Comcast Corporation
Rating: BUY
Analysts
Pinjalim Bora
bora.7@osu.edu
(309) 550 - 2734
Ticker: CMCSA, 12/1/2009
Current $14.86 Target
$19.90
Open
$14.89 52 Wk Hi
$18.10
High
$15.10 52 Wk Lo $11.10
Low
$14.70 Mkt. Cap
$42.62B
Yield
1.81%
2.95B
Shares
Recommendation Summary:
Buy Comcast
Comcast.
The share price of Comcast is currently undervalued with
maximum upside potential of 68% and minimum upside
potential of 25%
25%.
The recommendation is based on a detailed analysis of its
strategic and financial position of Comcast and its valuation using
multiples and discounted cash flow approach.
Fundamental Drivers:
Change of sales mix towards high mar
margin
gin voice and internet
services. Supported by strong 3rd quarter numbers.
Increase
ncrease in operating efficiencies driven by the “All Digital”
initiative, up selling potential
potential.
St
Strong growth implication in the commercial space.
space
Partial n
neutralization of the “Video over internet” threat.
threat
Risks:
Fierce competition from regional telecom and satellite television
companies.
Limited Wireless Capability.
Regulatory threat
threat.
Table of Contents
Company Overview ........................................................................................................................ 3
Competitive Advantage – An analysis .................................................................................... 4
Latest Events............................................................................................................................ 4
Macroeconomic Overview .............................................................................................................. 5
Industry Overview .......................................................................................................................... 6
Investment Thesis ........................................................................................................................... 8
Fundamental Drivers ................................................................................................................... 8
Financial Analysis ....................................................................................................................... 9
Profitability Analysis ............................................................................................................... 9
Efficiency Analysis................................................................................................................ 10
Liquidity Analysis ................................................................................................................. 11
Solvency Analysis ................................................................................................................. 12
Cash Flow Analysis ............................................................................................................... 12
Projections ............................................................................................................................. 12
Valuation Analysis .................................................................................................................... 14
Sector Valuation (Consumer Discretionary) ......................................................................... 14
Industry Valuation (Cable & Satellite) .................................................................................. 14
Company Valuation ............................................................................................................... 14
Discounted Cash Flow .............................................................................................................. 15
Sensitivity Analysis ............................................................................................................... 16
Potential Risks/Concerns .............................................................................................................. 16
Recommendation .......................................................................................................................... 16
Summary ....................................................................................................................................... 17
Endnotes ........................................................................................................................................ 21
2|Page
Company Overview
Comcast Corporation (Comcast), incorporated in 1969, is the largest cable television and
internet service provider in US in terms of customers served. It caters to both, residential and
commercial sectors on a monthly subscription basis. At the end of 3Q 2009, Comcast served
approximately 47 million customers.i It has two main business segments: Cable and
Programming.
Cable Segment
The cable segment is the company’s largest operating segment. It primarily comprises of
video, high speed internet and phone services. In 2008, Comcast served approximately 24.2
million video customers, 14.9 million high-speed Internet customers, and 6.5 million phone
customers. ii
Video - Comcast’s “video service offerings range from limited analog service to fulldigital service, as well as advance services, including high definition Television (HDTV) and
digital video recorder (DVR)”iii. The number of channels depends on the level of service selected
and can range from 20-40 in case of analog service and more than 250 for digital service. It also
provides a range of premium channels which broadcasts films, concerts and sporting events
without any commercial interruption. Digital service customers also gets the option of
subscribing to the “On-Demand” service which gives them the access to a selection of more than
10,000 standard and high definition programs for a full month and are charged on a pay per view
basis for the same. In recent years, the digital video segment has witnessed significant growth
while the standard video segment is losing business due to fierce competition from regional
telecom companies. Average monthly video revenues per customer also increased to $64 in
2008, compared to $61 and $57 in 2007 and 2006 respectively.
High-speed Internet - Comcast offers high-speed internet services with downstream
speeds ranging from 24mbps to 50 mbps, depending on the service selected. The ability to
almost double the speed is because of the incorporation of a new technology called DOCSIS 3.0,
also referred to as Wideband. At the end of 3Q 2009, Comcast successfully deployed this
technology in 65% of its footprint.iv Revenues increased in 2008 due to additional new customers
and cable systems. However, there was little change in the average revenue per unit (ARPU),
which had consistently remained around $42 over the last few years.
Phone – Comcast provides Voice over Internet Protocol (VOIP) digital phone services
that include local as well as domestic long distance calling. Other features offered include caller
id, voicemail and call waiting. The phone segment is currently the growth segment for Comcast
as more and more customers are opting for the service offered as a part of the bundled product
offering.
Programming segments
This segment mainly consists of the programming networks owned by Comcast. Revenue
is generated from the sale of advertising as well as from monthly per subscriber license fees
collected from other multichannel video providers who distribute these programming networks.
3|Page
Other Businesses
Comcast’s operations also comprises of other businesses including a portfolio of ecommerce websites focused on entertainment, information and communication. It also owns two
professional sports teams and two large multipurpose arenas. It is also involved in managing
other facilities for sporting events, concerts and other events.
Competitive Advantage – An analysis
Infrastructure: The robustness and the flexibility of the cable infrastructure play a very
important role in the growth and success of Comcast. The ability to acquire regional players
and increase subscriber base is critical for Comcast to ward off fierce competition. It has
made significant investments in infrastructure to provide bundled services to retain and attract
new customers. However, this investment in infrastructure is the cost of doing business in this
industry and hence not a source of competitive advantage.
Technology: The current stress on the “All-Digital” initiative increases Comcast’s
operating efficiency and reduces costs through automation. Comcast also has a first mover
advantage in introducing DOCSIS 3.0 / Wideband which in turn enables it to provide high
speed internet over the cable lines. This has enhanced its Internet and VOIP offerings. While
these technological developments have given Comcast a competitive edge, they are easily
imitable and hence not a source of sustained competitive advantage.
Sales & marketing: Comcast sells its services through various channels such as direct
marketing, telemarketing and retail sales. It operates in the form of clusters, servicing
specific geographic regions as well as specific real estate properties. Comcast’s ability to enter
long term contracts with realtors helps Comcast reduce its marketing expenses as well as lock in
subscriber base. While this discourages new entrants, incumbent players have no significant
advantage over the others. One could argue that this exclusivity is a source of temporary
sustained competitive advantage, but recall that Comcast has no control over the supply of
content and hence the effect of this advantage is neutralized by the ever increasing expenses
related to acquiring content.
