QVC Group Inc (QVCGA) 2007 Q2 法說會逐字稿

Good day, everyone, and welcome to the Liberty Media Corporation second quarter earnings conference call. Today's call is being recorded. This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about financial guidance, business strategies, market potential, future financial performance, new service and product launches, and other matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of new products or services, competitive issues, regulatory issues, and continued access to capital on terms acceptable to Liberty Media.

These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Including, without limitation, possible changes in market acceptance of new products or services, competitive issues, regulatory issues and continued access to capital on terms acceptable to Liberty Media. These forward-looking statements speak only as of the date of this presentation and Liberty Media expressly disclaims any obligation or undertaking to disseminate any update or revisions to any forward-looking statements contained herein to reflect any changes in Liberty Media's expectations with regard thereto, or change in event, conditions, or circumstances on which any such statements are based. Please refer to the publicly filed documents of Liberty Media, including the most recent Form 10-Q for additional information about Liberty Media and about the risks and uncertainties related to Liberty Media's business, which may effect the statements made in this presentation.

On today's call, we will discuss certain non-GAAP financial measures. The required reconciliations can be found at the end of this presentation. At this time, for opening remarks and introductions, I would like to turn the call over to the President and Chief Executive Officer, Mr. Greg Maffei. Please go ahead, sir.

Thank you, and good morning, and thank you all for joining us. Liberty has kept up a rapid pace of activity through the second quarter and I look forward to sharing some of those developments of the past several months with you this morning. We'll discuss recent events at Liberty and take a look at the operating performance of some of the businesses and assets attributed to both Liberty Interactive and Liberty Capital's tracking stocks. I'm joined on the call today by QVC's CEO, Mike George; QVC's COO Meade Rudasill; QVC's Chief Financial Officer, Dan O'Connell; from Starz, we have the Chairman and CEO, Bob Clasen; President and COO, Bill Myers; and EVP and CFO, Glen Curtis. And from Liberty, I'm joined by our Chairman, John Malone, and several of our senior executives. At the end of my remarks and the remarks of the others, we'll be happy to answer any questions.

After we discuss the developments of the second quarter, I'll turn over the call to our controller, Chris Shean, who will chat about Liberty Interactive and Liberty Capital's attributed businesses, including recent financial results on our liquidity picture. Mike George will pick up and address developments at QVC, and Bob Clasen will chat about recent events at Starz. And then I'll close with a brief summary of the quarter and our outlook as we embark upon the remainder of 2007. Then we'll open the call to questions. So let me now turn to recent developments.

As we announced this morning, upon completion of our asset exchange with News Corp., we will issue two new tracking stocks. One of these groups designated Liberty Entertainment, is expected to have attributed to it the assets obtained in the News Corp. exchange including the 38.5% stake in DirecTV, which is probably now actually about a 40% stake in DirecTV, given their share repurchases, the three regional sport sports networks in the northwest, Rocky Mountain, and Pittsburgh, and $588 million in cash. Liberty's interest in Starz Entertainment, Starz Media, FUN Technologies, our 50% interest in GSN and our stake in WildBlue, and approximately $551 million of exchangeable debt, are also expected to be attributed to Liberty Entertainment.

The other new tracking stock will retain the Liberty Capital name and will include all the businesses, assets, and liabilities previously attributed to Liberty Capital, other than the list that I just went through, that will be attributed to Liberty Entertainment. No changes will be made to Liberty Interactive tracking stock.

We believe this change, the issuance of the two tracking stocks, will further our efforts to reduce the complexity inherent in the diverse group of assets and financial instruments attributed to the existing Liberty Capital. It will give our investors the opportunity to further focus their investment and will create a currency to give us enhanced financial flexibility at Liberty Entertainment. This structural change will also further concentrate the remaining non-core assets attributing them to the new Liberty Capital, where each transaction to rationalize those assets, including their conversion to operating assets, will have a more material effect on reducing the discount at which the tracking stocks trade.

During the quarter we made additional progress towards simplifying Liberty Capital. We completed the sale or exchange of a number of our non-core assets, including the exchange of $68.5 million Time Warner shares for a company holding the Atlanta Braves, Leisure Arts, and $984 million of cash. The sale of On Command, and the exchange of our stake in CVS for cash and their Green Bay affiliate. We will continue to convert our remaining non-core businesses into operating -- non-core businesses into operating businesses, in an effort to transform Liberty into a well-positioned, focused operating entity. The foregoing transactions resulted in significant cash generation during the quarter and despite the completion of our $1.3 billion self tender for LCAPA shares, we closed the quarter with an increased cash balance attributed to Liberty Capital. We're pleased with the progress to date on simplifying our assets, while reducing Liberty Capital common shares by over 8%. As we complete further transactions during the remainder of the year, we may further grow our cash reserves, resulting in continued enhancement of our financial flexibility, which can be used for acquisitions, business development, and potentially further share repurchases.

On the operating side, the reduction of Starz programming costs drove a 10% increase in OCF. We expect ongoing reductions in programming costs and marketing costs this year and next. Bob Clasen will detail these developments at Starz further later in the call. On the Liberty Interactive side, we also completed a self tender for $484 million of LINTA shares. This resulted in an increase to our debt leverage to about 3.6 times 2006 OCF, and likely less on a pro forma basis, well short of our target leverage of 4 to 5 times OCF. We have about $500 million remaining under our current share repurchase authorization. Over the past 12 months, we've repurchased over 10% of LINTA's equity and we will continue to evaluate opportunities to further reduce outstanding LINTA shares.

QVC's domestic operations slowed during the quarter, due to difficult comparisons and some challenging market conditions. On the international side, CVC's UK business is picking up and showing signs of ongoing operational improvement and as predicted, QVC's German and Japanese operations continued to encounter difficulties, but management remains confident and has identified the key challenges and will drive better results in the periods ahead. Mike George will discuss QVC's results and our investment, branding, and marketing initiatives at QVC in more detail. On the LINTA side also, Provide Commerce and BUYSEASONS produced solid financial results in the quarter and we were pleased to welcome backcountry.com to the Liberty family. With that summary, I'll turn the call over to our Controller, Chris Shean, who will walk us through the operating performance and liquidity picture across the Company.

Thanks, Greg. Let's start by taking a look at Liberty Interactive. The slide you're looking at is a quick glance at second quarter revenue and OCF performance of LINTA. As this slide indicates, Liberty Interactive's attributed businesses continue to grow revenue and operating cash flow during the quarter, albeit at a slower pace. Slowing growth was primarily the result of difficult market conditions, and a challenging comparisons with last year's strong results, and continuing operational challenges at QVC's international businesses, most notably Japan and Germany. We'll get into that more shortly.

