Comcast Corporation NASDAQ: CMCSK/CMCSA

April 29, 2014 Volume XL, Issue IV Comcast Corporation NASDAQ: CMCSK/CMCSA

Dow Jones Indus: 16,535.37 Initially Probed: Volume XXII, Issue VII & VIII @ $16.25 S&P 500: 1,878.33 Last Probed: Volume XXXIX, Issue XI &XII @ $47.22 Russell 2000: 1,120.83 Trigger: Yes Index Component: S&P 500 Type of Situation: Consumer Franchise, Business Value

Price: $ 50.85 Shares Outstanding (MM): 2,603 Fully Diluted (MM) (% Increase): 2,645 (1.6%) Average Daily Volume (MM): 2.9 Market Cap (MM): $ 134,498 Enterprise Value (MM): $ 182,951 Percentage Closely Held: Brian Roberts: 33% Voting 52-Week High/Low: $ 52.95/37.49 5-Year High/Low: $ 52.95/12.85

Trailing Twelve Months

Price/Earnings: 22.1x Price/Stated Book Value: 2.6x Introduction Long Term Debt (MM): $ 48,453 Comcast’s (“CMCSK” or “the Company”) Implied Upside to Estimate of shares have performed well since we last featured Intrinsic Value: 39% them in our October 2010 issue of Asset Analysis Dividend: $ 0.90 Focus, increasing by 160% compared with a gain of Yield: 1.8% 59% for the S&P 500. At that time, we believed the uncertainties surrounding the Company’s pending purchase of a controlling stake in NBCU were creating Net Revenue Per Share: an overhang on the Company’s valuation. While the TTM $ 24.45 Company’s shares are clearly not as cheap as they 2013: $ 23.80 were back then, we believe there is a sizable gap 2012: $ 22.52 between the current share price and our estimate of its intrinsic value. Earnings Per Share: TTM $ 2.73 We believe that Comcast’s core Cable 2013: $ 2.56 Communications business is underappreciated as 2012: $ 2.28 investors focus on video subscriber challenges (elevated programming expenses and subscriber losses) while overlooking attractive growth Fiscal Year Ends: December 31 opportunities in its non-video business including Company Address: One Comcast Center broadband and businesses services. It should be noted Philadelphia, PA 19103 that Comcast’s Cable Communications segment (76% Telephone: 215-286-1700 of 2013 EBITDA) now derives over 50% of its revenue Chairman/CEO: Brian L. Roberts from non-video sources, up from 41% in 2008. Notably, these products and services command superior Clients of Boyar Asset Management, Inc. own 69,865 combined margins to Comcast’s video service and boast good shares of CMCSK and CMCSA at a cost of $17.27 per share. future growth opportunities. While we are under no Analysts employed by Boyar’s Intrinsic Value Research LLC own shares of CMCSK common stock. illusion that Comcast’s video business is anything but mature, the Company has posted two consecutive

- 39 - Comcast Corporation quarters of net subscriber additions following 26 consecutive quarters of declines. Results have been aided by the Company’s recent deployment of its X1 platform, a cloud based user interface that has been received very favorably by consumers. We would not be surprised if the deployment helps stabilize, if not increase, the Company’s video business going forward.

The timing of the Company’s acquisition of a controlling stake in NBCU could not have been better. NBCU’s EBITDA has increased by over 50% since the deal was announced in 2009. Despite the improvement at NBCU, we believe there are plenty of opportunities to meaningfully boost profitability in the coming years. NBCU’s Cable Networks, which are the crown jewel of the NBCU portfolio, have been an underperformer in recent years, but should benefit from higher distribution and advertising revenue as management monetizes the gap between the profitability of its networks and similarly rated peers. Management is in the process of executing a successful turnaround of its Broadcast Television business evidenced by the fact that NBC is poised to finish the latest season as the number 1 rated network in the highly coveted 18-49 demographic following several years of underperformance. In our view, the ratings improvement at NBC should allow the Company to generate higher advertising and retransmission revenues. The Company’s Theme Park business has been another bright spot and generated over $1 billion in EBITDA in 2013 compared with $591 million in 2010, while EBITDA margins have expanded to 44.9% from 36.9%. While the economic recovery has aided recent results, so has the investments management has made in the business subsequent to acquiring control in 2011, which should help the Theme Parks sustain momentum.

At current levels, Comcast trades at 8.3x trailing EBITDA and just 7.2x our projection for 2016E EBITDA. In our view this valuation is inconsistent with the Company’s first-rate media properties, which include the nation’s largest multichannel video provider and a collection of well regarded cable network properties and entertainment assets. In determining our estimate of Comcast’s intrinsic value, we have employed a sum of the parts approach. We believe that we have employed a conservative approach, both with the multiples that we have applied and in our projections. Based on our projections, our estimate of Comcast’s intrinsic value is $71 a share, representing 39% upside from current levels. We believe there could be significant upside to our estimate as the Company benefits from the recently announced acquisition of Time Warner Cable. In our view, the Company is acquiring TWC at favorable price (6.6x EBITDA including cost synergies) with a significant opportunity to improve its operations. It should be noted that TWC’s margins are 500 basis points below those posted by Comcast’s Cable Communication segment. The combined Company’s newfound scale and larger geographic presence should also present opportunities to serve larger enterprises (both companies have little/no presence currently) and capture additional advertising revenues from national advertisers.

