康卡斯特 (CMCSA) 2012 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Comcast's fourth-quarter and full-year 2012 earnings conference call. At this time all participants are in a listen-only mode. Please note that this conference call is being recorded. I will now turn the call over to Senior Vice President Investor Relations, Ms. Marlene Dooner. Please go ahead, Ms. Dooner.

Thank you, operator, and welcome, everyone. Joining me on this morning's call are Brian Roberts, Michael Angelakis, Steve Burke and Neil Smit. We have a full agenda this morning. Brian and Michael will make formal remarks on both our earnings results and our announced early acquisition of GE's 49% common equity interest in NBCUniversal. Following their remarks Steve and Neil will also be available for Q&A.

As you review our materials please refer to our trending schedules, which are available on our Investor Relations website, for pro forma results covering the past 12 quarters, as well as detailed information for our business segments and other consolidated metrics.

As always let me refer you to slide number 2, which contains our Safe Harbor disclaimer, and remind you that this conference call may include forward-looking statements subject to certain risks and uncertainties. In addition, in this call we will refer to certain non-GAAP financial measures. Please refer to our 8-K for the reconciliation of non-GAAP financial measures to GAAP. With that let me turn the call to Brian Roberts for his comments. Brian.

Thanks, Marlene, and good morning, everyone. This is a really special moment for our Company with a number of exciting developments to tell you about today. We are reporting strong results for the fourth quarter and the full year of 2012, accelerating the acquisition of GE's equity interest in NBCUniversal and demonstrating confidence and optimism in the future of all our businesses by increasing our dividend 20% and announcing our plan to repurchase $2 billion of our stock during 2013.

Let me begin with our strong financial results for both the fourth quarter and the full year which highlight our momentum and how we are benefiting from scale and from our focus on operational excellence. These results demonstrate that our investments for growth and strategic differentiation, particularly in programming, technology and in new products, are helping us lead in innovation and strengthening our position in the market.

Michael will discuss the results in more detail, but I want to provide a few highlights. Let me start with Cable which capped accelerating performance throughout the year with a strong fourth quarter. Every part of the Cable business showed strength with revenue increases in all our residential products, in Business Services and in advertising. High-speed Internet led the way in both revenue and subscriber growth. We added 1.2 million HSI customers in 2012, a 6% increase and the seventh year in a row of more than 1 million customer additions.

In video we extended the trend of improving subscriber and revenue results. The fourth quarter was the ninth quarter in a row of year-over-year improvements in video subscribers and we expect that, excluding the impact of Hurricane Sandy, we added subscribers in the fourth quarter.

Just as important, video revenue growth of 2.9% in the fourth quarter was the highest in four years. Our triple-play offering is driving a rebound in voice with strong customer growth in the fourth quarter and we reached the milestone of 10 million voice customers early this new year.

Last but certainly not least, Business Services was again the second largest contributor to Cable's growth as it continues to expand its services to small businesses and its presence in the mid-size market.

So it's been a fantastic 2012 for Cable and a great fourth quarter. The XFINITY brand is taking hold and we are making steady headway in customer service and the Cable team is delivering consistent and first-rate operating performance. Neil Smit is doing a fabulous job and so is his team.

Similarly at NBCUniversal, Steve Burke and the NBCUniversal folks have had a very successful year. NBCUniversal's 2012 results highlight in particular the improving performance of our broadcast businesses. NBC's primetime performance this fall has been improving. While we recognize it is early in the turnaround, this is driving a big swing in momentum which should continue to help the network.

Our Cable networks continue to drive NBCUniversal's profitability and there were some real highlights there too. USA remained the highest rated Cable Entertainment Network for the seventh year in a row, Bravo had its seventh consecutive best year ever, and we also completed re-brands at E! and Style, and in terms of a rating, golf, mun2 and MSNBC were three of the five fastest growing channels on television all of last year. NBCUniversal's 2012 results also included stronger box office performance in film and outstanding results at the theme parks.

So let me talk about now our future since we are excited about our businesses and are going to continue to invest to reinforce our differentiation and to drive growth.

High-speed Internet and Business Services continue to be the drivers for Cable. And in 2013 we are investing to increase the speed once again of our high-speed Internet services and to expand the deployment of wireless Gateways that deliver the fastest in-home service and power the growing number of wirelessly connected devices in our customers' homes.

We're also extending our network to business rich areas to continue to gain share in small businesses and medium-sized businesses and to expand our MetroE products. Our XFINITY Home service has exciting growth potential too. It is now available across the entire footprint and, while it's still early and the numbers are relatively small, XFINITY Home is attracting new customers and working well as the fourth product in some of the bundles.

76% of our XFINITY Home customers are quad-play, 22% are new to Comcast, and of those 73% come in buying all four products. In 2012 we rolled out our first X1 service, our cloud-based interactive guide and user interface, in six markets. This year we will expand the rollout of X1 to the majority of our footprint and you'll also begin to see X1 more as a platform as we enable cloud delivered applications to our customers.

