Fitch Affirms Sprint Nextel's IDR at 'BBB+'; Rates CP Program 'F2'; Outlook to Negative.

CHICAGO -- Fitch affirms the ratings for Sprint Nextel Corporation and its subsidiaries as follows:

Sprint Nextel Corporation (Sprint Nextel);

-- Issuer Default Rating (IDR) 'BBB'+;

-- Senior unsecured notes 'BBB+';

Sprint Capital Corporation

-- IDR 'BBB'+;

-- Senior unsecured notes 'BBB+';

Nextel Communications Inc. (Nextel)

-- IDR 'BBB'+;

-- Senior unsecured notes 'BBB+';

Fitch also has assigned new ratings on the following Sprint Nextel subsidiaries, which have recently been acquired:

IWO Holdings Inc. (IWO)

-- IDR 'BBB'+;

--Senior unsecured notes 'BBB+';

US Unwired Inc (US Unwired)

-- IDR 'BBB'+;

-- Second priority secured notes 'BBB+';

Alamosa Delaware Inc. (Alamosa)

-- IDR 'BBB'+;

-- Senior unsecured notes 'BBB+';

AirGate PCS, Inc. (AirGate)

-- IDR 'BBB'+;

-- Senior unsecured notes 'BBB+';

Additionally, Fitch assigns a 'F2' rating to the commercial paper program of Sprint Nextel. This action follows Sprint Nextel's initiation of a $2 billion commercial paper program that is supported by the company's $6 billion credit facility.

The Outlook has been revised to Negative from Stable for all ratings.

The Negative Outlook reflects Fitch's concern over Sprint Nextel's weak operating results in the second quarter 2006, particularly relating to average revenues per user (ARPU), churn, subscriber additions, and its ability to materially improve this trend during a period of network integration and intense market competitiveness. Additionally, the Sprint Nextel operating trends significantly lag other nationwide operators. As a result of the weaker operating metrics, growth expectations for the remainder of the year will be flat.

The company has announced a $6 billion share repurchase program along with its 4G network build-out, which adds to the financial risk associated with the current operating results. Nevertheless, Sprint Nextel does have flexibility within its current rating category to withstand some operational pressures and increased spending requirements. The company has reduced debt by approximately $5 billion since the end of the first quarter when including anticipated debt redemptions during the third quarter. Currently, Fitch expects leverage (total debt to EBITDA) to approximate 1.7 times (x) by the end of 2007.

The rating considers the strength of the company's credit profile including Sprint Nextel's financial stability owing to the scale and considerable cash generation of its assets, which results in significant free cash flow. Fitch expects these operations to produce over $3 billion of free cash flow in 2006. The Sprint Nextel merger created the third largest operator in the U.S. that includes over 50 million subscribers, garners approximately 23% of gross addition market share and generates in excess of $41 billion of consolidated revenue.

While the company has made considerable progress on integrating Nextel and several affiliates over the past quarters, the operating challenges at Sprint Nextel remain numerous and include the increased mix of sub-prime customers in its base resulting in elevated churn, weak market strategy and brand position, ARPU declines impacted in part by pricing actions, integration issues related to the rebanding process and cost structure improvements associated with the Nextel merger. Fitch believes many of these issues are not readily resolved and could take several quarters before corrective actions improve operating results. Fitch would consider revising the Outlook back to Stable once the company has displayed at least two quarters of improved operating performance particularly from churn, ARPU and postpaid net additions.

Sprint Nextel's liquidity position is solid given its free cash flow, recent asset sales, cash position and available draw under its credit facility, although Sprint's recently announced share repurchase program and 4G network expenditures may consume a significant amount of its excess capacity. Accounting for the Ubiquitel acquisition, proForma cash at the end of the second quarter was $4.5 billion. Sprint has a five-year $6.0 billion senior unsecured revolving credit facility with a $2.5 billion letter of credit under the facility. In addition, the company has approximately $500 million of commercial paper outstanding. Sprint Nextel used a portion of the proceeds from the Embarq spin-off to redeem approximately $3.6 billion of term loan and affiliate debt. Sprint Nextel has approximately $880 million of remaining maturities in 2006 as well as expected redemptions of approximately $750 million in affiliate debt, $1.6 billion in maturities for 2007 and $1.25 billion in 2008.

The new ratings at the subsidiary companies reflect the issuance or the expected issuance of a guarantee by Sprint Nextel on an unsecured basis. Sprint has issued a guarantee for the debt at IWO and USUnwired. For the debt at Alamosa and Airgate, Sprint Nextel has released a preliminary S3 indicating their intent to guarantee the debt at those subsidiaries.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.