Fitch Affirms Cablemas' IDR at 'BB-'; Outlook Stable

MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed Cablemas, S.A. de C.V.'s (Cablemas) ratings as follows:

--Local currency Issuer Default Rating (IDR) at 'BB-';

--Foreign currency IDR at 'BB-';

--National scale long-term rating at 'A(mex)'.

The Rating Outlook for these ratings is Stable.

In addition, Fitch affirmed Cablemas' US$175 million 9.375% coupon senior notes due in 2015 at 'BB-'.

Cablemas' ratings are based in its solid operating network, geographically diverse subscriber base, improving financial position, increasing competition and current negative cash flow generation. Cablemas continues investing in its network development, which has derived in negative cash generation in recent years. A rating upgrade by Fitch depends on the company's ability to achieve and maintain positive free cash flow over time, which would allow it to reduce its total debt-to-EBITDA to 2.0 times (x) or below on a continued basis.

For 2008, Cablemas' capex is budgeted in US$150 million, and will be focused on telephony, network construction and bidirectional reconversion and digital video. During 2007 operating EBITDA margin was affected by the telephony service launching; however, during 2008 margins are expected to recover due to price increases and cost & expense efficiencies. At June 2008 the company had 2.32 million homes passed and 805,390- 224,799 and 67,012 video, broadband and telephony subscribers, respectively. In 2008 Cablemas expects to have 2.6 million passed homes and 92% of the network with bidirectional capability. With this the company will be well positioned to capture triple play subscribers.

The rating actions incorporate the increased participation of Grupo Televisa, S.A.B. (Televisa, rated 'BBB+/AAA(mex)' by Fitch) in Cablemas' equity and its active role in the company's strategy, decision and execution processes. In February 2008 Televisa injected US$100 million in exchange of an additional 11% equity stake, represented by Cablemas' non-voting shares. The cash was used to pay down debt and fund the company's capex program. With this transaction, Televisa's total economic stake in Cablemas' equity is approximately 54.6%. The controlling shares remain in the same proportions; the Alvarez Family owns 51% and Televisa 49%.

Fitch believes that Televisa's participation brings long-term strategic synergies, as well as a robust partner with ample financial flexibility and growth support. The latter is evidenced in the acquisition by Empresas Cablevision, S.A.B. de C.V. (Cablevision), direct subsidiary of Televisa, Cablemas and Television Internacional, S.A. de C.V., of the majority of the assets of Bestel, a national telecommunications service provider, which main asset is an 8.0 thousand kilometer fiber optic network. This acquisition benefits the consortium and strengthens its position given the competitive environment prevailing in the convergence of the Mexican telecommunications service market.

Cablemas' financial position has improved. With the reconfiguration of Cablemas' balance sheet after the equity infusion from Televisa, Fitch believes the company's financial position and key credit metrics should remain stable and could moderately improve in the mid-term. For the last 12 months (LTM) ended in June 2008, Cablemas generated MXP 2,911 million, vs. MXP 2,704 million and MXP 2,391 million in fiscal year (FY) 2007 and FY2006, respectively. EBITDA generation was MXP 1,089 million, MXP 1,018 million and MXP 969 million for the LTM June 2008, FY 2007 and FY 2006, respectively. Total Debt-to-EBITDA for the LTM ended June 30, 2008 was 2.2 times (x), an improvement from 2.9x in December 2007.

The company's liquidity is manageable. At June 30, 2008, Cablemas had cash balances of MXP 454 million and total debt registered in its balance sheet of MXP 2,351 million, of which only 1.2% is short-term. Total debt is comprised of US$175 million in senior notes due in 2015 and US$50 million of a term loan with final maturity in December 2012.

Cablemas is the second largest cable television operator in Mexico, in terms of subscribers and homes passed. The company has operations in 46 cities and 15 states, including important cities distributed across the country such as Chihuahua, Tijuana, Cancun, Playa del Carmen, Merida, Cuernavaca and Acapulco.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.