Proposed Time Warner Cable Transaction – Significant Cost and Revenue Synergy Opportunities On February 13 2014, Comcast announced that it had reached an agreement to acquire Time Warner Cable in an all stock transaction initially valuing Time Warner Cable at $158.82 a share (2.875 shares of CMCSA for each TWC share). The proposed transaction represented a 16% premium to Time Warner Cable’s closing price on February 12, 2014 and valued TWC at 7.9x 2014E EBITDA, roughly in-line with recent precedent cable transactions (see Appendix p. 61). Comcast noted that the TWC acquisition multiple declines to ~6.6x 2014E EBITDA when factoring in the $1.5 billion in operating efficiencies it expects to achieve by integrating the two companies. Comcast believes that the proposed TWC transaction is attractive because it is at the low end of precedent cable industry transactions (post synergies), offers the potential for double-digit IRR, and will be accretive to free cash flow within the first year after closing (excluding deal related expenditures). Management has pointed out that programming expenses represent the minority of synergies (a statement that is likely intended to appease the regulators) and it should be noted that there are no revenue synergies factored into the Company’s accretion or return analysis, which could provide additional upside. It should also be noted that there is no breakup fee, which could make it easy for Comcast to walk away from the transaction if the deal isn’t approved and/or it is contingent upon onerous conditions.

The Comcast bid for all of Time Warner Cable (note: there had been some press speculation that Comcast would team up with Charter in a joint bid for Time Warner Cable) was somewhat of a surprise and trumped a series of proposals made by Charter between July 2013 and January 2014, the last of which valued Time Warner Cable at $132.50 a share based on a mix of cash and stock. Charter is much smaller than TWC (4.2 million video subs vs. 11.1 million), but it had the backing of cable industry mogul John Malone, who had acquired a 27% stake in the cable operator through his controlled Liberty Media entity during March 2013.

- 40 - Comcast Corporation

Malone, who is famous for his leveraged equity return mantra, was intending to take advantage of the availability of cheap financing and balance sheet capacity at Liberty to help complete an acquisition of Time Warner Cable.

According to Charter, Time Warner Cable became a target because of its poor customer service track record, underperforming cable operations (in terms of key subscriber metrics) and lack of innovative products. Liberty’s Malone & Maffei reasoned that Charter’s management team, which is led by the highly regarded Tom Rutledge, would be able to benefit by improving Time Warner Cable’s operations. In addition, the shareholder base of both companies would benefit from Charter’s massive net operating loss carryforwards, which would be better utilized with the larger Time Warner Cable in the fold. After turning down Charter’s initial overtures, Time Warner Cable ostensibly reached out to Comcast about the potential for a merger between the two companies. According to an SEC filing, Comcast CEO Brian Roberts indicated in an October 2013 meeting with Time Warner Cable management that Comcast would be interested in acquiring Time Warner Cable.

Operational Efficiencies and Revenue Synergies The EBITDA margins generated by Time Warner’s cable systems are ~500 basis points below those posted by Comcast’s cable business (2013 Cable Communications EBITDA margin: 41.1% vs. TWC: 36.1%). Comcast should be able to close this gap through a combination of both revenue and cost savings presented by the proposed transaction. As noted above, Comcast intends to generate $1.5 billion of operating efficiencies and expects to realize approximately half of this amount ($750 million) in the first year after closing with 25% in each of the next two years. In addition, Comcast believes that it will also be able to generate $400 million in capex synergies thanks to the newfound purchasing power of the combined entity.

Growth and Value Creation from Operating Efficiencies $1.5B in Operating Efficiencies

Homes Passed 53,836 29,896 Video Penetration 40.3% 38.1% HSD Penetration 38.4% 38.9% Voice Penetration 19.9% 17.3% Cable EBITDA Margins 41.1% 36.1% Source: Company presentation, February 2014

A significant amount of the margin gap can be attributed to TWC’s underinvestment in its infrastructure. In recent years, Comcast has migrated all of its systems to all digital whereas time Warner cable has only converted approximately 20% of its footprint according to industry researcher SNL Kagan. Comcast’s investment in its cable plant has allowed it to provide its customers innovative services and maintain a robust broadband network, which has helped buoy its subscriber metrics relative to industry peers. For example, Comcast notes that its triple play penetration rate is 1,000 basis points above TWC’s. We believe that Comcast should be able to close this gap as well as other key subscriber metrics through cross selling and via the deployment of X1, Comcast’s cloud based entertainment platform. While we provide a detailed discussion of X1 later in this report, we note that the platform is helping to drive higher triple play penetration among its many benefits.