Looking a little more closely at LINTA, Liberty Interactive's businesses achieved 4% revenue growth and a 2% increase in operating cash flow. As I will discuss in more detail in a minute, the pace of revenue and operating cash flow growth slowed at QVC during the second quarter. Provide Commerce and BUYSEASONS which were acquired in 2006, again experienced strong year-over-year revenue growth during the period and Provide also continued to experience solid operating cash flow increases.

Backcountry, which was acquired in June and is not reflected in the second quarter results, experienced 83% revenue growth during the quarter. Its operating results will be consolidated starting in the third quarter of this year. During the quarter we continued to repurchase Liberty Interactive shares. Through June 30, we have repurchased 21.4 million shares in 2007 and 73 million shares, or over 10% of the shares outstanding since the inception of the LINTA share repurchase program, about a year ago. We continue to believe in share repurchases as a good means of enhancing shareholder value and we will continue to evaluate opportunities to cost effectively shrink Liberty Interactive equity. We have remaining authorization from our Board of Directors to purchase up to an additional 500 million of Liberty Interactive equity.

Taking a closer look at the quarterly performance at QVC, QVC experienced consolidated revenue growth of 4% to $1.69 billion during the quarter and a 1% increase in operating cash flow to 383 million. Domestic revenue grew 4% in the second quarter to $1.18 billion. This increase was mainly due to increased sales in the home product category. This was partially offset by ongoing challenges in the jewelry category, as sales in this area declined due to continued increases in the price of gold. Total units shipped increased 1% for the quarter to 28.8 million, while the average selling price grew 3% to $44.83.

Domestic OCF increased 3% for the quarter to $292 million, while cash flow margins declined 16 basis points, to 24.7%, due to a decline in the gross margin. QVC.com sales continued to grow as a percentage of overall domestic sales, rising from 20% last year to 23% this year for the second quarter. International revenue increased 4% to 509 million for the quarter, while OCF declined 4% to 91 million. Revenue increases were due to favorable foreign currency exchange rates in the UK and Germany, partially offset by unfavorable exchange rates in Japan. Also, lower ASPs in the UK and Germany and the ongoing effect of changes in the enforcement of Japan's regulation of the marketing of health and beauty aids.

The OCF decline was due to lower margins stemming from a greater inventory obsolescence provision and higher product distribution costs. Excluding the effect of exchange rates, international revenue increased less than 1%, while OCF declined 7%. International operating cash flow margins declined about 150 basis points during the quarter, primarily due to a 130-basis point decline in gross margins. As anticipated on the first quarter call, we experienced improved results in the UK, where QVC produced 7% revenue and operating cash flow increases in the local currency, which is the pound sterling.

QVC Germany and QVC Japan, as expected, continued to experience challenges. QVC Japan began to show signs of improvement in the latter half of the second quarter and management is taking corrective action in Germany, which it believes will lead to improved performance in that marketplace. Before I walk through the LINTA liquidity picture, I'm going to turn the call over to Mike George, who will discuss QVC's operations in a bit more detail and describe some interesting new initiatives the Company is undertaking. Mike?

Thanks, Chris. First, I thought I would provide some color on QVC's performance in the quarter and then I'll touch on some of the new initiatives we're pursuing for the back half.

In the U.S., as Chris mentioned, the biggest single driver of the reduced growth rate was jewelry, led by double-digit declines in our 14 carat gold business, so we continue to struggle with the rising cost of gold and to a lesser extent, silver. Candidly, some of our performance challenge in jewelry is self inflicted. We try to reduce the impact in the rising costs by simplifying our gold designs, providing the customer with a lighter alternative to keep the price point down, and she told us clearly that that's not what she wants, so we've reversed course and are focused on upgrading the quality of our assortments, which we'll need the higher price points, but we're seeing very positive early results, as we've begun to go back to what works for us in gold and silver. We had a very successful Italian gold mini series a few weeks ago and last week, an all-day designer silver gallery that did well, so we think we're beginning to get in front of the challenges in jewelry, but by no means are we all the way through it.

Part of what's working for us is the introduction of some hot new designers in the category, Anthony Nak and [Citing Gang], as an example, along with some continued growth in designers that we've had for a while, that have a strong external presence as well, like Judith Ripka, Michael Dawkins, Robert Lee Morris and Carolyn Pollack. Again, we're not out of the woods yet, but feeling a little bit better about jewelry. Clearly, though, it was an anchor on our performance in Q2.

We also saw general softness in our base business across all categories beginning around mid-April. And we've always felt that we could rise above macroeconomic challenges, but we do think that the general softness that we've been seeing in the retail marketplace and the somewhat skittish consumer spending is impacting us and we'll simply need to execute at higher levels to outrun some of that softness that we've all been seeing in the general retail marketplace.

Now, as I stressed in the past, we strive to maintain a disciplined long-term orientation to our business and because of that, top line results can be lumpy from quarter to quarter. This quarter was no exception. We chose not to become more promotional, to try to combat the environment. We think becoming heavily promotional erodes customer trust and price credibility in the long run and is not in our interest. So as you'll notice, our gross margins did remain healthy through the quarter in the U.S., roughly equal to last year, if you exclude a couple of impacts, the Florence distribution center where we are incurring incremental expenses as we got ready to launch that. We also had a strong computer TSV in April and that tends to depress margins a little bit. But by and large, our product margins are fairly stable and we've avoided becoming promotional in this environment.

We've also kept a tight reign on fixed and variable expenses, which were both favorable on a rate basis to last year, despite the lower revenue. Let me touch on the UK, as Chris and Greg mentioned, we were pleased with our progress in Q2, although we're clearly not operating at the full growth potential of that business. We're seeing strong growth in home electronics and apparel, and we're beginning to see, we think the early signs of the jewelry rebound. That business began to pick up a little bit of steam late in the quarter, so we do think we're beginning to get our arms around the jewelry merchandising in both the UK and the U.S., but clearly we need to demonstrate that consistently over time.

