DBRS Comments on Vidéotron Ltée

On October 3, 2012, DBRS confirmed Vidéotron Ltée’s (Vidéotron or the Company) Issuer Rating at BB (high); its Secured Bank Debt rating at BBB (low), with an RR1 recovery rating; and its Senior Unsecured Notes at BB (high), with an RR2 recovery rating; all trends remain Stable. The confirmation reflected Vidéotron’s steadily growing subscriber base and strong incumbent position in Québec.

Since DBRS’s latest report on Vidéotron, Industry Canada has restated its intention of establishing four wireless carriers in each region of the country. DBRS notes that a viable fourth competitor with strong financial backing could cause the competitive environment to intensify. Although the Company’s wireless operations represent an important growth area, DBRS notes that, currently, these services contribute only nominally to operating income. Furthermore, a strong brand and proven customer loyalty may help prevent wireless subscriber losses from affecting wireline market share. As the Company’s ratings are currently well placed within their categories, a more competitive environment would not likely result in a negative rating action for Vidéotron.

The ratings continue to be supported by Vidéotron’s strong market position in Québec and its ability to grow and bundle television, Internet and wireless services. DBRS’s ratings also take into account the intensifying competition in the telecommunications industry and the constant innovation and capital intensity required to maintain market positioning. DBRS will continue to carefully monitor the operating performance and financial management of Vidéotron and parent Québecor Media Inc., particularly in the context of an evolving competitive environment.

Notes:
The applicable methodologies are Rating Companies in the Communications Industry, Rating Companies in the Television Broadcasting Industry and Rating Companies in the Radio Broadcasting Industry, which can be found on our website under Methodologies.