Although there appears to be plenty of opportunities on the residential side of the transaction, the biggest potential opportunity could come from the scale created by the combined entity, which could allow it to become a meaningful player in the enterprise voice and data communications market. The combination of TWC and Comcast would give the new company a presence in 19 of the top 20 designated market areas (DMAs) and 43 of the top 50 DMAs. In our view, the additional scale should allow the new entity to sell voice and data services to larger enterprise customers. While TWC currently serves enterprise customers, Comcast’s strategy has been focused on small/medium sized enterprises (less than 500 employees). These businesses typically have a regional presence and do not typically require a company to have a national presence. We would also - 41 - Comcast Corporation note that TWC/Comcast have a combined 2.8% share in the attractive wireless backhaul market, presenting the combined company with another meaningful growth opportunity. According to industry projections, the global mobile and wireless backhaul market is expected to increase at a 12% CAGR between 2013 and 2023 from $13.1 billion to $23.3 billion with the North American region representing the largest market opportunity. In addition to the enterprise opportunity from the larger footprint, the combined entities’ larger national presence could also boost its advertising business since its increased scale would provide an attractive alternative to national broadcasters.

Comcast Boasts Strong Acquisition Integration Track Record While integration of these two cable behemoths seems daunting, we would point out that Comcast has a proven track record of successfully integrating large scale acquisitions including AT&T Broadband (2003) and the Adelphia/TWC transaction (2006). In addition, Comcast has also shown that it has been able to integrate non-cable distribution properties given its success to date with NBCU.

Regulatory Approval Uncertainties The proposed transaction will likely face a great deal of scrutiny from regulators as the combined company will have significant market share in video (~30% market share) and broadband services (40%). In most regional markets, the Company’s market share will be significantly higher. In April, Comcast reached an agreement with Charter to divest ~3.9 million subs in a series of transactions that are contingent upon receiving regulatory approval for the TWC transaction. The divestitures are greater than the approximately 3 million subs that it said it would divest upon announcing the initial transaction and should help Comcast increase the chances of receiving regulatory approval. We view favorably the tax efficient nature of the proposed divestitures and asset swaps, which strengthens CMCSK’s presence in key markets including New York, Boston and Southern California, among others. It should be noted that the proposed divestitures would place Comcast’s video market share at under 30%, which is a prior cap level that was twice vacated by the courts (most recently in 2009). Comcast has gone out of its way to point out the combination will not result in any reduction in choice for consumers since it is not eliminating any competitors in any of its served markets (no zip code overlap in any market). In addition, Comcast has positioned the merger as pro-consumer since Time Warner Cable customers will be able to receive the next-generation of broadband, video, voice and related technologies that Comcast customers are currently enjoying. Comcast has made significant investments in its operations to deliver superior products and services to its customers. For example, Comcast’s most popular broadband tier is 25 Mbps vs. 15 Mbps at TWC and Comcast customers have access to over 1 million hotspots compared with TWC’s 29k. Comcast customers also have access to the state-of-the-art X1 user interface (discussed in a later section), a more comprehensive “on-demand” library (50k vs. 15k-20k), and 300k+ streaming options including 50 live streaming channels that can be viewed both inside and away from the home.

While we don’t believe that regulators will be too concerned with the Company’s video market share (there’s plenty of competition including satellite companies and online video distributors), the combined Company’s broadband presence is likely to receive a great deal of attention. Together, Comcast and TWC would have a broadband market share of 40% and pass approximately 60% of potential broadband customers. We would note, however, that there are plenty of broadband alternatives and, similar to the makeup of the Company’s video market, there is not expected to be any change in the number of providers offering broadband services. Within the top 20 metropolitan statistical areas, there are an average of 24 providers that offer broadband services in addition to CMCSK/TWC.

- 42 - Comcast Corporation

Broadband Providers in the Top 20 Metropolitan Statistical Areas (MSAs)

Source: National Broadband Map (www.broadbandmap.gov). Includes wireline, terrestrial fixed wireless, terrestrial mobile wireless, and satellite providers in the Top 20 MSAs with a reported "highest advertised download speed" of 3Mbps or more. Chicago-Joliet- Naperville, IL-IN-WI MSA information obtained from Broadband Illinois.

It is worth pointing out that the number of providers could experience pressure to the downside as the major telcos deploy fiber and no longer have an obligation to give resellers access to their networks.1 While this could reduce the number of broadband providers, it does provide an incentive for the incumbents to boost the capacity of their networks. In fact, recent comments by AT&T CEO Randall Stephenson suggest broadband competition is only going to become more intense: “Somebody invests in technology and it gives them an advantage and they ride it for a while. Somebody comes along and they invest. ... [Y]ou’re just going to continue to see bandwidth improvements over time. And it’s going to be a dogfight between us and cable for the next 20 years. I don’t see that changing. They will invest and they’ll step up. We’ll invest. It’ll go back and forth. But I feel really good that we’re doing very well against cable today.” 2

In addition to the ongoing broadband investments that are likely to be made by the telco incumbents, there are other firms including Google that are building fiber networks. In fact, eight of the nine next Google fiber networks are within the Comcast/TWC footprint (source FCC filing). Other sources of competitive broadband offering are likely to come from overbuilders (RCN, WOW!,etc.), municipal providers, and satellite broadband providers. We would also note that recent press reports suggesting that the FCC may be taking a more lenient stance toward net neutrality could indicate that the deal has a better than average chance of being approved.