Gross margin and expense performance was also strong in the UK. If you exclude the impact of obsolescence, gross margins were up over 50 basis points in the quarter. However, as we discussed in our Q1 call, the UK is anniversarying unusually low inventory obsolescence rates from the first four months of last year. So we're comfortable with our obsolescence rates this year but we're anniversarying abnormally low rate from last year. That had in total 185-basis point impact on gross margin in Q2, but it should not have a material impact on the rest of the year. We're largely past that issue. The operating expense rate was also favorable in the UK to last year and we're seeing good efficiency in our distribution costs. So net, feel good about the margins and the expenses in the UK and we're seeing sales pick up -- we saw sales pick up nicely in Q2, although below where we would like them to be.

Let me turn to Japan. The revenue decline that we experienced in Japan reflects the first full quarter impact of the heightened regulatory environment that we talked about last call, that hit us, as you'll recall, in March, so we've now -- we had a month of it in Q1 and obviously three months in Q2. We do think, as we mentioned in the last call, that we're going to need to anniversary these changes in the regulatory environment, before we see the Japan business return to strong growth. In the interim, we're working to build our apparel, accessories and jewelry categories to fill the gap that's been created by the decline in health. And we're seeing solid gains in each of those three categories, but clearly not enough yet to fully overcome the health shortfall.

Gross margins in Japan were largely stable. They were down slightly, partly driven by the cost of readying the new distribution center in Japan, which is launching this month. Much of the incremental expenses associated with the new DC are behind us, so we don't see that as having a material impact on the rest of the year. The operating expense rate was favorable. I'm sorry. The operating expense rate was also below last year. That's primarily driven by commissions. Recall that in Japan we have a fixed minimum commission we have to pay, so when the volume is low, we end up on the fixed part of that curve, but that was our primary issue on the expense side.

Finally, let me touch on Germany. Germany is clearly more challenging than the other markets. The business continued to struggle in Q2, on both the top and the bottom line. We're continuing to see the adverse impact of an over reliance on the home textiles category, which was used to fuel growth in the past. We were also overly dependent on a few big apparel brands and we've made some merchandising missteps, as we've tried to move away from dependence on those brands. And we've also struggled in jewelry, as we have in the other markets.

So we have a number of challenges that we've been trying to work through on the merchandising side. We're taking a number of actions to address it, including diversifying our product mix and driving growth in underserved categories, like beauty. We're adding a number of brands and new concepts throughout the business. We're focused on key promotional drivers, like the today special value to improve our operations in those promotional techniques, and we're taking a very aggressive line on expense management in Germany. So we think we're on the right track with these changes, but they are taking a while to work through.

I'm clearly disappointed with our pace of this. I would have expected us to be at a better place by now, so I don't want to predict the timing of a turnaround until we're really confident that we see it. We think we're on the right track, but I think we have some more bumps in the road, as we try to re -- continue to reassort the merchandise to where we need it to be. So in sum, our results in each market are below where we would like them to be, but we do believe the revenue challenges are relatively focused and addressable in the U.S., the UK, and Japan. If we execute well. We're also pleased with our tight management of gross margin and expenses in those markets, and as I've said, we have more work to do in Germany.

Let me now close by turning to the future and talking about some of the key initiatives we'll be launching in the back half of the year. We remain focused, as I've discussed on prior calls, to adding top tier destination brands to our assortments and we're seeing increased vendor interest in our channel, partially driven by the declining growth in consolidation, department store sales. Our brands will be launching in the next few months include Harry Slatkin, one of the leading home fragrance brands, Calvin Klein Intimates, Samsung in electronics, Garmin, which is the number one GPS provider, Skil power tools, and Acer computers, which is one of the fastest growing computer brands and we think is a good value-oriented complement to our Dell product line-up. And in September we'll launch our exclusive partnership, which we previously announced with the NFL and GSI.

These brand introductions follow other key launches in recent months, including Bobbi Brown, Frederick Fekkai, (inaudible) and Origins in Beauty, Magellan in electronics, Paula Dean in Cook, and Leslie Green, (inaudible) and Anthony Nak in jewelry. So we're clearly seeing when we add these kinds of brands to the assortment that the customer is responding and we think this will help fuel ongoing growth. We're also launching a major branding initiative in the fall, which we believe captures the essence of what drives this loyalty and passion among our customers; while also updating the look and feel of the brand in helping us reach out to new customers. We'll share more specifics at the September Liberty investor conference, but it will be a multipronged effort, involving updated visual imagery around our brand and an integrating advertising and promotional campaign.

Coinciding with the launch of the brand initiatives, we're going to roll out the most comprehensive redesign we've ever undertaken of our website. Key components of the new QVC.com will be a tighter integration of the video and web experience, more community and social networking elements, improved shopping tools, in a more compelling visual design that is aligned with the new brand look that we'll launch in the fall.

And finally, in our efforts to ensure leading channel position, which is a differentiator of our performance versus the competition, we were pleased to reach agreement on a new long-term channel position with EchoStar in Q2. Although we have confidentiality restrictions in this agreement, the public has been informed through printed programs and electronic means that QVC was moved on July 1, from channel 226 in a shopping network genre with all the other TV shopping channels to channel 137, a much higher traffic location around leading cable networks, like TBS, TNT, and FX, which we believe is roughly equivalent to below channel 36 on an analog cable system. While we don't expect this to have an immediate impact, and could even hurt sales in the very short-term, as customers adjust to the new location, we are confident this will help support long-term growth, with our 12 million plus dish subs. And with that, I'll hand it back to Chris.

Thanks, Mike. Let's take a quick look at the Liberty Interactive liquidity picture. We continue to maintain a strong capital structure and good liquidity at the businesses attributed to LINTA, the group has attributed cash and public investments of $5.4 billion and has $6.9 billion in attributed debt. The increase in the debt balance during the quarter was a result principally of the $484 million tender offer of LINTA shares that we completed in June. Excluding the value of the investment positions in Expedia and IAC, LINTA's attributed net debt of approximately 6 billion equates to a multiple of just over 3.5 times annual OCF. As previously stated, we would be comfortable sustaining net debt levels of four to five times OCF. As a result, the LINTA businesses have significant liquidity to grow organically and through acquisitions and to shrink LINTA equity as appropriate.

Now let's move on to Liberty Capital's businesses. As Greg mentioned earlier, upon completion of our exchange in principal we will clarify our Liberty Capital tracking stock into (inaudible) capital. In the meantime, we made continue progress during the second quarter, transforming the assets attributed to Liberty Capital into well-positioned, focused operating assets. Overall during the quarter, Liberty Capital reported a 30% revenue gain, while OCF declined 38%. LCAPA largest attributed operating asset Starz Entertainment, which excludes Starz Media is continuing to strengthen its cash flow. During the quarter, its revenue declined 4% to $254 million, while it experienced a 10% operating cash flow growth to 55 million. We'll talk more about this shortly.

