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Trend of Consumers Switching From Wireline to Wireless-Only Phone Service to Intensify in 2004, Concludes S&P Telecoms Equity Analyst in New Report Nationwide S&P/InsightExpress Consumer Survey on Local Number Portability Suggests Upcoming Challenges to Telecom Firms NEW YORK, Dec. 11 /PRNewswire/ -- In a research report based on a nationwide consumer survey on Local Number Portability, both of which were released today by Standard & Poor's Equity Research Services, wireless substitution for traditional wireline telephone service in the home emerged as one more threat to the wireline telecom carriers, who are already challenged by competition from wholesale access providers and cable providers, and sizable labor and pension expenses. Nearly 10% of current wireline customers responded that they would take their wireline number to a wireless carrier based on new rules allowing this, which is more than double the percentage of customers that have actually cut the wireline cord to date. The consumer survey was commissioned by Standard & Poor's, a leading provider of independent investment research, ratings and indices, and conducted by InsightExpress, an online market research firm, during the last week of November 2003. Based in part on the results of the nationwide consumer survey, Standard & Poor's telecommunications equity analyst Todd Rosenbluth is concerned that wireless substitution, which has been plaguing the wireline carriers for the past two years, will intensify in 2004. He expects access line losses to widen, as a greater percentage of consumers "cut the cord" and the carriers see more minutes of use flow to wireless networks. The survey results also suggest that the prevailing assumption -- that aggressive bundling of data services with traditional services would ensure consumer loyalty to one telecommunications provider -- is questionable. "We believe that loyalty to one's carrier may be challenged, as consumers turn to price and convenience," says Todd Rosenbluth, Telecommunications Services Equity Analyst Standard & Poor's Equity Research Services. "In the survey results, we found no significant difference in intentions to stick with current wireline providers between those who receive traditional services only, like local and long-distance, and those that have additional services, like DSL." "We expect all carriers to develop aggressive bundling strategies, particularly wireline and wireless services under one plan, as they try to reduce customer churn, and we believe bundling should be catered toward sharing minutes between wireline and wireless services. We also found no evidence that the youth segment is more prone to cut the cord, although the prepaid market is just emerging," concludes Rosenbluth. Rosenbluth also does not expect a sizable increase in customer churn from one wireless carrier to another as a result of local number portability. According to the survey, only 4% of current wireless customers will switch their number to a new carrier regardless of when their current contract expires. Also, approximately an additional 16% of those surveyed plan to switch when the current contract expires. This stated intention by the survey respondents is consistent with the normalized 25% annual turnover in wireless customers. The majority of respondents believe that the most important factors in selecting a wireless carrier are price and quality of service, suggesting that aggressive minute packages and wireless capital spending should increase in 2004. Standard & Poor's Equity Research Services recommends that investors underweight the telecom services sector. Standard & Poor's STARS recommendations within the sector include "Sell" (one STARS out of five) on shares of Cincinnati Bell (NYSE:CBB) at $5.30 per share, and "Avoid" (two STARS out of five) on shares of BellSouth (NYSE:BLS) at $27 per share, SBC Communications (NYSE:SBC) at $25 per share, and Sprint FON (NYSE:FON) at $15 per share. About the Standard & Poor's/InsightExpress Survey Standard & Poor's Equity Research Services surveyed 500 individuals nationwide regarding their telephone usage, attitudes and behaviors, with a particular focus on Local Number Portability. Respondents are evenly distributed across all age groups, ranging from 18 to 55 years or older. Over 80% have more than one person in the household. Just over half (55%) the respondents are female. InsightExpress is a leading market research firm with access to over 100 million online individuals. About Standard & Poor's Standard & Poor's Equity Research Services has the largest U.S. equity coverage count among equity research firms that are not affiliated with a Wall Street investment bank, analyzing 1,200 U.S. stocks. Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With 5,000 employees located in 20 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com/. The analyst quoted above is a Standard & Poor's equity analyst and a registered representative of Standard & Poor's Securities, Inc. He has no affiliation with any company referenced above. He has no ownership interest in any company referenced above. Standard & Poor's other affiliates may provide services to the companies that are the subject of this report. Standard & Poor's analytic services are performed as entirely separate activities in order to preserve the independence of each analytic process. In this regard, STARS, which are published by Standard & Poor's Equity Research Services, operates independently from, and has no access to information obtained by Standard & Poor's Ratings Services, which may in the course of its operations obtain access to confidential information. About InsightExpress InsightExpress is the acknowledged pioneer of rapid turnaround, high-quality, online market research services. With its award-winning and patented technology, market research expertise, and access to more than 100 million online individuals, InsightExpress enables its clients to easily harness market research to make the right business decision in real-time. InsightExpress is affiliated with General Atlantic Partners. For more information, visit http://www.insightexpress.com/ or call 203-359-4174. DATASOURCE: Standard & Poor's CONTACT: Media Contact: John Piecuch Communications Manager Standard & Poor's Tel.: 212-438-1102 Customer Contact: Michael Roncone Standard & Poor's Tel.: 617-482-7223 Web site: http://www.standardandpoors.com/ http://www.insightexpress.com/

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