DBRS Conf Sprint at BBB(H), Assigns BBB(H) Rtg to Bank Debt

Dominion Bond Rating Service (“DBRS”) has today confirmed the ratings of Sprint Nextel Corporation (“Sprint Nextel” or the “Company”) and its affiliated issuers at BBB (high). Additionally, DBRS has assigned a BBB (high) rating to the new credit facility at Sprint Nextel whose borrowers include Nextel Communications, Inc., Sprint Capital Corporation, and Sprint Nextel. These three parties will act as tri-borrowers on a new five-year US$6 billion revolving credit facility and a new 364-day US$3.2 billion term loan. Furthermore, DBRS has assigned a BBB (high) rating to the US Unwired Inc. debt, which was guaranteed by Sprint Nextel recently. The trends are Stable.

The credit profile of Sprint Nextel has remained stable since August 2005 after the Company completed the merger between Sprint Corporation and Nextel Communications Inc. DBRS notes that Sprint Nextel’s ratings continue to reflect its good business risk profile, including its size and market position in the U.S. wireless market (third), and its strong financial risk profile including moderate levels of debt and a strong liquidity profile. Furthermore, with nearly 38 million direct subscribers the Company is more favourably positioned to compete with its two larger peers, Cingular Wireless LLC and Verizon Wireless. DBRS also believes that Sprint Nextel can leverage its two strong national networks (based on CDMA and iDEN platforms) along with significant national distribution channels.

DBRS also notes that Sprint Nextel can offer differentiated wireless services to distinct subscriber markets. Additionally, the Company can cross-sell and bundle its services to: (1) its business customer base, (2) its 7.5 million fixed-line customers even after this business is spun off, and (3) to cable subscribers through a recent partnership with a consortium of some of the largest cable operators in the United States. The Company will also be able to take advantage of sizeable synergy opportunities, which were increased recently to US$14.5 billion. However, DBRS continues to note that achieving these synergies, along with migrating onto a single platform and undertaking its re-banding obligation, will require significant execution.

From a financial perspective, DBRS notes that Sprint Nextel now has a strong balance sheet and will generate strong free cash flow. This includes a dividend in the near term that represents Sprint Local’s dividend program going forward. Sprint Nextel’s strong financial position includes a good liquidity position (US$13 billion with its new credit facility), ample financial flexibility, and a manageable debt maturity schedule.

DBRS has factored the strong possibility that Sprint Nextel will potentially acquire its remaining wireless affiliates along with Nextel Partners Inc. – valuation recently agreed upon at US$6.5 billion after Nextel Partners Inc. exercised its put option in October. While these transactions are sizeable [roughly US$11 billion in enterprise value (EV)], this is expected to be manageable given its strong balance sheet.

Finally, DBRS expects the spin-off of Sprint Local to occur in Q2 2006 (EV of roughly US$17.5 billion), which, upon issuing new debt, will return roughly US$7.2 billion in proceeds back to Sprint Nextel in cash. This is expected to replenish its liquidity and give it the potential to reduce debt levels, which should further underpin its ratings.

Note: These ratings are based on public information.