After analyzing the various part of Comcast’s value chain, I believe that Comcast don’t
have a sustained competitive advantage and nor has any other player in this industry. Its
competitive edge lies in the economies of scale created by its robust network and wide
geographic reach, as well as its ability to exploit the network effects created by locking in
customers by offering them discount bundled products and superior customer service. There is a
fierce competition not only among other cable TV companies like Time Warner Cable but also
from regional bell operating companies (RBOC) like AT&T and Verizon. The mantra seems
simple –keep costs low, be the first to differentiate, spread fast and lock in customers.
Latest Events
The latest buzz surrounding Comcast refers to the talks of a deal with NBC Universal,
where Comcast is supposed to own a 51% stake. NBC Universal is one of the world’s leading
media and entertainment companies. In the last few years, Comcast’s cost of acquiring content is
increasing at a rapid pace, which is a source of concern for the company as programming
expense is one of the big ticket items in their cost structure. The increase in the programming
expenses can be attributed to the strengthening of position of its suppliers i.e. the content
4|Page
providers. There has been a wave of consolidation in the content area with many big players like
Walt Disney acquiring small players like Marvel. Such mergers reduce the number of suppliers
for Comcast hence putting the company in a precarious position and wide open to opportunistic
behavior. There is also a lot of uncertainty about the future of content distribution as online
portals like Hulu.com is gaining recognition and the concept of “TV Anywhere” is becoming
popular. Keeping all these dynamics in mind, this deal seems to be a classic case of backward
vertical integration. The deal would bestow Comcast with lots of power over the cable industry
as well as the programming industry. Moreover, it will also secure a lot of future advertising
revenue for Comcast irrespective of the future direction of content distribution. On a negative
note, the deal raises questions about the appropriation of value created from this merger by
Comcast shareholders as well as on Comcast’s capability of managing a content provider like
NBC Universal. There are also speculations of regulatory actions that might pose problems for
the deal to go through. It will be interesting to note how the events unfold in the next few weeks.
Macroeconomic Overview
Comcast is a part of the Consumer Discretionary sector which, as the name suggest, is
highly cyclical in nature. Its growth and profitability has a high correlation with many
macroeconomic factors like consumer confidence, consumer spending, personal savings rate,
unemployment rate and inflation.
Consumer Confidence is defined as “the degree of optimism on the state of the economy
that consumers are expressing through their activities of savings and spending”.vThe Conference
Board Consumer Confidence Index edged up in November after a slight decline in October.
Currently, the index stands at 49.5, up from 48.7 in October. The current situation index was
unchanged, although the expectations index increased to 68.5 from 67.0 in October.vi The gain
indicates a slight improvement in the perception of business and labor market conditions by
consumers.
Consumer spending is a particularly important number for the well being of the US
economy as it accounts for about 70 percent of the US gross domestic product. The personal
consumption expenditure jumped 0.7 percent in October after a 0.6 percent dip in September.
The boost was led by durables which increased 2 percent after an 8.8 percent drop last month.
Although, the October numbers paint a rosy picture of the times ahead it is difficult to conclude
if the gain was organic or spill-over effects of government incentives like the Cash-for-clunkers.
Currently, all eyes are set on the expectation of top line growth in December as a result of the
holiday sales to bolster the organic growth story.
Personal Savings Rate is the fraction of the personal income that is not consumed. It can
also be defined as the percent of disposable income less personal outlays. The 3rd quarter saw a
slight drop in the personal savings rate although it is still at a historical high. It has been argued
that this represents a fundamental shift in the behavior of American consumer although this
statement is open for debate.
Unemployment rate rose from 9.8 percent to 10.2 percent in October. The largest job
losses were in construction, manufacturing and retail.vii Although the unemployment numbers
shows a growing disconnect between economic recovery and continued job losses, it clearly
explains the increase in productivity as less number of workers continue to do the job of others.
5|Page
Inflation measured in terms of Core CPI numbers increased by 0.1 percent in October
while the overall CPI increased by around 0.3 percent. The latter is mainly driven by increase in
energy prices which, along with food prices, is excluded in the calculation of the former. The
index has decreased 0.2 percent over the last twelve months.
What does it all mean?
The various economic indicators point to a growing positive consumer confidence which
is good news not only for the consumer discretionary sector or Comcast but for the economy as a
whole. Regarding the unemployment condition, we have probably reached the bottom as
indicated by continuous decline in initial jobless claims as well as an increase in temporary
hiring. The firing has almost come to an end and it is just a matter of time for the hiring to start
in full swing. I also don’t see any danger of inflation in the near future as the Fed will probably
not increase the Feds fund rate over the target of 0-0.25 percent unless the unemployment
conditions improve or the falling dollar pose a credible threat. In short, the future economic
conditions would be conducive to cyclical companies like Comcast which can ride the high tides
along with the economy.
Industry Overview
The “cable and satellite” industry is primarily comprised of operators engaged as thirdparty distribution systems for broadcast programming. These operators are involved in the
delivery of visual, aural, or textual programming received from cable networks, local television
stations, or radio networks to consumers via cable or direct-to-home satellite systems on a
subscription or fee basis. The operators however, have very limited, or no proprietary
programming material of their own.viii In addition to distributing broadcast programming, some
companies in the industry have also diversified into the distribution of high speed internet
bandwidth and telephony services.
Product Segments - The various product segments of the cable industry can be broadly
classified as video (comprising of basic programming packages and premium programming
packages), high speed data, and voice. Since 2007, the video segment has been under pressure as
it is losing subscribers every quarter. These losses are largely attributed to emerging competition
from regional telecom companies including AT&T and Verizon, in addition to satellite TV
companies. However, despite a declining video subscriber base, the cable industry’s Multiple
System Operators (MSOs) have managed continuous growth in the video top-line due to
increasing adoption of their digital service offerings. The second largest contributor to their
revenues is from the high speed internet segment, while the voice segment is the smallest
contributor, though it is growing rapidly. Compared to video and Internet, voice is a relatively
new offering for cable providers. Growth in the number of subscribers for voice services remains
high for the cable operators, driven mainly by adoption by their current video and data
subscribers that have previously used a traditional telecom provider for voice services.
