Presentation is loading. Please wait.

Presentation is loading. Please wait.

Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Copyright (c) 2008 Standard.

Similar presentations


Presentation on theme: "Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Copyright (c) 2008 Standard."— Presentation transcript:

1 Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Copyright (c) 2008 Standard & Poors, a division of The McGraw-Hill Companies, Inc. All rights reserved. Impact Of The Debt And Economic Crisis On The Telecommunications Business Impact Of The Debt And Economic Crisis On The Telecommunications Business Richard Siderman

2 2. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Telecom and Cable Finance - Challenges and Opportunities Outline Recent market conditions Our view on: Cable Wireless Wireline M&A The importance of financial policy

3 3. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Impact of Recent Capital Market Tumult Across the board impact on most industrials – telecom/cable no exception Most spec grade had little access; all issuers had to pay more Quality of operations do matter Lessons: Credit quality does matter Liquidity is key But, have lessons been learned? Despite recent market tumult, our concerns are mostly longer term, secular ones Taking a look at cable, wireline, wireless

4 4. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Cable Television – A Brief History Fifty years ago, just a retransmission service Rural areas Inexpensive No bells and whistles

5 5. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Cables Metamorphosis For decades cable bills were just a few dollars a month Now the average monthly cable bill is over $ How did that happen? Answer: Always a new product

6 6. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Chronology Of New Cable Services HBO & other pay channels Imported broadcast signals Cable-exclusive programming: CNN, Weather Channel, ESPN, etc Digital converters Modems Telephone But, is there a new `killer app in the wings?

7 7. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Our View On Cable Stagnant to eroding basic subscriber base Digital and high speed Internet services maturing Still growth left on telephony for most operators But, cable telephony likely to face same pressure as wireline down the road Financial Performance: Double digit revenue and EBITDA growth probably over Likely mid to upper single digit growth in near term But: Stable EBITDA margins Declining Cap Ex So, should be more discretionary cable cash flow

8 8. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Cable TV – The Challenges The big challenge – telephone competition, its here and its growing Industry overlap with U-verse &/or FiOS: Now around 20% - 25% Probably growing to 50% in next 2-3 years FiOS and U-verse both offer triple play Will cable companies diversify as core business matures?

9 9. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Our View of Wireline Secular decline and no relief in sight DSL cannot offset high line losses indefinitely Intense competition, especially in residential, from: Wireless substitution, with a generational component Cable telephony VoIP over broadband as a free or cheap alternative When, and where, might wireline stabilize? But, at what price point? Will investment in FiOS and U-verse pay off? What is the appropriate capital structure in the face of secular decline?

10 10. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Our View of Wireless Still good growth but not at rates of a few years ago Wireless is maturing, now about 90 % penetration Some growth from date-centric applications, still, fairly flat ARPUs Higher perception of differences between national players: Handsets, i.e., success of AT&Ts iPhone Service quality and customer care Leap/MetroPCS business model showing traction

11 11. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Wireless Industry Challenges How to prepare for slower growth? With maturation, how to gain share via differentiation Will customers go to Leap or MetroPCS during tough economic times, and then stay with them?

12 12. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. What is the outlook for M&A? Cable – Already Highly Consolidated CompanyBasic Subs% Of Cable% Of Pay TvRating (approx) Universe Comcast24 Million 40% 27%BBB+ TWC13 Million 22% 14%BBB+ Charter 5 Million 8% 6%D Cox 5 Million 8% 6%BBB- Cablevision 3 Million 5% 3%BB DirecTV 18 Million 20%BB EchoStar 14 Million 14%BB- TOTAL PAY TV90 Million

13 13. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. M&A Cable Comcast – Size, regulatory issue Time Warner Cable – Just Split From Time Warner Inc. Still, opportunistic cable add-ons possible With maturity, cable may try to expand outside its core area

14 14. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. WIRELINE M&A Are there any buyers for telephone properties? Secular decline Limited interest by financial investors Hawaiian Telecom and Fairpoint experiences M&A among telcos possible but synergies are limited Larger size might not mitigate secular decline

15 15. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. WIRELESS M&A Already concentrated industry with AT&T Mobility and Verizon leaders Could see regional consolidation Always speculation on a national player

16 16. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. IMPORTANCE OF FINANCIAL POLICY Sector Maturity Brings: Slower growth But, may increase discretionary cash flow What to do with the cash? Reduce debt to recognize slowing business? Or Shareholder friendly actions like: - Share repurchases - Dividends - Acquisitions These policy decisions are key rating factors


Download ppt "Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Copyright (c) 2008 Standard."

Similar presentations


Ads by Google