Transcript Title set in Georgia 50pt

Cable: A Look At Trends & Opportunities
Past, Present and Future
Marci L. Ryvicker, CPA, CFA
Harrisburg, PA
April 2011
Please see page 82 for rating definitions, important disclosures and required analyst certifications.
Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports.
As a result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of the report and investors should consider this report as only a single factor in making their
investment decision.
AGENDA
I. SUBSCRIBER TRENDS
II. ARPU TRENDS
III. 2010 THEMES
IV. OPPORTUNITIES FOR GROWTH
V. INVESTOR FOCUS
VI. WHAT ABOUT…..?
VII. YOUR QUESTIONS
Source: Company websites, and Wells Fargo Securities, LLC
1
SUBSCRIBER TRENDS
 BASIC VIDEO
 HIGH SPEED DATA
 TELEPHONY
Source: Company websites, and Wells Fargo Securities, LLC
2
BASIC VIDEO
OVERALL VIDEO INDUSTRY
100
100
98
60%
60%
98
97
50%
96
95
40%
33%
29%
30%
7%
10%
1%
Cable
DBS
Source: SNL Kagan and Wells Fargo Securities, LLC
10
FY
20
09
FY
20
08
20
FY
Telco
90
88
07
20
FY
20
FY
20
06
0%
FY
94
92
92
20%
05
Market Share (Cable, DBS and Telco)
71%
70%
102
Total US Multichannel Video Subs (MMs)
Total video subs grew 8% from 2005 - 2010
80%
Total Multichannel Subscribers
4
OVERALL VIDEO INDUSTRY
70%
104
103
71%
101
60%
50%
102
98
95
34%
29%
30%
90
88
1%
Cable
DBS
Source: SNL Kagan and Wells Fargo Securities, LLC
Telco
16
E
FY
20
15
E
FY
20
14
E
FY
20
13
E
FY
20
12
E
FY
20
11
E
20
10
FY
20
FY
FY
20
09
86
08
FY
20
07
20
FY
FY
20
06
0%
20
94
13%
10%
FY
96
92
92
20%
104
100
53%
97
40%
106
102
100
98
05
Market Share (Cable, DBS and Telco)
80%
Total US Multichannel Video Subs (MMs)
We are forecasting another 4% growth through 2016
Total Multichannel Subscribers
5
OVERALL VIDEO INDUSTRY
61%
100.1
60%
61%
60%
100.1
50%
100.0
99.9
40%
33%
33%
33%
30%
33%
99.7
10%
99.9
99.7
7%
6%
6%
5%
100.0
99.8
20%
99.6
Cable
DBS
Source: SNL Kagan and Wells Fargo Securities, LLC
Telco
A
Q
4
20
10
A
20
10
3
Q
2
Q
Q
1
20
10
A
99.5
A
0%
20
10
Market Share (Cable, DBS and Telco)
62%
100.2
Total US Multichannel Video Subs (MMs)
2010: FIRST PAY-TV LOSSES EVER
70%
Total Multichannel Subscribers
6
TOP CABLE VIDEO PROVIDERS
2010 Top Cable Provider Snapshot
Company
Basic Subs
Y/Y Change
Net Adds
Y/Y Change
Market Share
1
Comcast
22,802
(3.2%)
(757)
(21.5%)
23%
2
Time Warner Cable
12,422
(3.4%)
(437)
(108.1%)
12%
3
Cox
4,868
(3.7%)
(185)
4
Charter
4,520
(6.3%)
(304)
(43.2%)
5%
5
Cablevision
3,314
(1.6%)
(53)
(5.0%)
3%
6
Brighthouse
2,187
(3.4%)
(76)
(73.4%)
2%
7
Suddenlink
1,193
(3.7%)
(15)
49.8%
1%
8
Mediacom
1,193
(3.6%)
(45)
43.8%
1%
9
Insight
692
(3.4%)
(25)
(383.9%)
1%
CableOne
647
(3.3%)
(22)
(4,300.0%)
1%
10
32.2%
5%
Note: Figures in thousands, except percentage data
Source: SNL Kagan and Wells Fargo Securities, LLC
7
TOP DBS/TELCO VIDEO PROVIDERS
2010 Top DBS/Telco Provider Snapshot
Company
Basic Subs
Y/Y Change
Net Adds
Y/Y Change
Market Share
1
DirecTV
19,223
3.6%
663
(29.4%)
19%
2
DISH Network
14,133
0.2%
33
(92.2%)
14%
3
Verizon FiOS
3,472
21.4%
611
(35.2%)
3%
4
AT&T U-Verse
2,985
44.6%
921
(9.6%)
3%
Note: Figures in thousands, except percentage data
Source: SNL Kagan and Wells Fargo Securities, LLC
8
HIGH SPEED DATA
OVERALL HSD INDUSTRY
58%, 26M
50%
42%,
19M
55%, 42M
56%, 31M
80
55%, 39M
55%, 36M
40%
80
56%, 75
45M
76
71
36%,
28M
65
70
65
60
30%
56
8%,
6.7M
20%
3%,
1.7M
10%
55
50
45
45
Cable
DSL
Source: SNL Kagan and Wells Fargo Securities, LLC
Fiber
10
FY
20
09
FY
20
08
20
FY
20
FY
20
FY
20
FY
07
40
06
0%
05
Market Share (Cable, DSL and Fiber)
60%
85
Total US Broadband Subscribers (MMs)
Cable Gained ~20M Subs 2005-2010
70%
Total Broadband Subscribers
10
OVERALL HSD INDUSTRY
58%, 26M
110
101
60%
100
42%,
19M
50%
80
28%,
28M
70
71
65
20%
56
10%
59%,
59M
90
84
80
76
30%
98
95
92
88
40%
60
13%,
13M
3%,
1.7M
50
45
Cable
DSL
Source: SNL Kagan and Wells Fargo Securities, LLC
Fiber
16
E
FY
20
15
E
FY
20
14
E
FY
20
13
E
FY
20
12
E
FY
20
11
E
20
10
