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S&P: Madison River stable
Standard & Poor's said it revised its outlook on Madison River Telephone Co. LLC and related entities to stable from negative. Ratings on the company, including the B corporate credit rating, were affirmed.
S&P said the outlook change primarily reflects recent trends that show a stemming in access line loss (the negative outlook had reflected concerns regarding the degree of access line loss in the near term). In addition, the stable outlook recognizes the higher demand for digital subscriber line (DSL) services resulting from increased marketing and the recent introduction of a bundled offering package, which offers unlimited DSL.
While DSL does not increase the number of access lines, it does provide an additional high-margin revenue stream. Increased revenue from DSL has resulted in a stabilization of the revenue stream, although there continues to be a soft economy in the Illinois service area.
S&P noted the ratings on Madison River reflect the company's high debt leverage and limited ability to withstand intense competitive pressures due to its size. These factors are partially mitigated by the stable cash flows of its core ILEC business and increased demand for DSL services. In addition, the quality of the company's revenue stream is not compromised by the uncertain future of universal services funding (USF) because USF represents less than 10% of total revenues.
S&P rates Madison River Capital LLC's corporate credit at B and senior unsecured debt (co-issued by Madison River Finance Corp.) at CCC+.
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