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ROCHESTER TELEPHONE SENIOR DEBT DOWNGRADED TO 'A+' BY FITCH -- FITCH FINANCIAL WIRE --

 ROCHESTER TELEPHONE SENIOR DEBT DOWNGRADED TO 'A+' BY FITCH
 -- FITCH FINANCIAL WIRE --
 NEW YORK, July 31 /PRNewswire/ -- Rochester Telephone Corp.'s first mortgage bonds are lowered to 'A+' and its debentures and medium-term notes to 'A' from 'AA-' and 'A+', respectively, by Fitch. Approximately $379 million in debt is affected. The credit trend is improving.
 The downgrades reflect the additional leverage and lower interest coverage resulting from the company's debt-financed acquisition of telephone operations and other properties. Between 1989 and year-end 1991, Rochester Telephone acquired telephone companies representing 224,000 additional access lines. This year, the company intends to acquire the Statesboro Telephone Co. in Georgia for an additional 15,000 access lines.
 Rochester Telephone's debt ratio increased to about 51 percent at year-end 1991 from 44.3 percent in 1988. Pretax interest coverage declined to about 3.0x from more than 5x during that period. Profitability, as measured by return on average equity, was bolstered in 1991 by the gains on the sale of cellular assets. Cash flow remains fairly strong, with cash from operations at 26.9 percent of total debt for 1991. While the current credit profile is weak for the rating category, Fitch expects gradual strengthening of credit quality measures over the next few years.
 The acquisition of smaller rural telephone operations outside New York State will allow Rochester to take advantage of the higher growth rates typical of those smaller companies. In addition, this acquisition program will help reduce the company's exposure to New York State regulation. At the end of 1991, about 300,000 of the company's 853,000 access lines were outside New York state. In addition to reducing the company's exposure to one regulatory agency, this expansion reduces overall risk by increasing the impact of diverse economies and thus reducing the role of the Rochester economy on the company's financial results.
 This diversification of regulatory, economic, and business risk will help stabilize the company's financial performance and credit profile, despite the relatively high leverage. Although Rochester Telephone may pursue further acquisition opportunities, the current rating reflects Fitch's anticipation that future acquisitions will be financed in a manner that does not impede the expected strengthening of the company's capital structure.
 Fitch expects gradual, relatively stable growth in revenue and earnings contribution from Rochester's wireless business and its RCI long distance operations. Rotelcom, the company's network systems and equipment business, will show more modest growth, with some potential fluctuations in revenue streams.
 -0- 7/31/92
 /CONTACT: Timothy Cain of Fitch, 212-908-0587/
 (RTC) CO: Rochester Telephone Corp. ST: New York IN: TLS SU: RTG


SH -- NY051 -- 5676 07/31/92 14:15 EDT
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Publication:PR Newswire
Date:Jul 31, 1992
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