FY
FY
20
09
FY
20
08
20
07
FY
20
FY
20
FY
FY
06
40
05
0%
20
Market Share (Cable, DSL and Fiber)
We forecast cable will gain another 15M HSD subs
Total US Broadband Subscribers (MMs)
70%
Total Broadband Subscribers
11
OVERALL HSD INDUSTRY
56%, 45M
56%
56%
56% , 43M
79.5
50%
37% , 29M
40%
36%
30%
36%, 28M
36%
76.8
10%
7% , 6M
79.5
78.5
78.0
77.5
77.4
20%
80.0
79.0
78.4
77.0
76.5
8%, 7M 76.0
8%
8%
75.5
Cable
DSL
Source: SNL Kagan and Wells Fargo Securities, LLC
Fiber
A
Q
4
20
10
A
20
10
3
Q
2
Q
Q
1
20
10
A
75.0
A
0%
20
10
Market Share (Cable, DSL and Fiber)
60%
Total US Broadband Subscribers (MMs)
Cable gained 3 M HSD subs in 2010
Total Broadband Subscribers
12
TOP CABLE HSD PROVIDERS
2010 Top Cable Provider Snapshot
Company
1
Comcast
2
HSD Subs
Y/Y Change
Net Adds
Y/Y Change
Market Share
6%
21%
16,988
7%
1,058
Time Warner Cable
9,803
6%
514
3
Cox
4,233
3%
139
4
Charter
3,246
6%
184
(2%)
4%
5
Cablevision
2,892
4%
105
(69%)
4%
6
Brighthouse
1,552
6%
91
19%
2%
7
Suddenlink
874
17%
125
57%
1%
8
Mediacom
838
8%
60
46%
1%
9
Insight
525
5%
23
CableOne
424
8%
31
10
(9%)
45%
(46%)
58%
12%
5%
1%
1%
Note: Figures in thousands, except percentage data
Source: SNL Kagan and Wells Fargo Securities, LLC
13
TOP TELCO HSD PROVIDERS
2010 Top Telco Provider Snapshot
Company
HSD Subs
Y/Y Change
Net Adds
16,310
2,612
13,698
3%
45%
(2%)
521
806
(285)
(27%)
(10%)
(59%)
21%
3%
17%
(828)
649
(477)
(251%)
(32%)
(18%)
11%
5%
5%
(60)
(147%)
4%
(14%)
3%
1
AT&T
AT&T U-Verse
AT&T DSL
2
Verizon
Verizon FiOS
Verizon DSL
8,392
4,082
4,310
2%
19%
(8%)
3
Qwest
2,914
(2%)
4
CenturyTel
2,394
5
Frontier
1,697
6
Windstream
1,303
7%
(4%)
15%
158
Y/Y Change
Market Share
61
9%
2%
171
11%
2%
Note: Figures in thousands, except percentage data
Source: SNL Kagan and Wells Fargo Securities, LLC
14
TELEPHONY
70%
86
63%
60%
88
Total telephony losses were 10M
86
86
84
83
50%
82
82
40%
81
79
30%
36%
33%
80
78
76
20%
18% 76
74
10%
8%
72
5%
0%
Total Landline Phone Subs (MMs)
Market Share (Cable, Telco and Wireless)
OVERALL TELEPHONY INDUSTRY
70
FY 2005
Cable
FY 2006
Telco
FY 2007
Wireless
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
FY 2008
FY 2009
FY 2010
Total Cable/Telco Phone Subs
16
We are forecasting another 10M loss
70%
100
86
90
83
60% 63%
82
50%
81
79
46%
76
73
71
80
70
69
67
40%
66
65
60
50
18%
24%
30%
40
30
20%
20
10%
Cable
Wireless
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
16
E
FY
20
15
E
FY
20
14
E
FY
20
13
E
FY
20
12
E
FY
20
11
E
20
10
FY
20
09
Telco
FY
FY
20
08
FY
20
07
FY
20
06
-
20
FY
20
FY
10
5%
05
0%
8%
Total Landline Phone Subs (MMs)
Market Share (Cable, Telco and Wireless)
OVERALL TELEPHONY INDUSTRY
Total Cable/Telco Phone Subs
17
3M telephony subs LEFT in 2010
45%
40%
78.1
39%
78.0
36%
35%
30%
78.5
33%
77.4
28%
77.5
77.0
25%
76.5
76.3
20%
18%
17%
75.9
15%
76.0
75.5
10%
Telco
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
Wireless
20
10
4
Q
20
10
Q
3
20
10
2
Q
20
10
1
Q
Cable
A
74.5
A
0%
A
75.0
A
5%
Total US Landline Phone Subs (MMs)
Market Share (Cable, Telco and Wireless)
OVERALL TELEPHONY INDUSTRY
Total Subs
18
TOP CABLE TELEPHONY PROVIDERS
2010 Top Cable Provider Snapshot
Company
HSD Subs
Y/Y Change
Net Adds
Y/Y Change
Market Share
1
Comcast
8,610
13%
990
(14%)
11%
2
Time Warner Cable
4,496
7%
276
(38%)
6%
3
Cox
2,641
0%
2
(91%)
3%
4
Charter
1,717
8%
121
(51%)
2%
5
Cablevision
2,269
4%
89
(52%)
3%
6
Brighthouse
968
4%
40
(49%)
1%
7
Suddenlink
363
30%
83
(27%)
0%
8
Mediacom
332
16%
45
9
Insight
304
CableOne
141
10
(3%)
28%
(11)
31
15%
(128%)
93%
0%
0%
0%
Note: Figures in thousands, except percentage data
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
19
TOP TELCO TELEPHONY PROVIDERS
2010 Top Telco Provider Snapshot
Company
HSD Subs
Y/Y Change
Net Adds
Y/Y Change
(5%)
Market Share
1
AT&T
21,495
(12%)
(3,067)
28%
2
Verizon
12,574
(10%)
(1,507)
19%
17%
3
Qwest
4,574
(12%)
(644)
13%
6%
4
CenturyTel
3,980
(8%)
(328)
7%
5%
5
Frontier
3,445
2%
56
(49%)
5%
6
