Fitch: CLECs May be Potential Acquisition Targets for U.S. Cable MSOs

Business Wire,  March 24, 2008  

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CHICAGO -- While near-term growth prospects are strong for U.S cable multiple system operators (MSOs), mid-to-long-term growth will need to be generated from an expansion of commercial services, and competitive local exchange carriers (CLECs) could represent that very opportunity for large cable MSOs to move aggressively and timely into a broader commercial services market, according to Fitch Ratings in a new report.

Cable MSOs have focused their initial commercial service efforts on the small office and home office (SOHO) market. Expanding from SOHO to regional or national business markets would require a material network investment to meet the additional managed services and connectivity needs. Fitch believes that CLEC operations with strong metro assets, a material number of on-net buildings and greater focus on non-carrier, non-wholesale service revenues would generate the greatest amount of interest from cable MSOs.

'With respect to timing of potential CLEC acquisition interest, Fitch believes that cable MSOs will desire to establish their SOHO foundation of commercial services before expanding more broadly into the business marketplace,' said Managing Director and Telecom group head Mike Weaver. 'As a result, Fitch believes that cable MSOs will have an interest in pursuing CLEC acquisitions in approximately 18 months.'

Fitch's report reviews the largest cable MSOs commercial service efforts, the increased breadth and scale of the largest CLECs, and also reviews the potential financial impact of these acquisitions. 'Could U.S. Cable MSO Commercial Services Growth Lead to CLEC Acquisition Interest?' is available on the Fitch Ratings web site at www.fitchratings.com under the following headers:

Corporate Finance Corporates Special Reports

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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