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Comcast Corporation (NASDAQ:CMCSA)

Morgan Stanley 2014 Technology, Media & Telecom Conference Call

March 04, 2014 01:15 PM ET

Executives

Michael Angelakis - Vice Chairman and CFO

Analysts

Unidentified Analyst

All right, good morning. We’re going to get started. Just to remind everybody once again, please note that important disclosures including my personal holdings disclosures and Morgan Stanley disclosures all up here as a hand-out available in registration area and on the Morgan Stanley public website. And we’re thrilled to welcome back to the conference this year Comcast. To my left, I think all of you know is the CFO and Vice Chairman Michael Angelakis. Michael, thank you so much for being here.

Michael Angelakis

Delighted to be here; it’s always great to be with you.

Question-and-Answer Session

Unidentified Analyst

So, it’s been already a pretty busy year for you guys. Maybe we can start out with the big announcement which is Time Warner Cable, what was attractive about that opportunity for Comcast? Why do you think shareholders should be excited about the potential of that transaction?

Michael Angelakis

Well listen, it’s really important for us to continue to sort of build what we think is a world-class company. And when we think about these kinds of investments, we have to believe that they’re compelling strategically and they’re compelling financially. And obviously, we spend a fair amount of time evaluating this. We love the cable industry. And we’re able to work on a transaction that we think is really value enhancing and at a price that we’re comfortable with, more than comfortable with. We see a lot of synergies with regards to the top-line as well as sort of on the operating line. So, we’re valuing it at roughly 6.6, 6.7 times operating cash flow. And really importantly, I think we’re continuing to build a world-class company that will continue to innovate and build our business. So, we’re very excited about it. It’s a large transaction. It’s not really a very complicated transaction in our mind. We look at it as a continuation of our operating strategy and our financial strategy and our technology strategy and that will happen over obviously a number of years.

Unidentified Analyst

What are the areas you guys are looking at in terms of creating value? You mentioned top-line synergies, in particular commercial; is that something you guys see as a big opportunity with the…?

Michael Angelakis

We think commercial is an enormous growth area for us. So just to level set, and I think you know this, our business services group today has roughly $3.5 billion of revenue and we really do divide it into three areas. We have the small side which has been in business now for roughly five or six or seven years and that business is roughly a $3 billion business with accretive margins, growing nicely double digit top-line revenue and we have roughly 20% market share. But these are really small businesses; these are small enterprises with primarily less than 20 employees. And that is where we really started on the enterprise side and we’ve put all the building blocks in place to move that from sort of a new business to now it’s very much in the execution mode.

Couple of years ago we moved upscale a little bit and now we are talking about larger businesses, a little bit more sophisticated. And those are businesses that have say less than 250 employees. And we had to put similar building blocks in place whether it’s technology and provisioning and people and literally we’ve hired thousands of people across this segment. And that business now is about $600 million business, growing even faster also with accretive margins; and in our estimate, it’s about a $10 billion or $15 billion opportunity in our market with about 5% share.

The enterprise side which is obviously larger more sophisticated, we haven’t really even begun to move into. And obviously having access to two premium markets and obviously Dallas as well and having access to 19 of the top 20 markets in the country, we think that is an enormous growth opportunity for us. And our business services folks as well as the Time Warner Cable business service folks we think are very excited about developing that business, which we look at as a very large opportunity as well. So there is a whole number of revenue upside that we would benefit from the scale and having these additional markets and additional benefits that we are obviously excited about.

Unidentified Analyst

You mentioned the transaction while the large as relatively straight forward, relatively simple; how do you guys come up with evaluation or an exchange ratio and you put these two together and you thought about fair value?

Michael Angelakis

I think that’s the right view point is what is fair value. Back in 2009 when Time Warner Cable was spun out from Time Warner basically the delta, the exchange delta at that point was roughly 2.67 times and the number has moved a little bit between those numbers over time. And we thought having the exchange ratio which is roughly just under 8 times operating cash flow and when we apply our expense synergies at 6.6, 6.7 times cash flow, we think that’s a very fair price, that’s a very attractive price for us.

