Moody’s Lays a Negative Smack Down on Sprint Credit Ratings

Moody’s Investors Service has effectively downgraded Sprint Nextel Corp.’s junk-grade credit ratings.

According to the Wall Street Journal, Sprint was taken down a peg on expectations “that costs to modernize the wireless company’s networks and formulate its long-term fourth-generation strategy will hurt its credit quality despite recent operating improvement.”

Making matters worse for Sprint is that if AT&T’s bid to acquire T-Mobile is ultimately given the green light from regulatory authorities, Sprint will largely be left in the dust – at least initially – of its rival mobile carriers in the US.

“The sacrifices required to turn around the company following the Nextel acquisition and the disastrous structure of the Clearwire partnership have led to Sprint’s current predicament,” Dennis Saputo of Moody’s tells The Wall Street Journal.

Helping push the outlook into negative territory is the company’s recent wholesale pricing agreement with Clearwire. Although the deal itself is seen in a positive light, the difficulty in getting the deal done underscores the perceived “issues” that complicate the partnership.

“Sprint and Clearwire are bound in a symbiotic relationship whereby each will be made weaker without the cooperation of the other,” Saputo said.

The WSJ adds that the ratings could be cut further “if the company’s network upgrades fall behind schedule or its churn rises over 2%.”