Taking a closer look at Liberty Capital's events during the second quarter. As I just mentioned, LCAPA attributed revenue grew 30% in the quarter, while OCF declined 38%. Revenue growth resulted from the inclusion of Starz Media and the Atlanta Braves, partially offset by lower GAAP revenue at True Position, which has been required to defer revenue recognition until it has delivered all software features required under one of its services contracts. The OCF decline was primarily due to a decrease in OCF at True Position and operating cash flow deficit at Starz Media, partially offset by gains at Starz Entertainment.

As mentioned previously, we have completed a number of divestitures and asset exchanges since the issuance of our tracking stocks. These transactions have resulted in the generation of significant cash reserves attributed to Liberty Capital. We put some of those reserves to work early in the second quarter, as we completed a Dutch auction Tender Offer for Series A Liberty Capital common stock. This tender resulted in the repurchase of approximately 11.5 million LCAPA shares at a price of $113 per share, which yields total cash considerations spent of 1.3 billion. The repurchase represented 8.2% of Liberty Capital shares outstanding. Nonetheless, our cash reserves increased during the quarter due to cash generation from the previously discussed transactions, more than offsetting the funds used to complete the tender.

We will continue to evaluate share repurchases as a means of enhancing shareholder value, as our liquidity position warrants. We continue to work on the completion of the News Corp. exchange and expect to close that transaction in the second half of the year. We're also evaluating numerous other transactions and will report on those as they arise.

Taking a quick look at Starz, Starz continued to experience solid subscriber growth in the first quarter, as Starz average subscribers increased 7% while Encore's grew 6%. For the quarter, revenue declined 4% and subscriber growth was more than offset by a reduction in the effective rate that resulted from certain of Starz fixed rate affiliation agreements and changes in the rate in which certain customers are paying under expired contracts that are currently under negotiation for renewal. Additionally, the sale of the Adelphia Systems to Comcast and Time Warner in 2006 also contributed to the lower effective rate.

Starz operating expenses declined 7% for the quarter, largely the result of a 10% decline in programming expenses, partially offset by a modest increase in SG&A. The reduction in programming cost resulted from lower effective rate for the movies shown in the quarter, partially offset by increased costs from a higher ratio of first run movie exhibitions versus library product exhibitions. Increase in SG&A resulted from higher sales and marketing expenses related to the timing of National marketing campaigns. Now I'll turn the call over to Bob Clasen, who will say a few words about Starz Entertainment and Starz Media.

With regard to Starz Entertainment, we're pleased that subscriptions to Starz and Encore continued to show solid growth in the second quarter. In addition, we continued to experience a decline in programming costs, which resulted in improved cash flow, versus the same quarter a year ago. However, we saw a decrease in the average effective rate for each subscription, which resulted in a decline in revenue. Our major goal in the coming months will be to complete ongoing negotiations with two of our key affiliates for new, mutually beneficial carriage agreements that will allow our business to continue to grow.

On the Starz Media side, we have completed the integration of the former IDT Entertainment into our business. Our home video unit, which accounts for the bulk of the Starz Media revenue increased revenue this quarter versus the same quarter a year ago. In addition, the addition of movies from our Overture Films unit will provide valuable new product for our Starz Home Video Company, which in the past has not had a slate of major first run films to sell. For it's part, Overture has announced its first slate of films, including Mad Money, starring Queen Latifah, Katie Holmes, and Diane Keaton; Last Chance Harvey, with Dustin Hoffman and Emma Thompson; and Righteous Kill, with Robert De Niro and Al Pacino. The quality of these first films and the level of talent appearing in them reflect the fact that the Overture model is being very well received in the Hollywood creative community. Since this is the first time we've talked about this, investors should be aware that in the movie business, even if a film is a hit, all the costs come prior to the release of the film and all the revenue after it. Even in the best case, a start-up studio, such as Overture, will have a negative cash flow for several months until revenue from its first films begins to come in.

Thanks. Taking a quick look at LCAPA's liquidity situation, the LCAPA businesses remains in a position of financial strength. At quarter end and including our News Corp. stake, LCAPA was attributed with approximately $16.8 billion of public investments and derivatives. This decline from the first quarter principally due to the disposition of a portion of our Time Warner stake in our entire CBS position. In addition to its public holdings, Liberty Capital had attributed cash and liquid investments of just over 2.7 billion at quarter end. Total cash and public holdings approximate 19.5 billion and are only partially offset by 5.3 billion, face amount of attributed debt. This provides Liberty Capital with significant flexibility to grow its businesses and will play an important role in the strategic direction of these assets going forward. That said, I'll now turn the call back over to Greg, who will quickly recap the second quarter and talk about what's ahead in 2007.

Great. Thanks, Chris, and thank you to Mike and Bob for the updates on your respective businesses. Well, we've tried to give you a lot of detail today on both the operations of the businesses and some of our transactions and capital, oriented capital markets oriented movements. As you can see, we've remained busy during the quarter and had a number of important developments. On the Liberty Capital side, as we've noted, we've completed a number of asset sales and exchanges and we've completed our first tender for the LCAPA shares. Today we announced our intent to take another important step in simplifying the assets attributed to Liberty Capital, by reclassifying the equity into the two new tracking stocks, Liberty Entertainment and Liberty Capital.

As I detailed earlier, we believe this change will further our efforts to reduce complexity, while giving investors the opportunity to focus their investment capital on the most attractive vehicle for their interest. It will also create, we believe, a currency, which should give us enhanced financial flexibility. Liberty Interactive did experience low organic growth in the quarter, but we remain confident in the long term fundamental strength of QVC and the other Liberty interactive businesses you've heard today some of the reasons why and some of the actions that management is undertaking to get us back on our normal track.

We again repurchased LINTA shares during the quarter, bringing our total repurchases since we issued the tracking stock last May to over 10%, and we are diligently seeking further strategic value enhancing acquisitions. Looking ahead, we will continue our strategic development efforts to determine the best path to increase shareholder value. We've maintained significant financial flexibility and look forward to putting that to work to enhance organic growth, shrink equity, and make strategic acquisitions. So thank you for listening, and thank you for your continued interest in Liberty Media and I would now like to open the call for questions. Operator?

Thank you. (OPERATOR INSTRUCTIONS) We'll go first to Robert Peck with Bear Stearns.