At NBCUniversal the Universal theme parks have been a real standout and we see great potential in the years ahead. And so we are investing in new attractions to continue to transform our parks into more must visit destinations. The new Transformers ride was an enormous success at Universal Studios Hollywood this past year and will be opening in Orlando in 2013. And we are expanding the hugely successful Harry Potter attraction including working on bringing it to Hollywood.

Now let's discuss the announcements we made last night regarding our acquisition of GE's existing 49% equity interest in NBCUniversal. Two years in the strategic rationale for bringing together our content and distribution businesses and the opportunities for growth and value creation available at NBCUniversal are even stronger and better than we first anticipated.

We've been hard at work inside these businesses for the last two years and now have the knowledge and confidence to accelerate the buyout of GE. In effect we are buying stock in our own Company and investing in businesses that we know well. Our programming investments are beginning to pay off driving strong early results at NBC Broadcast Network and a turnaround in ratings and financial performance at our local stations.

We also successfully integrated the Comcast cable channels and regional sports networks and we're investing across our cable networks to strengthen the brands and to reinforce the value. As a result we're beginning to see improved affiliate fees for the cable channels and the benefits of retransmission consent fees for NBC and Telemundo. We have achieved strong growth across the theme parks and we're also reinvigorating our franchises in the film business.

Finally, we've demonstrated real value when we bring together our content and distribution businesses to support important initiatives for the whole Company. We call that Project Symphony and whether you look at the success of The Lorax or The Voice or in particular last year's Olympics, many of these successes were amplified because of our Symphony approach.

So we are really pleased with the transition, have a great management team in place and strong momentum and we are bullish about NBCUniversal's future. This is also a good time to complete the acquisition since we are able to fund it through a combination of cash from operations, proceeds from the sale of nonstrategic assets, plus attractively priced public debt and seller financing from General Electric.

We now have a simplified structure and balance sheet and our goal is to continue to strengthen this balance sheet and achieve even stronger credit ratings over time while we continue to provide a sustainable return of capital to shareholders. I believe we are uniquely positioned with great businesses and real opportunities for growth and aim to continue to strengthen our Company.

As we start 2013 we have real momentum and we are maintaining our focus on execution and disciplined investment to build in each and every one of these exciting businesses. Let me now pass it to Michael to cover the results and the transaction in greater detail.

Good morning and thank you, Brian. It was quite a bit to review today including the NBCUniversal transaction and our 2013 financial strategy. But I think most important is our strong operational performance and positive momentum in the fourth quarter and for all of 2012.

As Brian mentioned, we are very pleased with our results, on slide 4, which reflect sustainable and profitable growth and the fundamental strength of our businesses. For the full-year consolidated revenue increased 12% to $62.6 billion and operating cash flow increased 9% to $20 billion reflecting strong organic growth in both our Cable Communications and NBCUniversal businesses.

Free cash flow for the full year, which excludes the impact of the economic stimulus, increased 13% to $7.9 billion primarily reflecting growth in operating cash flow and improvements in working capital, partially offset by higher cash taxes and capital expenditures. Free cash flow per share increased 16% to $2.92 per share in 2012.

For the year our Cable free cash flow generated $6.2 billion or 78% of the total while NBCUniversal contributed $1.7 billion or 22% of consolidated free cash flow. Earnings per share grew 52% to $2.28 per share for the full year from $1.50 per share in 2011.

Excluding gains from the SpectrumCo and A&E transactions and an income tax benefit resulting from a state tax will change in 2012, an NBCUniversal transaction and related costs and other nonrecurring items in 2011 our adjusted earnings per share increased 22% to $1.93 per share.

Now let's review the pro forma results of our Cable Communications and NBCUniversal businesses on slide 5. As you know, we believe the pro forma presentation provides a more meaningful comparison of the operating performance of the businesses. The pro forma results are only necessary for the full year and are presented as if NBCUniversal and the Universal Orlando transactions were both effective on January 1, 2010.

For the fourth quarter of 2012 consolidated revenue increased 6% to $15.9 billion and consolidated operating cash flow increased 7% to $5.3 billion. Fourth-quarter results reflect Cable Communications' revenue increase of 7% to $10.1 billion driven by growth in high-speed Internet, Business Services, video and advertising. Cable operating cash flow also increased 7% to $4.2 billion.

At NBCUniversal fourth-quarter revenue increased 5% to $6 billion and operating cash flow increased 11% to $1.2 billion driven by strong results at our broadcast business. For the full year of 2012 consolidated pro forma revenue increased 8.5% to $62.6 billion reflecting the inclusion of $1.2 billion of revenue generated by the Olympics and $259 million of revenue from the Super Bowl.

