Fitch Upgrades Call-Net Debt to 'BB'

Business Wire, July 5, 2005

CHICAGO -- Fitch Ratings has upgraded the rating assigned to the senior secured notes of Call-Net Enterprises Inc (Call-Net) to 'BB' from 'B-' and removed the company from Rating Watch Positive. The Rating Outlook for Call-Net is Stable.

The rating action reflects Rogers Communications Inc. (RCI) receipt of the necessary approvals to close the Call-Net acquisition. On June 30, 2005, the Ontario Superior Court of Justice gave a final approval to the transaction. Consequently, since shareholders at both Call-Net and RCI have also approved the transaction, effective July 1, Call-Net became an operating subsidiary of RCI. Fitch takes a consolidated view when rating RCI and its other subsidiaries, Rogers Cable and Rogers Wireless. Accordingly, while RCI did not guarantee the Call-Net debt, the rating incorporates the strength of the Rogers group of companies and the strategic importance of Call-Net's assets to RCI that Fitch expects to become highly integrated over time. The notching difference between the secured debt at Call-Net and the secured debt at Rogers Wireless and Rogers Cable, which are rated 'BB ', reflects Fitch's belief that the wireless and cable operations would support a higher level of anticipated recovery in a stressed scenario.

On May 11, 2005, RCI announced the company had entered a definitive agreement to acquire Call-Net Enterprises Inc. in a stock-based transaction. At closing, RCI issued one class B nonvoting share of RCI for each 4.25 shares of Call-Net, representing a value of $330 million. RCI also assumed US$223 million in senior secured notes and a fully drawn accounts receivable program of $55 million. While the secured notes contain a change of control provision, Fitch does not expect bondholders to tender the debt since the notes are trading at a premium to the redemption price. However, in January 2006, the debt becomes redeemable at the company's option with a make whole premium. For 2004, Call-Net generated $819 million of revenue and $105 million in EBITDA. Fitch believes the transaction is credit neutral for RCI with the company deriving benefits from Call-Net's longhaul network, business exposure, and overlapping telephony customers.

The ratings on the Rogers group of companies incorporates the relatively high debt levels, the negative free cash flow at a consolidated RCI, and the lack of meaningful restrictions on advancing funds between companies. Additionally, Fitch recognizes the strong business position of cable and wireless as evidenced by Rogers bundle of video, HSD, wireless, and cable telephony (launch in second half of 2005) services. Debt at the consolidated RCI should increase modestly in 2005, largely as a result of funding requirements at Rogers Cable, before stabilizing in 2006. Consolidated cash generation is expected to materially improve over the rating horizon, driven by sizable cash flow improvements at Rogers Wireless, modest cash flow increases at Rogers Cable, and reduced capital spending at Rogers Cable. Consolidated leverage for 2005 should remain at approximately the same level as the end of 2004 (5.2 times (x)) with leverage improving moderately in 2006.

Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.