Press Release

DBRS Confirms the Ratings of Insight Communications Company, Inc. and Related Entities

Telecom/Media/Technology
July 21, 2006

Dominion Bond Rating Service (DBRS) has today confirmed the ratings of Insight Communications Company, Inc. (Insight or the Company) and related entities as indicated above, ranging from B (low) to BB (low). The rating differential among the entities is related to ranking and/or structural subordination. The trends are Stable. The ratings are underpinned by Insight’s success in bundling existing customers with additional services, such as digital, Internet and telephony, using the Company’s existing highly advanced network. Furthermore, DBRS notes that Insight has stabilized its basic subscriber base due to more multiple-product customers who are less likely to churn than basic only. Lastly, despite start-up costs for IP telephony and other cost increases, EBITDA margins have remained above 40% due to further penetration of higher-margin products.

DBRS believes Insight currently has a window of opportunity as the only facilities-based operator in some of its markets able to deliver the triple-play of services (video, Internet and telephony) under one bill and one company. Notwithstanding success in bundling customers, Insight faces competitive pressure from satellite and telco operators for video and Internet service, respectively. DBRS also expects competition to further intensify when the telco operators begin to launch video service. However, telco’s launch of video service is not likely to reach Insight’s entire footprint in the near term and hence Insight will continue to have an advantage to further bundle its customers. Moreover, DBRS believes satellite operators will soon be in a position to launch Internet service, which would compete head-to-head with Insight’s high-speed Internet offering.

Two other key points concerning Insight include the partnership with Comcast Corporation (Comcast) and the going-private transaction. Beginning in 2006, the partnership with Comcast could unwind at any time. Although DBRS believes any potential split would be equitable to both parties and would likely proceed in an orderly process, the break-up would have negative rating implications when taking into account Insight’s relationship with Comcast, whereby it benefits from programming and equipment purchasing. Also, reduced cash flow from operations would leave Insight less able to support its senior discount notes. Secondly, DBRS notes that Insight completed its going-private transaction in December 2005. No material debt was added to Insight as the transaction was funded outside of the operating structure, by The Carlyle Group, and, as such, there were no material ratings implications.

DBRS expects Insight to grow EBITDA in 2006; however, free cash flow will be pressured by increased debt servicing costs and capital expenditure levels that are expected to increase due to further penetration of services.

Insight must focus on increasing free cash flow and reducing debt levels in order to improve its financial profile before rating improvements can be considered.

Notes:
These ratings are based on public information.
Issuer ratings apply to all general senior unsecured obligations of the issuer in question.

Ratings

Insight Communications Company, Inc.
Insight Midwest Holdings LLC
Insight Midwest, LP
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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