1 The Wall Street Journal, April 7, 2014, “AT&T's Plan For the Future: No Landlines, Less Regulation” http://online.wsj.com/news/articles/SB10001424052702304834704579403090132882148 2 Comcast and TWC FCC submission, April 8, 2014 http://online.wsj.com/public/resources/documents/comcast20140408.pdf - 43 - Comcast Corporation

Our Favorable View of Comcast is Not Contingent on TWC Merger Approval While we believe Comcast can derive a significant amount of shareholder value from a combination with TWC, we would point out that our favorable view of the Comcast shares is not contingent on successful deal approval. Comcast owns an attractive mix of content and distribution assets with good long-term growth opportunities that should continue to generate meaningful free cash flows for many years to come.

Revenue by Segment ($MM) EBITDA by Segment ($MM)

Cable Networks Cable Networks $9,201 $3,501 14% 16%

Broadcast Television Cable Broadcast Cable $345 Communications Television Communications 2% $41,836 $7,120 $17,205 64% 76% 11% Filmed Entertainment $483 Filmed 2% Entertainment $5,452 8% Theme Parks Theme Parks $1,004 $2,235 4% 2013 Total EBITDA $22,538 2013 Total Revenue $65,844 3%

Note: 2013 Revenue ixcludes 1.8 billion in eliminations and excludes Note: 2013 EBITDA excludes $1.1 billion in various other expenses $631 million in headquarters, corporate and other

The Company’s Cable Communications segment, which represented 64% of revenue and 76% of EBITDA in 2013, is a standout in the cable industry. While the Company has not been immune to video subscriber pressure, the Company has generated strong levels of cash flow thanks to good growth in non-video products and services. Although video revenue has increased at a CAGR of just 1.4%, over the past 5 years, the segment’s non-video businesses including high-speed Internet, voice and business services, among others have expanded at a nearly 10% CAGR over the same time frame.

Cable Communications Segment Cable Communications Segment - Revenue Mix ($MM) Non-Video Revenue ($B)

5 Year $21.3 2008 2009 2010 2011 2012 2013 CAGR 60% $19.7 $20 Video $19,162 $19,279 $19,363 $19,464 $19,952 $20,535 1.39% $17.8 55% H-S Internet $7,225 $7,281 $7,958 $8,743 $9,544 $10,334 7.42% $16.0 $15 $14.3 50.9% Voice $2,649 $3,091 $3,300 $3,503 $3,557 $3,657 6.66% $13.5 49.6% 50% 47.7% Bus. Services* $828 $1,267 $1,953 $2,565 $3,241 40.6% $10 45.2% Advertising $1,709 $1,621 $2,020 $2,001 $2,284 $2,189 5.08% 45% 42.5% Other $1,877 $1,444 $1,455 $1,562 $1,702 $1,880 0.03% 41.3% Non-Video % of Total

Non-Video Revenue ($B) $5 Total: $32,622 $33,544 $35,363 $37,226 $39,604 $41,836 5.10% 40% * Note: Business Services reflects 4-Year CAGR

$0 35% 2008 2009 2010 2011 2012 2013 Non-Video Revenue ($B) Non-Video % of Total

- 44 - Comcast Corporation

Thanks to this growth, the Company’s non-video business represented 51% of total revenue at year end 2013, up from 41% just 5 years ago. Notably, these services/businesses command higher margins than video services and have helped the Company maintain stable margins despite a soft video market and significant programming expense headwinds. While we provide further detail on the Company’s cable business below, we believe that there are a number of opportunities that should drive future segment growth and help sustain overall profitability (2013 cable EBITDA margin: 41.1%) for many years to come. Consumers’ perception of the cable industry in general and Comcast in particular have improved markedly over the years. During 3Q 2013, the Company noted that since it launched its XFINITY brand (rebrand of its triple play offering) in 2010 the rate of non-customers that would consider purchasing services has increased by 70%.

During 2013, Comcast acquired the 49% stake in NBCU that it didn’t own from GE. We provide further analysis of NBC’s ongoing improvement and prospects below, but we would note that there are a number of opportunities to drive future growth at each of the Company’s segments. There is currently a large gap between ratings and affiliate/retrans fees at both the Cable Networks and Broadcast businesses. Meanwhile, the Theme Parks segment should benefit from increased capital investment to bolster attractions and lodging aimed at driving higher attendance and park spending. While the results of the Film business will undoubtedly be lumpy from year to year, 2013 was a record year and the Company has a strong lineup slated for 2015.

Distribution is King “If the rule is adopted, winners would be the major broadband providers that would be able to charge both consumers and content providers for access to their networks.” 3 – The Wall Street Journal, April 23, 2014

Despite programming expense increases and video subscriber pressure, Comcast’s cable business has continued to post extremely strong results. Between 2008 and 2013, segment revenue and EBITDA has increased at a 5% and 5.5% CAGR, respectively. As we noted above, the Company’s non-video businesses have been a major contributor to this growth. Since these other services also command higher margins than the Company’s video service (no programming expenses), their growth has had a favorable impact on overall Cable Communications segment profitability. The businesses’ strong and sustained margin profile also helps to demonstrate the Company’s favorable competitive position and competitive advantages.