Hey, guys, just two quick questions. I guess the first, just to give a sort of bigger picture. As we think about the domestic growth of being about 4%, HSM domestic, ex America store was around 3% or so. Both of them not doing as well as maybe you had originally anticipated. Is there anything else bigger picture going on here besides the inventory issues and what have you? Are you losing industry share maybe to the Internet with Amazon and eBay doing relatively strong quarters, could you talk maybe just bigger picture, beyond the prices of gold, what's happened domestic, and I just have a follow-up?

I would start and then I'll ask Mike or Meade or any of the other folks from QVC to follow in. My perspective is that we have a business which we have always suggested has lumpy elements and that if you look at what we've put forth as our long-term growth rate, the business exceeded that in '05 and exceeded that in '06 and is trailing it in '07 and we don't believe we need to change what our suggested long-term growth targets are. We do model that. We watch and it we think about it, but we are comfortable that we can get back on track. I would -- I don't think you're seeing, radical change in how video commerce is viewed by the consumer versus eCommerce, and in fact, as you know, an increasing percentage of our sales are eCommerce, so in a way, it's more of a continuum of which we're a part, despite the success of eBay and Amazon.

I also would say that there is a somewhat of a difference between the performance at H and the performance at Q. While we clearly were disappointed to get 4% revenue growth domestically, and that was below our targets, as we've said, that was done with a pretty controlled cost structure and a pretty controlled, maintained gross margin, rather than what appears to have been just looking at the external numbers and the decline in operating performance at the EBITDA line, at the gross margin line, a far more promotional environment at H. So while we're disappointed and not satisfied with what we've got, I don't think it's the same animal as what occurred at H. You want to add something to that, Mike?

I'm just echoing your comments, Greg. We've seen down quarters in the past. I don't think it portends any long-term trends in the business or any shift to other channels. We've always said, we need to execute well and if we execute well over the long-term, we think the kind of guidance we've provided is attainable. (Inaudible - audio difficulties) But they come back and you would have strong quarters and we think we can continue beyond that kind of trajectory and achieve those results. So, no, we really don't see any long-term shift away from the business. We need to continue to advance our business, make the Internet even more impactful, which we think we'll be doing this September. So it's not so say that we can stand still. We have got to bring in great brands. We have got to make Internet commerce more powerful. We have got to leverage other multimedia platforms, but we think all of those trends are, if anything, to our favor, as long as we make the right kinds of investments to pursue those opportunities.

And Greg, has there been any recent talks about asset swaps at all and would there be anything preventing any sort of near-term tender?

There have been forever talks about asset swaps, so this period would be not different than any other period, and I don't think we, as a practical matter reveal whether we're blacked out from tendering or not. I don't believe we've done that in the past and I don't think that's a policy I would want to start with now. So I'm not going to -- I think as a practical matter, we're not going to disclose whether we're blocked or not.

Thank you very much.

Thank you.

We'll take our next question from Imran Khan with JPMorgan.

Yes. Thank you for taking my questions. A couple of questions. Number one is regarding the credit crunch and the credit market. Does that have any impact in your buyback for Liberty Interactive shares? And secondly, can you give us some breakdown on average selling price and unit growth for Germany, UK, and Japan? And last question, sorry for all these questions, I think you mentioned that channel changes in EchoStar might impact the consumer behavior in the near term. Can you give us some color, what kind of impact you see in the near term and any sense how quickly you can have channel shift for DirecTV after the News Corp. deal close? Thank you.

Well, I'll take a shot at number one and I'll let -- why don't we let you do two, Mike, and I'll split number three. So I think the liquidity we have at LINTA is committed. Certainly to fund the open to buy and actually we have a credit facility that is committed through the end of the year, I don't believe we'll have any issue or that will have impact upon our share repurchase or our ability to certainly do our open to buy the 500 million we've got open and in fact larger amounts. Mike, do you want to talk about ASP's?

Yes, let me actually ask Dan O'Connell, our CFO, just to run through the numbers on ASP versus units in the two markets and then I can add additional commentary, if needed.

Okay. In the UK, unit growth for the quarter was 7.6% and ASP was down roughly 3%. Germany, the unit growth was 5.3%, roughly 8.7% decline in the ASP. Japan had just under 1% decline in unit growth and basically flat ASP.

The only thing I would add to that is, to give you a little flavor of the dynamics, UK we're not particularly concerned about the ASP decline, largely driven by the fact that with the strength of the pound, our purchasing costs are a little bit better in China on a relative basis in the way we price (inaudible) so those -- relatively healthy in the UK. That currency affect is probably part of the driver of the decline you're seeing. Germany is really an issue of the continued struggles in merchandising. That does reflect some level of markdowns, which obviously compressed the ASP, as well as some of the challenges in the jewelry mix. So I do think that low of ASP performance is a reflection of some of the challenges we've talked about in Germany, and Japan is pretty stable right now, and of course the U.S. had a solid pickup in ASP.

On the DirecTV question, a couple thoughts, and Greg can add to it. Just a comment I would make, and then I'll let Greg add, is we -- while we're interested in an improved channel position on Direct, we don't think it is as material as a change in the channel position on Echo because our starting point is much better today on DirecTV than it is on Echo. So we think we can do better. We would like to do better, but we're already in a solid neighborhood and not next to other shopping channels. We want to generally avoid being mixed with shopping channels. That was our problem on Echo. With Direct, we would love to see an improved position, although, again, the caveat is we don't see the impact of it being as great as it is with Echo.

And I think I would Echo, so to speak, Mike's remarks, we are in a better position on Direct and whatever we would do there, we certainly hope that our friends at Direct would work with us and be as positive as they could be, but they are, they have their own public shareholders and in fact, they are not even, even the 40% odd stake that we have is not even attributed to the Liberty Interactive business which is an under group of Liberty Interactive, it's attributed to Liberty Capital, so all things, while they could be done friendly, they would have to be done to justify and make sense for Direct as well.

Okay. Thank you.

Thank you. Next question, please.

We'll take our next question from Doug Mitchelson with Deutsche Bank Securities.

Thanks very much. I was interested in a little bit more information on the new tracking stock. Will the terms you proposed be similar to those of the LINTA Liberty Capital split, where the Company's going to be put back together again without a shareholder vote? And any other details you think might be relevant, and also what are the tax implications and any strategic limitations that the tracking structure might create? Any more details would be helpful.

