DBRS Confirms Comcast Corporation at BBB (high), R-2 (high), Stable Trend

DBRS has today confirmed the long-term and short-term ratings of Comcast Corporation (Comcast or the Company) at BBB (high) and R-2 (high), respectively, and the long-term rating of Comcast Holdings Corporation at BBB. The trends on all ratings are Stable.

The rating confirmation reflects Comcast’s strong cable franchise, solidified by good subscriber growth driven by high-speed Internet, and new services such as telephony and digital video, including HDTV and VOD. Comcast’s triple-play bundle has remained a key driver of growth and a key competitive advantage over other video providers and new entrants, helping the Company to reduce subscriber churn. DBRS believes Comcast is well positioned to continue to leverage existing subscriber relationships as it continues its transition from a pure-play cable operator to a multi-service communications provider.

However, DBRS notes that while Comcast still maintains a window of opportunity for growth, this will likely begin to dwindle in the medium term as the telcos begin to push deeper into the lucrative terrestrial video market with their own service offerings and bundled packages of three or even four services, led by wireless.

In the latest period, Comcast’s EBITDA and cash flow from operations continued to improve, led by strong growth in average revenue per basic subscriber, which now approaches $100 per month. Additionally, Comcast maintains above-average EBITDA margins in the low-40% range, despite new service deployment and the acquisition of new systems which typically depress profitability over the short term.

Going forward, DBRS expects Comcast to continue to demonstrate good EBITDA growth as the Company continues to aggressively market its triple-play and digital service offerings. As such, DBRS expects EBITDA to reach roughly $11.9 billion by the end of 2007, primarily led by strong subscriber growth with EBITDA margins expected to remain stable.

Free cash flow is expected to remain roughly flat on a year-over-year basis at just over $2 billion (DBRS adjusted), as improvement in cash flow from operations is expected to be offset by higher variable capital expenditures to support expected subscriber growth. DBRS expects Comcast to continue to balance its deployment of free cash flow between share repurchases and small- to medium-sized acquisitions.

DBRS expects the Company’s key credit metrics to remain relatively stable in 2007, with debt-to-EBITDA expected to be just under 2.6 times and cash flow-to-debt to remain at roughly 0.27 times at the end of 2007.

Note:
All figures are in U.S. dollars unless otherwise noted.