DBRS Upgrades Rogers Cable to BB (high), Trend Remains Positive

Dominion Bond Rating Service (DBRS) has today upgraded the rating of Rogers Cable Inc. (Rogers Cable, or the Company) to BB (high) from BB. The trend remains Positive. The upgrade follows DBRS’s trend change of the Company’s Senior Secured Notes & Debentures to Positive on May 16, 2006, given the steady improvements to the Company’s credit profile and the considerable improvements at all of the Rogers group of companies. DBRS has also upgraded the ratings of Rogers Wireless Inc. (Rogers Wireless) and the parent of both companies, Rogers Communications Inc. (RCI). (See separate press releases by DBRS on both Rogers Wireless and RCI dated today).

The upgrade reflects (1) continued strong performance in the cable and Internet segments driven by strong growth in subscribers, (2) improved credit metrics and a focus on debt reduction, and (3) reduced free cash flow deficits funded by intercompany notes from RCI.

Rogers Cable has experienced significant growth in its Internet segment due to subscriber additions and price increases, which have resulted in improvements in EBITDA and strong margins. Continued strength in the cable segment, combined with the addition of Rogers Telecom and strong subscriber growth in cable telephony, has also contributed to EBITDA growth. Additionally, the Company’s “quadruple play” offering of video, broadband, telephony and wireless (through Rogers Wireless) continues to drive average revenue per unit and reduces customer turnover. As such, DBRS believes the Company is well positioned for increased competition with other telecommunications companies. However, DBRS notes that Internet-protocol-based terrestrial video services are expected to be rolled out in the near term, and recent regulatory decisions have improved the flexibility of pricing and bundling of services for the incumbent telcos.

DBRS expects Rogers Cable to continue to improve its key credit metrics with a stated focus on debt reduction, including the Company’s intention to eliminate $450 million in notes that mature in 2007. Despite Rogers Cable’s operating strength, the Company’s free cash flow deficit continues to persist. Stronger cash flow from operations, lower capital expenditures and the inclusion of Rogers Telecom in results has led to free cash flow deficit improvements. DBRS expects free cash flow deficits to continue in 2007; however, deficits are expected to improve to roughly $150 million, in line with incremental EBITDA gains and reasonable capital investments over the period. DBRS also expects free cash flow deficiencies to continue to be funded through intercompany borrowings from RCI.

A Positive trend has been maintained by DBRS on the rating of Rogers Cable, given the expectation of further growth in EBITDA and continued strength in margins in the Company’s core cable and Internet segments. DBRS expects continued improvement in the Company’s financial ratios and meaningful debt reduction in the near term. DBRS also expects to continue to view the Company’s credit profile in conjunction with that of Rogers Wireless and RCI. On the whole, consolidated RCI is expected to generate good levels of positive free cash flow (roughly $600 million in 2007), with strong contributions from Rogers Wireless.

Notes:
All figures are in Canadian dollars unless otherwise noted.
This rating is based on public information.