Oct 9 - According to a new report issued today by Fitch Ratings, the U.S. Telecom and Cable sector's liquidity and margins remain stable in the face of competitive pressures and a slow growth environment.
Second-quarter liquidity remained strong, with 91% of committed facilities available for borrowing and total liquidity exceeding aggregate 2012, 2013, and 2014 maturities. Issuers in the portfolio have decreased aggregate 2012 and 2013 maturities by over $13 billion since first quarter 2012. Latest 12 months (LTM) free cash flow (FCF) improved in the second quarter to $34 billion, and issuers maintained balance sheet cash and short-term investment balances of approximately $40 billion.
Margins have remained stable in the face of persistent competitive pressures, and with minimal organic growth opportunities. Aggregate LTM EBITDA margins declined 100 basis points (bps) year over year to 32%. Credit profiles are steady as leverage is relatively unchanged from the previous year at 2.35x from 2.42x. However, a few companies saw an increase in debt levels. Crown Castle International Corp. increased leverage after closing on the NextG Networks acquisition for $1 billion during April. DISH Network Corp. also witnessed higher leverage after committing capital for a potential wireless network buildout.
Issuers have continued to funnel FCF to shareholders in the form of dividends and share repurchases. Dividends and share repurchases increased almost 3% year over year to $5.72 billion from $5.57 billion. Fitch expects the issuers to continue channeling excess FCF to shareholders in the near term.
A series of recently announced merger and acquisition activity within the cable sector underscores the difficulty smaller operators are encountering in generating organic revenue growth. Revenue growth and incremental service-penetration gains of legacy products are slowing. Operators are faced with maturing product and service portfolios and unrelenting competitive pressures. Inorganic growth opportunities are emerging as a key element to long-term growth strategies.
The full report 'Telecommunications & Cable Stats Quarterly -- Second-Quarter 2012' is available on
Additional information is available at '
Applicable Criteria and Related Research: U.S. Telecom and Cable Stats Quarterly - Second-Quarter 2012 (Telecom and Cable)
(New York Ratings Team)