BACKGROUND -- Earlier today, Moody's Investors Service confirmed its top rating, Prime-1, of Verizon Communications' commercial paper. Verizon said that it is not surprised that as part of a broader review of the telecom industry Moody's has placed the company's long-term debt rating under review. The following response should be attributed to Doreen Toben, Verizon executive vice president and CFO.
"We are confident a review will show that we have made significant progress in reducing debt and improving liquidity and free-cash-flow generation. We remain committed to the debt-reduction strategy previously put in place.
"We do not think a long-term ratings change will be warranted, and we agree with Moody's reaffirmation of our P-1 commercial-paper ratings.
"Verizon's previously announced debt strategy includes reducing levels of overall debt and commercial paper. Our first quarter results showed that we dramatically improved free cash flow. We also reduced overall debt by $1.4 billion and reduced commercial paper by $2.2 billion. We expect to sustain robust cash flow by delivering on our plan to contain costs, generate revenues and properly size our capital expenditures.
"Several factors will further help us sustain our debt strategy. In April the Federal Communications Commission returned $1.5 billion of the deposit we made in connection with the so-called NextWave licenses. We applied the refund to our debt reduction. Later this year, we expect to close the previously announced wireline property sales, generating an additional after-tax $2.8 billion that will be applied to debt reduction.
"We continue to have excellent access to the capital markets. Earlier this month, we closed a long-term debt offering for Verizon New England that was upsized by $180 million, to $480 million, due to strong market demand.
"Verizon's strong cash flow and diverse set of assets, which includes both wireline and wireless, differentiate it from other companies in the telecom sector. We feel that any review of our company will bear out that we are better positioned to take advantage of changes in the industry than any other telecom company."
NOTE: This press release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: the duration and extent of the current economic downturn; materially adverse changes in economic conditions in the markets served by us or by companies in which we have substantial investments; material changes in available technology; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations; the final outcome of federal, state, and local regulatory initiatives and proceedings, including arbitration proceedings, and judicial review of those initiatives and proceedings, pertaining to, among other matters, the terms of interconnection, access charges, and unbundled network element and resale rates; the extent, timing, success, and overall effects of competition from others in the local telephone and toll service markets; the timing and profitability of our entry and expansion in the national long-distance market; our ability to satisfy regulatory merger conditions and obtain combined company revenue enhancements and cost savings; the profitability of our broadband operations; the ability of Verizon Wireless to achieve revenue enhancements and cost savings, and obtain sufficient spectrum resources; the outcome of litigation concerning the FCC NextWave spectrum auction; the continuing financial needs of Genuity Inc., our ability to convert our ownership interest in Genuity into a controlling interest consistent with regulatory conditions, and Genuity's ensuing profitability; our ability to recover insurance proceeds relating to equipment losses and other adverse financial impacts resulting from the terrorist attacks on Sept. 11, 2001; and changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings.