Fitch Rates ALLTEL's $1.385B Senior Notes 'A'.

CHICAGO -- Fitch Ratings has assigned an 'A' rating to ALLTEL Corporation's (ALLTEL) $1.385 billion senior unsecured notes due 2007. The Rating Outlook is Stable. ALLTEL issued the senior notes in May 2002 in conjunction with the issuance and sale of 27.7 million equity units in the form of corporate units. Under terms of the indentures with the securities, the senior notes were to be remarketed in 2005.

On Jan. 10, 2005, Fitch affirmed ALLTEL's debt ratings and Outlook following the announcement of ALLTEL's agreement to purchase Western Wireless Corporation (Western Wireless) for approximately $6 billion using a mix of equity and cash. Pro forma for the Western Wireless transaction, ALLTEL's debt would be about $6.6 billion based on approximately $5.6 billion of ALLTEL debt at the end of the fourth quarter 2004 and an expected $1 billion of new transaction debt. Fitch estimates pro forma debt-to-EBITDA for 2005 is expected to be in the range of 1.7 times (x) or less.

Credit protection measures should improve in 2006 and thereafter due to ALLTEL's significant cash-generation abilities. Fitch estimates that, on a combined basis, ALLTEL and Western Wireless generated more than $900 million in free cash flow for 2004. ALLTEL has a modest maturity schedule and a scheduled inflow of $1.385 billion in May of 2005 upon the conversion of its equity units. Maturities over the next two years include $200 million 6.75% senior notes due September 2005 and $450 million 7.5% senior notes due March 2006. Fitch expects ALLTEL to utilize its commercial paper program to fund a portion of the Western Wireless acquisition and then use the company's free cash flow to reduce commercial paper borrowings.

The 'A' long-term debt rating reflects ALLTEL's strong focus as a leading rural telecommunications operator with solid margins and stable cash flows. Over the past several years, ALLTEL has increased its reliance on the wireless segment through organic growth and acquisitions. The lower business risk profile of ALLTEL's predominantly rural wireless and wireline businesses compares favorably to the higher business risk profiles of the urban-based regional bell operating companies (RBOCs). An issue for ALLTEL and other rural local exchange carriers (RLECs) are potential reforms to the universal service funding (USF) system and intercarrier compensation. However, ALLTEL derives less than 5% of its wireline revenues from USF subsidies, comparing positively to the average RLEC, which receives over 10% of revenues from USF. In addition, since ALLTEL is undertaking a review of the strategic alternatives related to its wireline business, Fitch will assess the impact to ALLTEL's credit profile, if any, once the company concludes the review.

ALLTEL, which will derive approximately 67% of its revenues from wireless services following the Western Wireless acquisition (60% before the acquisition), has a natural hedge against the wireline-specific risk factors, as wireless services provide growth and benefit greatly from less regulation than wireline services. Fitch believes ALLTEL will continue to focus on pursuing additional wireless acquisitions in tier two and tier three markets over time and notes that the company has shown financial discipline when bidding on assets. Fitch believes ALLTEL's record of pursuing built-out wireless operations versus start-up greenfield deployments and its healthy FCF prospects mitigate the acquisition risk for moderately sized transactions. Furthermore, the company has effectively managed its balance sheet risk in recent years by integrating over $12 billion of acquisitions without affecting its credit profile.