Windstream
1,983
12%
210
(17%)
3%
Note: Figures in thousands, except percentage data
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
20
ARPU TRENDS
 TOTAL ARPU
 BASIC VIDEO
 HIGH SPEED DATA
 TELEPHONY
21
TOTAL ARPU
TOTAL ARPU
Total ARPU has been growing mid to high single digits
$160
10%
$134
$120
$124
$108
9%
8%
$117
7%
$100
6%
$80
5%
4%
$60
Y/Y Growth
Average Total ARPU
$140
3%
$40
2%
$20
1%
Source: SNL Kagan and Wells Fargo Securities, LLC
20
10
20
09
20
08
0%
20
07
$0
23
TOTAL ARPU
We expect growth to stabilize in the mid single digit range
$200
$189
$160
$140
$120
$124
$108
$134
$142
$151
$160
$170
9%
8%
7%
$117
6%
$0
0%
20
16
20
15
20
14
20
13
20
12
20
11
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
E
1%
E
$20
E
2%
E
$40
E
3%
E
$60
20
10
4%
20
09
$80
20
08
5%
20
07
$100
Y/Y Growth
Average Total ARPU
$180
$179
10%
24
TOTAL ARPU
Total ARPU grew 8% in 2010 for the cable industry
$140
8.2%
$138
$137
8.0%
$136
$135
$134
7.6%
$134
7.4%
$132
7.2%
7.0%
$130
$130
$128
6.8%
Y/Y Growth
Average Total ARPU
7.8%
6.6%
$126
6.4%
Source: SNL Kagan and Wells Fargo Securities, LLC
4'
10
Q
3'
10
Q
Q
Q
2'
10
6.2%
1'
10
$124
25
TOTAL ARPU
2007
2008
2009
2010
2011E
2012E
2013E
2014E
2015E
2016E
CAGR
Cablevision
$121
$133
$140
$150
$156
$164
$172
$180
$188
$196
5%
Comcast
$102
$111
$118
$128
$137
$147
$155
$165
$174
$184
6%
Time Warner Cable
$100
$108
$115
$124
$134
$143
$153
$164
$175
$187
7%
Charter
$93
$105
$114
$125
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Mediacom
$91
$95
$99
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$101
$110
9%
$117
6%
$132
12%
$142
8%
$151
6%
$160
6%
$170
6%
$179
5%
$189
6%
6%
Dish Network
$66
$69
$70
$74
$78
$79
$82
$84
$87
$89
3%
DirecTV
$79
$84
$86
$89
$93
$97
$100
$103
$106
$109
3%
$73
$77
$78
$82
$86
$88
$91
$93
$96
$99
3%
Average cable peers
Y/Y Change
Average DBS peers
Note: N/A – Not available; CAGR is a 6-year CAGR between 2011E and 2016E
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
26
TOTAL ARPU
Q1'10
Q2'10
Q3'10
Q4'10
Y/Y Growth
Cablevision
$146
$149
$149
$151
7%
Comcast
$123
$128
$130
$133
9%
Time Warner Cable
$119
$124
$125
$128
8%
Charter
$120
$124
$126
$130
10%
Mediacom
$100
$103
$103
N/A
N/A
Average cable peers
Y/Y Change
$127
12%
$131
13%
$132
13%
$136
13%
8%
Dish Network
$71
$73
$74
$75
6%
DirecTV
$85
$88
$89
$97
4%
$78
$80
$82
$86
5%
Average DBS peers
Source: SNL Kagan and Wells Fargo Securities, LLC
27
BASIC VIDEO
VIDEO ARPU
Cable Video ARPU grew 17% v. 12% for DBS
$90
8%
$70
$73
$78
$77
$70
$77
$73
$66
$82
7%
6%
$60
5%
$50
4%
$40
3%
$30
Y/Y Growth
2%
$20
0%
Cable Avg
Satellite Avg
Source: SNL Kagan and Wells Fargo Securities, LLC
Cable Y/Y Change
20
10
$0
20
09
1%
20
08
$10
20
07
Average Video ARPU
$80
Satellite Y/Y Change
29
VIDEO ARPU
Video ARPU should moderate to MSD growth
$99
$96
$100
$98
$93 $94
$91
$88
$91
$86
$87
$84
$78
$82
$80
$77
$77
$80
$73 $70 $73
$66
$60
8%
7%
6%
5%
4%
3%
$40
Y/Y Growth
Average Video ARPU
$120
2%
$20
1%
Cable Avg
Satellite Avg
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
Cable Y/Y Change
E
20
16
E
20
15
E
20
14
E
20
13
E
20
12
E
20
11
20
10
20
09
20
08
0%
20
07
$0
Satellite Y/Y Change
30
VIDEO ARPU
Cable Video ARPU grew 5% v. 4% for DBS
$88
6%
$86
5%
$84
$82
$82
$80
$78
3%
$78
$76
4%
$80
$77
$78
$77
$76
2%
Y/Y Growth
Average Video ARPU
$86
$74
1%
$72
Satellite Avg
Source: SNL Kagan and Wells Fargo Securities, LLC
Cable Y/Y Change
4'
10
Q
3'
10
Q
Q
Q
Cable Avg
2'
10
0%
1'
10
$70
Satellite Y/Y Change
31
VIDEO ARPU
2007
2008
2009
2010
2011E
2012E
2013E
2014E
2015E
2016E
CAGR
Cablevision
$74
$79
$83
$88
$93
$98
$103
$108
$113
$118
5%
Comcast
$61
$66
$68
$70
$72
$75
$77
$79
$82
$84
3%
Time Warner Cable
$64
$66
$69
$72
$76
$78
$82
$85
$88
$91
4%
Charter
$55
$59
$61
$69
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Mediacom
$55
$58
$62
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Average cable peers
Y/Y Change
$62
$66
6%
$69
5%
$75