Market Segments - The two primary market segments which companies in the cable
industry cater to are households / education, and businesses / commercial. Industry data indicates
that 96% of total industry revenue is derived from the residential market, while only 4% comes
from the commercial and the government sectorix
Cost Structure - Given the primary role for operating in the industry is distributing
broadcast programming, the majority of costs are related to the acquisition of program content
6|Page
and production materials, and depreciating the programming rights and cable infrastructure.
Most of the program agreements are structured such that there is a base cost and an additional
flat fee or a percentage share of the subscription revenue. The programming expenses have a
direct relation with the number of subscribers. Therefore, as the number of subscriber increases
so does the programming costs to the distributors. Historically, cable operators have not been
successful in passing along increasing programming costs to consumers. Additional cost also
arises from marketing and advertisement expenses as competition between the various players in
the industry is high. Figure 6 (at the bottom of the page) lists downs the different parts of the cost
structure.
Item
Cost %
Depreciation
29.5%*
Program costs
26.4%*
Wages
15.9%*
Utilities
0.8%*
Rent
0.7%*
Purchases
0.6%*
Other
23.6%*
Profit
2.5%*
x
Capital Intensity - The industry has high capital costs associated with cable, fiber optic
network supply, and maintenance. The recent upgrade from the analog to digital cable format is
also a significant investment.
Regulations - The industry is heavily regulated by a combination of legislation and
controls at all levels of the government namely the Federal, State and Local. The major regulator
of the industry is the Federal Communications Commission (FCC). The FCC monitors industry
ownership and control to restrain potential market dominance, in addition to imposing
restrictions on content and program diversity. The FCC also monitors technological compliance
to insure non-interference with other telecommunications signals. Its social responsibility charter
requires operators to report on equal opportunity policies, measures, and outcomes. While basic
cable rates are monitored by the FCC, premium cable rates (those above basic cable services) are
not.
Industry outlook & Comcast
I believe that as competition further intensifies and the different players start providing
similar offers, the communication services would be increasingly viewed as a “commodity” by
consumers and the main drivers of demand would be price, along with speed (for internet
consumers) and reliability(for phone customers). This would probably lead to a waning of
pricing power and force the industry players to move towards a “low cost” strategy. Keeping in
mind Comcast’s constant efforts on reducing cost and its initiative for rapid deployment of
technology to enable high speed internet, I believe Comcast is favorably positioned for the
future.
7|Page
Investment Thesis
Fundamental Drivers
Change of sales mix towards higher margin voice and internet services
A close look at the sequential changes in number of customers of the different segments
suggests that there is a continuous shift in the sales mix towards the higher margin voice
and internet services. This is mainly fueled by the fully integrated bundled product
offerings which provide Comcast the potential to up sell.
In 3Q 2009, High speed internet adds outpaced that of the regional telecom companies by
almost a 2:1 margin while digital voice adds were the highest for the year.
With penetration level at 15%, I believe there is a huge growth potential for the digital
voice segment. As the housing market again picks up, I expect a greater uptick in the
voice subscriber base for Comcast since, I believe, it is in a better position to lock in
customers given its triple play product offering as compared to the telecom companies.
With the increase in popularity of online video streaming, I expect a surge in the required
bandwidth by consumers. Keeping in mind that, Comcast has successfully deployed
DOCSIS 3.0 in 65% of its footprint by the end of 3Q2009, xi I believe it has a superior
standing compared to not only its industry competitors but also the telecom companies.
The “All digital" initiative – increase in operating efficiencies, up sell potential
The “All Digital” project is an initiative to convert mode of delivery of cable television
from analog to digital. Analog delivery takes up more space on the network. For every analog
channel, Comcast can deliver 10-15 standard definition Digital Channels or 2-3 High Definition
channels.xii
The “All digital” project is gaining acceptance as the number of customers shifting to
digital delivery of cable television is increasing. The increase is also acting as an offset to
the overall decrease in basic video subscribers.
The digital mode of delivery not only frees up space but also increases the picture quality.
The whole digital experience also paves way to potential up selling opportunity towards
more profitable services like the Video on Demand service.
In addition to all the product benefits, the digital conversion also creates operating
efficiencies by allowing automation of many activities which previously required a
technician. This complements Comcast’s the cost reduction initiatives.
Growth potential in commercial space
Comcast is focusing on providing communication services to small and medium sized
business through its Business Services division. This division is realizing consistent yearover-year revenue growth of 40-50% over the last 18 monthsxiii
I believe there is a huge growth potential in this space as it is a very new initiative in this
industry.
8|Page
Neutralizing the “Video over internet” threat
Comcast is investing a lot on DOCSIS 3.0/Wideband technology in order to put in place a
robust architecture which could enable downstream speed of up to 50mbps. This will not
only help Comcast to lure more broadband consumers but will also help neutralize the
threat to video streaming over internet. Video streaming requires a lot of bandwidth and
if the online content distribution model proves to be a hit, consumers will demand higher
bandwidth which in turn places Comcast in a better position as compared to DSL
services.
Comcast also have launched the “TV Everywhere” model which allows Comcast
subscribers to watch missed episodes on the internet. Although, this is a great move to
build capabilities for online content distribution, it has the potential risk of cannibalizing
Comcast’s present efforts to sell services like DVR.
Financial Analysisxiv
Profitability Analysis
Horizontal comparative analysis
A cursory glance at the numbers shows somewhat flat returns per dollar of asset, equity
and overall invested capital for the last three years. This can be simply explained by the flat
growth in net income which is in turn driven by high interest expense charges on debt taken in
2006 as part of the growth initiative to capitalize the popularity of triple play offering.
Additionally, the prevailing macroeconomic circumstances slowed things down a bit.
The slight growth in the EBITDA margin as compared to the growth in the Gross Profit
Margin indicates decreasing SG&A expenses as a result of the efficiencies created by the
bundled product offerings; for e.g. decreasing marketing expenses as all of the three products can
be advertised together. Moreover, the net profit margin when compared to the EBITDA margin
clearly indicates the impact of depreciation and amortization in this industry.
