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Rating Action:

CORRECTION TO HEADLINE: MOODY'S CHANGES COMCAST CORPORATION'S DEBT RATING (Baa3 SR. UNSEC.) OUTLOOK TO POSITIVE FOLLOWING ANNOUNCED SALE OF ITS INTEREST IN QVC (Rating in headline changed to Baa3)

08 Jul 2003
CORRECTION TO HEADLINE: MOODY'S CHANGES COMCAST CORPORATION'S DEBT RATING (Baa3 SR. UNSEC.) OUTLOOK TO POSITIVE FOLLOWING ANNOUNCED SALE OF ITS INTEREST IN QVC (Rating in headline changed to Baa3)

Approximately $25 Billion of Debt Securities Affected.

New York, July 08, 2003 -- Moody's Investors Service has affirmed the debt ratings of Comcast Corporation (Baa3 sr. unsec.) and its subsidiaries and changed the outlook for the long-term debt ratings to positive from stable. The outlook for Comcast's Prime-3 short-term rating has also been changed to positive from stable. The change in outlook was prompted by Comcast's agreement to sell its 57.5% interest in QVC, Inc., a consolidated subsidiary of Comcast, for about $7.9 billion to Liberty Media Corporation. The transaction is expected to close before year-end, and Moody's expects Liberty will receive Hart-Scott-Rodino approval to buy Comcast's QVC stake.

Comcast's rated subsidiaries include Cable Communications (Baa3 sr. unsec.), Comcast MO of Delaware Inc. formally known as MediaOne Delaware Inc. (Baa3 sr. unsec.), Comcast MO Group Inc. formally known as MediaOne Group, Inc. (Baa3 sr. unsec.), Comcast Cable Communications Holdings Inc. formally known as AT&T Broadband LLC (Baa3 sr. unsecured), Comcast Cable Holdings LLC formally known as TCI Communications Inc. (Baa3 sr. unsec.) and Comcast Holdings Corp. formally known as Comcast Corporation (Ba1 sr. unsec.).

The outlook change is based on Moody's view that Comcast will receive sizable proceeds from the sale of its interest in QVC, which ultimately will be used to reduce debt and leverage levels, thereby accelerating improvement in the company's credit metrics. The $7.9 billion in proceeds are expected to be in the form of a combination of equity (up to a maximum of about $2.3 billion of Liberty shares valued at $11.71 per share) and cash and/or a three-year senior unsecured note (registered with the SEC and freely marketable) from Liberty. Moody's anticipates that Comcast will seek to monetize the debt and equity securities it receives and reduce debt in an expeditious, though practical manner. Since Comcast has a fairly low basis in QVC, Moody's believes that a portion of the proceeds and eventual monetization of the equity received, net of NOL benefits, will be taxable to Comcast, for net proceeds of between $5 and $6 billion.

The Baa3 rating for Comcast following the merger with AT&T's cable systems contemplated between $4.5 to $5 billion of asset sales within the first two years (through 2004 Q4). However, once Comcast can dispose of its $1.5 billion AOL Time Warner stock received as part of the Time Warner Entertainment, L.P. partnership restructuring, and upon receipt of the QVC sale proceeds, the company will have more than doubled that asset sales estimate. The outlook change incorporates Moody's expectation that substantially all after-tax proceeds will be applied toward debt reduction. In addition, Moody's believes that additional material asset sales proceeds may be realized over the medium-term as the company participates in the IPO of its approximate 21% residual interest in Time Warner Cable.

The Baa3 rating also contemplated significant challenges in integrating a cable company that was over one-and-one-half times its own size, that had been experiencing significant subscriber erosion, had the lowest operating margins in the industry and required a significant network upgrade. Only a few quarters have passed following the merger so far, but encouraging results confirming the initial expectations are apparent, such as margin improvements and the stemming of subscriber defections, are occurring or are in progress which is demonstrative of better management of the former AT&T cable systems. Moody's notes, however, that the competitive landscape remains dynamic (i.e. change of ownership of DIRECTV and increasingly aggressive pricing of DSL service by some of the telephone companies, notably Verizon) and represents potential threats to the solid revenue and cash flow growth rates Comcast has achieved over the past several quarters. Moody's also believes that over the longer-term, that the RBOCs could pose an even greater competitive threat when they rebuild the last mile of their network to increase capacity and capabilities.

Moody's anticipated that the company would bring down what was initially considered high leverage for a Baa3 investment grade rating. The sale of QVC reduces debt far more quickly than we anticipated, but since QVC generated good operating and free cashflows, the reduction in leverage ratios are favorable but not as dramatic. We anticipated that the company would pour significant capex into the AT&T cable systems to bring them up to an equivalent capability level as those of the Comcast previously owned systems. The amount of spending is now estimated to be somewhat less than anticipated for 2003 and 2004, following the company's full review and inspection of the upgrade status and condition of the former AT&T properties. Moody's believes that the resulting impact together with the good operating performance, will likely be a quicker return to free cashflow generation than we anticipated, despite the elimination of QVC results. Moody's expects this acceleration together with lower debt levels could position the company for stronger credit metrics over the next 12 to 18 months. A lack of continued margin improvement and continuing traction of the company's subscriber retention initiatives would likely be the primary barriers to a rating upgrade and therefore a few more quarters of favorable results will be viewed to make a determination.

Comcast Corporation, with its headquarters in Philadelphia, Pennsylvania, is the nation's largest cable television system operator with 21.3 million subscribers, owns and operates cable television programming, owns sports teams and arenas and owns other material related but non-core investments.

New York
Robert Konefal
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Neil Begley
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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