Moody’s reiterates B1 rating for Telecable

Credit rating agency Moody’s has reiterated its B1 credit rating for Spanish cable operator Telecable, which is owned by UK investment outfit Zegona Communications and operates in the Asturias region of north-western Spain.

Moody’s said that the company had a strong position in its regional market, which had to be offset against the modest scale of its operation. It said that the economic environment was improving for telecoms, following a period of intense price competions and revenue contraction.

Moody’s said that Telecable’s strategy of developing its position in pay TV was a good one, with opportunity to develop DVR penetration in a base with relatively low penetration of set-top boxes currently.

Risks include the rollout of fibre networks in the region by rival operators. However, the operator currently offers the fastest network in the region, and enjoys high EBITDA margins, which Moody’s expects to remain stable. However, the agency expects free cash flow generation to be limited after shareholder distributions.

“The B1 rating balances Telecable’s solid and entrenched market position in its domestic market, improving trends in the Spanish telecoms market, its financial and operational track record and high-quality network, its moderate leverage, and its prudent financial policies and liquidity against its modest scale because of its concentration in one region of Spain, the potential for increased competition and more expensive content costs, and its limited free cash flow generation after shareholder distribution,” said Moody’s.