S&P: AT&T remains on watch

Standard & Poor's said its ratings on AT&T Corp. remain on CreditWatch with negative implications following the company's announcement that it will focus on the business segment and no longer pursue investing in and growing its consumer segment due to market and regulatory challenges.

The CreditWatch listing also reflects the continued pricing pressure in the business segment, as indicated in second-quarter 2004 results, and attendant weak operating margins.

The long-term ratings on AT&T were initially placed on CreditWatch April 28 due to continued weakening in the company's business risk profile as reflected in first-quarter 2004 results and the potential for steeper revenue declines and compression in operating margins. On June 24, the A-3 short-term ratings were placed on CreditWatch due to AT&T's announced lower revenue and operating income guidance for 2004.

As indicated in its June 24 news release, S&P's current assessment of the CreditWatch resolution is that a rating downgrade of either one or two notches could occur.

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