9%
$80
7%
$84
4%
$87
4%
$91
4%
$94
4%
$98
4%
5%
Dish Network
$66
$69
$70
$74
$78
$79
$82
$84
$87
$89
3%
DirecTV
$79
$84
$86
$89
$93
$97
$100
$103
$106
$109
3%
$73
$77
$78
$82
$86
$88
$91
$93
$96
$99
3%
Average DBS peers
Note: N/A – Not available; CAGR is a 6-year CAGR between 2011E and 2016E
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
32
VIDEO ARPU
Q1'10
Q2'10
Q3'10
Q4'10
Y/Y Growth
Cablevision
$87
$89
$88
$88
6%
Comcast
$69
$70
$71
$71
4%
Time Warner Cable
$71
$73
$72
$73
5%
Charter
$68
$69
$69
$70
13%
Mediacom
$62
$64
$63
N/A
N/A
Average cable peers
Y/Y Change
$74
9%
$75
10%
$75
10%
$76
9%
7%
Dish Network
$71
$73
$74
$75
6%
DirecTV
$85
$88
$89
$97
4%
$78
$80
$82
$86
5%
Average DBS peers
Source: SNL Kagan and Wells Fargo Securities, LLC
33
HIGH SPEED DATA
HSD ARPU
$41.80
$41.51
$41.56
$41.40
5%
4%
3%
$41.20
2%
$41.00
1%
$40.80
$40.66
$40.60
0%
$40.62
(1%)
$40.40
20
10
(3%)
20
09
$40.00
20
08
(2%)
20
07
$40.20
Source: SNL Kagan and Wells Fargo Securities, LLC
Y/Y Growth
Average HSD ARPU
$41.60
HSD ARPU has been relatively stable
35
HSD ARPU
We are conservatively forecasting slight increases
$60.00
5%
$41.51
$40.00
$45.19 $46.45
$47.71
3%
$40.66 $40.62 $41.56
$43.94
$42.63
2%
$30.00
1%
0%
$20.00
Y/Y Growth
Average HSD ARPU
$50.00
$48.97 4%
(1%)
$10.00
(2%)
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
E
20
16
E
20
15
E
20
14
E
20
13
E
20
12
E
20
11
20
10
20
09
(3%)
20
08
20
07
$0.00
36
HSD ARPU
Cable HSD ARPU grew 2% in 2010
$41.50
$41.42
$41.41
$41.40
2.5%
$41.30
$41.24
$41.20
$41.10
$41.00
2.0%
1.5%
$41.00
1.0%
Y/Y Growth
Average HSD ARPU
3.0%
$40.90
0.5%
$40.80
Source: SNL Kagan and Wells Fargo Securities, LLC
4'
10
Q
3'
10
Q
Q
Q
2'
10
0.0%
1'
10
$40.70
37
HSD ARPU
2007
2008
2009
2010
2011E
2012E
2013E
2014E
2015E
2016E
CAGR
Cablevision
$39.09
$38.69
$38.14
$38.09
$38.13
$38.72
$39.50
$40.29
$41.09
$41.91
2%
Comcast
$43.40
$41.94
$41.91
$43.30
$44.67
$46.02
$46.94
$47.88
$48.83
$49.81
2%
Time Warner Cable
$42.04
$41.34
$41.81
$43.30
$45.09
$47.08
$49.14
$51.19
$53.21
$55.17
4%
Charter
$40.56
$40.39
$41.44
$42.05
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Mediacom
$37.08
$37.94
$38.53
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$40.43
$40.06
$40.37
$41.69
$42.63
$43.94
$45.19
$46.45
$47.71
$48.97
3%
Average cable peers
Note: N/A – Not available; CAGR is a 6-year CAGR between 2011E and 2016E
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
38
HSD ARPU
Q1'10
Q2'10
Q3'10
Q4'10
Y/Y Growth
Cablevision
$37.87
$38.09
$37.39
$37.50
(0%)
Comcast
$42.80
$43.30
$43.53
$43.58
3%
Time Warner Cable
$42.35
$42.88
$43.32
$42.63
4%
Charter
$42.32
$42.20
$41.97
$41.72
1%
Mediacom
$39.51
$39.84
$39.50
N/A
N/A
$41.33
$41.62
$41.55
$41.36
2%
Average cable peers
Source: SNL Kagan and Wells Fargo Securities, LLC
39
TELEPHONY
TELEPHONY ARPU
$39.00
Telephony ARPU has trended down
0.0%
$38.51
(0.5%)
$38.00
(1.0%)
$37.50
$37.36
(1.5%)
$36.90
$37.00
(2.0%)
$36.50
$36.28
$36.00
(2.5%)
20
10
(3.5%)
20
09
$35.00
20
08
(3.0%)
20
07
$35.50
Source: SNL Kagan and Wells Fargo Securities, LLC
Y/Y Growth
Average Telephony ARPU
$38.50
41
TELEPHONY ARPU
$39.00 $38.51
We anticipate further declines
0.0%
$38.00
$37.00
(0.5%)
$36.90
(1.0%)
$36.00
$36.28
$35.59 $35.28
(1.5%)
$34.94
$35.00
$34.57
$34.20
$34.00
(2.0%)
$33.84
(2.5%)
$33.00
(3.0%)
$32.00
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
E
20
16
E
20
15
E
20
14
E
20
13
E
20
12
E
20
11
20
10
20
09
(3.5%)
20
08
$31.00
20
07
Y/Y Growth
Average Telephony ARPU
$37.36
42
TELEPHONY ARPU
$36.30
Cable Telephony ARPU shrunk 2% in 2010
0.0%
$36.25
$36.22
(0.5%)
$36.20
$36.15
(1.0%)
$36.10
$36.05
(1.5%)
$35.99
$36.00
$35.96
$35.95
$35.90
(2.0%)
Y/Y Growth
Average Telephony ARPU
$36.25
(2.5%)
$35.85
Source: SNL Kagan and Wells Fargo Securities, LLC
4'
10
Q
3'
10
Q
Q
Q
2'
10
(3.0%)
1'
10
$35.80
43
TELEPHONY ARPU
2007
2008
2009
2010
2011E
2012E
2013E
2014E
2015E
2016E
CAGR
Cablevision
$31.81
$32.93
$32.81