So listen, there is always a negotiation about that. I think the folks at Time Warner Cable are pleased with the price. We think it’s a very fair price. And we are going to build I hope a lot of value for shareholders over time.

Unidentified Analyst

You guys have spent some time talking about the cost synergies in a way how to view there; can you just help the audience understand what’s driving the $1.5 billion and the 400 and to the timeline to achieve those?

Michael Angelakis

Yes, there is a tremendous amount of duplicative areas that obviously over time will rationalize. And that’s relatively a big number. We also have -- although we have areas of efficiencies in terms of technical operations in one platform and the ability to do things within the infrastructure of the organization that I think we will generate significant benefits as well.

The programming side which tends to get little bit of attention is actually the minority of those numbers. And we feel, we’ve sort of set a target of $1.5 billion in synergies of which we hope to get about 750 of that in the first year. And then the other 20% we believe we’ll get in year two, and the other 25% we believe we’ll get in year three.

So we feel very comfortable; we’ve done our diligence; and we’re working collaboratively with the Time Warner Cable folks to fine-tune those. And we have begun forming our integration teams. And obviously we’re -- it takes some time to do that, but we’re quite comfortable that $1.5 billion that we’ve set as a synergy number is achievable.

Unidentified Analyst

You’ve been through a couple of big acquisitions with Comcast as NBC and then for others in the past before your time, but what’s your view of the regulatory approach to this transaction and what gives you confidence and the team confidence this deal can get approved?

Michael Angelakis

The reality is that we have upfront said, we may divest up to 3 million customers from the combined group. If we do that, we will have roughly 30% share of the multi-channel video market. We actually had basically the same share when we did the AT&T transaction as well as when we did the Adelphia transaction. And the 30% threshold that we’re talking about is actually a bit of a theoretical threshold, it’s not actually a legal threshold. So, we feel very comfortable of that. We don’t compete with Time Warner Cable; it’s a very different situation than some other situations. We really look at it as we’re just expanding our footprint. We’re going from roughly 22 million video customers to say 30 million video customers and we’re going to be at roughly the same share we were at in two previous periods of time when I would say even today it’s a more competitive, more intense, more dynamic time today than it was when we had that share before.

So we’ve done our homework, we have a very open dialogue with the regulatory framework. And we feel pretty comfortable that that we will get this approved. And we understand some of the [aims] I think we’ll work through a lot of that aims over time.

Unidentified Analyst

You guys sort of in your announcement talked about the 3 million subscriber divestitures or willingness to look at that, there is a lot of focus in the market about that. Can you just talk about your thought process on where those might be or where you are as a team in the process of figuring out what’s going to happen with those?

Michael Angelakis

Yes. I just think it’s too early. I know there has been some conversations and I know that there is some interest in it, but we have a lot of data gathering to do internally and we have a lot of analysis and this is complex issue. So I think we’re going to be methodical about it and thoughtful about it. I think we want to gather a whole variety of data points everything from tax information to print quality to where we think some of the [DMAs] play out. And I think we’ll also have some conversations with folks who may be interested and this will play out over months. I just think it’s literally way too early to determine where, when, how one may divest those 3 million customers.

Unidentified Analyst

There is probably a lot of Comcast customers in the room given where we are, but for those of us Time Warner Cable customers in New York like myself, what’s the likely timeline for rolling out the product suite that really helped drive the cable business for you guys over the last couple of years? And maybe you can put the history in Comcast in the context for us with Time Warner Cable?

Michael Angelakis

Yes. I think again we’re going to -- as time goes on I think we’ll be a little bit more articulate and precise in terms of how we intend to integrate and how we intend to roll out. But clearly if you go back four, five years ago, we initiated a project we called the project Calgary and that project was really designed to go all digital, was really designed to upgrade the broadband capacity with DOCSIS 3.0. It was designed to expand the VOD platform and provide many more choices for VOD and it was also designed to add more high depth and more digital channels.