Operating Cash Flow, Year/Year Growth Rates and Margins

Source: Company presentation, January 2014

3 The Wall Street Journal, April 7, 2014, “FCC to Propose New 'Net Neutrality' Rules” http://online.wsj.com/news/articles/SB10001424052702304518704579519963416350296 - 45 - Comcast Corporation

The Company has also been able to offset some of the video headwinds with ongoing operational efficiencies. These efficiencies include reduced truck rolls, which declined by 3.5 million in 2013 and by over 8 million over the past two years thanks in part to the ability to diagnose 200 issues remotely vs. just 20 a couple of years ago. In addition, approximately one third of customers are now managing their accounts online (9 million unique visitors in 2013, up 42% vs. prior year) and self installations continue to increase and accounted for 47% of total installations in 1Q 2014 vs. 38% in the year ago quarter, helping to reduce the number of calls to its call centers by ~13 million over the past two years. Comcast’s programming expenses are likely to remain elevated (management projects another 9% - 10% increase in 2014 following 8.6% growth in 2013), but the Company should be able to offset these challenges with ongoing operational efficiencies and further growth of its non-video businesses. Although the Company’s non-video businesses are unlikely to experience the same rate of growth going forward, we believe that there are plenty of opportunities for future gains. While the Company’s video service is mature and has experienced net subscriber losses in recent years, the business has begun to reverse its losses and could begin to experience much improved prospects going forward. The first quarter of 2014 represented the second consecutive quarter of net subscriber gains following 26 straight quarters of subscriber losses. While two quarters does not make a trend and gains have been relatively modest (46k and 24k of additions in 4Q 2013 and 1Q 2014, respectively), we would note that early results of the Company’s deployment of X1, a cloud based entertainment platform, have been very encouraging and could provide an opportunity to further stabilize, if not meaningfully increase, video subscribers.

X1 Platform Could Be a Game Changer “But I have an X1, the Comcast box, at home. It’s got apps and I listen to Pandora on it. I would like to be able to watch Netflix and that would keep me on the Comcast X1, which is a great product.” – Reed Hastings, Netflix CEO, on NFLX’s 3Q 2013 Earnings Call in October 2013

During 2013, the Company began deploying its X1 platform, which is a state of the art cloud-based user interface for its video service that can be accessed over multiple devices (TV, tablet, smartphone, etc.). The platform was available to the Company’s entire footprint at year end 2013 and contains products and features that greatly enhance the video experience including personalized recommendations, enhanced search, voice control and embedded apps (Facebook, Pandora, Twitter, etc.). The deployment of X1 is not without its costs as the platform requires a new set-top box for users to access the functionality. Due in part to the Company’s X1 rollout, Comcast’s cable capex increased by 9.8% in 2013 to $5.4 billion or 12.9% of cable communications segment revenue (up from 12.4% of revenue in 2012). Based on early results, the Company is receiving significant benefits from X1 including increased video on demand viewing (VOD viewing among X1 users up 25%), higher VOD transactions (up 20%), more adoption of DVRs and reduced churn (voluntary churn down 20%-30%). While time shifted viewing among X1 users is up, so too is linear viewing suggesting that the platforms’ power recommendation engine is working and providing a better user experience. In addition, the Company is experiencing success converting single and double play customers into triple play subscribers, which is also having a favorable impact on churn as customers that take more products have historically exhibited greater loyalty (at 1Q 2014 35.6% of customers were triple product customers vs. 32.5% in 2012). The above quote by Netflix CEO Reed Hastings is intriguing because Netflix has differentiated itself by its superior user interface, among other items (it’s possible Mr. Hastings is publicly praising the product so that he may be better able to entice Comcast to include the Netflix App on X1). Mr. Hastings isn’t the only Comcast consumer that has been enamored with the new platform as 65% of X1 subs rate the new program guide as superior to their other guide experiences.

As a result of the strong early results from X1, Comcast plans to accelerate its deployment in 2014 and expects the majority of its video customers to be using the new platform within the next few years. During Comcast’s 1Q 2014 earnings call, management noted that it is now adding/delivering 15k-20k X1 boxes a day, which is double the rate of deployment six months ago. Due to the extra capital associated with the X1 rollout and other growth initiatives, management expects cable capex to increase again in 2014 and it will represent 14% of cable revenue, up ~100 basis points vs. 2013. Management believes the additional capital to support the X1 rollout is money well spent with the Company noting that not only does it improve the user experience, but it is generating double-digit IRRs for the Company. Further, as the rollout accelerates, management believes that the returns should increase. While the upfront investment to launch X1 will pressure near term free cash flow generation, the cloud based architecture should reduce future capital intensity. Comcast’s set-top boxes will

- 46 - Comcast Corporation have a longer shelf life since the Company will be able to deliver upgrades via software updates rather than expensive capital deployments.