$32.20
$31.10
$30.47
$29.86
$29.26
$28.68
$28.10
(2%)
Comcast
$41.95
$39.40
$38.58
$37.78
$36.89
$36.71
$36.52
$36.34
$36.16
$35.98
(1%)
Time Warner Cable
$41.77
$39.74
$39.31
$38.86
$38.78
$38.68
$38.43
$38.11
$37.78
$37.45
(1%)
Charter
$42.09
$40.69
$42.43
$41.54
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Mediacom
$30.20
$32.85
$33.45
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$38.51
$37.36
$36.90
$36.28
$35.59
$35.28
$34.94
$34.57
$34.20
$33.84
(1%)
Average cable peers
Note: N/A – Not available; CAGR is a 6-year CAGR between 2011E and 2016E
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
44
TELEPHONY ARPU
Q1'10
Q2'10
Q3'10
Q4'10
Y/Y Growth
Cablevision
$31.76
$31.89
$32.17
$31.43
(2%)
Comcast
$37.68
$38.12
$37.79
$37.53
(2%)
Time Warner Cable
$38.54
$38.64
$38.79
$38.93
(1%)
Charter
$41.69
$41.74
$41.45
$41.29
(2%)
Mediacom
$33.62
$32.39
$31.68
N/A
N/A
$35.99
$36.22
$36.25
$35.96
(2%)
Average cable peers
Source: SNL Kagan and Wells Fargo Securities, LLC
45
2010 THEMES
 TITLE 2
 OVER THE TOP
 THE ECONOMY
 COMCAST-NBCU
46
TITLE 2
TITLE 2
1. Section 202: Prevents “unjust or unreasonable discrimination in
charges, practices, classifications, regulations, facilities, or
services
2. Section 203: Requires that the FCC and public have access to
information about rates and charges
3. Section 208: Gives the right to complain to the FCC about
violations of any of the relevant sections
4. Section 254: Allows the FCC to promote universal service (to
allow the migration of the Universal Service Fund to broadband)
5. Section 222: Protects confidential information received as part
of the service
6. Section 253: Service must be accessible to people with
disabilities
Source: FCC documents and Wells Fargo Securities, LLC
48
TITLE 2 LITE
1. Transparency Rule – The right to know basic information
regarding broadband service including how networks are
managed
2. No Blocking Rule – The right to send and receive lawful internet
traffic and to use the devices of choice
3. No Unreasonable Discrimination Rule – The right to a level
playing field; i.e. let the “marketplace” decide
4. Reasonable Network Management Rule – Broadband providers
should take appropriate and tailored steps to address
congestion and deal with unwanted traffic as well as traffic that
is harmful to the network
Source: FCC documents and Wells Fargo Securities, LLC
49
STOCK PERFORMANCE
Cable stocks rose 50% in 2010 v. S&P +13%
160
Title 2 Lite Outlined
Title 2 Announced
150
140
130
120
110
100
90
S&P 500
Source: FactSet and Wells Fargo Securities, LLC
Ja
n11
D
ec
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0
0
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0
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-1
O
ep
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0
S
0
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Ju
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A
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0
0
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M
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80
Cable
50
OVER THE TOP
NETFLIX
70
100.2
61.8
60
61.1
100.1
60.4
60.0
50
100.1
100.0
40
100.0
99.9
99.9
30
99.8
99.7
20
15.0
14.0
20.0
16.9
99.7
20
10
Q
4
20
10
3
Q
20
10
2
Q
20
10
1
Q
Cable
A
99.5
A
0
A
99.6
A
10
Netflix
Total Pay-TV
Source: Company filings, SNL Kagan and Wells Fargo Securities, LLC
Total-Pay TV Subscribers (MM)
Cable/Netflix Subscribers (MM)
Cable lost 2M subs in 2010 while Netflix gained 7.7M
52
WHY OTT CAN’T REPLACE CABLE
1. HD Content is limited over-the-top
2. Sports content is mostly linear; online options require
a subscription
3. Bandwidth becomes constrained in an exclusive OTT
model
4. User interface/content aggregation is key -technologies are working within the TV ecosystem,
not against it
5. Content providers cannot afford to disenfranchise the
MSOs
6. Distributors are becoming competitive with OTT