And the reality is when we completed that project kind of on a market-by-market basis, it was a bit of a transformation of the video product at that point in time. I think if you look at that as a baseline and you layer on top of that all the TV Everywhere apps we have today that we’ve developed over the number of years and really importantly the X1, X2 navigation and user interface that we’ve developed, I think you will see a similar kind of transformation over time whereas we are deploying X1, X2 in Comcast markets. We’re deploying Cloud DVR we just announced it in Boston as we ultimately begin to integrate on the Time Warner Cable side. I think you will see some of those same technology platforms, same services be deployed in other markets. And I think we have to work through that business plan, we have to work through that technology roadmap. But I think that’s a good indication of how the integration will develop.

Unidentified Analyst

You mentioned upfront that this transaction doesn’t change sort of the operational, financial philosophy of Comcast. But could you talk about the impact, if there is any of this transaction on your return of capital and sort of balance sheet view at Comcast?

Michael Angelakis

Yes. I mean when I say it’s large, but it’s not that complicated that’s one of the areas which really not that complicated. If you think about 2013 and where we ended in 2013, our balance sheet had roughly 2.2 times leveraged, 2.3 times leverage and that’s after in 2013 we actually purchased the remaining 49% of NBC Universal.

Our target has been between 1.5 and 2 times leveraged for a number of years. So put aside TWC, we were certainly on a glide path of doing multiple things at once, some having modest organic deleveraging to try to get into our target range we want to get into. We’ve increased the dividend pretty nicely, we just announced January a 15% increase in the dividend. If you look at our track record of increasing dividend, it’s been modestly aggressive. And then we increased our buyback by 50%, which we also announced in January.

So that’s going to be the strategy for 2014. I think when you pro forma TWC, our leverage is approximately 2.2, 2.3 times as well that if you pro forma at the end of ‘14. I really don’t see a material difference in our financial strategy as we think about our payout ratio for dividends, how we think about buybacks. We are obviously very close to our target leverage range. So it’s actually been relatively simple in terms of the financial strategy. And I think that the strategy we’ve had at Comcast for the last, I don’t know, four, five, six years, I think you will see that just continue with the new company as we go forward.

Unidentified Analyst

Great. Okay. Coming from this transaction to your core business…

Michael Angelakis

Yes. That would be important.

Unidentified Analyst

Let’s talk about the opportunities you see for Comcast looks on our cable in 2014 and beyond, you guys clearly ended the year with a lot of strong momentum products and top-line growth. Whether you could just set the stage for everybody about how you’re feeling about the opportunities ahead of the company organically?

Michael Angelakis

We are continuing to feel bullish. We think that we do have some operating momentum. I do think it’s started a little bit with project Calgary and how we have been very focused on a number of areas. One is, just block and tackle. And literally very lots of gables in the detail and continue to drive the business from a block and tackle perspective.

Second is, I think be very innovative and develop a whole variety of apps in TV Everywhere and multi-platform type services. And then I think support all that with improving customer service. So the cable business today, they’ve done a really nice job in 2013. And I think in 2014, we feel we have real momentum throughout the year and hopefully we’ll continue that.

Business services, large growth area, we talked a little bit about that. Our market shares are relatively low within the two areas that we’re focusing. And we continue to see accretive margins and nice top-line growth there.

High-speed data which is a terrific business for us continues to grow nicely. We’re at about 38% market share with regards to our high-speed data. And we’re continuing to develop that product and our view is we’ll continue to increase speed in that product. So over the last 12 years we’ve increased speed literally 12 times. And now about 36% of our customers have 50 meg or greater. And you’re going to continue to see us embellish that product.

