KEY RATING DRIVERS
--Comcast's pending merger with TWC is strategically sound and creates significant opportunity to realize operating and capital spending efficiencies with minimal execution risk and enables the combined entity to effectively compete on a national scale for incremental commercial segment business.
--The all-stock consideration structure of the merger with TWC is not expected to have a material impact on Comcast's credit protection measures.
--Comcast's capital structure and financial strategy remains intact and centered on reducing leverage to its target of between 1.5x and 2.0x.
--Fitch does not expect any material change to Comcast's capital allocation strategy over the near term and believes there is sufficient capacity within the ratings to accommodate a contemplated expansion of Comcast's share repurchase authorization.
Comcast's ratings reflect its strong competitive position as one of the largest video, high-speed Internet and phone providers to residential and business customers in the U.S. and the company's compelling subscriber clustering profile. In Fitch's view, NBCUniversal's size, scale, leading brand positions, and diversity of operations and business risk as one of the world's leading media and entertainment companies, all lower the business risk attributable to Comcast's credit profile. These factors also create new avenues for revenue and cash flow growth while limiting the near-term impact on Comcast's balance sheet and credit profile.
The pending merger with TWC enables Comcast to extend its operating strategies and technology roadmap into TWC's operations, creating the opportunity to realize material operating cost and capital spending efficiencies. Fitch points out that Comcast's cable-segment EBITDA margin was nearly 500 basis points higher than the comparable TWC EBITDA margin during the year ended 2013. Comcast's ability to successfully establish its key operating strategies within TWC's legacy operations creates a potential
Fitch estimates that approximately
Comcast's liquidity position and overall financial flexibility are strong based on Fitch's expectation that the company will continue to generate material amounts of free cash flow (FCF). Fitch acknowledges that Comcast's share repurchase program represents a significant use of cash; however, Fitch believes that the company would reduce the level of share repurchases should the operating environment materially change, in order to maximize financial flexibility. The liquidity position is further supported by cash on hand (which totaled
Comcast's debt maturity profile is well-laddered and within Fitch's FCF expectation. Maturities total approximately
--A positive rating action would likely coincide with Comcast achieving and committing to a financial policy consistent with an 'A' rating, including maintaining its leverage below 1.5x on a sustained basis. Comcast would need to demonstrate that its operating profile will not materially decline in the face of competition and less than robust housing and employment conditions.
--Negative rating actions would likely coincide with discretionary actions of Comcast's management including, but not limited to, the company adopting a more aggressive financial strategy, or event-driven merger and acquisition activity, that drive leverage beyond 2.5x in the absence of a credible deleveraging plan.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology' (
--'Rating Telecom Companies' (
Rating Telecom Companies
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
David Peterson, +1 312-368-3177
Richard Hunter, +44 20 3530 1102
Source: Fitch Ratings
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