Source: Wells Fargo Securities, LLC
53
CORD CUTTING VS. CORD SHAVING
CORD CUTTING – Shutting off pay-TV completely
CORD SHAVING – Downgrading services
 Economy (housing, unemployment)
 More choice
 Limited HD content
 TV Everywhere
 A la carte is not an efficient means of distribution
 No catalyst to prove or disprove either argument
Source: Wells Fargo Securities, LLC
54
THE ECONOMY
GDP
Y/Y Nominal GDP Growth
Nominal GDP growth is back to historical levels
8%
7%
Historical Average – 4.1%
6%
5%
4.1%
4%
4.7%
3.9%
3%
2%
1%
0%
0.6%
(0.7%)
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
E
20
12
E
(1%)
(2%)
Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates
56
HAVEs VERSUS HAVE-NOTs
 THE HAVES
 NOMINAL GDP GROWING 4%-PLUS
 RETAIL SALES UP MSD AFTER A 10% DECLINE IN
2009
 AUTO – NEW VEHICLE SALES UP BY ~1M, to 11.5M
UNITS
 THE HAVE NOTS
 HOUSING STARTS ARE STILL BELOW 2008 LEVELS
 FORECLOSURES CONTINUE TO INCREASE
 UNEMPLOYMENT IS STILL AT ~9%
 GAS IS AT $3.47/gal vs. $2.46/gal ONE YEAR AGO
Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates
57
HOUSING STARTS
The housing market has been slow to recover
2,000
1,500
1,000
Historical Average – 1.4M
2010A: 590k
500
0
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
1
20 0
11
20 E
12
E
U.S. Housing Starts (‘000s)
2,500
Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates
58
Housing starts still slow to recover
2,500
2,258
1,998
2,000
1,801
1,500
1,426
1,355
1,264
1,080
906
1,000
830
500
707
620
590
554
381
Housing Starts
12
E
FY
20
11
E
FY
20
10
FY
20
09
FY
20
08
FY
20
07
20
FY
20
06
0
FY
Occupied HHs and MVPD Net Adds (‘000s)
HOUSING V. MVPD ADDS
Multichannel TV Net Adds
Source: SNL Kagan, The Federal Reserve of St. Louis and Wells Fargo Securities, LLC
59
UNEMPLOYMENT
Unemployment continues to improve SLOWLY
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Historical Average – 6.0%
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
1
20 0
11
20 E
12
E
U.S. Unemployment Rate
2010A: 9.6%
Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates
60
GEOGRAPHIES
State Economic Activity: Recession Severity & Probability
Coincident Index Peak to Trough, Probability of Weak Fundamentals in Two Quarters
0.0%
A - Not Severe Recession, Improving Economic Fundamentals
ND
Severity of Recession
MN
MA
-5.0%
NH, AR
WI
OK
UT
TN
-10.0%
OR
AL
OH
SC
B - Not Severe Recession, Weak Economic Fundamentals
AK
NY
Not Hit Hard and Likely Strengthening
IA
TX MS
VA
VT
CT
WY
KS
PA
KY
IL
NC
Not Hit Hard but Likely Deteriorating
SD
LA
NE
NJ
CA
CO
State Average: -9.3%
MD
IN
DE
MT
MO
ME
-15.0%
Hit Hard but Likely Strengthening
FL
RI
ID
-20.0%
NM
HI
WV
AZ
GA
WA
Hit Hard and Likely Deteriorating
MI
-25.0% C - Severe Recession, Improving Economic Fundamentals
0%
10%
20%
30%
40%
D - Severe Recession, Weak Economic Fundamentals
50%
60%
70%
80%
NV
90%
100%
Probability of Weak Fundamentals
The Recession’s Best: 1) Alaska, 2) North Dakota, 3) New York, 4) Minnesota, 5) South Dakota
The Recession’s Worst: 1) Nevada, 2) Michigan, 3) Idaho, 4) Rhode Island, 5) Florida
The Most Upside: 1) Michigan, 2) Arizona, 3) Ohio, 4) North Carolina, 5) South Carolina
The Most Downside: 1) Nevada, 2) New Mexico, 3) Montana, 4) Florida, 5) Georgia
Source: SNL Kagan, The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates
61
GEOGRAPHIES – MVPD Exposure
MVPDs With Greatest Exposure (by % of Subs) to the…..
Recession’s Best States (AK, ND,
NY, MN, SD):
Recession’s Worst States (NV, MI,
ID, RI, FL):
1) Cablevision (97%)
1) Brighthouse (78%)
2) Verizon (33%)
2) Cable One (28%)
3) Time Warner Cable (22%)
3) AT&T U-Verse (17%)
4) DirecTV (8%)
4) Comcast (14%)
5) Dish Network (8%)
5) Charter (12%)
6) Mediacom (8%)
6) DirecTV (11%)
7) Comcast (6%)
7) Dish Network (10%)
8) Charter (5%)
8) Cox (10%)
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
62
GEOGRAPHIES – MVPD Exposure
MVPDs With Greatest Exposure (by % of Subs) to the…..