And somebody mentioned earlier in here, what you think about even higher speeds and last year we demo 3 gigabits and three year ago we demo 1 gigabit. So that product is a terrific product and we’re going to continue to invest heavily in that product because obviously it’s pretty important to our business.

Don’t forget phone, we’re at 10 million customers on phone and growing and we’re big believers in the bundle. We have about 44% of our customers take all three services just under 80% take at least two services that really helps with customer lifetime value, really helps with retention and particularly when you are able to sort of surround it with what we think is best-in-class, a video product and best-in-class high-speed data product.

So video itself we are trying to do better. It’s a competitive market. We launched 300,000 customers last year, went positive in the fourth quarter. We launched less customers last year than we did the year before and we have more RBOC competition and a little bit more intensity. And our goal is to continue to do better and do it in a very balanced way. So what I mean by that is we want to continue to have more financial discipline in the system as well as customer growth. And I think we’ve been able to achieve that. We have been very consistent with our revenue growth and very consistent with our margins and the team is doing an outstanding job of executing on that business. So we’re pretty bullish as we enter 2014.

Unidentified Analyst

Terrific. Let’s stay on the cable business, big focus in the industry is on programming costs or may be more holistically rights, content rights as they announced in addition Disney overnight. What’s been the benefit, as focus on the cost growth and margin pressure, what’s been the benefit of these rights to your business your video business and why are you doing the deals you’re doing?

Michael Angelakis

Listen, I think that we want to be able to provide our customers who obviously pay us a monthly fee to access their video on whatever device wherever they are in the home out of the home, whether on-demand or whether linear. And I think that goal requires us to purchase more rights. So we have 400 million VOD views every month now and that number has continued to accelerate. We have many shows where we have prior seasons, we call them full bankable. And we have obviously EFT now and we have obviously our pay-per-view. But the whole view from our perspective whether it’s TV everywhere or on-demand or download to go and if you look at our app store, how people can go on a tablet and watch 39 live channels or download a movie on their tablet which they can watch on an airplane if they’re heading back east. So we’re totally focused on adding more value to the video product for our customers so that whether it’s my young son or whether it’s my older daughter or whether it’s my wife or myself we can almost ultimately personalize our service. Part of that is how you navigate and that’s part of the X1, X2 and part of it is do you have the rights whether they are in the home, outside of home, tablet, phone, wireline, wireless, linear, on-demand, SPOD. And that all obviously costs incrementally more money, but we are big believers that linear TV is one platform, but many people want to watch different platforms. And I think our results speak for themselves that we are trying to surround that customer so that if they want to watch a piece of content that we will provide it for them in whatever platform they chose to watch it.

Unidentified Analyst

Great. Along with your product offering you have had a lot of operational initiatives I know you talked [cavalry] five years, but these things going today I think on the sales side and relation side some of the blocking and tackling that makes a real difference to the bottom line, can you sort of talk about some of those items?

Michael Angelakis

Yes. I mean this is a block and tackle that exactly that I did mentioned. I think that the team is really focused on taking noise out of system and at the same time providing a better customer interface or relationship.

So we have many customers about 40% of our customers now are managing their services online. We have about 40% of our customers also are doing self installs of their own services. So in obviously we have help lines and those kinds of things. We have been able to take about 8 million truck rolls out of the system over the last two years and been able to take about 13 million agent calls out of the system, people are utilizing self help more. We have more tools, automated tools that people are utilizing. And the goal really is to take some of that noise out of these systems and reduce the processes. That does two things for us one it provides a higher customer satisfaction, because frankly people can access information online and do things much easier themselves. And secondly it reduces our costs and our activity levels.

So our costs have increased in last year under 4% when you take our programming, yet we have added almost 2 million new customers in different RJUs. And the whole goal for us is continue to try to take the noise out of the system, provide much more innovation and choice. And hopefully we will continue to make progress on that.