Excluding the Super Bowl and the Olympics full year consolidated pro forma revenue increased 6%. Consolidated pro forma operating cash flow increased 7% to $20 billion including $120 million of operating cash flow from the Olympics. Excluding the Olympics the full-year consolidated operating cash flow increased 6%.

Cable Communications revenue increased 6% to $39.6 billion for the full year and represented 63% of our consolidated revenue while Cable operating cash flow grew 6% to $16.3 billion and represented 81% of consolidated operating cash flow.

For the full-year NBCUniversal revenue increased 13% to $23.8 billion and operating cash flow increased 9% to $4.1 billion. Again, excluding the results of the Super Bowl and the Olympics, NBCUniversal revenue and operating cash flow increased 6% respectively.

Please refer to slide 6 and we will review Cable Communications results in a bit more detail. For 2012 Cable Communications reported another year of strong financial results and customer growth with substantial year-over-year improvements reflecting growth in our residential businesses, continued strength in our Business Services and increased advertising revenue driven by political.

Contributing to Cable's growth are rate adjustments, new customer additions and an increasing number of customers taking multiple products. At the end of the fourth quarter 75% of our video customers took at least two products and 40% took all three services compared to 37% in the fourth quarter of last year. As a result total revenue per video customer increased 9% to $154 per month in the fourth quarter.

We continue to experience real strength in our customer metrics. In the fourth quarter we added 503,000 total video, high-speed Internet and voice customers, an 8% increase in net customer additions over last year's fourth quarter. For the year we added 1.5 million total customers, a 5% increase in net customer additions compared to 2011.

In the fourth quarter, even with the negative impact of Sandy, we reduced video losses by 60%, reporting a loss of only 7,000 video customers compared to the 17,000 video customer losses in last year's fourth quarter. And for the full year we reduced video losses by more than 25% over 2011 as we continue to execute with improved products and customer support.

Video revenue increased 3% for the fourth quarter and 2.5% for the full-year reflecting rate adjustments and a higher number of customers taking advanced services. In addition to our improved video results, our high speed Internet business performed well as we added 341,000 new customers in the fourth quarter and 1.2 million customers during the year.

High-speed Internet revenue was again the largest contributor to Cable revenue growth as revenue increased 9% in both the fourth quarter and for the full year reflecting rate adjustments, continued growth in our customer base and 29% of our customers now receiving higher tier services.

With regard to voice, revenue increased 1% in the fourth quarter and 1.5% for the full-year reflecting continued growth in our customer base. We added 168,000 voice customers, a 15% increase in the fourth quarter and 613,000 customers in the full year. Our voice penetration is now at 19% of homes passed and our customer results improved throughout 2012 as we increased the number of triple-play customers.

The momentum in Business Services continues with revenue increasing 32% in the fourth quarter and 34% for the full year for total revenue of $2.4 billion in 2012. The small end of the market, or businesses with less than 20 employees, continues to be the primary driver of growth and accounted for 85% of Business Services revenue in 2012.

The mid-size business is established and growing rapidly and now represents almost 15% of this group's revenue. As I mentioned, Cable advertising also performed well in the fourth quarter with revenue increasing 19% and full-year revenue increasing 14% including political revenue of $131 million in the fourth quarter and $239 million in the full year.

Please move to slide 7. In the fourth quarter Cable Communications' operating cash flow increased 7% to $4.2 billion and full-year operating cash flow increased 6% to $16.3 billion resulting in stable margins for the quarter and the year. During 2012 total expenses in Cable increased 6% driven primarily by three pressures, two of which we control and have positive ROIs.

First, we are absorbing expenses as we offer and expand new products like XFINITY Home and Signature Support. Secondly, we have been increasing our sales and marketing spend in media, direct sales and new marketing channels to more effectively target customers and enhance our competitive positioning in both our residential and commercial segments. These increased marketing efforts have had a positive impact on our core customer metrics.

Finally, program expenses increased 7% in 2012 reflecting higher rates and an increase in the amount of content we provide to consumers across multiple platforms. As we look to 2013 we expect program expenses to increase at low-double-digit rates driven by several factors including the continued expansion of rights to multiple platforms, additional channel launches, continuing increase in sports costs, meaningful increases for retransmission consent fees and step-ups for recently completed long-term agreements.

We have appropriately planned for these program expense increases and are confident we can effectively offset these costs through modest rate adjustments, further efficiencies and improving product mix, as well as increasing the number of customers upgrading to higher tiers of service. As a result we expect to maintain relatively stable margins.

In addition, we remain very focused and believe we can continue to gain further efficiencies in our customer service and technical operations. In 2012 we reduced our activity levels by more than 4.5 million truck rolls and by 16 million agent calls handled in our call-centers even as we added 1.5 million total new customers.