In addition to the benefits X1 provides to the Company’s video service, the powerful platform also has the potential to open up entirely new revenue streams through the sale of products and features and the potential to license the technology to other cable operators. For example, the Company utilized X1 to launch Electronic Sell-Through (EST), which allows consumers to purchase movies before they are released on DVD. Comcast initially released content from of its sister company, Universal Studios, and management noted it was the top selling electronic retailer of Fast and Furious 6, Hunger Games and Despicable Me 2 during the initial weekend of their availability. EST is now available to other studios including Fox, Lionsgate and Time Warner. During the Company’s 3Q 2013 earnings call, Comcast stated that a number of MSOs had expressed an interest in licensing the X1 platform and management noted recently that is working with Cox Communications on how the cable operator could utilize the platform. According to some industry observers, there could be a much larger opportunity for Comcast down the road with the current X1 serving as a prelude to offering a so called virtual cable service to customers throughout the U.S. that would provide access to live and on-demand 4 programming.

High-Speed Internet Service Drives Non-Video Growth – Further Opportunities “And so as we look at the data business you say okay, we are 38% penetrated. We are not done. We don't think we're anywhere near done. And then you come to a consumer electronics show and you see all this innovation and all of it starts and stops with some sort of Wi-Fi connection.” – Comcast CEO Brian Roberts at January 2014 Citi Conference

Comcast’s residential high-speed Internet (or broadband) product has been the largest contributor to the Company’s non-video revenue growth in recent years. Over the past 5 years (2008-2013) revenue has increased at a 7.4% CAGR with penetration increasing to 38.4% from 29.5%

Comcast High-Speed Internet Customers and Penetration Rate

25 50% 20.7 19.4 20 18.1 45% 17.0 15.9 14.9 15 38.4% 40% 36.4% 34.6% 10 32.7% 35% 31.1%

29.5% Penetration Rate Customers (MM) 5 30%

0 25% 2008 2009 2010 2011 2012 2013

Customers (MM) Penetration Rate

During 2013, Comcast added over 1 million broadband customers, the eighth year in a row that it has achieved this milestone. While residential broadband growth is unlikely to increase at the same pace going forward, we believe there are plenty of opportunities to drive further growth. At present, Comcast currently has a ~38% broadband share of homes passed. According to data by IHS, broadband penetration in the U.S. currently

4 FierceCable, Oct. 18, 2013, “How virtual cable and Cable WiFi may have killed the Verizon Wireless-Comcast joint innovation lab” http://www.fiercecable.com/story/how-virtual-cable-and-cablewifi-may-have-killed-verizon-wireless-comcast-jo/2013-10-18 - 47 - Comcast Corporation stands at ~71%, but is forecast to increase to 74% by 2017, which would represent an increase of approximately 20 million U.S. (note: not all of which Comcast’s plant passes) homes receiving broadband. Comcast management believes that U.S. broadband penetration could ultimately approach 85-90%, which is not inconsistent with the current penetration rates experienced in a number of developed international markets. As of June 2013, IHS estimated that there were still 31 million U.S. homes with DSL connections, representing 34% of the fixed broadband market. Given DSL’s limitations, the technology has continued to cede market share to cable companies, which will likely be a recurring theme going forward and an opportunity for Comcast to increase its market share. In addition to share gains, Comcast continues to invest in its broadband network and as of April 2014, the Company has increased the speed 13 times in the past 12 years. During 2013, the Company launched its fastest speed tier ever (505 Mbs) and ~38% of customers are currently receiving at least 50 Mbs or greater as of 1Q 2014. Given consumers’ insatiable demand for online consumption, we would expect the share of customers receiving higher speeds to continue to increase. Notably, the Company charges a premium for higher speeds with consumers paying about $50 a month on average for its 50 Mbs service compared with $40 per month for its 25 Mbs service. Usage based pricing could be a longer term opportunity as data consumption continues to increase and Comcast has noted that recent usage based pricing has been neutral to slightly positive.

While Comcast looks poised to continue capturing broadband share, the market will likely be very competitive going forward. The aforementioned comments by AT&T’s CEO suggest that its going to invest heavily to increase its share in the attractive broadband market. In order to differentiate itself, Comcast has not only been investing to ensure that it has the fastest speeds to the customer’s home, but is also in the process of an aggressive deployment of wireless gateways (a combination of a cable modem and a router) to ensure that its customers also have the fastest speeds in the home. The gateways are capable of speeds up to 250 Mbs and help meet the bandwidth needs within a customer’s home, where there are often multiple WiFi enabled devices (smartphone, tablet, laptop, etc.) being used simultaneously. With an estimated 75% to 85% of mobile data consumption at home traveling over WiFi Networks, Comcast’s gateways ensure speed and robust performance amidst heavy consumption. At year-end 2013, wireless gateways had been installed in approximately one third of the Company’s footprint and management expects to continue rolling out gateways in the coming years. While the gateways are contributing to the Company’s increased capex, the Company considers WiFi as an extension of its broadband service and an attractive investment to make especially since customers who utilize WiFi more frequently tend to churn less.

