Midcontinent Communications

The stable outlook reflects S&P Global Ratings' expectation that solid growth from broadband will offset COVID-19 headwinds in commercial services and advertising, such that leverage declines to 4.0x from 4.2x at fiscal year-end 2019. We could lower the rating if the company completes a debt-financed acquisition or dividend that pushes leverage above 5x. Also, we could lower the rating if a more competitive environment resulted in the EBITDA margin declining to the mid-30% area, leading to debt leverage rising above 5x with little sign of improvement. We could raise the rating if Midcontinent's leverage declined to below 3.5x and we were confident that financial policy considerations would not lead to higher leverage. U.S. GDP contraction of 5.0% in 2020; however,

...High-margin broadband revenue should continue to grow at a healthy rate for at least the next two years driven by price increases and subscriber growth. The increasing importance of high-speed data (HSD) should enable Midcontinent Communications to continue to monetize demand as customers migrate to faster tiers to enable video streaming on multiple devices, online gaming grows, and new applications emerge. S&P Global Ratings believes Midcontinent will continue to grow subscribers from a combination of more homes passed and market share gains from telecom competition that uses copper-based infrastructure with inferior speeds, though these opportunities are dwindling. The COVID-19 pandemic will have a limited impact on earnings and cash flow. Large-scale quarantines have increased both the importance of reliable high-speed internet connections and the demand for faster tiers, accelerating HSD revenue growth, which accounts for the vast majority of Midcontinent's earnings. Video cord-cutting...

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