Our service is improving and customers continue to elect self installations which accounted for 36% of our total installations at year-end 2012 compared to 21% at year-end 2011. In addition, we now have 27% of our customers managing their accounts online. All these improvements reflect the innovative efforts we are making to increase customer satisfaction by giving our customers more choice and control, which results in lower activity levels for our Cable operations.

Overall our XFINITY brand is building momentum, and Cable's performance in 2012 clearly demonstrates that we are executing well and competing effectively with our improved products and services. Please refer to slide eight so we can review our pro forma results for the segments of NBCUniversal.

For the fourth quarter NBCUniversal's revenue increased 5% and operating cash flow increased 11% as it was a strong fourth quarter that ended a solid performance in 2012. For the full year 2012 NBCUniversal revenue increased 13% and operating cash flow increased 9%. These strong results were partially driven by the success of the Super Bowl and the Olympics during the year.

Excluding any impact from these two events, NBCUniversal revenue and operating cash flow each increased 6% which was driven by strong results at Broadcast Television and Theme Parks as well solid results at Filmed Entertainment and Cable Networks.

As we review the pro forma results of the individual segments in 2012 Cable Networks generated revenue of $8.8 billion, an increase of 3% driven by a 5% increase in distribution revenue and a 2% increase in advertising revenue as weaker ratings were more than offset by higher pricing.

In the fourth quarter distribution revenue increased 2.5% but was negatively impacted by the NHL lockout. Cable Networks' operating cash flow declined 1% to $3.3 billion primarily reflecting higher programming and production cost due to our continued investment in increased original program. In addition, we experienced higher sports programming costs mostly driven by more NBA games in 2012 compared to 2011 due to the lockout.

With regards to our Broadcast segment, full-year revenue increased 27% to $8.2 billion reflecting the inclusion of $1.2 billion of revenue generated by the Olympics and $259 million of revenue from the Super Bowl.

Excluding the impact of both the Olympics and Super Bowl Broadcast revenue increased 5% reflecting the strong primetime ratings at the NBC broadcast network and over $100 million of political revenue at the owned local stations. This was partially offset by lower content licensing revenue from a library content agreement signed in 2011.

Full-year 2012 Broadcast operating cash flow increased by $246 million to $369 million. And excluding the Olympics operating cash flow more than doubled, increasing by $126 million to $249 million reflecting higher revenue and a slight increase in programming costs.

Moving to filmed entertainment, 2012 revenue increased 12% to $5.2 billion driven by higher theatrical revenue from the strong box office performances of Ted, The Lorax and Les Miserables, as well as higher home entertainment and content licensing revenue. Film operating cash flow increased $55 million to $79 million reflecting the performance of the film slate partially offset by an increase in the amortization of film costs.

Switching to our Theme Park segment, 2012 was a terrific year. Full-year revenue increased 5% to $2.1 billion and operating cash flow increased 10% to $953 million. These solid results were driven by increased attendance and per capita spending at our parks which are continuing to benefit from the success of the Wizarding World of Harry Potter attraction in Orlando and the new Transformers attraction in Hollywood.

Let's move on to slide 9 to review our consolidated capital expenditures. We strongly believe that operational excellence, strategic differentiation and attractive capital investment drive profitable growth in shareholder value. Therefore we have a disciplined and balanced capital allocation strategy that is returns focused as we invest in our core businesses while maintaining a strong balance sheet and providing consistent and sustainable return of capital to shareholders.

Our first priority is to generate strong returns by investing in our businesses. In both Cable and NBCUniversal we are continuing to reinvest to strengthen our competitive position and to support attractive organic growth opportunities. For 2012 consolidated capital expenditures increased almost 8% to $5.7 billion compared to $5.3 billion in 2011.

At Cable Communications full-year capital expenditures increased 2% to $4.9 billion, equal to 12.4% of Cable revenue versus 12.9% in 2011. The increase in capital expenditures reflects the continued expansion of Business Services and investment in network infrastructure to ensure our product leadership.

Our capital investment plan is focused on strategic areas of growth yield strong risk-adjusted returns. Our investments in our network and in CPE to support strategic initiatives, like all digital and DOCSIS 3.0 and in new businesses like Business Services, have yielded strong returns, enhanced our competitive advantage and contributed to our strong financial performance.

At NBCUniversal we have a similar approach. NBCUniversal's capital expenditures for 2012 increased $329 million to $763 million driven by increased investments in parks and facilities. The higher facilities investment reflects the consolidation of operations and improvements made in our New York area and LA properties.

At Parks we have increased our investment in new attractions at both Orlando and Hollywood as we opened Despicable Me in Orlando and Transformers in Hollywood with great results. We will moderately increase our 2013 investment in attractive growth areas for Cable and NBCUniversal.

We plan to continue to increase high-speed Internet speeds, deploy new wireless Gateways to deliver the fastest in-home WiFi, invest more aggressively in the mid-market with Metro-E, expand the rollout of X1 across our footprint and accelerate the expansion of XFINITY home.

