Citizens Utilities Expands in Telecom

Fortnightly Magazine - January 15 1995
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Citizens Utilities Co. is continuing its aggressive expansion into the telecommunications business with an agreement to buy $292 million of telephone and cable television assets from Alltel Corp. However, the deal places the company's credit rating under increasing pressure.

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Citizens will buy 109,000 telephone access lines in eight states, and acquire operations serving 7,000 cable television customers in four states. Alltel is a telecommunications and information services company based in Little Rock, AK. Citizens will pay $250 million in cash, assume $32 million in Alltel debt, and transfer 3,600 Citizens telephone access lines (valued at $10 million) to Alltel. Citizens currently provides telecommunications service in six of the eight states.

The announcement prompted Moody's Investors Service to place Citizens' $425 million in long-term debt (senior debt Aa3) under review for possible downgrade. Moody's is concerned about the amount and timing of the additional debt burden. In 1993, Citizens made a $1.1-billion acquisition of GTE telephone properties. Although the GTE purchase is 98 percent complete, Moody's says the "resulting high levels of debt continue to weaken the balance sheet." (em LG

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