Fitch Ratings Affirms Cablemas' IDR at 'BB-'; Outlook Stable.

MONTERREY, Mexico -- Fitch Ratings has affirmed the following ratings for Cablemas with a Stable Rating Outlook:

--Foreign Currency Issuer Default Rating (IDR) 'BB-';

--Local Currency Issuer Default Rating (IDR) 'BB-';

--US$175 million senior notes due 2015 'BB-';

--National scale 'A(mex)'.

Cablemas' ratings reflect its solid operating network, diverse subscriber base, increasing competition and leveraged financial position. Cablemas has been upgrading its network and investing heavily to achieve network bi-directionality capabilities and to widen its transmission capacity. An upgraded network allows Cablemas to offer additional services, other than traditional video services, which supports growth and diversify its revenue generating units (RGU). Currently, Cablemas offers internet services, and has started to offer voice over internet protocol (VoIP) services in Tijuana jointly with Axtel and in Cuernavaca with Bestel. As part of its strategy, Cablemas offers bundled services, mostly video and internet but should move to a triple play service offering that includes voice in its most important markets. Cablemas received 22 telephony concessions during 2006. Fitch believes that the offering of bundled services under the same invoice, increases the competitive position of Cablemas, helps retain customers by increasing loyalty and reduce churn rates.

Fitch considers that the leveraged buyout (LBO) transaction between founding shareholders and investment funds does not change directly Cablemas balance sheet or its financial profile, but may indirectly burden Cablemas. The ratings factor in that the financial risk profile of Cablemas will not change due to the shareholder reorganization process. On Sept. 20, 2006 Cablemas announced the founders of the company bought, for an undisclosed price, the shares in possession of several investment funds. The transaction was financed with a credit facility provided to the Alvarez family, which intends to find a strategic investor or place equity in the capital markets to repay the facility.

Cablemas' credit quality is underpinned by its pay television segment, which accounts for approximately 80% of revenues, providing the company with a stable and geographically diversified cash flow. Voice and broadband services are expected to remain the main growth drivers for Cablemas in coming years, diversifying away its revenue base. Fitch expects competition to increase with the entrance of the convergence agreement and may eventually derive in a new consolidation phase. The agreement allows pay television companies to offer voice services and voice companies to offer video services. Despite Cablemas entering earlier to offer voice services, it should face strong competition from Telmex once it starts offering video services. Fitch expects Telmex to have available a pay-television offering by late 2007 or the beginning of 2008.

Fitch expects Cablemas to continue with strong operating performance, with increases in revenues and RGU. Strong operating performance should translate over the medium to long term into an improved financial profile, besides an expected increase in debt over the current year. Total debt to EBITDA ratio of 2.2 times (x), as of Sept. 30, 2006, may increase during 2007 to levels in the range of 2.5x-3.0x; depending on the speed of the telephony rollout. Credit protection measures are expected to remain consistent with the rating category and should gradually strengthen over the next few years supported by growth in revenues and EBITDA, both from organic and additional services such as broadband and voice. Cablemas has a comfortable debt maturity profile that eliminates any liquidity or refinancing risk in the short-term. Debt primarily consists of US$175 million unsecured note maturing in 2015. While Cablemas has been free cash flow negative over the past few years, Fitch expects that the company will turn free cash flow positive by 2008 may be extended to 2010 if Cablemas accelerates its investments related to the roll out of telephony services.

Cablemas is the second largest MSO in Mexico. As of Sept. 30 2006, Cablemas had operations in 46 cities and 15 states distributed across the country, with 676 thousand video subscribers, 160 broadband lines and 21 thousand voice subscribers. Cablemas had during 2005 revenues and EBITDA of MXN$1,725 million and MXN$664 million, respectively.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.