Return on Assets
Net Profit Margin
Total Asset Turnover
Financial Leverage
Return on Equity
Return on Invested Capital
Gross Profit Margin
EBITDA Margin
Net Operating Margin
FYE2004
0.9%
5%
0.18
2.50
2.3%
1.5%
63.4%
37.4%
14.7%
FYE2005
0.9%
4%
0.20
2.53
2.3%
1.4%
64.4%
38.3%
16.7%
FYE2006
2.3%
10%
0.23
2.67
6.1%
3.6%
60.7%
37.8%
18.5%
FYE2007
2.3%
8%
0.27
2.73
6.2%
3.5%
60.6%
38.1%
18.1%
FYE2008
2.3%
7%
0.30
2.77
6.3%
3.5%
60.7%
38.3%
19.7%
(The sudden increase in the profitability numbers from 2005-2006 and beyond is because of the introduction of bundled product
offering in 2006 which was an instant hit)
9|Page
Competitive analysis (2008)
In terms of profitability as well as margins, Comcast takes the cake. As compared to its
competitors, it has successfully sailed through the economic crisis and has been able to maintain
pretty stable returns and comparatively high margins. Focused marketing efforts and offers like
the free analog to digital upgrade, helped Comcast to maintain growth in broadband and voice
segment while offsetting the basic video subscriber losses.
CMCSA
Return on Assets
2%
Net Profit Margin
7%
Total Asset Turnover
0.30
Financial Leverage
2.77
Return on Equity
6%
Return on Invested Capital
3%
Net Gross Margin
61%
EBITDA Margin
37%
Net Operating Margin
20%
TWC
-15%
-43%
0.36
2.79
-43%
-21%
53%
36%
18%
CVC
-2%
-3%
0.77
(1.75)
4%
-4%
59%
34%
10%
Efficiency Analysis
Horizontal comparative analysis
The turnover ratios show a steady increase in efficiency as Comcast is increasingly able
to make more money for every dollar of fixed or total asset. The slight drop in the cash turnover
ratio is as a result of negative cash flow in FYE 2007 which decreased the FYE 2008 beginning
balance of cash.
The decreasing trend of the accounts receivable turnover days shows that Comcast is able
to efficiently manage its credit sales and is able to get the money from their customers sooner.
The decreasing trend in the accounts payable turnover days can probably be attributed to
the current macroeconomic conditions as credit terms become tighter.
Cash Turnover Ratio
Total Asset Turnover
Fixed Asset Turnover
Accounts Receivable Turnover (days)
Accounts Payable Turnover (days)
SG&A/Sales
FYE2004
43
0.18
1.03
18
39
26%
FYE2005
22
0.20
1.19
17
37
26%
FYE2006 FYE2007 FYE2008
20
32
29
0.23
0.27
0.30
1.17
1.31
1.40
18
18
17
37
37
36
23%
22%
22%
Competitive analysis
As compared to its competitor, Comcast seems to be better at cash utilization. However,
its ability to generate sales by using its assets is comparatively lower. Comcast’s low total asset
turnover indicates that may be it has overestimated some of the intangible assets acquired as part
of acquisitions.
10 | P a g e
Comcast has the lowest A/R turnover days and the highest A/P turnover days. This
suggests that Comcast is much more efficient in managing receivables and payables as compared
to its competitors. By maintaining low receivable turnover days and high payable turnover days,
Comcast is essentially enjoying an interest free loan.
CMCSA
Cash Turnover Ratio
28.67
Total Asset Turnover
0.303
Fixed Asset Turnover
1.40
Accounts Receivable Turnover (days)
17.43
Accounts Payable Turnover (days)
35.85
SG&A/Sales
22%
TWC
3.16
0.359
1.27
18.10
22.78
17%
CVC
22.40
0.771
2.08
30.53
18.73
24%
Liquidity Analysis
Comparison to previous years
Although Comcast has a low level of current liability as compared to its total asset base,
it is very significant when compared to its current assets. The current asset ratio of 0.42 for FYE
2008 suggests that it has 42 cents for every dollar of liability coming due in the next twelve
months. It indicates that in case of an emergency, Comcast may be in a dire position to pay off
its current debt. The high current liability is because of its high rate of borrowing. The borrowed
funds are mainly for used for acquisition, to pay for share buy backs or for capital expenditures.
A look at the actual cash flows, however, speaks a different story. Comcast has enough
cash flow from operations to pay for the current liabilities, if need be.
Current Liability / Total assets
Cash Ratio
Quick Ratio
Current Ratio
Cash flow ops / Current liabilities
FYE2004
8.2%
0.23
0.343
0.41
-
FYE2005
6.3%
0.17
0.322
0.43
0.56
FYE2006 FYE2007 FYE2008
6.5%
7.0%
7.9%
0.41
0.13
0.14
0.615
0.340
0.322
0.72
0.46
0.42
1.01
1.22
1.29
Competitive analysis
A comparison among the competitors reaffirms the fact that Comcast has the lowest
liquidity ratios in the Industry but it has enough cash flow from operations to satisfy the current
liabilities.
CMCSA
Current Liability / total assets
8%
Cash Ratio
0.14
Quick Ratio
0.32
Current Ratio
0.42
Cash flow ops / Current liabilities
1.29
TWC
6%
1.90
2.19
2.32
1.84
CVC
24%
0.22
0.48
0.81
0.59
11 | P a g e
Solvency Analysis
Comparison to previous years
Even though the increasing trend of the debt-equity ratio seems alarming, a glance at the
debt-asset ratio neutralizes the threat. The total debt of the company is not even 30% of its total
asset base. Moreover, the interest coverage ratio for FYE 2008 indicates that Comcast’s
operating income is more than 1 and half times its interest expense which gives it the status of a
safe and solvent entity.
Debt to Equity
Debt to Assets
Interest Coverage Ratio
FYE2004
0.56
0.23
0.930
FYE2005
0.57
0.23
0.958
FYE2006 FYE2007 FYE2008
0.70
0.75
0.80
0.26
0.28
0.29
1.741
1.900
1.664
Competitive analysis
Comcast has the lowest debt-equity and debt to asset ratio among its peers. This indicates
the highly leveraged nature of the cable industry.
CMCSA
Debt to Equity
0.80
Debt to Assets
0.29
Interest Coverage Ratio
1.66
TWC
1.03
0.37
3.24
CVC
(2.10)
1.20
0.93
Cash Flow Analysis
Comparison to previous years
A glance into the financing section of the cash flow statement shows that Comcast is
involved in constant borrowing as well as steady repayment of previous debt. There is also a
component of regular share repurchase. Moreover, Comcast started paying dividends from 2008
and it currently pays around 68 cents on the dollar
The main ticket item in the investing section is the capital expenditure. Comcast has been
investing a lot on the cable network as well as on deployment of technologies like DOCSIS.
