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Fitch Rates Comcast's Senior Unsecured Notes 'A-'; Outlook Stable
January 5, 2017 / 9:16 PM / a year ago

Fitch Rates Comcast's Senior Unsecured Notes 'A-'; Outlook Stable

(The following statement was released by the rating agency) CHICAGO, January 05 (Fitch) Fitch Ratings has assigned an 'A-' rating to Comcast Corporation's (Comcast) benchmark size, senior unsecured notes maturing February 2024 and 2027. Proceeds from the offering are expected to be used for general corporate purposes including the repayment of maturing debt and commercial paper. The notes will be guaranteed by Comcast's subsidiaries included in the company's cross-guaranty structure, namely Comcast Cable Communications, LLC and NBCUniversal Media, LLC. The Rating Outlook for all of Comcast's ratings is Stable. As of Sept. 30, 2016, Comcast had approximately $61.1 billion of debt and preferred stock outstanding, including $11.9 billion outstanding at NBCUniversal Media, LLC and $4.4 billion outstanding at NBCUniversal Enterprise. KEY RATING DRIVERS Consistent Capital Structure Policy: Comcast's capital structure and financial strategy remains balanced between investing in its businesses, maintaining leverage at its target range of low 2x and returning capital to shareholders. Significant Financial Flexibility: Fitch believes Comcast's strong operating profile and solid free cash flow (FCF) metrics afford the company a high degree of financial flexibility at the current rating category. Comcast generated approximately $4.7 billion of FCF during the latest 12 month (LTM) period ended Sept. 30, 2016. Going forward, Fitch anticipates the company will consistently generate material levels of FCF during our rating horizon in excess of $6 billion. Consistent Capital Allocation Strategy: Comcast's capital allocation policy is expected to remain relatively consistent and focused on returning capital to its shareholders while continuing to invest in the strategic needs of its businesses. Fitch expects that share repurchases will total approximately $5 billion during 2016, in line with management guidance and that total shareholder returns are expected to be in line with FCF generation before dividends. Leading Market Positions: Fitch's ratings incorporate Comcast's strong competitive position as one of the largest video, high-speed data and voice providers to residential and business customers in the U.S. and the company's compelling subscriber clustering profile with operations in 39 states and the District of Columbia. In Fitch's view, NBCUniversal's size, scale, leading brand positions and diversity of operations and business risk, and position as one of the world's most prominent media and entertainment companies, lowers the business risk attributable to Comcast's credit profile. The company also creates new avenues for revenue and cash flow growth while limiting the impact on Comcast's balance sheet and credit profile. Strength of Cable Networks: NBCUniversal's portfolio of leading cable networks as well as the growing importance of its theme parks business are key considerations supporting our ratings and are a strength of the company's credit profile. Fitch considers cable networks one of the strongest subsectors in the media and entertainment industry, which provides NBCUniversal with a revenue base largely consisting of stable, recurring and high-margin affiliate fee revenue generated from multichannel video programming distributors as well as being a significant source of NBCUniversal's FCF generation. Evolving Competitive Environment: Fitch believes that over-the-top (OTT) can become a persistent, long-term drag on the pay-television sector. The internet is becoming another platform to distribute video content. Fitch expects that OTT will have a broad impact on the sector affecting the size of pay-television and cable network subscriber bases, advertising and affiliate fee revenues, and programming costs. However, in Fitch's view, OTT and its impact on pay-television subscriber base will not materially affect Comcast's operating or credit profile over the current ratings horizon. Comcast has sufficient flexibility within the current ratings to withstand modest subscriber losses due to cord cutting. However, the largest offset to the threat of OTT to Comcast's cable business is that regardless of how a subscriber consumes video content - through the internet or with a traditional video service - the subscriber will still need to pay for network access (video or high-speed data service). KEY ASSUMPTIONS --Reflecting the overall maturity of Comcast's services, Fitch's base case assumes overall primary service unit (PSU) additions continue to slow, reflecting increasing penetration of the company's service offering portfolio. Importantly, Fitch believes