Unidentified Analyst

Does this over the long term, and you mentioned B2B being accretive to margins and that you guys have the kind of top line, we probably could see some operating leverage, but how do you think about the margin structure cable over the longer term?

Michael Angelakis

You know the margin structure in cable has been very stable for a relatively the long time. And it’s truly have and you mentioned it, your pressure on the video margins, but we probably have other areas of expansion in business services and so forth. The biggest headwind is really on the programming side, and we are not being as aggressive on video rate increases and we have a tough comp last year versus this year on video rate increases, but the reality is that we are going to continue to invest in the businesses. So we are absorbing costs on the medium size business, we are absorbing cost on XFINITY Home, we are absorbing costs on the deployment of X1, X2, we are absorbing costs on the deployment of wireless gateways which is something we should talk about.

So from our standpoint we are kind of we can walk and shoot gum at the same time. We can absorb some of the programming headwind. We have some tailwind from other areas that’s being very helpful. We have some investment areas that we think are medium term, long term very profitable areas that we want to pursue and then we have some efficiencies in the business that we are continuing to capture.

When you sort of added all up, net is margins are relatively stable. And I could tell you, I don’t think we really manage specifically to margins, we really manage to, are we making the right financial decisions and are we investing in the areas that we make a lot of sense and are they going to be high ROIC type investments where they are going to hopefully be beneficial to the business over the short, medium, long term. But the net benefit has been that we have had pretty stable margins and I think our expectations are we can manage some of that headwind and keep relatively stable margins.

Unidentified Analyst

But say of the theme of investing and I know as CFO you scruitinized every dollar going out the door X1 is a big investment for the company, CapEx has been rising, capital intensity has been rising for the cable business. Tell the audience why this investment makes sense in your mind, what the returns look like and what’s the timing for getting X1 that where you guys wanted in the base.

Michael Angelakis

Okay. So, X1 and I am sure a lot of folks have seen the demo and I think when I was here, I forgot it’s last year or -- I think it was last year.

Unidentified Analyst

Yes. A year ago. Yes.

Michael Angelakis

Last year we did the demo on X1 and it is a same way [Cavalry] I think was a bit of a step function. I think the deployment of X1 is another step function. Actually we’re already at X2 and deploying that. And if our goal is to provide a world-class service that allows you to navigate through tens of thousands of choices and you need to have a terrific interface that is ubiquitous over your TV, over your tablet, over your laptop, over your smartphone. And I think that’s what X1, X2 does.

And really 12 months ago, when I was here we were kind of demo it and the goal was to start to deploy it in 2013, it’s now available in every market for Comcast and we have decided in 2014 to accelerate that deployment. And that means, moving a lot of boxes and a lot of software into people’s homes. And why it beneficial, why we’re making that investment is one, we want to have a world-class video experience; two, when it’s in the home we have lower churn within that home, people have a higher satisfaction rate related to that, people watch more VOD and therefore your VOD revenues are higher. So, it literally is a whole another element of -- it’s literally changing our architecture.

So, the X1, X2 deployment is a cloud-based architecture. So literally, if you go back 3 years, if we put a box in someone’s home, the next-generation box that came up the next day, almost made the box you deployed yesterday obsolete. And by the way, you had to program to the lowest common denominator versus what your most advanced box was. Here everything is in the cloud. I’ve had X1 in my home now for about a year and I now have X2 and literally I can toggle like I do between web pages, between X1 and X2. And X2 is clearly better than X1. So, this is a smart investment for us, both in terms of pure cash on cash returns as well as strategically how we think about providing a great service to our customers.

Unidentified Analyst

Great. Let’s shift over to the broadband side of the equation, about a focus particularly in this area around Google Fiber and gigabit speeds, you mentioned you’re testing some of that, but what’s the Comcast view over time of ramping speeds and what’s the appetite for the consumer for those level of super speed?