Small and Medium Sized Businesses – Long Growth Runway While we noted above that the proposed TWC deal could allow the combined entity to become a more meaningful player in the enterprise market for voice and data services, the small and mid-sized business market still presents an attractive growth avenue. Based on 1Q 2014 revenues, the Company’s business services is a $3.7 billion annual run rate business with ~80% of revenues derived from small business (fewer than 20 employees) with the balance from mid-sized businesses (~20 to 250 employees). Revenue from Comcast business services has increased at a 41% CAGR (quarterly revenue growth has been in the mid 20s% recently) over the past 3 years. Importantly, Business Services is accretive to segment margins due in part to the absence of video programming expenses.

Business Services Revenue Summary ($MM)

$3,500 $3,241

$3,000 $2,565 $2,500 $1,953 $2,000

$1,500 $1,267 $917 $1,000 $828 $741

$500

$0 2009 2010 2011 2012 2013 1Q 2013 1Q 2014

- 48 - Comcast Corporation

Comcast has a ~20% share of the $15 billion market for small business services and a 5% market share of medium sized businesses, which is of similar size to the small business market. Management believes that its business services revenues will double in the next 4-5 years and ultimately be able to reach a 50% penetration rate.

Miscellaneous While the above items are likely to be a major driver of the Company’s Cable Communications results in the near to intermediate term, the following could also aid the Company’s future prospects:  Additional High Margin Advertising Dollars – Increased Video on Demand viewing as a result of the Company’s X1 deployment could result in incremental advertising revenue opportunities. As part of the Company’s agreement with its content suppliers, Comcast has disabled the fast forwarding feature on its VOD platform. As a result, this should translate to higher ratings, which will in turn help Comcast capture higher advertising dollars. Another important component of VOD is the ability to provide addressable ads. While addressable advertising has been long talked about as being the Holy Grail for cable companies, it’s finally starting to gain traction. During 2013, Comcast began deploying (expected to be fully rolled out by year end 2014) third party technology that allows it to deliver separate advertisements to individual households based on geographic and demographic data. For example, ads featuring diapers or baby formula would only be inserted into homes with young children.5  Home Security and Automation – Comcast’s home security and automation offerings (Xfinity Home) provide home monitoring services to its customers, as well as the ability to manage other functions within the home, such as lighting and climate control online or with smartphones and tablets. The national penetration rate of home security/monitoring is relatively low at ~20%, providing a good growth opportunity for service providers. Comcast has been offering its security/monitoring services for about three years now and reviews have been favorable. Comcast recently noted that 40% of consumers that have signed up for the service have never had a relationship with the Company and of those customers more than half are subscribing to all four of the Company’s services (video, broadband, voice and security). In addition, approximately 2/3 of the Company’s home security customers have never had a home security service before. While national home security penetration is unlikely to reach penetration rates of is other services, the product will likely provide the Company with another opportunity to increase customer loyalty and reduce churn.  Potential WiFi Service – To date, the Company has utilized WiFi to be an extension of its broadband strategy rather than a separate service. The Company currently has over 1 million public hotspots, and the potential to activate millions more with virtually the flip of a switch. The aformentioned wireless gateways the Company has been deploying (~10 million to date) have multiple SSIDs (Service Set Identifier) that can be utilized to also function as a public wireless hot spot. It’s curious to note that during 2013, Comcast ended its joint venture agreement with Verizon that was established in 2011 and to develop next generation products. As part of that agreement, the Company sold its wireless spectrum to Verizon, but still has the ability to access Verizon’s network on a wholesale basis. According to some industry observers, Comcast’s own WiFi network coupled with wholesale access could provide it the capabilities to launch its own wireless broadband network.6  Improved Economy and Housing Market – Comcast management has noted that it has not seen any material lift from the ongoing housing recovery. However, given the expected increases in household formations (we discussed this topic in our 2011 summer issue), we would not be surprised if we began to see a more sustained housing recovery have a greater impact on the Company’s results. Many economists believe that housing starts will have to recover to approximately 1.5 million a year just to keep up with population growth. While this level is below the

5 “Multichannel New: Comcast to widen world of Addressable ads” http://www.multichannel.com/news/cable-operators/comcast-widen-world-addressable-ads/325962 6 http://www.fiercecable.com/story/how-virtual-cable-and-cablewifi-may-have-killed-verizon-wireless-comcast-jo/2013-10-18 - 49 - Comcast Corporation

2 million a year peak experienced just prior to the 2006 housing downturn, it is well above recent trough levels of ~500k a year and even the 925k starts in 2013.  Peering Agreements and Interconnection – During 2014 Comcast reached an agreement with Netflix that will allow Netflix to connect directly to Comcast’s broadband network in order to improve delivery speeds. In our view, the agreement represents a strong vote of confidence in the Company’s cable infrastructure. The so-called peering arrangements could morph into a meaningful revenue stream for the Company as other content providers and content delivery networks (CDNs) such as Akamai and Level 3 are likely going to look into similar agreements. In addition to peering agreements, a recent FCC proposal could give broadband companies the ability to charge content companies for faster access over the coveted last mile. This will likely be a boon for broadband companies.7

