DBRS Confirms Verizon Wireless at “A”, Trend Remains Stable

Dominion Bond Rating Service (“DBRS”) has today confirmed the rating of Verizon Wireless Capital LLC (“Verizon Wireless” or the “Company”), a guaranteed subsidiary of Cellco Partnership dba, at “A”. The trend is Stable. The rating was also confirmed earlier this year after its parent, Verizon Communications Inc. (“Verizon”), closed on its acquisition of MCI, Inc. DBRS notes that Verizon Wireless’s rating continues to reflect its modest business risk profile – as it continues to lead the industry in many of its operating metrics – as well as its reasonable balance sheet and improving credit metrics.

Verizon Wireless continues to benefit from a number of factors supporting its modest business risk profile resulting in good EBITDA margins – currently in the upper 30% range. This is despite the wireless industry in the U.S. remaining intensely competitive, with competitors gaining further scale through consolidation. These factors include: (1) principally operating on a single national network (using a CDMA platform); (2) a focus on improving network quality and customer service levels, which help to keep churn levels below 1.5% per month; and (3) a continued focus on profitable subscriber growth. As a result, Verizon Wireless continues to achieve scale benefits that drive EBITDA margin improvement and double-digit EBITDA growth. DBRS expects Verizon Wireless’s EBITDA margins to continue lead the industry in the U.S. in 2006 and improve closer to the 40% level (of total revenue).

While DBRS notes that despite competition and potential competitive threats (such as VoIP over mobile, WiMax, etc.), Verizon Wireless will continue to benefit from further subscriber growth, increased voice and data usage, which are expected to mitigate these potential threats. Additionally, with its Evolution-Data Only (“EV-DO”) network coverage expected to further improve in 2006, Verizon Wireless will have significant national coverage for its advanced data and multimedia services. Finally, DBRS expects that carriers such as Verizon Wireless, which are part of a large wireline business, will lead in the development of converged wireline and wireless services (to both residential and enterprise customers now under Verizon Business). This is expected to help to drive additional retention benefits and revenue growth opportunities.

From a financial perspective, DBRS notes that Verizon Wireless’s free cash flow has grown substantially after its distribution policy (specifically, its non-tax related distribution policy) to its parents expired in early 2005. DBRS does not expect Verizon Wireless to re-initiate a distribution in the near term, which will allow it to apply this considerable free cash flow (DBRS estimates roughly US$6 billion in 2006) to potential acquisitions (spectrum or other operations) and/or debt reduction. In 2006, DBRS believes that Verizon Wireless will be in a position to repay its remaining public debt upon maturity in December (US$2.5 billion) and potentially make considerable inter-company loan repayments to Verizon, which will sweep any excess cash.

As a result of DBRS’s expectations of further debt reduction and the maintenance of a modest business risk profile, Verizon Wireless’s credit and operating metrics are likely to further improve over the next couple of years. DBRS believes that this will further strengthen the Company’s current rating and firmly position it in the upper quartile of DBRS’s global wireless universe.