Telenet Group Holding N.V.

The stable outlook reflects our view that, in the next 12 months, Telenet will demonstrate about flat organic revenue and EBITDA growth, thanks to the continued solid performance of its broadband segment. This should translate to maintenance of S&P-adjusted leverage below 5x, funds from operations (FFO) to debt above 15%, and free operating cash flow (FOCF) to debt above 5%. We could lower the rating if Telenet adopted a more aggressive financial policy, leading to an adjusted debt to EBITDA of about 5x or adjusted FOCF to debt (excluding spectrum and the benefit of vendor financing) below 5% for a prolonged period. This could also stem from more fierce competition, causing higher churn or price pressure, with unchanged shareholder remuneration.

...Telenet Group Holding N.V.'s operating performance will only be marginally affected by COVID-19. S&P Global Ratings assumes the pandemic's impact will be mainly from advertising revenue and handset sales, with direct impact on EBITDA. However, handset sales are relatively low margin, and roaming should have broadly neutral impact on EBITDA. In addition, while there could be some negative impact on Telenet's business-to-business (B2B) revenue, its exposure is fairly small, at less than 10% of revenue, and we anticipate this will be more than offset by increased revenue from retail broadband as customers upgrade their contracts. This translates to overall about a flat revenue growth (about 2% decline rebased) in 2020, recovering to about a 1% revenue increase in 2021, mainly on improved other revenue, including handset sales. The EBITDA margin is anticipated to somewhat increase in 2020 on improved cost structure and we forecast EBITDA will increase about 1% in 2020 (about 1% decline rebased),...

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