AT&T, Verizon Take Ratings Hit After Going Big in C-Band Auction

S&P addressed major C-band auction bidders Thursday. S&P moved Verizon to stable from positive based on its $45 billion in bids, noting the carrier must pay an additional $8 billion in incentive costs to satellite operators. Verizon's adjusted debt-to-EBITDA ratio will likely increase to about 3.2x this year, from about 2.6x in 2020, “and will remain substantially above our 2.5x threshold for an upgrade over the next couple of years,” S&P said. AT&T bid $23.4 billion and is likely on the hook for an additional $4 billion, the firm said. S&P changed the carrier to negative from stable since its debt-to-earnings ratio is likely to rise to 4x from about 3.65x at the end of 2020. “Ongoing declines in business wireline and video due to secular and macroeconomic pressures, coupled with investments in HBO Max and potentially weak advertising trends at WarnerMedia in 2021, creates higher operating uncertainty and could result in leverage remaining at or above 3.75x through 2022,” S&P said. T-Mobile bid $9.3 billion, with an expected $1.6 billion in incentive payments, S&P said. “Despite the increase in leverage to fund the purchase of spectrum in the auction, our rating on T-Mobile is unchanged because we expect leverage will remain comfortably below our 5x downgrade threshold over the next year,” the firm said: T-Mobile has “good prospects to reduce leverage to the mid-3x area by 2023 as synergies ramp up and [Sprint] merger costs wind down, coupled with service revenue growth.”