006 spinoff from Sprint Nextel and relatively stable operating performance despite growing competition from cable and wireless operators, the agency said. Since the spinoff, the company's debt-to-EBITDA ratio has improved to about 2.4x from 2.8x.

S&P said the ratings reflect Embarq's position as the dominant provider of local and long-distance telecom services in its markets, its solid operating margin, strong free cash flow characteristics, monthly recurring revenue from a sizable and geographically diverse customer base and good growth potential from DSL data services.

Tempering factors include modestly declining revenue and cash flow due to advancing access-line erosion caused by wireless substitution and cable telephony competition, as well as limited product diversity compared with cable competitors' broader and more-integrated bundle of services, the agency said.

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