Michael Angelakis

We’re going to continue to increase speeds; I have no doubt about it. A lot of the edge providers, some of them clearly out here are benefiting from that. By the way I think there is a very symbiotic relationship between us and those edge providers. It’s important whether in Netflix, Google, in terms of YouTube, Amazon Prime, we can go to a whole variety number of folks, Hulu. Obviously people who are consuming those services over broadband are using more and more speed, watch ESPN, I can go right down the lift. So we’re going to continue to invest heavily in broadband, we’re going to continue to increase speeds.

We have deployed wireless gateways which is something I wanted to come back to. If you go back a couple of years, the wireless gateways that we would deploy had a 25 megabit throughput limit. That was the technology that was available at that point in time. We literally have gone out and proactively replaced about 8 million of those, and we are going to continue to replace more and more this year. And now the technology allows for a 250 megabit throughput.

So, our goal is to have the best pipe coming into the house that provides the best user experience but also within the house all of us have tablets, all of us have smartphones, and the number of devices that are connected is gone from two in changed to over five over the last few years and the majority of those are all connected through Wi-Fi. So it’s our short-term, medium-term, long-term goal is to have the best pipe coming into the house and then have the best Wi-Fi experiencing connection in the house. I think you can see that’s one of the elements of increasing our investment this is providing more and more of those wireless gateways.

Unidentified Analyst

Sticking on the data theme and it’s been a big topic at this conference and in generally which is net neutrality and interconnects and the risk of asking a simple question on incredibly complex topic. Can you talk a little bit about your view of net neutrality and what’s happened with the core, the outlook with the FCC and then any comment you would want to make at all on the agreement with Netflix that was…?

Michael Angelakis

Sure. Listen, we have been actually supporters of net neutrality. So from a principle perspective, we’ve always believed in having an open internet, we’ve always believed in net neutrality. In fact when we did NBC Universal, we agreed to a multi-year consent decree that required us to have net neutrality, no matter what happened in the court system. And from our standpoint, we were very supportive of the commission’s view at that point and the new commission with regard to Chairman Wheeler, we’re very supportive of what he is trying to do there. We think it’s the right thing to do from a consumer perspective.

So from our standpoint, actually going back a little bit to Time Warner Cable, the customers that we ultimately will own, will be under that consent decree that we have right now and therefore we’ll be under the net neutrality side. So listen, we are big believers in broadband, we are big believers in Wi-Fi and we are going to continue to invest in that. And we think net neutrality is a foundational principle that is important to it.

On Netflix, I think that there is a lot of misinformation, to be honest with you. I don’t think the press has completely got it right. But we have a number of interconnect agreements with many companies, both in terms of CDNs as well as transport type companies that have worked in a commercial arrangement for the benefit of our customers.

Netflix, we have many customers who use our broadband to access Netflix. We think it’s important to provide them with a really good experience and obviously, it’s Netflix interest as well. So for months, we have been talking to them about what’s an appropriate interconnect agreement. And we think we have a commercial agreement with them, that is sound for both companies and the benefit is really to both our customers. So I really don’t think it’s a bigger deal as the press has made it. I really think that we are complementary in a lot of ways. And they’ve been helpful with our broadband business and we’ve been helpful to them with our broadband business.

So, I am not sure there is much more to say. I think the dollars that have been articulated are quite de minimis. And this is just a normal commercial relationship.

Unidentified Analyst

Got it. Home security is an area that the company has invested a lot in and seems to really getting some momentum, you don’t disclose the numbers. So maybe you could tell everybody about how you feel about that business, the opportunity, the addressable market, how Comcast is positioned?

