Fitch rates Telenet notes

Fitch Ratings said it has assigned a B- rating to Telenet Communications NV's €500 million 9% senior notes due 2013 and a CCC+ rating to Telenet Group Holding NV's $558 million 11.5% senior discount notes due 2014.

The agency has also assigned Telenet BidCo NV, a subsidiary of Telenet Communications NV, a senior unsecured rating of B and a senior secured rating of BB-.

The outlook is stable.

Fitch said the senior unsecured rating reflects Telenet's strong market positions in cable television, internet and telephony services and, in particular, the stability of the cable television business.

Notwithstanding the success of Telenet's "triple-play" of media, data and voice services and its profitability (EBITDA margin of 50% in third quarter 2003), the rating is constrained by the group's high financial leverage, possible regulatory risks and the potential for increased price competition in the Belgian internet and telephony markets, the agency said.

"It seems unlikely that Telenet will be able to maintain its current broadband internet pricing in the face of increasing competition from DSL services," said Fitch analyst Roger Coyle.

The senior notes and senior discount notes were issued in December 2003 to repay subordinated shareholder debt issued as part of Telenet's 2002 acquisition of a cable network and deferred obligations relating to the network upgrade. Proceeds from the issuance were also used to reduce the outstanding balance on Telenet's senior secured credit facilities to €740 million from €975 million.

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