Moody’s Investors Service downgrades Sprint Nextel rating to ‘Ba2′

Moody’s downgrades Sprint rating

NEW YORK — Moody’s Investors Service said Friday that it downgraded ratings for Sprint Nextel Corp. because it is taking longer than expected to stanch a deterioration in its profit.

Moody’s downgraded the wireless service company’s corporate family and probability of default ratings further into speculative, or junk, territory, to “Ba2″ from “Ba1,” saying that Sprint’s leverage “is likely to deteriorate before stabilizing at much weaker levels than previously expected.”

The rating service said the downgrade shows the issues Sprint still faces in stabilizing its postpaid wireless service business, in spite of improvements in customer service, as competition grows increasingly fierce and industry growth slows.

Sprint of Overland Park, Kan., reported in October that its third-quarter loss widened as it lost a net 545,000 wireless subscribers, 801,000 of them postpaid customers who sign annual contracts and tend to spend more than monthly prepaid customers.

Moody’s noted that Sprint’s prepaid business is doing well, but this business is not as profitable as the subscription business.

The ratings service thinks Sprint’s earnings will be under pressure until it can cut down on postpaid customer losses.

Moody’s, which holds a “Negative” outlook for Sprint’s ratings, also kept its “Baa2″ rating for the company’s bank credit facility and the “Ba2″ rating for Nextel Communications’ debt.

Moody’s also reiterated its “SGL-1″ speculative grade liquidity rating for Sprint.

Approximately $23 billion of debt is affected.

Shares of Sprint Nextel shed 2 cents to $3.74 in after-hours trading, after losing 9 cents to $3.76 during the regular session.