I think I'm going to hold on how those combinations would work until we distribute more information in the form of the proxy. But I think we'll obviously endeavor to make sure that it's fair to all parties and that it makes sense for all parties. If you look what's happened here, I can just give some color. We split off Liberty Interactive and Liberty Capital because we thought we had a cogent group of companies and businesses and investments that fit together in Liberty Interactive and we had somewhat more of a mish mash at Liberty Capital.

We've now come together and put a, because of our proposed exchange, which we believe will close, we will have a logical group of companies and investments that fit together and are synergistic and additive together at Liberty Entertainment. So our focus is that these companies, not that they will come back with the Liberty Capital, but really that they will have, would make sense that they are their own cohesive unit and candidly, I think they have more synergies over time with Liberty Interactive as a series of operating businesses than they do with joining with Liberty Capital, but we will outline all of that in the proxies when that comes forth. As far as the tax matters, I'm not exactly sure about what you're aiming at there, Doug, but there will be a tax treaty between the businesses, similar to the tax treaty that is currently in place between Liberty Interactive and Liberty Capital today.

I guess what I'm curious about is strategically, is there anything that would stop you or limit you from taking any one of the three tracking stocks and selling them to another company or buying them?

Well, I think that's -- look, I mean candidly, that's always a challenge, only in that, you, you can certainly do that, but does the buyer want to be part of the group? And still owning shares in a group in which they have issues because you're not disconnected from the group, from a credit perspective. You're still from part of the same tax group, et cetera. So that would need to be thought through. The other point about this all is that we're working hard to ensure that we have maximum flexibility and that if we have opportunities to have these in the hands of our shareholders eventually, if that makes sense at some point, that's not our plans today, but we believe -- we're going to create as much flexibility to do that if we want.

I also ask, has your relative position changed in terms of competing with private capital buyers for assets given the liquidity in the debt markets? Maybe it's a temporary liquidity but?

Who knows. It may be the case right now that the capital markets are so bad for borrowing that even relatively less leveraged corporate buyers, who should be advantaged right now the markets are probably so negative that unless you truly are willing to pay up and you need to get it done, people are backing off, even doing those kind of deals and you're seeing assets pulled from the market, Virgin Media being a good example, because the perception that there are not buyers may be creating such a condition that you don't -- it's moved past helping us to the point where nothing's getting done, but eventually, I, without having a lot of absolute evidence, but just prognosticating, we do believe that a situation where you can borrow, but you can't leverage to the degree of the private equity has been able to leverage is probably a good situation for us in terms of strategic acquisitions.

Got it, thank you.

We'll take our next question from Scott Devitt with Stifel Nicolaus.

Thank you. I was wondering if you could talk about how much of QVC's inventory that you feel is proprietary in one way or another, meaning the unique product, the bundle, or a warranty customer service attachment, versus a product that can be just directly comparison shopped on the Internet? And then secondly, could you just explain the sales tax legislation that requires QVC to charge tax on TV and online, despite only having a physical presence in a few states? Thanks.

Sure. On the -- in terms of the sales tax, we charged sales tax for a number of years. We made the decision quite a while ago to error on the side of charging sales tax, rather than trying to fight the game of physical presence, so that's been an ongoing, ongoing strategy. And I'm sorry. Remind me of the first question.

Just in terms of the proprietary nature of the inventory on the show, I mean historically you've stated that a significant percentage of the inventory that's displayed is proprietary in one way or another, whether they are providing distribution for a regional brand or there's a unique warranty customer service line, like have you in your Dell presentations, and I'm just wondering, the earlier question related to the Internet and comparison shopping. How much of your inventory that you feel is protected because it's proprietary?

Yes, I -- thank you. I would say it's hard to put an exact number on it, but the overwhelming majority of our product sales are exclusive, and I want to clarify when I say that. We have an extended assortment online that is similar to assortments, other Internet -- but that's a very small percentage of our sales, less than 2 or 3%. The majority of our product for on air and online is exclusive in some way, so for example, about a third of our business we would classify as proprietary. That means it is a QVC brand name, like Denim & Company in apparel that is only -- we make the product, it's only on QVC.

When you look at our national brands, which is roughly another third of our business, much of that is proprietary in that it is an exclusive line, like the Diva line by Dana Buckman. Dana Buckman, you can find in department stores, but you can't find the Diva line in a department store. It's made only for QVC. And in the electronics area, which is the one area where it's harder to have strictly exclusive merchandise, we do have, as you described, generally speaking the heavy hitters in terms of sales volume will be products where we've reached some agreement on exclusive configuration, exclusive features, bundles, or something else that allows us to sell the whole bundle at a discount to what's available in the retail marketplace. And we always want to be below the retail marketplace in price point and sometimes we get there through a proprietary product line. Sometimes we get there through value-added configurations that are exclusive to us. So a long way of saying I'm going to put it in the 80% plus neighborhood that is needed on some dimension.

That's helpful. Thank you.

We'll take our next question from Jeff Shelton with Bleichroeder.

Thanks. It appears that the increase in gold prices hit the UK market about a quarter ahead of the U.S. I was wondering if there are any lessons to be learned there and if you think the U.S. market can dig out of its second quarter hole quicker.

I don't know that there are any specific lessons. A lot of -- to businesses. I think they were both hit by the challenge of how to absorb the price increases and probably the timing of when we took the price increases, what the condition of the existing inventory was, all of that impacted, impacted the results. As I mentioned, I do -- I am cautiously optimistic, but I'll underscore cautiously that, we're beginning to see a little bit of a pickup in the market, which I think is driven by a number of things, although it's all speculation. Part of it is that customers have now had many, many months to get used to higher gold prices, which they are obviously experiencing at all retailers. I think we are getting smarter about our merchandising and, again, not dumbing down the product, which we were a little guilty of doing as an initial reaction, and partly, quite frankly, the comparisons are getting a little bit easier because the business started to soften last year. So as we go into the back half, the comparisons are a little bit easier.

And do you have a revenue breakout for the international markets for the quarter?

Yes, it's included in the quarterly report that will get filed later today.

Okay, and then could I also ask you, do you have OCF numbers for the international operations, so we can get a base for how those are performing on an individual basis?

We have not disclosed that information at that level of detail.

Okay. Thank you.

We'll go next to April Horace with Janco Partners.

Hi, thank you for taking my question. One, I just want to congratulate you on proposing this new tracker, I think it's a good thing with respect to having the flexibility for new currency, but my real question is, could you give me some clarification on the turnaround in the international? Previously you said it was going to be three quarters and I'm not sure I quite followed what you thought it was going to be for each of the individual markets going forward.