As a result of these investments our 2013 Cable capital expenditures will increase by approximately 10% with capital intensity increasing slightly or equal to 2011 levels. We are excited about these initiatives to accelerate our product offerings, drive future growth and provide attractive returns.

At NBCUniversal our 2013 capital investment plan will increase by approximately 25% primarily driven by our Theme Park's investment in new attractions including Transformers and other attractions at Orlando in Harry Potter and Despicable Me in Hollywood. Investments in our Theme Parks over the last few years have actually reset the level of their performance generating strong returns and dramatically expanding the potential of our Theme Park business.

Please refer to slide 10. As we balance our capital allocation priorities, our acquisition of GE's remaining 49% common equity interest in NBCUniversal also demonstrates our disciplined investment approach. We are buying stock and investing in businesses that we own and where we belief we have significant and attractive opportunities to build shareholder value.

As the slide outlines, we agreed to an accelerated acquisition of GE's 49% common equity interest in NBCUniversal for $16.7 billion. We are also purchasing NBCUniversal's 30 Rockefeller Center and Englewood Cliffs facilities for $1.4 billion, which we consider strategic facilities given the amount of infrastructure and capital investment that has been made in both of these properties.

The transaction values NBCUniversal at approximately $39 billion of enterprise value. We believe this values NBC at approximately nine times operating cash flow, exclusive of tax benefits, and in line with comparable media peers and is attractive to our shareholders relative to the business' trajectory and our estimates of value under the originally contemplated redemption structure.

The transaction yields meaningful tax benefits to Comcast and generates strong returns yielding double-digit cash-on-cash IRRs and is immediately accretive to EPS.

In addition, we have conservatively planned for this event as NBCUniversal and Comcast have built significant financial capacity to fund part of this transaction. We will utilize $11.4 billion of existing cash on hand, which was generated primarily from operations, the sale of our A&E and SpectrumCo assets and the issuance of $7.5 billion of long dated senior notes since July of 2012.

We will borrow $2 billion additional debt under our credit facilities and will issue to GE $4 billion of seller notes and $725 million of subsidiary preferred shares. In addition, GE has made additional long-term advertising commitments to NBCUniversal.

Based on this transaction and on a pro forma basis we will have consolidated debt of approximately $48 billion and a debt to operating cash flow leverage ratio of 2.4 times. We view our strong balance sheet as an important strategic asset and we plan to moderately delever over the next few years with a medium-term goal to further strengthen our credit ratings.

Given the magnitude of our balance sheet we believe a new medium-term leverage target of between 1.5 to 2 times provides the appropriate financial flexibility and liquidity to support our balance sheet and our long-term operating and strategic plan.

Please refer to slide 11. Within the context of the NBCUniversal transaction, which is an indirect stock buyback, and our long-term leverage target we remain committed to deliver a consistent and sustainable return of capital to shareholders through a combination of dividends and buybacks. Today we've announced a 20% increase in our dividend to $0.78 on an annual basis and plan to repurchase $2 billion of our stock in 2013.

The newly announced dividend represents 32% of our last 12 months net income and raises our current dividend yield to approximately 2% which we believe is attractive and in-line with the S&P 500. Since the initiation of our dividend in 2008 and to our return of capital commitments in 2013 we will have returned $19 billion to shareholders including $7 billion in dividends in repurchasing $12 billion in shares.

We strongly believe we can continue to balance investing in our business and returning meaningful amounts of capital to shareholders even as we strengthen our balance sheet. So as we conclude 2012, the Company is performing well with a real focus on innovation and execution. In addition, we are pleased with the start in 2013 and hope to build on Cable Communications and NBCUniversal's momentum.

We are also very pleased that this momentum, our financial strength and our confidence in the business is allowing us to invest for profitable growth and to provide a meaningful return of capital to shareholders. Now let me turn the call to Marlene for Q&A.

Thanks, Michael. Operator, let's open up the call for Q&A, please.

(Operator Instructions). Jason Bazinet, Citi Investment Research.

Thanks. I just had two questions for Mr. Angelakis. I'm sure there is a lot of moving parts to the economic stimulus and I don't know if there are any changes with the full redemption of the NBCU stake, but would you mind just outlining anything that you can on cash taxes for the next few years in a percentage basis?

And then secondly, if you had to quantify what sort of assets there are sort of an NPV basis, are there any guideposts you can give us in terms of what folks would be thinking about for their valuation? Thank you.

Is your second question, Jason, regarding to the tax benefits we're receiving as part of the transaction on an NPV basis? I just want to make sure I clarify the question.

Correct.

Okay, so when we announced the transaction -- the first part of the transaction back in December of 2009 we articulated that we thought the NPV benefit of the taxes was approximately $1.5 billion. We have been fortunate in terms of how we structured it and other benefits where now we estimate that the NPV of those tax benefits is approximately $2.2 billion, so they have gone up nicely over the last several years.

