Fitch affirms Alltel

Fitch Ratings said it affirms the A rating assigned to Alltel Corp.'s debt and the F1 rating to Alltel's commercial paper following the announcement that Alltel will spin off its wireline operations.

In addition, Fitch has downgraded the ratings on $262 million of operating company debt, including Alltel Georgia and Alltel Communications Holdings Co. of the Midwest to BBB- from A.

The ratings for the $262 million of operating company debt are also on Rating Watch negative.

The outlook for Alltel is stable.

The rating affirmation reflects the significant de-leveraging that will occur at Alltel as a result of the planned spin-off of its wireline operations, the expansive rural-focused wireless operations primarily utilizing spectrum at 850 MHz and the material free cash flow generation, which Fitch said it expects will increase as the company fully integrates the two most recent acquisitions and grows subscribers.

These factors are balanced against the increased business risk as a standalone entity, the wireless competitive environment, the financial resources of much larger competitors and the pricing pressure on wholesale rates, the agency said.

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