Fitch Affirms Liberty Media's Ratings.

Business Editors

CHICAGO--(BUSINESS WIRE)--Sept. 4, 2001

Fitch has affirmed Liberty Media's (Liberty) `BBB-' senior unsecured rating. The Rating Outlook for this credit has been changed to Stable from Positive.

When the initial credit rating and Rating Outlook were assigned, Fitch assumed Liberty would increase its debt leverage to take advantage of the opportunities in Europe. The German cable and UGC/UPC transactions do not cause leverage to increase beyond the level originally anticipated for the `BBB-` rating. However, the ample financial flexibility within the rating has been reduced due to the leveraging effect of the German cable transaction and the leveraging acquisitions in Europe (i.e., Level 3 and 4 operators) that are likely to occur. Therefore, Liberty's Positive Rating Outlook has been revised to Stable.

Liberty intends to finance the EUR5.5 billion German cable acquisition via equity (27% of the total), cash (55%) and debt (18%). The cash proceeds will be generated from the monetization of a portion of its Sprint PCS stake that is currently collared. The debt portion represents the issuance of a EUR1 billion, 10-year senior note to Deutsche Telecom. The cable entity will be self-funding with access to a EUR2 billion secured bank facility. Its bank covenants will allow the German cable entity to increase debt up to 6.5 times (x) EBITDA, including debt issued from the facility to make acquisitions. The closing of the acquisition of the cable properties from Deutsche Telecom is expected to occur in the beginning of 2002 and is contingent upon European regulatory approvals.

Compared to other new operators in Europe, Liberty plans to pursue a success-based upgrade, marketing its cable services months prior to upgrading the plant. This decreases Liberty's exposure to stranded capital. Fitch expects EBITDA margins to decrease in the near and intermediate term at the German cable subsidiary due to the increase in SG&A expense required to support and market the new services. At worst, if Liberty discovers the demand for additional services does not justify the cost to upgrade the network, Liberty will generate stable EBITDA from basic programming without incurring the debt associated with upgrading the system. Thus, bondholders will continue to benefit from the stable cash flow generated from the current properties. Therefore, Fitch does not believe the business risk of this investment is abnormally high.

Currently holding a 44% economic interest in UGC, Liberty has the option to acquire 51% depending on the performance of UGC's underlying assets and stock price without deploying additional capital. It will continue to have minority voting control due to an existing, long-term voting agreement. Instead of an equity investment in UGC, Liberty has structured a more attractive investment for Liberty bondholders. Liberty will hold an enhanced equity position in UPC, placing it senior to UPC's bondholders until it is exchanged into UPC common shares. Liberty will still transfer its obligation to invest more than $500 million in Cablevision to UGC, offsetting its $1.4 billion investment to a net investment amount of $800 million-$900 million. This will be funded with the proceeds from security sales, Viacom exchangeable and a portion of the NOL from AT&T.

A stronger relationship with UGC/UPC allows Liberty to create scale economies throughout Europe and Latin America and benefit from UGC/UPC's experiences with offering additional services to cable subscribers and solving back-office issues. UGC is currently funded 18-24 months with the utilization of its bank facilities and has attractive assets that could be used to increase its financial flexibility (e.g., 1 million German cable subscribers through its investment in PrimaCom). Fitch expects Liberty to continue to support UGC and its other investments within the parameters of its current rating category.