We expect to receive those benefits over really the next 10 to 15 years, which is several hundred million dollars a year of benefits to Comcast. So we are really pleased of how this has been structured.

With regards to cash taxes, they do move around a little bit related to gains and other kinds of things. We don't anticipate any meaningful changes. And I think you'll see that our effective tax rate on our P&L will probably hover around 38% to 39% as we go forward.

Okay, thank you very much.

Jessica Reif Cohen, Bank of America-Merrill Lynch.

I have a question for Neil and Steve, if each of you could just talk about kind of the big three drivers for your divisions for the year ahead?

Hi, Jessica, it's Neil. I think the big drivers for our business are, number one, executing the growth of our businesses, our high-speed business and Business Services. Those are drivers of our profitability and revenue and I think we are very focused on those.

Number two is grow and continuing the improvement on our video business. We've seen, as you know, about nine quarters of improving results in video and I would like to continue that trend.

And number three is just executing well on some of the efficiencies we are finding in the business, reducing truck rolls, improving the call center performance and just overall improvement on the execution side of the business.

And, Jessica, on the NBCUniversal side I would say if I had to pick three the first would be what I call the monetization gap or the entitlement gap. I think our affiliate fees are not what they should be both in terms of the Cable channels and retransmission consent. And on the advertising side our CPMs are lower than some of the other people in the business who have lower ratings than we do.

Secondly, I would say the Broadcast Business continues to seem like a big opportunity to us whether it is the NBC Network, our local stations or Telemundo, I think all three of those represent a big opportunity. And finally Theme Parks, which is a business that we have come to really appreciate over time. We are doing quite well in the Theme Park business and I think that growth will continue.

Thank you.

Jason Armstrong, Goldman Sachs.

Congratulations. First maybe a question on content cost growth that you talked about in the double-digit range. Where are we in the process of content step-ups and authentication rights? I guess what is included here is presumably Fox and I know ESPN sort of hit at the beginning of the year.

Does this represent the later stages of the process and content costs can start to moderate -- or growth in content costs can start to moderate after this year? Or are we still in the middle stages of this process?

And then just related to that Cable margins, you talked about stable Cable margins in 2013 despite the content cost growth. I guess in order for that to be the case it looks like you'd probably have to accelerate revenue growth in Cable, is that the right assumption? Thanks.

Morning, Jason. Let me take the Cable margin. We can pass off to Neil with regard to some of the content costs. So, on the Cable margin we have done a great job over the few years keeping a relatively stable margin. When you look at really the revenues of our Cable business right now, roughly half of the revenue is the video side and the other half are other services, which from a product mix standpoint have better margins and are higher growth.

So a combination of increasing product mix, some adjustments that we'll have on the pricing on our video side, some efficiencies that we are confident we will be able to access, which actually help the customers and help our efficiencies, we think as we look to 2013 we will be able to keep pretty stable margins. On the content side in terms of where we are and the Fox deal was announced yesterday, I will let Neil answer that.

Hi, Jason. On the content side our programming costs, as you know, have grown from about 7% this year to low-double-digits is what we are projecting. With that we are extending the terms, we are getting more programming content, we are getting it across more platforms in and out of house.

And I think what we are doing now is figuring out how to leverage that content so we deliver more value to the customers and that comes in the form of X1. And X1 improves the ability to discover that content and it also acts as a platform so that we can deliver more cloud services and applications going forward.

So we've got the most on demand, we have the 80 authenticated networks on our online service. What is driving the growth is a mixture of things. One is we had a couple step-ups this year, we have sports costs continuing to grow, we have re-trans fees coming in and we are just growing the overall content.

I think we planned for and anticipated these increases and, as Michael said, we are able to offset that with efficiencies in the business and moderate rate increases. I think that the content along with better marketing and execution is really -- is delivering results.

We saw a 27% reduction in video losses this year and we've also seen improved revenue growth -- last year it was 1.3%, or 2011, and this year it was 2.5% and that is $490 million worth of growth. So I think we can manage the programming increases. We are going to continue to deliver great product and I think that is our plan, we want to drive share growth.

I just want to add one last point on the -- each of these agreements, including the Fox agreement and the Disney agreement that Neil alluded to before, we have signed long-term agreements. So the question of where are we with most of our -- we always have some agreement coming up, but we have now with the majority of our relationships for the next several years there's always a few here and there and then there are new things that get created.

And we are always -- seem to be finding new ways to deliver content to consumers. So it is an ongoing dialogue. That being said, we did plan for this and expected this for 2013.

Great, thank you.

Doug Mitchelson, Deutsche Bank.