Most Upside States (MI, AZ, OH,
NC, SC):
Most Downside States (NV, NM, MT,
FL, GA):
1) Insight (32%)
1) Brighthouse (74%)
2) Time Warner Cable (27%)
2) Mediacom (15%)
3) Cox (24%)
3) Comcast (10%)
4) Charter (19%)
4) AT&T U-Verse (9%)
5) AT&T U-Verse (15%)
5) DirecTV (9%)
6) DirecTV (14)
6) Cox (9%)
7) Dish Network (13%)
7) Dish Network (8%)
8) Verizon FiOS (0%)
8) Verizon FiOS (7%)
Source: SNL Kagan and Wells Fargo Securities, LLC estimates
63
COMCAST-NBCU
COMCAST/NBCU – TIMELINE

8/16/09: Reuters reports CMCSA is planning an acquisition

9/30/09: CNBC reports CMCSA is in talks to buy NBCU

12/3/09: CMCSA announces its intention to take a 51% stake in
NBCU, increases its dividend by 40% and speeds share repo

1/25-28/10: CMCSA/GE/NBCU file with DOJ and FCC

2/4/09-3/11/10: CMCSA/GE/NBCU testify to Congress committees

7/14/10: The EU approves the acquisition

7/21/10: CMCSA replies to opposition petitions at the FCC

9/26/10: Steve Burke is named CEO of NBCU

9/27/10: Vivendi sells 7.7% of its 20% stake to GE for $2B

9/27/10: NBCU says it is fully funded for deal ($5.1B placement)

1/19/11: DOJ and FCC provide regulatory clearance

1/28/11: CMCSA/NBCU officially closed
Source: Company filings, CNBC.com, Reuters and Wells Fargo Securities, LLC
65
COMCAST/NBCU – STOCK PRICE
CMCSA is +57% since the deal was “leaked” v. the S&P, +27%
160
150
140
130
120
Deal officially
closes
110
GE reports Q3 reports
and that NBCU deal
will close by year-end
100
90
CMCSA announces it will
acquire 51% of NBCU
80
70
S&P 500
Source: FactSet and Wells Fargo Securities, LLC
1
-1
M
ar
11
Ja
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N
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0
0
S
ep
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0
Ju
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0
M
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0
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M
ar
10
Ja
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9
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S
9
Ju
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9
M
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-0
9
-0
M
ar
Ja
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09
60
9
CNBC reports that CMCSA is planning
to buy 51% of NBCU
CMCSA
66
COMCAST/NBCU – POSITIVES, IN OUR VIEW
 CREATIVE DEAL STRUCTURE
 FINANCIALLY ACCRETIVE
 SPURS INNOVATION
 REGULATORY PRECEDENCE
Source: Wells Fargo Securities, LLC
67
COMCAST/NBCU – CONCERNS
 BIGGER MAY NOT BE BETTER
 DIVERGENCE FROM PEERS
 OVER-THE-TOP
 CONCESSIONS SET A PRECEDENCE
Source: Wells Fargo Securities, LLC
68
OPPORTUNITIES
Source: Wells Fargo Securities, LLC
69
RESIDENTIAL HSD
 ARPU
 USAGE BASED PRICING
 ‘NAKED’ HSD SUBSCRIBERS
Source: Wells Fargo Securities, LLC
70
TVE – WHY IS IT IMPORTANT?
 CUSTOMER RETENTION
 POTENTIAL SUBSCRIPTION MODEL
 ADDITIONAL ADVERTISING $s
Source: Company websites and Wells Fargo Securities, LLC
TV EVERYWHERE BY OPERATOR
PROPRIETARY TVE ONLINE PORTALS
 COMCAST
 VERIZON FIOS
 DISH NETWORK
 AT&T U-VERSE
PARTNERSHIP TVE PORTALS
 TIME WARNER CABLE
 COX COMMUNICATIONS
TVE PRODCUTS
 SLING BOX
‘OTHER’ TVE
 CABLEVISION (IPAD APPLICATION)
 DIRECTV (NOMAD)
 CHARTER (TBD)
Source: Company websites and Wells Fargo Securities, LLC
TVE – LIVE IPAD/TABLET
WHO HAS IT?
 Cablevision
 Time Warner Cable
 Dish Network
WHY IS IT DIFFERENT?
 These particular companies allow subscribers to watch LIVE
TV on their iPad as if the screen were simply another
television in the household.
WHAT IS ALL THE LEGAL FUSS ABOUT?
 Certain content producers contend that the MVPDs do not
possess the required rights for this type of distribution.
 Viacom currently has an open case against Time Warner
Cable, which could set precedents.
Source: Company websites and Wells Fargo Securities, LLC
ADVERTISING
Ad Spend ($MM)
$60,000
54.9M HH
48.4M HH
60
$50,000
50
$40,000
40
$30,000
19.8M HH
19.8M HH
30
$20,000
20
$10,000
10
0
'9
1'9
'9 2
2'9
'9 3
3'9
'9 4
4'9
'9 5
5'9
'9 6
6'9
'9 7
7'9
'9 8
8'9
'9 9
9'0
'0 0
0'0
'0 1
1'0
'0 2
2'0
'0 3
3'0
'0 4
4'0
'0 5
5'0
'0 6
6'0
'0 7
7'0
'0 8
8'0
'0 9
9'1
0
$0
Cable Ad $s
Broadcast Ad $s
Cable Ratings
ABC/CBS/NBC Broadcast Ratings
Note: “Broadcast Ad $s” includes ad spending on the entire TV broadcasting medium, not just at the ‘Big 3’.