Comcast is involved in a lot of strategic acquisitions as well although it experienced a downward
trend after it bought E! Entertainment television from Disney in 2006.
Projections
Earnings forecast
The table below compares my estimates for EPS, revenue and EBIT to the consensus estimates.
As evident from the table, I am slightly aggressive towards my long term outlook of the company and I
believe there is a lot of potential for top line as well as bottom line growth, especially with the current low
penetration levels of high margin services like voice and internet.
12 | P a g e
Year
EPS Estimates ($)
Consensus Estimates
Low
High
Revenue Estimates ($)
Consensus Estimates
Low
High
EBIT Estimates ($)
Consensus Estimates
Low
High
2008
0.86
34,256
6,732
2009E
1.18
1.18
1.09
1.25
35,782
35,552
35,410
35,664
7,365
7,153
7,120
7,177
2010E
1.23
1.2
1.1
1.34
37,551
36,731
35,753
37,499
7,784
7,647
7,427
8,075
2011E
1.40
40,051
(Please refer to the attached income statement for a detailed view)
Revenue Forecast
To dig a little deep into the model, I divided the revenue from the cable division (which
accounts for almost 95% of the total revenue) into its constituent business segments and further
divided the business segments into number of customers and average revenue per unit (ARPU).
To obtain the forecasted revenue for the years 2009-2011, I forecasted the growth in ARPU and
the customer base and rolled them together to get the segment revenue which was further rolled
up to get the revenue of the cable division.
To reflect the continuous loss of video customers, I modeled in a decline of 4% for 2009
leveling it off to a decline of 2% by 2011 as I believe the increase of digital customers will help
offset the overall decrease in subscribers. For internet and voice services, I have used a
subscriber growth rate of 5% and 15% respectively for the year 2009. If compared to the growth
rates as of 3rd quarter, these numbers can be considered conservative (Figure 7 shows the
trending schedule of Comcast for the 3rd quarter). I have also used very conservative ARPU
growth.
EBIT Forecast
For the cable division, I used an EBIT margin of 21% for 2009 and grew it slowly to 23%
by 2011. Keeping in mind the favorable changes in sales mix towards the higher margin services,
I believe my forecast is conservative, at least in the short term.
Even after using such aggressive estimates, as compared to the street, my EPS numbers
are almost in line with consensus mainly because I have not factored in any future share
buybacks which seems to be a regular activity for Comcast. Moreover, I have also used a
conservative tax rate of 40%.
In my opinion, the street seems to be underestimating the numbers a bit. This probably
can be explained by its short term view which is currently mired by the doubts about the
prevailing macroeconomic conditions.
13 | P a g e
Valuation Analysisxv
Sector Valuation (Consumer Discretionary)
In absolute basis, looking at the forward PE, P/S and the P/CF ratios, the consumer
discretionary sector seems to be slightly undervalued, although relative to the index, it seems to
be fairly valued. The extremely high current trailing P/E ratio can be explained by the low
earnings during the last few quarters due to the current macroeconomic conditions. The high P/B
ratio indicates an inflated price which can be attributed to the current rally of the stock market.
Overall, the sector seems to be attractive especially after looking at the forward P/E ratio
which seems to still factor in the uncertainty of economic growth.
Absolute
Basis
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High Low Median Current
53.7
44.1
5.0
1.0
14.3
17.2
15.9
1.5
0.4
5.5
21
19.6
2.4
0.9
9.3
49.7
18.1
3.1
0.7
8.9
Relative to
S&P500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High Low Median Current
3.9
3.0
1.4
0.7
1.0
0.69
.75
0.7
0.4
0.7
1.2
1.2
0.8
0.6
0.8
2.7
1.1
1.4
0.6
0.8
Industry Valuation (Cable & Satellite)
The cable and satellite industry looks really cheap relative to the index as all the
multiples are sufficiently below the median. However, on an absolute basis, it seems to be
undervalued in terms of P/S and P/CF and fairly valued in terms of forward earnings. In other
words, the industry is attractive in the universe of S&P , although it might have a few overvalued
companies within itself.
Absolute
Basis
P/Trailing E
P/Forward
E
P/B
P/S
P/CF
High
Low Median Current
189.5 14.2
17.4 12.8
40.5
14.3
15.8
14.3
Relative to
S&P500
P/Trailing E
P/Forward E
1.6
3.0
8.0
1.4
2.1
5.9
1.6
1.2
5.0
P/B
P/S
P/CF
1.1
1.0
3.8
High Low Median Current
10.1
1.6
0.87
0.81
2.5
1.0
0.87
0.85
0.8
1.8
0.8
0.7
1.0
0.5
0.8
1.5
0.6
0.7
1.1
0.5
Company Valuation
Comcast currently looks really cheap across all the multiples. Assuming reversion to the
median, Comcast clearly has a lot of upside potential and hence the resounding “BUY” rating for
the stock.
14 | P a g e
Relative to
Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
EV/EBITDA
High Low
Median Current
1.2
1.1
0.8
1.5
1.1
21.2
1.1
1.0
0.8
1.4
1.0
9.4
0.78
0.95
0.7
1.0
0.9
5.5
0.89
0.98
0.7
1.1
0.9
5.5
Relative to
S&P 500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
EV/EBITDA
High Low Median Current
24.8
23.3
1.6
3.0
3.3
21.2
0.77
0.84
0.5
1.1
0.4
5.5
2.8
2.4
0.6
2.2
1.2
9.4
0.77
0.84
0.5
1.1
0.4
5.5
A quick determination of the expected target price based on Comcast’s absolute multiples
suggests a range of $18.53 - $24.96 per share. The target multiples assumed for this calculation
(as shown in column F) are pretty conservative as compared to the median.
Absolute
Valuation
A.
P/Forward E
P/S
P/B
P/EBITDA
P/CF
High
Low Median Current
B.
435.4
6.8
8.2
19.24
56
C.
13
1.2
0.9
2.98
4.2
D.
36.8
3.4
1.7
7.87
13.1
E.
12.41
1.18
0.99
3.3
4.6
Target
Multiple
Target
value/share
F.
17
2
1.4
4.3
7
G.
1.09
12.48
13.49
4.5
3.22
Target
Price
(F x G)
H.
18.53
24.96
18.89
19.35
22.54
(The insanely high forward P/E ratio was because of a data error in Baseline)
Discounted Cash Flow
Using a DCF model, the intrinsic value of Comcast was calculated as $19.94 per share.
