Fitch Affirms Verizon's IDR at 'A'; Outlook Stable

Fitch Ratings has affirmed Verizon Communications Inc.'s (NYSE: VZ) Issuer Default Ratings (IDRs) and debt ratings as follows:

--Long-term IDR at 'A';

--Senior unsecured debt at 'A';

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

The Rating Outlook is Stable.

In addition, Fitch has reviewed and affirmed the ratings of certain VZ subsidiaries. A detailed list of the affirmations follows at the end of this release.

VZ's ratings reflect the company's strong free cash flows (FCF) which, in turn, underpin its ability to operate within its target leverage range of 1.3x-1.4x which is within Fitch's expectations of around 1.5x for the category. Additionally, the ratings recognize the significant scale and scope of the company's domestic wireline and wireless businesses and the high proportion of revenues from wireless and wireline growth areas. An important component of VZ's ratings is the expectation for continued relatively strong growth in Verizon Wireless' (VZW) revenue, EBITDA, and FCF. In the first quarter of 2012, the domestic wireless segment produced approximately 65% of total consolidated revenues. Over the next several years, Fitch expects VZW's contribution to consolidated revenue and EBITDA to continue to increase as a result of moderate subscriber growth and relatively strong data service revenue growth.

Gross leverage for the last 12 months (LTM) ending March 31, 2012 was 1.4x. Consolidated cash balances declined from $13.4 billion at the end of 2011 to $5.9 billion at March 31, 2012 as VZW paid a $10 billion dividend in January, of which $4.5 billion was to VZW's 45% owner, Vodafone Group Plc. The support for the distribution is provided by VZW's strong FCF generation. Over the LTM ending March 31, 2012, VZW's simple FCF (EBITDA less capital spending) was approximately $19.3 billion.

Ratings also reflect the expectation that in 2012 VZW will complete the pending acquisition of Advanced Wireless Services (AWS) spectrum from SpectrumCo, LLC and Cox TMI Wireless for a total of $3.9 billion. Fitch expects the acquisition to be funded by VZW's FCF. Potential proceeds from VZW's sale of its A and B block 700 MHz licenses, which is contingent on its receipt of approval for the purchase of the AWS spectrum, is not incorporated into Fitch's expectations.

Concerns include the ongoing competitive pressures in the residential wireline market from wireless substitution and cable telephony competition, and the effect of the slow economic recovery on revenues from business and residential customers.

There is event risk regarding VZ's potential acquisition of Vodafone 45% interest in VZW, as there would be concerns with regard to its initial outlay and financing. At the current time, the companies are strongly committed to the partnership, particularly given the distribution in early 2012 and expected strong cash flows that would support potential future distributions.

At March 31, 2012, VZ had $51.6 billion in debt on a consolidated basis, and of this, $3.1 billion matures within one year. VZ's CP issuances are backed by a $6.2 billion credit facility, and Fitch expects the company to maintain aggregate CP balances within a level fully backed by the facility. The credit facility has no ratings triggers or other restrictive covenants, such as leverage or interest coverage tests. The three-year facility matures in October 2014. After the effect of letters of credit (LOCs), approximately $6.1 billion is available on the facility. On a consolidated basis, VZ and its subsidiaries have debt maturities of approximately $1.1 billion and $5.4 billion in 2012 and 2013, respectively.

In the LTM ending March 31, 2012, FCF after dividends and capital spending (but prior to the VZW distribution to Vodafone) was approximately $9.8 billion. In 2012, Fitch expects VZ's FCF (after capital spending and dividends but prior to distributions to Vodafone and the acquisition of wireless spectrum) to be in a $10.5 billion to $11.5 billion range, an increase from the $8.0 generated in 2011. The company's recent cash deployment policy has been focused on reducing leverage to within a 1.3x-1.4x target range. Fitch believes that as FCF continues to grow, the company will have the flexibility to consider stock repurchases within the context of maintaining leverage within its 1.3x-1.4x target range.

In 2012, Fitch expects consolidated capital spending to be flat or down slightly relative to 2011 levels, when spending totaled approximately $16.2 billion. VZ has not provided capital spending guidance by business segment for 2012. In 2012, key areas of capital spending will consist of the continued buildout of advanced networks, including the 4G wireless network and FiOS, well as core network spending on IP and data center enhancements.

Fitch has affirmed the following Verizon entities with a Stable Outlook:

Cellco Partnership

--IDR at 'A';

--Senior unsecured debt (co-issued with Verizon Wireless Capital LLC) at 'A'.

Verizon Wireless Capital LLC

--IDR at 'A';

--Senior unsecured debt (co-issued with Cellco Partnership) at 'A'.

Alltel Corp.

Alltel Communications Inc.

GTE Corp.

Verizon Delaware

Verizon California

Verizon Florida

Verizon Maryland

Verizon New England

Verizon New Jersey

Verizon New York

Verizon Pennsylvania

Verizon Virginia

--IDR at 'A';

--Senior unsecured at 'A'.

GTE Southwest

--IDR at 'A';

--First mortgage bonds at 'A'.

Verizon Global Funding

--Senior unsecured at 'A'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011);

--'Rating Global Telecoms Companies' (Sept. 16, 2010).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

Rating Global Telecoms Companies - Sector Credit Factors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=550205

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.

Contacts:

Fitch Ratings
Primary Analyst
John C. Culver, CFA, [phone]
Senior Director
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Bill Densmore, [phone]
Senior Director
or
Committee Chairperson
Michael Weaver, [phone]
Managing Director
or
Media Relations
Brian Bertsch, New York, [phone]
[e-mail]