Mediacom receives S&P credit rating upgrade after 2015 sub gains

Standard and Poor's upgraded its credit rating for Mediacom after the MSO reported its best subscriber numbers in seven years.

The cable operator's rating was bumped to "BB" from "BB-" after it reported gains in high-speed data customers, as well as improvements in pay-TV losses.

"Our assessment of the company's business risk profile recognizes the good revenue visibility characteristics of cable's largely subscription-based business model," S&P said. 

"In our view, Mediacom faces significant competitive pressures on both its video customer base from the satellite TV providers and, to a lesser extent, on its data customers from the local telephone companies," the financial services company added. "Nevertheless, the company's more rural second-tier markets limit video competition from the local telephone operators, at least in the near to medium term.

S&P noted that Mediacom, the nation's eighth largest cable operator, faces only limited competition in regard to telco-based operators.

With AT&T continuing to coalesce resources around DirecTV, competition with satellite operators will only increase. But S&P said Mediacom's increasing connectivity service acumen will give it a competitive advantage.

"Mediacom looks to remain competitive as the company continues to upgrade its network with the roll-out of DOCSIS 3.1 this year," S&P said... Continued investment in the company's network and increased demand for high-speed data (HSD), should help to further increase penetration rates, which grew at a rate of about 7 percent year-over-year in the fourth quarter.

"We expect HSD growth will continue to offset flat video revenue near term, as the company continues to offset video subscriber declines with increased prices primarily driven by retransmission cost pass- throughs to customers," S&P added.

For the fourth quarter, Mediacom reported losses of 7,000 video subscribers, an improvement from 10,000 lost in the fourth quarter of 2014. For the full year, the MSO lost 35,000 video subs, nearly halving losses of 55,000 the previous year.

Meanwhile, the addition of 72,000 high-speed Internet users also represented a seven-year best. And the MSO more than doubled phone-service additions with 33,000 for the year compared to just 14,000 in 2014. 

Quarterly revenue rose 3.9 percent for Mediacom Broadband and 4.3 percent for Mediacom LLC. Adjust OIBDA was up 3.7 percent for Mediacom Broadband and 6.1 percent for Mediacom LLC. 

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