A number of assumptions were used for the model as explained below.
I assumed a revenue growth rate of around 7% by 2011and leveled it off to around 3% by
2019 assuming a mature high speed internet and the voice segments as well as possible loss
of revenue from new reliable technologies.
I believe Comcast would be able to enjoy the positive effects of efficiency on its margin as
the Digital initiative completes and their commercial business grows. So, I assumed a EBIT
margin of 15% and tapered it down to 7% by 2019
To simplify the model and remain conservative, I assumed a constant rate for interest and a
constant tax rate. Moreover, I also used a low value for change in working capital for the
same reasons.
To remove any affect from depreciation and amortization, I assumed that D&A gets
cancelled out with any additional capital expenditure in the long run.
I assumed a discount rate of 10.5% as I think Comcast’s business is not that risky. However,
there are some risks related to regulations, advent of new technology and consumer spending
habits.
I believe that Comcast has a pretty stable cable business and the growth potential is mainly in
the internet and the voice segments. Assuming that these services will be pretty stable by
2019, I used a terminal growth rate of 3%.
15 | P a g e
Sensitivity Analysis
Discount rate
A small sensitivity analysis was conducted to show the affect of different discount rates
and terminal growth rates on the value of the stock. The analysis is pretty consistent with the
multiple valuations done earlier and has a very similar range of prices.
$ 19.94
10.00%
10.20%
10.40%
10.60%
10.80%
11.00%
3.00%
21.14
20.64
20.17
19.72
19.29
18.88
Terminal
3.50%
21.88
21.33
20.80
20.31
19.84
19.40
Growth Rate
4.00%
4.50%
22.75
23.77
22.13
23.06
21.54
22.40
20.99
21.79
20.48
21.21
19.99
20.67
5.00%
24.99
24.18
23.43
22.73
22.07
21.46
Potential Risks/Concerns
Increasing competition from RBOCs and Satellite – The competition from regional telecom
companies like AT&T and Verizon as well as from satellite television companies like Dish
TV and Direct TV are increasing mainly in the video segment. This may continue to eat on to
Comcast’s subscriber base if they are not able to differentiate their products in some aspects
or if they are unable to build the perceived differentiation.
Limited Wireless Capability – Wireless service is a big threat to Comcast’s services as they
have very limited, if any, capability in this sector. Although Comcast is waking up to this
call, if they don’t work fast they might be left behind as wireless voice services becomes
more reliable and efficient.
Regulatory threat – Change in incumbent regulation can also be perceived as a threat in this
heavily regulated industry. Any change in regulation may force the firm to offer services that
compromise profitability.
Recommendation
Using the results from the DCF model and the multiples analysis suggests that the
intrinsic value of Comcast’s share price lies anywhere between $18.53 – 24.99. A quick
calculation based on the share price dated 01/01/2009, shows a maximum upside of 68% and a
minimum upside of 25% in the investment. Hence, my final recommendation is a resounding
“BUY”.
Current Price
Implied equity value/share
Upside/(Downside)
DCF
14.86
19.9
Low
14.86
18.5
High
14.86
25.0
34%
25%
68%
16 | P a g e
Summary
Comcast is a well managed company with a lot of growth potential especially in the voice
and internet segments. The current change in sales mix towards these higher margin
businesses looks promising. The commercial segment also looks promising. It warded off
the recent financial turmoil with grace and it is ready to enjoy any uptick in the economy.
Its continuous efforts of cost reduction as well as rapid deployment of new technology
have positioned it as a strong player in the industry.
There are a few potential risks associated with it mainly the fierce competition from RBOCs and
the satellite television and the effect of any future regulations. However, these risks are not that
severe and Comcast is aware of the same and working towards neutralizing them.
In term of numbers, its financial statements look good. It is the most profitable in the industry. It
has a liquidity issue, however, that can be explained by the nature of the industry it is in. It has
been constantly paying debt and starting from 2008 has started paying dividends. In terms of
multiples it looks amazingly cheap in both absolute as well as relative terms with respect to the
industry and the S&P 500.
A DCF analysis on Comcast suggest that it is currently undervalued and indicates an upside
potential of 34% (based on the share price dated 01/01/2009) while other numbers suggest a
maximum upside of 68% and a minimum upside of 25%. In other words, it would be a rational
decision to invest in Comcast as soon as possible.
17 | P a g e
Figure 1: Income Statement & Segment Information
Income Statement of Comcast Corporation
(in millions, except share data)
Revenue
Operating (excluding depreciation and amortization) Expenses
