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Rating Action:

MOODY'S UPGRADES ROGERS COMMUNICATIONS TO Ba2 WITH A POSITIVE OUTLOOK

17 Feb 2006
MOODY'S UPGRADES ROGERS COMMUNICATIONS TO Ba2 WITH A POSITIVE OUTLOOK

Approximately C$6 billion of debt securities affected.

Toronto, February 17, 2006 -- Moody's Investors Service upgraded the Corporate Family Rating of the Rogers Communications Inc. ("RCI") group of companies as well as the Senior Secured ratings of Rogers Cable Inc. ("Cable") and Rogers Wireless Inc. ("Wireless") to Ba2 from Ba3, while the Senior Subordinated rating of Wireless was upgraded from B2 to Ba3. The Issuer and Senior Secured ratings of Rogers Telecom Holdings Inc. have been withdrawn because all related debt has now been repaid. The outlook for all long-term ratings is positive.

This action reflects Moody's expectation that RCI, after generating only nominal cash flow in recent years through 2005, will likely produce meaningful cash flow by 2007 and that management will likely use it to reduce debt, although execution risks remain. RCI will depend on improving results at Wireless to offset a continuing material cash drain at Cable. The ratings reflect Moody's belief that Cable is considered to be a strategic asset by the CEO and RCI will support sustained investment in the cable operation despite the lack of a guarantee.

The risk also remains that either future capital expenditures or acquisitions will dilute the company's ability to improve its credit metrics.

The outlook is positive because Moody's believes that RCI is likely to produce increasing levels of cash flow. The ratings could be further upgraded if RCI is able to demonstrate an ability to execute on these expectations and to use the proceeds to reduce debt. Moody's currently expects consolidated Debt/EBITDA (all metrics after Moody's standard adjustments) to improve from about 4X at the end of 2005 to less than 3X by the end of 2007. At the same time, Retained Cash Flow/Debt is expected to improve from 17% at the end of 2005 to the upper 20% range over the next two years, while Free Cash Flow/Debt should improve from less than 1% to upper single digits. (EBITDA-Capex)/Interest was only 1.3X in 2005 but should improve to about 2.3X in 2007, while (Funds From Operations+Interest)/Interest of 3.3X in 2005 should approximate 4.5X in 2007. If RCI executes towards these metrics, the ratings would be considered for an upgrade. The outlook would likely be stabilized at the current level if RCI is unable to generate Free Cash Flow/Debt exceeding 5%, Retained Cash Flow/Debt remains closer to 20% than 30%, (EBITDA-Capex)/Interest remains less than 2X, or Debt/EBITDA remains closer to 4X than 3X.

The ratings are primarily supported by RCI's leading position in both the Canadian protected, oligopolistic wireless and cable sectors, and the group's unique ability to offer a quadruple bundle of voice, video, data and wireless products. Moody's also expects that free cash flow will be used to reduce debt for at least the next two years. At the same time, the ratings are constrained by RCI's significant debt (C$9.3 billion at the end of 2005, after Moody's standard adjustments), the execution risk in actually growing free cash flow from a breakeven level in 2005, and the risk of re-leveraging for future acquisitions . RCI is also competing against a larger, financially stronger telco competitor that is aggressively upgrading its network for wireline video.

Moody's believes Rogers is very well positioned in the Canadian communications segment. Moody's expects that the new cable telephony product will be beneficial to Rogers' market share and customer churn and is therefore strategically appropriate, although Moody's remains concerned with Cable's high level of capital expenditures relative to its peers and its related continuing cash drain. Moody's expects approximately mid-teens wireless revenue growth and further margin expansion over the next two years, with the related growth in cash flow to more than offset a planned investment of over $300 million to upgrade their network with high speed HSDPA capability. Moody's expects Rogers Media Inc. ("Media") to generate modest continuing free cash flow after absorbing the cash drain of the Toronto Blue Jays baseball club and related stadium which were both transferred from RCI to Media in early 2005. Moody's believes that Rogers could increase debt to partially fund future acquisitions, as it has done so in the recent past, and would likely be willing to do so in the future should Canadian communications or media companies become available.

Moody's has notched the senior secured ratings of both Wireless and Cable at the same level as the Corporate Family Rating even though Wireless' credit metrics are expected to be materially better than those of Cable in 2007: Moody's believes there are no effective restrictions on the flow of funds amongst the operating and holding companies. RCI has used this financial flexibility in the past when liquidity at Cable was used to support RCI's wireless acquisitions, and Moody's expects RCI will utilize Wireless' cash flow to fund Cable's cash drain over the next several years. As well, although Cable's Second Priority Notes rank behind up to $600 million of that company's $1 billion bank facility, Moody's does not consider this prior claim to be large enough to notch the Second Priority Notes down from the Corporate Family Rating.

The Wireless subordinated debt rating has now been notched one level below the Corporate Family Rating, which is Moody's current standard notching practice when Corporate Family ratings are Ba2 or better.

Moody's believes that Rogers will have approximately C$1.9 billion of expected consolidated liquid resources available to fund C$260 million of cash uses over the next twelve months. Please refer to separate research available on Moodys.com.

Upgrades:

..Issuer: Rogers Cable Inc.

....Senior Secured Regular Bond/Debenture, Upgraded to Ba2 from Ba3

..Issuer: Rogers Communications Inc.

....Corporate Family Rating, Upgraded to Ba2 from Ba3

..Issuer: Rogers Wireless Inc.

....Senior Secured Regular Bond/Debenture, Upgraded to Ba2 from Ba3

....Senior Subordinated Regular Bond/Debenture, Upgraded to Ba3 from B2

Outlook Actions:

..Issuer: Rogers Cable Inc.

....Outlook, Changed To Positive From Rating Under Review

..Issuer: Rogers Communications Inc.

....Outlook, Changed To Positive From Rating Under Review

..Issuer: Rogers Telecom Holdings Inc

....Outlook, Changed To Rating Withdrawn From Rating Under Review

..Issuer: Rogers Wireless Inc.

....Outlook, Changed To Positive From Rating Under Review

Withdrawals:

..Issuer: Rogers Telecom Holdings Inc

....Issuer Rating, Withdrawn, previously rated Caa1

....Senior Secured Regular Bond/Debenture, Withdrawn, previously rated B3

Rogers Communications Inc. is a communications company that owns all of Rogers Cable Inc., Canada's largest cable company, Rogers Wireless Inc., Canada's largest wireless operator, and Rogers Media Inc., which owns radio, TV, sports and publishing assets. All companies are headquartered in Toronto, Ontario, Canada.

Toronto
Donald S. Carter CFA
Senior Vice President
Corporate Finance Group
Moody's Canada Inc.
(416) 214-1635

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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