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 ofcompetitive pressures and a slow growth environment.
Second-quarter liquidity remained strong, with 91% of committed facilitiesavailable for borrowing and total liquidity exceeding aggregate 2012, 2013, and2014 maturities. Issuers in the portfolio have decreased aggregate 2012 and 2013maturities 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 issuersmaintained balance sheet cash and short-term investment balances ofapproximately $40 billion.
Margins have remained stable in the face of persistent competitive pressures,and with minimal organic growth opportunities. Aggregate LTM EBITDA marginsdeclined 100 basis points (bps) year over year to 32%. Credit profiles aresteady as leverage is relatively unchanged from the previous year at 2.35x from2.42x. However, a few companies saw an increase in debt levels. Crown CastleInternational Corp. increased leverage after closing on the NextG Networksacquisition for $1 billion during April. DISH Network Corp. also witnessedhigher leverage after committing capital for a potential wireless networkbuildout.
Issuers have continued to funnel FCF to shareholders in the form of dividendsand share repurchases. Dividends and share repurchases increased almost 3% yearover year to $5.72 billion from $5.57 billion. Fitch expects the issuers tocontinue channeling excess FCF to shareholders in the near term.
A series of recently announced merger and acquisition activity within the cablesector underscores the difficulty smaller operators are encountering ingenerating organic revenue growth. Revenue growth and incrementalservice-penetration gains of legacy products are slowing. Operators are facedwith maturing product and service portfolios and unrelenting competitivepressures. Inorganic growth opportunities are emerging as a key element tolong-term growth strategies.
The full report 'Telecommunications & Cable Stats Quarterly -- Second-Quarter2012' 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)