Sure. If I go through it market by market, the UK, UK essentially had a tough quarter in Q1 of this year. We saw solid performance in Q2. And I don't want to try to predict obviously the current quarter performance or give a short-term outlook, but there's nothing in the fundamentals that would make me think that the UK business isn't on anything other than a fairly healthy and improving track.

Japan, I think you have to look to a year from March, a year from last March, to see us fully anniversary the impact of this regulation that caused us to have to pull back on our health business. So our health business has declined in mix about 10 -- our health business alone was in the low 20s in mix of our business. It's now running in the 10 to 12 range, so that essentially took about 10 points of top line growth off the business. Once you anniversary that next March, then obviously you're on a cleaner comparison. In the interim, we're trying to get these other businesses that I mentioned to a little bit stronger growth rate to fill in some of the gap. We did see somewhat improving performance in Japan through the quarter. So year to anniversary the full impact, clearly we're not standing still and we're trying to fill in some gaps in the interim. And Germany, as I mentioned, I would be hesitant to try to predict a date, because the issues there are a little more fundamental and we need to resort the merchandise and we're doing that in a way that we think is going to be long-term healthy, but it basically means earning credibility in a number of new brands and categories to offset over reliance on a few categories in the past. And so it's just -- it's always hard to predict how long that's going to take to work through, while we also work through current inventory. And so that one, I would hate to put a date on that one.

Okay. Considering the current credit environment and what was previously thought about leveraging up DirecTV, can you give us an update as to what your thoughts are now with respect to when the transaction is closed and leveraging, either DirecTV or Liberty Entertainment?

Well, I think as far as the transaction closing, we have no new information. We expect to close in the next few months, but we don't have much clarity beyond that. It's August in Washington, DC. It's probably unlikely to be this month, so we're hoping maybe September or October. As far as the leverage at Liberty Entertainment and DirecTV, both will be at -- Liberty Entertainment will be net cash, though it will not be a hugely cash flow generating entity, will have net cash and low net debt, and DirecTV today has probably got, depending on where their share repurchase is, and I think they are going to announce tomorrow, so I'm not going to tip all that off, they are probably at about $1 billion of net debt against, heading towards $4 billion of EBITDA, so it's not a -- it's significantly below what we would think is optimal leverage.

Whether the credit markets are -- this is the right time to go out and get that leverage and how you might want to use that leverage, are you using it for share repurchase, are you using it for combination, are you using it to buy other content assets? All of those are opportunities we think are interesting, but this might not be the optimal time in the next month to think about trying to go out and get a big yield out, or a big offering out. But clearly both entities are underleveraged from what we would consider optimal.

Okay. Thanks. That's all I got.

We'll take our next question from Matthew Harrington with Ferris Baker Watts.

Good morning. Can you comment, or give us some more elaboration on some of the initiatives you talked about at your QVC analyst day last year? I mean specifically you talked about rebranding, trying to reach beyond the 8.2 million or so customers that you had. You work I think with the shop in the Bay area IDO to that effect, and also I think you said that your advertising spend to sales was about 0.2% and clearly the last thing you want to do is crank it up to what somebody like Amazon or Best Buy does, but you more or less implied that you thought that there was some elasticity to marketing spend that hadn't been fully capitalized on in the past.

Sure. As I mentioned briefly, earlier in the call, we're going to be talking a lot more about our rebranding efforts in September. We did retain IDO to help us really take a hard look at the brand, and since that work, we've taken a very deliberative posture in terms of really trying to sort out how to take the brand to the next level. We think our brand is strong today, so we don't want to do anything knee-jerk to go after new customers that would offend, or turn off current customers. That obviously never works in our favor. But having said that, we're kind of through those deliberations and in the design phase of some pretty exciting work, to just update the brand a little bit in terms of how we present ourselves on air, how we present ourselves on dot-com, how we advertise the brand. And you'll see that unveiled in the back half of the year. We're not prepared at this point to talk in detail about it, but we likely will at our Liberty September investor conference.

When we look at marketing spend, the pure advertising portion of it is 0.2 to 0.3, although when you add in other dimensions of marketing, our total discretionary spend I think in the U.S. is in the 0.6 or 0.7 range and we may begin to take that up carefully. It won't be a massive increase by any means, but we do think a little more spend to get the word of mouth, to help the word of mouth, which is one of our big drivers of new customers, is probably a value. But we'll do that on a pretty methodical way and test away too, beginning, again, beginning later this fall.

Great. Thank you.

We'll take our next question from [Jamie Neilson] with AJS Ventures.

Hi, Bob. The past two quarters, operating cash flow has been negatively impacted by True Position and Starz Media, and positively impacted by reduced programming expenses at Starz Entertainment. As a percentage, what is the overall impact of the True Position and Starz Media and how do you see the negative and positive trends for each of these three entities continuing through the rest of 2007 and 2008?

Well, this is Greg, and I'll say we'll probably let Bob Clasen not have to cover True Position, because I don't think that's in his portfolio and probably not what he feels most comfortable commenting on, so maybe, Bob, why don't you talk about the two Starz entities and then John Orr, do you want to comment on True Position or Mark (inaudible) afterwards?

Sure.

Go ahead, Bob.

This has not been released yet.

Yes, but the press release has got it.

Starz Entertainment, which is the pay television company, we continue to expect, as we've reported previously, a continuing decline in our programming costs, as the amortization of bonus payments go away and as we're able to buy in the spot market very high quality films for less than we could a few years ago. And so we're optimistic that cash flow will continue to grow. Starz, by the way, in 2006, when our studio partners in 2005 hadn't released the greatest slate of films, we were still the 12th rated service by Nielsen in homes where we existed so we have a pretty important position in the cable and satellite universe. So that's the trend there. Starz Media is new. We're just starting to report it. We have--

I don't believe report it separately. We report it as a part of the other, right? The cash flows?

Right.

You might just comment generally.

Okay. Well, the decrease was influenced by Starz Media, 16 million and 26 million in the period. Both -- Starz Media is in the business of both delivering home video, but also in the business of television production, animation, theatrical, and for television, our film roaming unit just completed the successful Simpsons movie, and we've done the Simpsons movie for years at that unit. And yet because it's so heavily into production, there is an awful lot of spending that goes on and that gets amortized over the period of when the revenue comes in and so we expect that that will be at a cash flow negative for some period of time until the revenue catches up to the spending to do the production, similarly to what I mentioned a little while ago at Overture. You've got an awful lot of spending to make the movies and market the movies and then all of a sudden as the revenue starts to come in, situation changes. But it does take quite a bit of time.