Michael Angelakis

Yes, it’s still a developing business. I am not sure I completely define it as home security, I tend to think of more, we call it XFINITY Home, some people can refer to it digital home. And mainly what it’s about in our mind is providing more Wi-Fi devices in the home that can be used for security, can be used for energy management, can be used for lighting and a whole variety of different things. So I think this is a exciting area for us. And we’re investing in it, we do have thousands and thousands and thousands of customers, don’t go to exact number. What’s really interesting is that a large number -- of over 40% of the customers that we do have that have come on the service have never had a relationship with Comcast. Of those customers, more than half take all four services. So, it’s a terrific entry point for us where people looking for more innovative type services. And when they do look at what other services we have, they’re taking all four services. Interestingly, about two-thirds of them have never had a home security service. So, it’s hard to sort of pigeonhole and say the addressable market is what security is and there is a competitive market share move on the security side. We don’t quite look at it that way.

So I think this is going to be evolutionary, it’s going clear be a lot about the digital home. We’re also launching a product where there is no professional monitoring service. I can get -- somebody opens up a door at my home, I can get text; somebody sets an alarm, I can get text. I have cameras outside my home where if something happens, I can get a text or an email. I can turn lights off, turn lights on; I can move thermostats, all kind of Wi-Fi and digitally connected. And I think that’s clearly an area that we’re going to continue to push into. We think it’s important and given -- again, given that pipe that’s coming into the house, giving the Wi-Fi that we have, I think these applications are really exciting and we’re going to continue to invest in the business.

Unidentified Analyst

Great. Let’s shift over to NBC in the time we have left. You guys had talked about the monetization gap, I wonder if you could touch on where you guys are around retransmission fees of the network, how you feel NBC’s position there and then same sort of question on the cable network portfolio?

Michael Angelakis

So NBC, we just finished our three year ownership of NBC Universal. In a lot of ways it feels much longer than that. In a positive like I think we’ve -- strategically it’s been a terrific transaction for us. And obviously financially operating cash flow is up roughly 50% since we bought it.

We have a lot of work to do left. The monetization gap that you talked about exists in not only cable network, but exists in the broadcast side as well. We’re making progress in both. Retransmission consent is an important part of the broadcast network’s revenue model. When we bought NBC Universal there was de minimis number sort of single-digit revenue of single-digit $1 million of retransmission consent that moved up to $40 million in 2011 or 2012 then it moved to $240 million last year and that’s a pretty darn good jump and then in 2014 it will be close to $350 million.

So from going to zero up to $350 million over roughly a four year period is pretty great acceleration. And we still think there is a monetization gap when we look at some of our peers in that business.

Also in the broadcast side we’ve done a terrific job on really ratings. Right now we were number four and we made a joke that you can’t fall off the floor when we bought. And we were so far behind and you got to give the team such great credit, we’re now being number one for I think it’s 17 weeks this year, our ratings are way up. And we had a good upfront last year. Our expectation is we’ll have a good upfront this year.

Obviously the Olympics helped, but really I hate to say block and tackle it’s been just making progress in sort of really continuing to build the broadcast network whether it’s on sports or news or entertainment, all of them are making real progress. And we have high hopes that we’ll have continued financial growth from that business.

Cable network side, we have a great portfolio of cable networks that are doing really well. And we also have a dozen regional sports networks that are also doing well. There is still a monetization gap there too both in terms of affiliate fees, as well as on advertising and as contracts come up we’ll continue to monetize them appropriately. And part of the goal is really just market-to-market. And I think we’re doing a terrific on that. I would think we are in the fourth or fifth inning of that process. And as I talked with Steve just yesterday we are going through our LRP and we’re pretty optimistic over the next few years of how that will develop.

So NBC overall and we can talk about film which had a terrific year last year we’ve kind of changed the parameters, the risk profile of the slate and I spent a lot of time on that, they had a great year last year and we’re off to a good start this year that’s one of the businesses you can see how it does every Friday or Saturday it’s kind of amazing.

Unidentified Analyst

Liam Neeson.