Gross Profit
Selling, general and administrative
EBITDA
Depreciation
Amortization
Operating income (EBIT)
Investment income (loss), net
Equity in net income (losses) of affiliates, net
Other income (expense)
Interest expense
Earnings before taxes (EBT)
Tax rate
Income tax expense
Net income from continuiing operations before minority Interest
Minority interest
Net income from continuing operations
Income from discontinued operations, net of tax
Gain on discontinued operations, net of tax
Net income
Weighted average shares outstanding
Basic
Diluted
EPS
Basic
Diluted
FYE 2004 FYE 2005 FYE 2006 FYE 2007 FYE 2008 FYE 2009E FYE 2010E FYE 2011E
$ 19,221 $ 21,075 $ 24,966 $ 30,895 $ 34,256 $ 35,782 $ 37,551 $ 40,051
7,036
7,513
9,819
12,169
13,472
12,185
13,562
15,147
18,726
20,784
5,005
5,490
5,705
6,940
7,652
7,180
8,072
9,442
11,786
13,132
3,197
3,413
3,828
5,107
5,457
1,154
1,138
995
1,101
943
2,829
3,521
4,619
5,578
6,732
7,365
7,784
8,721
472
89
990
601
89
716
751
801
(81)
(42)
(65)
(63)
(39)
(39)
(39)
(39)
397
(53)
114
522
(285)
224
127
182
(1,874)
(1,795)
(2,064)
(2,289)
(2,439)
(2,505)
(2,629)
(2,804)
1,743
1,720
3,594
4,349
4,058
5,761
5,994
6,862
46.0%
50.8%
37.5%
41.4%
37.8%
40%
40%
40%
(801)
(873)
(1,347)
(1,800)
(1,533)
(2,304)
(2,398)
(2,745)
942
847
2,247
2,549
2,525
3,457
3,597
4,117
$
(14)
928
42
970 $
(19)
(12)
38
22
828
2,235
2,587
2,547
100
103
195
928 $ 2,533 $ 2,587 $ 2,547 $
22
3,479
22
3,619
22
4,139
3,479 $
3,619 $
4,139
3,360
3,375
3,295
3,312
3,160
3,180
3,098
3,129
2,939
2,952
2,939
2,952
2,939
2,952
2,939
2,952
0.29
0.29
0.28
0.28
0.80
0.80
0.84
0.83
0.87
0.86
1.18
1.18
1.23
1.23
1.41
1.40
Revenue (Consensus)
EBIT (Consensus)
EBT (Consensus)
EPS (Consensus)
35,500
7,153
5,010
1.18
36730
7647
5620
1.2
-7%
2%
1%
-7%
2%
0%
Common size Statement
Revenue
Operating (excluding depreciation and amortization) Ex
Gross Profit %
Selling, general and administrative
EBITDA
Depreciation
Amortization
Operating Margin
Interest expense
Investment income (loss), net
Other income (expense)
Income before income taxes
Income tax expense
Profit Margin - Continuing Operations
100%
37%
63%
26%
37%
17%
6%
15%
10%
2%
2%
9%
4%
5%
100%
36%
64%
26%
38%
16%
5%
17%
-9%
0%
0%
8%
-4%
4%
100%
39%
61%
23%
38%
15%
4%
19%
-8%
4%
0%
14%
-5%
9%
100%
39%
61%
22%
38%
17%
4%
18%
-7%
2%
2%
14%
-6%
8%
100%
39%
61%
22%
38%
16%
3%
20%
-7%
0%
-1%
12%
-4%
7%
-7%
2%
0%
18 | P a g e
Segments of Comcast Corporation
(in millions, except share data)
Revenue:
Video
High Speed Internet
Phone
Advertising
Other
Franchise fees
Cab le Segment
Programming Segment
Corporate and other
Eliminations
Tota l Reve nue
EBITDA:
Cab le Segment
Programming Segment
Corporate and other
Eliminations
Total EBITDA
Depreciation and Amortization:
Cab le Segment
Programming Segment
Corporate and other
Eliminations
Total De pre ciation a nd Amortiza tion
EBIT:
Cab le Segment
Programming Segment
Corporate and other
Eliminations
Total EBIT
Capital Expenditure:
Cab le Segment
Programming Segment
Corporate and other
Eliminations
Total Ca pital Ex penditure
FYE 2004 FYE 2005 FYE 2006 FYE 2007 FYE 2008 FYE 2009E FYE 2010E FYE 2011E
12,211
2,938
620
1,206
654
601
18,230
787
332
(128)
$ 19,221
12,887
3,737
617
1,249
859
638
19,987
919
315
(146)
$ 21,075
15,062
4,953
911
1,468
927
721
24,042
1,054
412
(542)
$ 24,966
17,686
6,402
1,766
1,537
1,087
827
29,305
1,314
515
(239)
$ 30,895
18,849
7,225
2,649
1,526
1,283
911
32,443
1,426
644
(257)
$ 34,256
$
6,940
269
(310)
281
7,180
$
7,947
272
(302)
155
8,072
$
9,704
241
(357)
(146)
9,442
11,922
286
(425)
3
$ 11,786
13,170
362
(399)
(1)
$ 13,132
$
4,102
162
105
(18)
4,351
$
4,346
154
71
(20)
4,551
$
4,657
166
80
(80)
4,823
$
5,924
223
100
(39)
6,208
$
6,125
199
107
(31)
6,400
$
2,838
107
(415)
299
2,829
$
3,601
118
(373)
175
3,521
$
5,047
75
(437)
(66)
4,619
$
5,998
63
(525)
42
5,578
$
7,045
163
(506)
30
6,732
7,514
179
(358)
30
7,365
8,261
244
(751)
30
7,784
9,212
280
(801)
30
8,721
$
5,993
35
130
6,158
$
5,545
44
161
5,750
5,607
76
160
-
$
4,244
16
31
104
4,395
5,257
64
150
-
$
3,409
16
38
158
3,621
5,010
54
143
-
$
3,394
17
21
228
3,660
$
19,000
7,662
3,199
1,602
1,411
947
33,822
1,554
676
(270)
35,782
$
5,725
208
111
(31)
$
$
6,013
5,206
19,252
8,206
3,742
1,698
1,552
1,023
35,474
1,663
710
(297)
37,551
$
6,008
248
116
(31)
$
$
6,341
5,471
19,810
8,872
4,536
1,817
1,708
1,115
37,858
1,780
746
(332)
40,051
6,408
280
124
(31)
$
$
6,782
5,843
As % of total Reve nue
Depreciation and Amortization:
Cab le Segment
Programming Segment
Corporate and other
Total De pre ciation a nd Amortiza tion
EBIT:
Cab le Segment
Programming Segment
Corporate and other
Total EBIT
Capital Expenditure:
Cab le Segment
Programming Segment
Corporate and other
Total Ca pital Ex penditure
21%
0.84%
0.55%
23%
21%
0.73%
0.34%
22%
19%
0.66%
0.32%
19%
19%
0.72%
0.32%
20%
18%
0.58%
0.31%
19%
16%
0.58%
0.31%
16%
0.66%
0.31%
16%
0.70%
0.31%
15%
0.56%
-2%
15%
17%
0.56%
-2%
17%
20%
0.30%
-2%
19%
19%
0.20%
-2%
18%
21%
0.48%
-1%
20%
21%
0.50%
-1.00%
22%
0.65%
-2.00%
23%
0.70%
-2.00%
18%