Source: Company websites and Wells Fargo Securities, LLC
Average Primetime Viewership (MMs of HHs)
Cable has more eye balls but not more ad $
ADVERTISING – CPM COMPARABLES
Both broadcast and syndication have higher CPMs than cable
2009 Average TV CPM Rates
$18
$16.09
$16
$14.07
$14
$13.20
$12
$10.07
$10
$8.74
$8.20
$8
$7.01
$6
$6.94
$5.15
$4.18
$4
$2.97
$2
$0
Early AM
Daytime
Early News
Prime-time
Late Evening
Daytime
Late Fringe
Prime Access
Daytime
Early/late
Fringe
Broadcast Networks
Syndication
Television
Source: Company websites and Wells Fargo Securities, LLC
Cable
Prime-time
COMMERCIAL SEGMENT
 HIGHER ARPU
 HIGHER MARGINS
 “BETTER VALUE” PROPOSITION, IN
OUR VIEW
 CELLULAR BACKHAUL
Source: Company websites and Wells Fargo Securities, LLC
OPPORTUNITIES
 RESIDENTIAL HSD
 TV EVERYWHERE
 ADVERTISING
 COMMERCIAL
Source: Company websites, and Wells Fargo Securities, LLC
77
INVESTOR FOCUS
 SUBSCRIBERS
 PROFITABILITY
 CAPITAL RETURNS
 CAPITAL INTENSITY
 M&A
 COMPETITION
Source: Company websites, and Wells Fargo Securities, LLC
78
CAPITAL RETURNS
 SHARE REPURCHASES
 Cablevision ($0.5B, 5% of shares outstanding)
 Comcast ($3B, 5% of shares outstanding)
 DirecTV ($6B, 17% of shares outstanding)
 Dish Network ($1B, 10% of shares outstanding)
 Time Warner Cable ($4B, 17% of shares
outstanding)
 RECURRING DIVIDEND
 Cablevision (1.52% Yield)
 Comcast (1.88% Yield)
 Time Warner Cable (2.65%Yield)
Note: Yields and current share repurchase plans as of 4/18/11
Source: Company websites, and Wells Fargo Securities, LLC
79
WHAT ABOUT…..?
 THE ECONOMY
 WIRELESS DATA
 PROGRAM COSTS
 OVER THE TOP
 TELEPHONY
 REGULATORY ENVIRONMENT
Source: Company websites, and Wells Fargo Securities, LLC
80
QUESTIONS?
Disclosures
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Wells Fargo Securities, LLC maintains a market in the common stock of Belo Corp., Cablevision Systems Corp., CBS Corporation, Clear Channel Outdoor Holdings, Inc., Comcast
Corporation, DISH Network Corporation, Entercom Communications Corp., Gray Television, Inc., Lamar Advertising Company, LIN TV Corporation, Saga Communications, Inc., Sinclair
Broadcast Group, Inc., The DIRECTV Group, Inc., Time Warner Cable Inc. Wells Fargo Securities, LLC or its affiliates managed or comanaged a public offering of securities for CBS
Corporation, Gray Television, Inc., LIN TV Corporation, Time Warner Cable Inc. within the past 12 months. Wells Fargo Securities, LLC or its affiliates intends to seek or expects to
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Inc., Time Warner Cable Inc. in the past 12 months. Wells Fargo Securities, LLC and/or its affiliates, have beneficial ownership of 1% or more of any class of the common stock of CBS
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Broadcast Group, Inc., Time Warner Cable Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities,
LLC. Wells Fargo Securities, LLC provided investment banking services to CBS Corporation, Clear Channel Outdoor Holdings, Inc., Comcast Corporation, Gray Television, Inc., LIN TV
Corporation, Sinclair Broadcast Group, Inc., Time Warner Cable Inc. CBS Corporation, Clear Channel Outdoor Holdings, Inc., Comcast Corporation currently is, or during the 12-month
period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securitiesrelated services to CBS Corporation, Clear Channel Outdoor Holdings, Inc., Comcast Corporation. Gray Television, Inc. currently is, or during the 12-month period preceding the date of
distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided nonsecurities services to Gray Television, Inc. Wells Fargo
Securities, LLC received compensation for products or services other than investment banking services from CBS Corporation, Clear Channel Outdoor Holdings, Inc., Comcast
Corporation, Gray Television, Inc. in the past 12 months. Wells Fargo Securities, LLC or its affiliates may have a significant financial interest in Belo Corp., Cablevision Systems Corp.,
CBS Corporation, Clear Channel Outdoor Holdings, Inc., Comcast Corporation, DISH Network Corporation, Entercom Communications Corp., Gray Television, Inc., Lamar Advertising
Company, LIN TV Corporation, Saga Communications, Inc., Sinclair Broadcast Group, Inc., The DIRECTV Group, Inc., Time Warner Cable Inc.
82
Disclosures
STOCK RATING
1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY
2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months.
HOLD
3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL
SECTOR RATING
O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months.
M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.
U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.
VOLATILITY RATING
V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects significant
volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.
As of: 4/18/2011 45% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Outperform. Wells Fargo Securities, LLC has provided
investment banking services for 38% of its Equity Research Outperform-rated companies. 52% of companies covered by Wells Fargo Securities, LLC Equity
Research are rated Market Perform.Wells Fargo Securities, LLC has provided investment banking services for 47% of its Equity Research Market Performrated companies. 3% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Underperform. Wells Fargo Securities, LLC has
provided investment banking services for 42% of its Equity Research Underperform-rated companies.
Important Information for Non-U.S. Recipients
EEA – The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors.
For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited (“WFSIL”). WFSIL is a U.K. incorporated investment firm
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83
Cable: A Look At Trends & Opportunities
Past, Present and Future
Marci L. Ryvicker, CPA, CFA
Harrisburg, PA
April 2011
Please see page 82 for rating definitions, important disclosures and required analyst certifications.
Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports.
As a result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of the report and investors should consider this report as only a single factor in making their
investment decision.