Michael Angelakis

Liam Neeson. I mean Ride Along and Lone Survivor and we’ve been just very fortunate this year so far to see do pretty well and come out of the box strong. And I can’t say enough about theme parks, we have obviously one here in California where we’re building Horry Potter and that’s a big project. We have Harry Potter 2 going into Orlando and that will open in just several months actually, as well as some hotels. And we’ve been an investor in parks. We think parks have been undercapitalized for a number of years. And numbers don’t lie but when you have under $400 million of EBITDA several years ago and now that number has blown to a $1 billion that is just great execution and we are excited about that. So NBC has been a terrific transaction for us, and strategically it’s been really important in helping that ecosystem that we are trying to leave.

Unidentified Analyst

Yes, one more then we will see if the audience has any quick questions content licensing has been a really nice tailwind for the media business over the last couple of years, your business has been, the one you report has been a bit more flattish, is there a strategy to own more of your own programming and drive that business up from here?

Michael Angelakis

Yes. You got to go back three or four years, right. And we said that part of NBC really was a turnaround. Broadcast was a turnaround, it was in fourth place. Clearly content licensing was a turnaround. The pipeline that we had was just not very robust. So we have invested in that pipeline. We have a couple of shows Brooklyn 99 and a couple of others, Mindy Project over Fox and the goal is to continue to build that pipeline and hopefully licensing. It’s a lucrative business, if you can make the right shows, that’s easy to say, hard to do. So we are investing in that pipeline both for our own network as well as our cable networks. And hopefully we will generate more content licenses. We do generate about $1.8 billion or so a year, but we are probably not doing as good job as we would hope to and get a little bit of a turnaround there.

Unidentified Analyst

Great. Quickly, if you have any questions from the audience, please raise your hand and wait for microphone. One right up here upfront. Thanks.

Unidentified Analyst

You will be issuing A shares of K shares for The Time Warner due?

Michael Angelakis

I am sorry, couldn’t hear what you said.

Unidentified Analyst

We will be issuing A shares or K shares for The Time Warner?

Michael Angelakis

A shares.

Unidentified Analyst

With the anti-dilutive provision kick in on the billing rights on the B shares?

Michael Angelakis

No there is nothing really changed, we’re just issuing the A shares.

Unidentified Analyst

We have one last. Simons, go ahead.

Unidentified Analyst

Alright. Mike, one of the advantages of the merger is, you are going to put together a lot of Wi-Fi hotspots, can you talk a little bit about your plans to leverage those, what’s the opportunity to bring that new products and services and even get into the wireless business more broadly? Thanks.

Michael Angelakis

I’m sorry, I can’t see where the gentlemen is?

Unidentified Analyst

Way back.

Michael Angelakis

There, sorry about it. Listen, we think Wi-Fi is really a terrific service. The majority of Wi-Fi users is clearly in the home. And also a lot of it is in business as well. So as we deploy these wireless gateways, we’re providing multiple exercises in homes and in businesses and trying to create more public hotspots. We are doing it in train stations and other areas. And I’m not sure that TWC transaction has a lot to do with our strategy of Wi-Fi, but you are going to can see as to be more aggressive in deploying Wi-Fi as clearly an extension of our broadband service.

We want to have people be able to access that content that we’re providing on whatever platform they are and we know that the primarily mechanism or the primarily transport outside the home actually even sometimes inside the home is Wi-Fiscal. I think Time Warner Cable turbocharges that a little bit for us. Obviously we have a relationship with them today on the Wi-Fi alliance, but as we think about the markets and we think about our desire to deploy more and more Wi-Fi in the home as well as outside the home we can see lots of opportunities as we can leverage that network I think for the benefit of our customer base, as well as other.

So right now it’s primarily an extension of our broadband service, it could move into more as we think about how people want to access remotely video, whether it’s cloud DVR or other services. So we’re pretty excited about our deployment of Wi-Fi. I think you will see this accelerated.

Unidentified Analyst

Michael, thank you so much for your time. Thanks everybody.

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Source: Comcast's Management Presents at Morgan Stanley 2014 Technology, Media & Telecom Conference (Transcript)

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