Fitch rates CenturyTel note BBB

Fitch Ratings said it affirmed CenturyTel, Inc.'s issuer default rating and senior unsecured debt at BBB, affirmed its commercial paper at F2 and assigned a BBB rating to the company's proposed $500 million offering of senior unsecured notes due 2017.

The ratings were removed from Rating Watch negative, and the outlook is stable.

The company intends to use the proceeds, combined with proceeds from additional debt offerings including a draw on its credit facility, to finance the acquisition of Madison River Communications Corp. for $830 million, including debt.

The agency said the affirmation follows a review of CenturyTel's proposed acquisition of Madison River and the company's expected financial policies following the close of the transaction. Fitch expects leverage to be about 2.6x at the end of 2007 and to decline modestly in 2008.

CenturyTel's existing ratings are supported by its generally lower exposure to competition in the rural local-exchange market, the relatively high EBITDA margins generated by its rural local-exchange carrier business, strong free cash flow and minimal dividend payout as a percentage of free cash flow, the agency said.

These factors are balanced against its dependence on wireline service revenues, which are facing increasing competition, and the unknown effect of potential reforms to the universal service funding program and intercarrier compensation regime, Fitch said.

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