DBRS Comments on Comcast Corporation’s Dividend and Share Repurchase Announcement

DBRS notes today’s announcement by Comcast Corporation (Comcast or the Company) that it has initiated a quarterly dividend, and its intention to utilize the remainder of its currently authorized share repurchase program by 2009, has no impact on the BBB(high)/BBB long-term and R-2 (high) short-term debt ratings of the Company. The trends on all ratings are Stable.

Comcast’s intention to pay an annualized dividend of $0.25 per share, will amount to roughly $575 million in 2008 (excluding the impact of share repurchases), which is manageable at roughly 20% of expected free cash flow. DBRS expects Comcast to continue to generate free cash flow well in excess of $2 billion (DBRS adjusted, after dividends) in 2008 as a result of continued cash flow from operations growth, and lower capital intensity (expected to decline to roughly 18% of revenue in 2008 from about 20% in 2007).

DBRS expects the Company’s free cash flow generating capacity to continue to demonstrate growth on a longer-term basis as capital intensity is expected to decline with increasing penetration rates and slower subscriber growth. DBRS notes that Comcast’s initiation of a dividend is an acknowledgement of its strong, stable, free cash flow generating capability as well as an indication of the beginning of a maturation of the cable product as newer services reach increasing penetration levels.

DBRS also notes Comcast has indicated that it intends on utilizing the remaining $6.9 billion of its $8.2 billion share repurchase program over the next two years. However, DBRS expects the Company to continue utilizing the program as a tool to execute its longer-term capital management plans, maintaining its capital structure within its target leverage ratio of between 2.5 times and 3.0 times debt-to-EBITDA.

Assuming roughly half of the remaining amount on the program is utilized and financed with debt in 2008 – which is just slightly more than the $3.1 billion the Company repurchased in 2007 – DBRS expects leverage to increase only modestly, with debt-to-EBITDA increasing to just over 2.7 times on a DBRS adjusted basis (from 2.65 times at year end 2007), within the comfort of the Company’s leverage target, and within the BBB (high) rating category when considering the Company’s strong operational profile.

DBRS expects Comcast to continue to manage its free cash flow deployment in a disciplined manner, managing share repurchases, potential strategic acquisitions and investments within the capacity of its existing financial profile.

Finally, Comcast announced its guidance targets and outlook for the year, with revenue and EBITDA expected to grow at a rate between 8% and 10%, and free cash flow (as calculated and reported by the Company) to improve by at least 20% in 2008. These targets are expected to be achievable, but DBRS expects EBITDA growth to remain in the bottom end of the target range, given intensifying satellite and telco competition in the U.S. video and high speed Internet market, combined with the potential impact of a weakening economy. However, DBRS expects lower capital intensity, should allow the Company to realize its free cash flow target by the end of 2008.

DBRS believes the Company is committed to maintaining its investment grade ratings, which provides comfort in terms of the Company’s intentions to manage its dividend and share repurchases within the framework of its existing credit risk profile. However, DBRS notes longer term issues such as maintaining subscriber, revenue and EBITDA growth, as well as the Company’s ability to develop new services and expand into new revenue streams within the context of an increasingly competitive and maturing industry could become relevant rating considerations over time.

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