0.09%
0.11%
19%
16%
0.08%
0.18%
17%
17%
0.06%
0.12%
18%
19%
0.11%
0.42%
20%
16%
0.13%
0.47%
17%
14%
0.15%
0.40%
14%
0.17%
0.40%
14%
0.19%
0.40%
6%
27%
0%
4%
31%
6%
10%
17%
-5%
14%
10%
17%
33%
48%
18%
8%
13%
20%
15%
31%
271%
18%
17%
29%
94%
5%
17%
15%
22%
25%
25%
-56%
24%
7%
13%
50%
-1%
18%
10%
11%
9%
25%
8%
11%
1%
10%
21%
1%
7%
17%
3%
8%
21%
5%
10%
4%
6%
10%
8%
7%
10%
9%
4%
5%
7%
9%
5%
5%
7%
5%
10%
7%
5%
12%
4%
5%
7%
As % of Y/Y Grow th
Revenue:
Video
High Speed Internet
Phone
Advertising
Other
Franchise fees
Cab le Segment
Programming Segment
Corporate and other
Eliminations
Tota l Reve nue
-
Subscribe r Base ( In millions)
Homes passed(a)
Video
37.80
38.60
45.70
48.70
50.58
20.50
20.30
-1.0%
23.40
15.3%
24.76
5.8%
24.18
-2.3%
23.215
-4.00%
22.402
-3.50%
21.954
-2.00%
Available homes(e)
Internet customers
Y/Y Growth
Penetration(c)
Phone
37.10
6.60
38.20
8.10
23%
0
45.20
11.00
36%
0
48.10
13.59
24%
0
50.30
14.90
10%
0
15.645
5%
16.427
5%
17.413
6%
Available homes(e)
Phone customers
Y/Y Growth
Penetration(c)
8.90
1.10
19.60
1.20
9%
0.06
31.50
2.40
100%
0.08
42.20
4.60
92%
0.11
46.70
6.50
41%
0.14
7.475
15%
8.746
17%
10.495
20%
53
7%
38
3.6%
43
-8.8%
54
1%
38
-2.4%
32
-26.2%
60
11%
39
4.6%
32
1.1%
65
9%
40
2.96%
34
6.2%
Video customers(b)
Y/Y Growth
High-speed Internet
Average Revenue Per Unit per month
Video
Y/Y Growth
High speed internet
Y/Y Growth
Phone
Y/Y Growth
0
0.12
50
37
47
68
72
75
5%
5%
5%
41
1%
36
42
2%
36
42
2%
36
5%
0%
1%
19 | P a g e
Figure 2: Discounted Cash Flow
Comcast Corporation
Analyst: Pinjalim Bora
10/20/2009
Year
Revenue
2009E
35,782
% Grow th
EBT
EBT Margin
Interest
Interest % of Sales
Taxes
Tax Rate
Net Income
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Capex % of sales
Free Cash Flow
5,761
16.1%
2,505
7.0%
2,304
40.0%
5,961
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
6,013
16.8%
16.0%
2,629
7.0%
2,398
40.0%
6,225
6,341
16.9%
10.5%
3.0%
2011E
2014E
40,051
6.7%
6,862
17.1%
2,804
7.0%
2,745
40.0%
6,921
11.2%
6,782
16.9%
79
32
125
0.2%
0.1%
0.3%
5,206
14.6%
6,846
5,471
14.6%
7,127
4.1%
35,146
23,711
58,857
15.72%
12.5
16.9
6.4
7.7
Shares Outstanding
2,952.0
Current Price
Implied equity value/share
Upside/(Downside) to DCF
$ 14.75
$ 19.94
35.2%
Debt
Cash
Cash/share
5,994
4.4%
% Grow th
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
37,551
4.9%
% Grow th
Add Depreciation/Amort
2010E
Terminal Discount Rate =
Terminal FCF Growth =
5,843
14.6%
7,984
12.0%
60%
40%
100%
2012E
2013E
2015E
2016E
2017E
2018E
42,855
45,854
48,147
50,555
52,577
54,680
56,867
58,573
7.0%
7.0%
5.0%
5.0%
4.0%
4.0%
4.0%
3.0%
6,428
6,420
5,778
5,055
5,258
4,921
3,981
4,100
15.0%
14.0%
12.0%
10.0%
10.0%
9.0%
7.0%
7.0%
2,571
2,751
2,889
3,033
3,155
3,281
3,412
3,514
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
3,600
3,668
3,467
3,235
3,365
3,281
2,957
3,046
40.0%
40.0%
40.0%
40.0%
40.0%
40.0%
40.0%
40.0%
5,400
5,503
5,200
4,853
5,047
4,921
4,436
4,569
-22.0%
1.9%
-5.5%
-6.7%
4.0%
-2.5%
-9.9%
6,420
6,741
7,078
7,361
7,655
7,961
8,200
14.0%
14.0%
14.0%
14.0%
14.0%
14.0%
14.0%
14.0%
86
92
96
101
105
109
114
117
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
6,000
6,420
6,741
7,078
7,361
7,655
7,961
8,200
14.0%
14.0%
14.0%
14.0%
14.0%
14.0%
14.0%
14.0%
5,485
5,594
5,296
4,954
5,153
5,031
4,549
4,686
-31.3%
2.0%
-5.3%
-6.5%
4.0%
-2.4%
-9.6%
Terminal Value
10.5
14.2
5.5
6.6
3.0%
6,000
Free Cash Yield
12.0
16.3
6.1
7.3
2019E
3.0%
64,352
7.28%
Terminal P/E
14.1
Terminal EV/EBITDA
7.8
32,456
1,195
0.40
20 | P a g e
Endnotes
i
Comcast 3Q 2009, Call transcript
Comcast 2008 10-K, item 1, pg 3
iii
Comcast 2008 10-K, item1, pg 3
iv
Comcast 3Q 2009, Call transcript
v
http://en.wikipedia.org/wiki/Consumer_confidence (Accessed:11/28/2009, 10am EST)
vi
http://www.conference-board.org/economics/consumerConfidence.cfm (Accessed:11/28/2009, 10am EST)
vii
http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm (Accessed:11/28/2009, 10am EST)
viii Cable, Internet & Telephone Providers in the US: 51322 (IBIS World industry report, November 10, 2009)
ix Cable, Internet & Telephone Providers in the US: 51322 (IBIS World industry report, November 10, 2009)
x
Cable, Internet & Telephone Providers in the US: 51322 (IBIS World industry report, November 10, 2009)
xi
Comcast 3Q 2009, Call transcript
xii
http://blog.comcast.com/2009/05/going-all-digital-tons-more-hd-and-a-faster-internet.html (Accessed:11/28/2009, 9pm EST)
xiii
Comcast 3Q 2009, Call transcript
xiv
The two main pure-play competitors Comcast has are Time Warner Cable and Cablevision Systems. There are other
companies like Dish TV and Direct group which competes in the video segment and AT&T and Verizon which completes in the
internet and voice business. For competitive analysis, however, I have included only the pure play firms in order to maintain an
apples-to-apples comparison.
ii
xvxv
The valuation analysis is based on multiples obtained from Baseline using a 10 year time period. Mean reversion has been
used as an assumption in the analysis.
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