Thanks so much. One for Michael, one for Brian, I guess I will just ask them both up front if that's all right. For Michael, the NBC price was cheaper than I expected. I understand quite well the pricing mechanism from the original deal for GE's exit in 2014 and 2017, but I would think GE would have held out for a nice premium to exit this early.

I mean the price was right in line with Time Warner, Viacom's trailing 9.5 times multiple. I think NBC would trade for something like 12 times forward in this market. Did Comcast provide any additional benefits to GE that convinced them to be so reasonable here on price and timing?

And then for Brian, perhaps this is [revisionist] history, but I feel like you have had a very clear vision for the past couple of decades. So in the 1990s you were building scale in a very strong belief in video on demand and last decade you were building out the pipes and building out a broadband and technology platform and buying content. Is the Comcast you were hoping to build now built? What is the vision as you look forward the next five to 10 years? Thanks.

Why don't I take the price. Listen, for NBC -- I mean for GE I think it's a very good deal for them as well. I think that they were expecting to receive half of the value of their ownership in 2014, almost two years from now, they would have been closer to the end of 2014. Then they really had to wait really until the early part of 2018 to receive the other half.

So I think from their standpoint they are going to receive a lot of cash, which we know they are going to deploy to other services. And from our standpoint I think it was an advantage to accelerate that's good and I think we received a very fair price. So we are quite pleased with the price and how we have structured the transaction as well. So I will pass it over to Brian for his -- to answer the second part of the question.

I think we appreciate what you said, not sure you ever have a perfect vision for a company at any one moment in time, but we have believed that the scale in Cable was going to make a difference and it is really starting to pay dividends. You are seeing it in the innovation, the service and frankly just the results that Neil and the team have done.

I think for content we have always thought for many years that it's a great business on a stand-alone basis, it has created a lot of wealth over a long period of time and we think we will find ways to do so in the future. Having both in one company makes us a really special company. And I think now we need to execute and continue to find ways to have the two work together and apart.

And it's a very special day for the Company and I think the employees and place where people want to come to work would be the last -- kind of my next goal would be to make it -- continue to make it the absolute home for where a young person coming out of school or somebody with their career says, this is a company at the crosshairs of media and technology and all parts of this Company make it where I want to spend my career.

Great. Thank you.

John Hodulik, UBS.

First a clarification and then a quick follow-up. But on the clarification, the CapEx guide on that Cable side says 10% growth in CapEx equated to about 12.9% of sales. Is it right to think that that suggests you are going to see Cable revenue growth of close to or around 6% in 2013, am I looking at that the right way?

And then in terms of CapEx, we've got a meaningful step-up here, 2013 versus 2012, is this the right level maybe for Michael that you are investing in or should we think of that from a dollar standpoint as a good level going forward or is 2013 sort of an outsized year? Thanks.

So, let me take that. I think on your first question I don't -- we are not providing guidance and your math is directionally correct. So let's just leave it at that.

With regards to the 2013, we are actually excited about investing in the areas that we articulated both on the Comcast Cable side and on the NBCUniversal side. So we do look at intensity in terms of 12.4% of Cable CapEx in 2012 and we articulated around 12.9% in 2013. And really the difference is we are investing in high-growth, high opportunity areas in both parts of the business.

So we have got X1 Comcast Business Services, high-speed Internet, wireless Gateways, a whole variety of areas, XFINITY Home, that we think are transforming the product set that we have on the Cable side. And I think Neil's team has done an amazing job of how we deploy that.

So those are all primarily variable type costs of how we successfully deploy really new products that we have invested in. And on the NBCUniversal side, as Steve mentioned, Theme Parks has been terrific, really have reset the bar. And the majority of those dollars are going into new attractions at the Theme Parks, which really are, again, high growth, high opportunity dollars.

So we are really -- we are not looking at multiple year plans, but for 2013 we wanted to sort of step on the pedal in areas where we think there are some high-growth, high opportunity areas for the Company.

Marci Ryvicker, Wells Fargo.

I have two questions, one related to NCBU and the transaction. Can you help us with the accretion math? We are hearing anywhere from $0.05 accretion to $0.30, so any guidance on how to think about that would be helpful.

And then, with regard to the programming cost guidance, can you just confirm that this is a P&L basis and not a per sub basis? And does the incremental expense at all incorporate an assumption of positive video adds for any period of time in 2013?

Okay, let me take the accretion one and let's be really clear about the accretion. So, on free cash flow there is really no accretion because we have been consolidating 100% of NBCUniversal's free cash flow since we have controlled 51%.

So on free cash flow what the impacts will be, as we just talked about, we'll have a little bit higher CapEx, we're going to have a little bit higher interest expense related to the dollars that we are borrowing to complete the transaction, but we are also going to have operating cash flow growth. And we feel that we will be able to keep relatively stable free cash flow for 2013, but the transaction itself isn't creating any kind of accretion.

