Fitch rates AT&T notes A

Fitch Ratings said it assigned an A rating to AT&T Inc.'s proposed $2.5 billion of exchange notes due 2031.

The outlook is stable.

AT&T will begin an offer to exchange outstanding 8.75% senior notes due 2031 of New Cingular Wireless Services for new notes and cash, according to the agency. In addition, AT&T is offering to exchange outstanding 8% senior notes of AT&T Corp. due 2031 for new notes and cash equal to $2.5 billion less the amount of 8.75% notes exchanged.

Key factors considered in AT&T's ratings include the company's diversified revenue mix, its significant size and economies of scale, and expectation that AT&T will benefit from continued growth in wireless operating cash flows, the agency said.

Fitch said the company has the financial flexibility to maintain leverage over the long term at about 1.5 times, which is down from the 1.74x recorded in 2009.

Fitch estimates that by the end of 2010 EBITDA growth combined with moderate debt reduction will return AT&T's net debt-to-EBITDA metric for the full year back to the company's target of 1.5x or below, and at or below the lower end of a 1.5x to 1.7x gross debt-to-EBITDA range expected by Fitch for the rating category.

Improvements in leverage in 2010 will be moderated by the acquisition of certain wireless properties from Verizon for $2.35 billion in the second quarter of 2010, the agency noted.

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