Thank you, Bob. And John, or Mark, do you guys want to comment on TP in general?

Greg, I'll cover this.

Okay.

The True Position situation is one where revenue recognition, from a financial reporting standpoint is virtually stopped due to some amendments to a contract that was done very late part of 2006. So I mean you're talking about a company that last year had, for the six months, over $50 million of revenue that this year, at least from a GAAP standpoint, generated $6 million of revenue. But I will point out that under these contracts, we continue to perform and the elements of the performance of the contract are hung up on the balance sheet in the form of deferred revenue and deferred costs, and that the entity itself is not burning cash at that rate.

Because of SOP 972, they can't recognize this revenue until they deliver the software elements at the end. And so they are, they are collecting a lot of cash, but not being able to recognize the revenue.

That's correct.

Next question, please. Maybe we have two more and call it a morning.

We'll go next to Jason Bazinet with Citi.

Thanks so much for the question. I just had two questions regarding the new Liberty Entertainment tracker.

We just wanted to make sure your research reports came true, Jason. We try to--.

Very kind of you to make strategic decisions based on our -- the stuff we print. Anyway, I was a little bit surprised on the 551 million of exchangeables that you're going to put at the Liberty entertainment side. I was wondering if you could just talk a little bit about the thinking there. And then second, I was also curious about the allocation of cash. I think you said $580 million of cash.

The -- what we're anticipating is that we will send over one of the exchangeable issues, which is, in which the, the potential for exchange is very low and it is considerably, the stock is considerably out of the exchange money, therefore highly unlikely will be exchanged and there's no real exposure. We don't believe there's significant exposure or risk that Liberty Entertainment shareholders will have to pay more than the face amount of the debt.

Got it.

So we think that's a true anticipation, if we send that one issue over, it would be a true -- or if we attribute that one issue. Obviously they are all part of the same legal entity, attribute the one issue, it would not be a burden on them in excess, the Liberty Entertainment shareholders in excess of the face amount of 551.

Understood.

And the cash, the cash that would be being received is the cash that we will receive upon the completion of the exchange with News.

Understood.

So our deal with News, we would give them exactly what we got from News, the Liberty Entertainment shows will get the stake in Direct, the three RSNs and that cash.

Okay. That's very helpful.

That is the general -- that's what we anticipate will be in there.

Okay. Thank you so much.

And our final question today comes from Ben Swinburne with Morgan Stanley.

Thanks. Thanks for taking the questions, guys. Just one on QVC and then one strategic for the team. How much of the U.S. business is jewelry this quarter versus a year ago, just so we can get a sense of that base business trend?

Dan, do you have those numbers?

The mix of jewelry in second quarter '06 was about 23% and we're down to 21 in the current quarter.

Great. Thanks. And then looking at what we've seen this quarter from Sprint and the cable companies and the joint venture side, if you need moving in different directions, you can throw Clearwire in there as well. You obviously have some Sprint assets that you would look to exchange at some point down the road potentially. I'm just curious, as you look at your DirecTV position, sort of developments in the wireless broadband side and what seems to be a moving apart from between cable and Sprint, any comments sort of on how you see wireless data playing out over the next couple years and sort of how involved you think DirecTV will be in that movement and any opportunities you see now to get closer to Sprint now that they have moved away from the cable venture?

Well, that's a big wide open question and I'll comment and maybe I'll ask John Malone if he's got any additional thoughts. But I, I would say a couple things. First, we're not, I think, entirely surprised that Sprint and the cable company Spectrum venture looks to be parting ways, didn't seem like a long-term fit for a bunch of reasons. We have positive dialogue with Sprint about 355-type exchanges. It's not clear that the Spectrum alone would qualify, but maybe some business shifting over and participating in Spectrum. All those are potentially interesting. DirecTV has expressed for a long time and looked at various ideas, and we are, I think in good dialogue with them about how to think about broadband and particularly mobile broadband, as an interesting opportunity.

I would note that both Comcast and Time Warner appear to have significantly slowing rates of broadband customers, and so one of the things that's been in the back of our minds with not an absolute certainty value, but with a fear or what we saw potentially was that you would move towards saturation on broadband and that if you were to come with a product in three or four years, the market could be quite saturated. It may turn out that it's happening -- rate of saturation is occurring quite earlier, if you look at those slowing rates. And coming with something that (inaudible) too and didn't offer incrementally differentiated features would not be of high value for our customers or ultimately for DirecTV and/or Liberty in terms of what the economic opportunity was.

So some broadband mobile, particularly where it provided the potential for mobile television, mobile video, is something we look at very closely and if potentially something arose out of Sprint, given our position, all the better. And as you note, the breaking of that partnership with the cable companies is perhaps a good first step in allowing us to reexamine that, or look at that more closely. But got to be probably something that's different and unique and not something where you are just going to offer what's fixed, fixed, competing with fixed because just on feeds and speeds and unlikely where that is in terms of the saturation point in the three, four years when you're really out there ubiquitously, if you had a launch today or -- you're not going to be particularly competitive. So we're weighing all those, weighing our stake and thinking about what interesting product in conjunction with DirecTV we might be able to offer. John, do you want to add anything?

Yes, I think it's just very interesting that this proposal coming out of the Internet crowd, that the architecture on these new licenses should be open, because that could change the ball game quite substantially in terms of bundling and bundling fire power of cable/satellite. So we're watching that real close. I mean obviously I agree with what Greg is saying. It's going take several years for these licenses to be issued and deployed, and it's really going to come down to portability versus capacity. And that's going to be a function of how much consolidation of Spectrum will take place, and how saturated the broadband market will be and also how saturated the broadband market will already be and also how saturated the cellular or wireless market will be with voice. So there's a lot of things going on here, but clearly more technology in broadband is good for our potential investment in DirecTV because it reduces the leverage of bundling that cable currently has relative to satellite.

Might be worth just noting also, it was interesting to see that in some of the competitive reports that the slowdown in the rate of broadband customers and loss in at least one case of a major cable company, not just mid-level guys, but a big guy, of basic video subs, and so we'll see what DirecTV reports tomorrow, but we're probably more optimistic than that about video growth and are happy with the performance. Great. So I think thank you very much, everybody, for joining us this morning and for your questions, and we appreciate your interest in the Company and your continued support.

This does conclude today's conference call. We appreciate your participation. You may disconnect at this time.