On the P&L side, we are going to see EPS accretion, so we are going to pay a bit more in taxes because now we will pay 100% of the taxes related to NBCUniversal, but we are also going to eliminate the non-controlling interest which is in our P&L. And net-net that is about a positive $550 million which is about $0.19 to $0.20 of EPS accretion. So that is a number that we think is immediately accretive on our P&L related to the transaction.

With regard to your second point on programming cost, it is all in with regards to the P&L. So we look at our total dollars of programming expense increasing in the low-double-digits for 2013. We are not providing any kind of view on what subscribers will do. Obviously we are making progress and I think that is the key part is making progress with quality type customers.

Ben Swinburne, Morgan Stanley.

Maybe for Neil, some color on the investment areas for 2013 that you called out. First on commercial, it is obviously running at a 30% plus clip. I don't know if you could talk about what your expectations are for 2013 in that business given the capital you are putting behind it, what kind of market share you think you have?

And then on the residential side, any more color on X1 and the Gateway product, what is the Gateway? Is that purely a modem or is it a residential Gateway set-top combo? And are the X1 markets performing better than your broader footprint? I am just curious sort of what kind of benefits you are seeing in the market? Thank you.

So concerning the Business Services, it is growing at a 30-plus-percent clip and we have been very pleased with the growth. Bill Stemper and his team have done a terrific job there. The mid market is really a lot of the investment that we are putting in now with MetroE and hosted voice, that is growing at a faster rate than our small business side and it is already 15% of the overall revenue.

Concerning HSI, we are investing, as you mentioned, behind wireless Gateways. The wireless Gateways are a combination modem and router and that provides for efficiency in the install process and gives us a better look into the self-diagnostic look into the network. So it is efficient as well as a better customer experience.

It takes in some of our older modems which perform at a kind of a 22 meg throughput, this takes it up to over 200 meg throughput. So as people hang more devices off of the -- their WiFi you are getting a better throughput of the device. So we are excited about that.

Concerning X1, we are seeing -- it is preliminary still, but we are seeing lower churn and higher customer satisfaction in the X1 market. So we are pleased with that and we are going to roll it out through the majority of our footprint this year based on those results.

And it also gives us the ability -- it acts as a platform; it gives us the ability, as Brian mentioned, to hang more applications and services off of it. So it is a great customer experience and it gives us a platform for future growth.

Thank you.

Michael Sena, Credit Suisse.

Just a question in regards to NBCU, another growth opportunity a lot of the media companies are investing in is internationally. I was just wondering, with this transaction behind you, what the view is on a large scale international M&A play weighed against the shareholder returns or what the general international strategy is moving forward?

Hi, it's Michael. I will take the question. I think that we are very focused on execution and I just really want to emphasize that. The investment of $16.7 billion in NBCUniversal I think really highlights our confidence in the business, but also where we think there is organic growth opportunities in the business.

And I think where our focus will be is clearly on organic growth opportunities that we think exist. International is an important area and we are continuing to study that, but we are excited about the organic opportunities we have.

And there is plenty to do organically. If you look at some of our businesses like film right now, the majority of our revenues are going to come from outside of the United States, we have Cable channels all over the world, we have a very large television syndication business.

And Jeff Shell, one off the senior most Comcast executives that we put in place at the deal close has a great team they are doing a great job. There is plenty to do organically and we should grow that business in the future.

Thank you, Michael. Operator, let's have this be the last question, please.

Bryan Kraft, Evercore Partners.

I just had two quick ones. One, since you are taking in the properties from NBC and Inglewood Cliffs and 30 Rock, will there be some lease or rent savings that will positively impact NCBU EBITDA? And if so if you could maybe quantify that. And I also wanted to clarify, is the $1.4 billion for the real estate in your $39 billion enterprise value calculation or is that in addition to it? Thanks.

I will take that. No, the $1.4 billion really has nothing to do with the $39.4 billion enterprise value. That value is separate for the business. A separate part of General Electric actually owned the real estate and we thought it was important to bring that into the transaction given what we consider to be both strategic facilities that we were fortunate enough to have both under one roof, one GE roof to be able to negotiate that.

So your first question, there will be some savings on EBITDA related to rent expense that we would have at both facilities that when the transaction closed that we won't have that. So it is not that meaningful given the size of roughly $20 billion of operating cash flow. But it is certainly going to help.

And we made the decision that it was strategic to buy these facilities as well as from an economic perspective it was a smart deal. And you can look at a whole variety of real estate metrics to make that decision.

Thanks very much.

Thank you and thank you all for joining us this morning.

There will be a replay available of today's call starting at 12.30 p.m. Eastern Standard Time. It will run through Wednesday, February 20 at midnight Eastern Time. The dial in number is 855-859-2056 and the conference ID number is 8575-1942. A recording of the conference call will also be available on the Company's website beginning at 12.30 p.m. today. This concludes today's teleconference. Thank you for participating. You may all disconnect.