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Rating Action:

MOODY'S UPGRADES COMCAST CORPORATION'S LONG TERM DEBT RATINGS (SR. UNSECURED) TO Baa2 FROM Baa3 AND SHORT TERM RATING TO PRIME-2 FROM PRIME-3; OUTLOOK STABLE

21 Apr 2005
MOODY'S UPGRADES COMCAST CORPORATION'S LONG TERM DEBT RATINGS (SR. UNSECURED) TO Baa2 FROM Baa3 AND SHORT TERM RATING TO PRIME-2 FROM PRIME-3; OUTLOOK STABLE

Approximately $24 billion of debt affected

New York, April 21, 2005 -- Moody's Investors Service has upgraded Comcast Corporation's long-term debt ratings (Senior Unsecured) to Baa2 from Baa3. Moody's also upgraded the company's short-term rating to Prime-2 from Prime-3. The outlook is stable.

The upgraded debt rating for Comcast Corporation and its subsidiaries include the following: Comcast Corporation (to Baa2 from Baa3 sr. unsec. and to Prime-2 from Prime-3); Comcast Cable Communications LLC (to Baa2 from Baa3 sr. unsec.); Comcast MO of Delaware LLC, formerly known as MediaOne Delaware Inc. (to Baa2 from Baa3 sr. unsec.); Comcast Cable Communications Holdings Inc. formerly known as AT&T Broadband Corp. (to Baa2 from Baa3 sr. unsecured); Comcast Cable Holdings LLC formerly known as TCI Communications Inc. and thereafter AT&T Broadband LLC (to Baa2 from Baa3 sr. unsec.); and Comcast Holdings Corp. formerly known as Comcast Corporation (to Baa3 from Ba1 sr. unsec.; to Ba1 from Ba2 subordinate).

The upgrade reflects improved operations and exceptional management performance, the restoration of credit metrics at the company to pre-AT&T Broadband (AT&T BB) acquisition levels following the completion of the upgrade of the former AT&T BB cable network, a successful integration of the former AT&T BB systems with the legacy Comcast operations, and the sale of non-core businesses for cash, all of which resulted in faster-than-expected paydown of acquisition-related debt over the past two years. Due primarily to the strong growth of EBITDA, the company's leverage has decreased substantially since the AT&T BB acquisition. The improved operating performance, coupled with decreasing capital expenditure needs after completion of the network upgrade, has generated strong free cash flow since mid-2004. The upgrade also considers the improvement in leverage as the company used cash from asset sales and cash flow from operations to decrease its outstanding debt. In addition, the rating action contemplates the benefits from the scale of the company. We expect Comcast to continue to benefit from its leading market position and significant scale. With a cable network platform that includes 21.5 million subscribers, the company benefits significantly from selling premium services, lowering programming costs, developing in-house content and creating strategic partnerships with other key companies. The advent of a triple-bundle capability also supports the upgrade, as it helps mitigate churn and provides the company with added protection in a more competitive environment.

The stable outlook reflects Comcast's maintaining moderate debt leverage between 2.5x and 3.5x adjusted debt-to-EBITDAR, (adjusted debt includes debt guarantees, Comcast's pro-rata share of debt from its joint ventures with Time Warner Cable and Insight Midwest, pension, and lease adjustments). This ratio decreased from approximately 6.0x EBITDAR at the close of the AT&T BB acquisition to around 3.3x EBITDAR at year-end 2004, and total debt decreased to just over 10.0x free cash flow. Moody's expects the company to generate strong free cash flow in the future as it increases the penetration of its 21.5 million subscriber base with digital cable television, high speed data and VoIP telephony services. The rating contemplates strong free cash flow generation from these services and the continued decline in capital expenditures needs, resulting in the potential for further decreases in leverage by year-end 2007. We also expect the company to lower its debt-to-free cash flow to under 7.0x over the next 24 months as well. We expect that this will position the company to maintain credit metrics consistent with the current rating in the more competitive landscape.

The ratings are supported by the company's experienced management team which has shown a history of strong operating performance and prudent balance sheet management. However, the stable outlook also factors in the more competitive environment from direct satellite broadcast service providers (DBS) and Moody's expectations of competitive disruption from the RBOCs as they look to rebuild the last mile of their network to defend their traditional telephone business and enter the pay-TV business over the intermediate-term. The senior unsecured debt rating also takes into consideration the company's position as the world's largest cable TV system operator. The existence of guarantees between all of the significant operating companies eliminates structural subordination (cross, upstream and downstream guarantees except for certain of its exchangeable debt, which resides at Comcast Holdings Corporation formerly known as Comcast Corporation before the AT&T BB merger). We do not anticipate the results of Comcast's recent agreement to acquire certain Adelphia assets jointly with Time Warner to affect its credit measures and debt ratings. The transaction is not expected to significantly change the amount of Comcast's total subscriber base (estimated to add about 1.8 million subscribers) nor do we anticipate Comcast to expend its financial flexibility to fund its part of the acquisition. Comcast has reached an agreement with Time Warner to use Comcast's 21% interest in Time Warner Cable and Time Warner Entertainment LP to finance a large portion of the deal.

Continued de-leveraging to under 2.5x lease adjusted debt-to-EBITDAR and a consistent level of free cash flow conversion of greater than 35% of EBITDA, such that free cash flow would be equal to or greater than 15% of total debt, would put further upward pressure on the company's debt ratings.

The Prime-2 rating reflects Comcast's Baa2 senior unsecured long term debt rating, and that of most of its subsidiaries, and Comcast's strong liquidity position. The company's liquidity profile reflects strong free cash flow growth as capital expenditures decrease, significant cash and marketable securities on hand, a conservative underweighted use of short-term debt instruments, and staggered maturities of long-term debt. In Moody's view, the company's internal sources of liquidity are significant, including growing free cash flow in 005 (which was about $2.0 billion in 2004) supplemented by about $500 million of cash and cash equivalents.

Comcast Corporation, with its headquarters in Philadelphia, Pennsylvania, is the nation's largest cable television system operator with approximately 21.5 million subscribers and owns and operates cable television programming and sports teams and arenas.

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

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

No Related Data.
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