that video service subscriber losses will continue to moderate over the forecast period. High-speed data subscriber growth remains in mid-single digits while telephony subscriber growth is in low-single digits. --Comcast's cable business will continue to report low- to mid-single-digit revenue growth during the forecast period as service ARPUs continue to grow in light of the favorable revenue mix shift of subscribers taking more advanced video services and higher speed (higher-priced) high-speed data service tiers as well as increased overall service penetration. --Cable segment margins decline modestly during the forecast period reflecting ongoing programming cost increases. The increased costs are offset somewhat by Comcast's ability to shift its revenue mix to higher margin services such as high-speed data services and business services, as well as improving operational efficiencies. --Cable segment capital intensity remains relatively consistent over the near term before moderating somewhat as the deployment of the X1 platform and related cloud DVR and wireless gateway spending winds down. --Fitch's base case assumes no change in Comcast's financial policy or capital allocation strategy. In line with company guidance, we expect Comcast will repurchase $5 billion of its common stock during 2016. RATING SENSITIVITIES A positive rating action would likely coincide with Comcast committing to and achieving 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. Negative rating actions would likely coincide with discretionary actions of Comcast's management including, but not limited to, 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. LIQUIDITY 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 FCF. Comcast generated approximately $4.7 billion of FCF during the LTM ended Sept. 30, 2016. Going forward, Fitch anticipates that the company will consistently generate consolidated FCF in excess of $6 billion. Fitch acknowledges that Comcast's share repurchase program represents a significant use of cash. However, Fitch believes 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 approximately $2.8 billion on a consolidated basis as of Sept. 30, 2016, and $6.6 billion of collective available borrowing capacity, as of Sept. 30, 2016, from Comcast's two revolving credit facilities. Commitments under Comcast's $7 billion revolver as well as NBCUniversal Enterprise's $1.5 billion revolver will expire on May 26, 2021. The credit facilities provide a liquidity back-stop to the company's two commercial paper (CP) programs. Comcast maintains a $6.25 billion CP program ($505.3 million outstanding as of Sept. 30, 2016) while NBCUniversal Enterprise has established a $1.35 billion CP program under which approximately $1.1 billion was outstanding as of Sept. 30, 2016. Comcast's debt maturity profile is well-laddered and within Fitch's FCF expectation. The company's maturities total approximately $2.6 billion during 2017 followed by $4.1 billion and $ 2.5 billion during 2018 and 2019 respectively. FULL LIST OF RATING ACTIONS Fitch currently rates Comcast as follows: Comcast Corporation --Long-Term IDR 'A-'; --Senior unsecured debt 'A-'; --$7 billion revolving bank facility 'A-'; --Short-Term IDR 'F2'; --Commercial paper 'F2'. Comcast Holdings Corporation --IDR 'A-'; --Subordinated exchangeable notes 'BBB'. Comcast Cable Communications, LLC --IDR 'A-'; --Senior unsecured debt 'A-'. Comcast Cable Holdings, LLC --IDR 'A-'; --Senior unsecured debt 'A-'. Comcast MO Group, Inc. --IDR 'A-'; --Senior unsecured debt 'A-'. Comcast MO of Delaware, LLC --IDR 'A-'. NBC Universal Media, LLC --IDR 'A-'; --Senior unsecured debt 'A-'. NBCUniversal Enterprise, Inc. --IDR 'A-'; --Senior unsecured debt 'A-'; --$1.5 billion revolving bank facility 'A-'; --Series A preferred stock 'BBB'; --Short-Term IDR 'F2'; --Commercial paper 'F2'. Contact: Primary Analyst David Peterson Senior Director +1-312-368-3177 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst John Culver, CFA Senior Director +1-312-368-3216 Committee Chairperson Michael Weaver Managing Director +1-312-368-3156 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: alyssa.castelli@fitchratings.com. Date of Relevant Rating Committee: Sept. 28, 2015 Summary of Financial Statement Adjustments - Financial statement adjustments that depart materially from those contained in the published financial statements of the relevant rated entity or obligor are disclosed below: --No material adjustments have been made that have not been disclosed in public fillings of this issuer. Additional information is available at 'www.fitchratings.com'. Applicable Criteria Criteria for Rating Non-Financial Corporates (pub. 27 Sep 2016) here Additional Disclosures Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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