NBCU – Premier Media Property With Good L-T Growth Prospects Acquired at Very Attractive Valuation “Accordingly, we believe that it is highly likely that the deal will prove to have been struck during a period of trough earnings providing Comcast with the opportunity to benefit as earnings and valuations in the media sector recover.” – Asset Analysis Focus, October 2010

The timing of Comcast’s purchase of its initial stake in NBCU, which was announced in late 2009, could not have been better. As we noted in our 2010 report, Comcast acquired its 51% stake in NBCU at an implied valuation of 10.7x depressed 2009 EBITDA. Given the improved results over the past few years (NBCU’s EBITDA has increased by over 50% from the time of the deal was announced in December 2009; 2009 pro forma NBCU EBITDA: $3.1 billion), the multiple paid declines to just 6.3x EBITDA base on 2013 results. We believe this represents an extremely attractive price for a preeminent media asset.

NBCU EBITDA ($MM) and Margin Summary

$5,000 $4,732 40%

$4,107 $4,000 $3,684 $3,769 30%

$3,000 20.0% 18.1% 17.8% 17.2% 20%

$2,000 EBITDA ($MM) EBITDA EBITDA Margin

10% $1,000

$0 0% 2010 2011 2012 2013 EBITDA EBITDA Margin

Note: 2010 and 2011 results are pro forma and as reported by Comcast.

During 2013, Comcast reached an agreement to acquire the remaining 49% interest in NBCU from GE for $16.7 billion (Comcast also purchased some of GE’s properties for $1.4 billion including its offices at 30 Rockefeller Plaza). The implied enterprise value of Comcast’s NBCU buyout was ~$39 billion (vs. ~$37 billion for its initial purchase) representing a multiple of ~9.5x trailing EBITDA (9.0x forward) and exclusive of meaningful tax benefits. In our view, the latest NBCU purchase was completed at an attractive valuation with peer publicly traded media companies selling for an average EV/EBITDA multiple of 11.5x.

7 The Wall Street Journal, April 23, 2014 “FCC to Propose New 'Net Neutrality' Rules” http://online.wsj.com/news/articles/SB10001424052702304518704579519963416350296 - 50 - Comcast Corporation

Select Trading Valuations of Comparable Media Companies ($MM) Enterprise EBITDA EBITDA EV/ EV/ Name Ticker Value (ttm) Margin EBITDA Sales Sales Discovery Communications DISCA $26,420 $2,300 41.5% 14.4x $5,540 4.8x Disney DIS $148,000 $12,360 26.8% 11.9x $46,010 3.2x Time Warner TWX $57,900 $7,870 26.4% 7.4x $29,800 1.9x Twenty-First Century Fox FOX $82,900 $6,100 20.5% 13.5x $29,800 2.8x Viacom VIA $47,110 $4,340 31.7% 10.8x $13,680 3.4x Average: 11.5x 3.2x

Comcast’s decision to purchase the rest of NBCU was about 5 years earlier than it had been required to. We suspect Comcast’s strong Cable Communications’ segment results and favorable view of its future outlook, coupled with the ongoing improvement at NBCU gave it confidence to take on modestly higher leverage to pursue an early acquisition. The transaction was funded with a combination of cash, debt and preferred stock. Despite the meaningful improvement at NBCU, we believe there are plenty of opportunities for profitability to expand further going forward. While Comcast relinquished its opportunity to participate in the future upside of the NBCU asset (it negotiated a carried interest as part of the initial deal), we believe that the acceleration made strategic sense for a number of reasons. First, it removes the uncertainty associated with the potential for elevated future media industry multiples and profitability. Second, there’s no guarantee that credit markets would be as accommodating and interest rates would be as favorable in 5 years when Comcast would have been required to purchase the remaining stake. Finally, Comcast is able to benefit from the full upside of the ongoing improvement at NBCU rather than having to share in the upside with GE.

NBCU Cable Networks – Valuable Portfolio With Large Monetization Gap NBCU’s Cable Networks segment consists of a diversified portfolio of national cable networks that provide a variety of entertainment, news and information and sports content. Notably seven of the Company’s cable networks generate in excess of $200 million in annual EBITDA including USA, the top rated cable network for the past 8 years (based on total viewers). The following provides a summary of the Company’s national cable networks: Approximate U.S. Subscribers at December 31, 2013 (in millions) Cable Network Subscribers (MM) Description of Programming USA Network 98 General entertainment Syfy 97 Imagination-based entertainment E! 96 Entertainment and pop culture MSNBC 96 News and information CNBC 95 Business and financial news Bravo 94 Entertainment, culture and arts Golf Channel 81 Golf competition and golf entertainment Oxygen 78 Women’s interests NBC Sports Network 77 Sports Esquire Network 71 Men’s lifestyle and entertainment Sprout 57 Children’s entertainment Chiller 41 Horror and suspense CNBC World 36 Global financial news G4 31 Gamer lifestyle Cloo 29 Crime, mystery and suspense Universal HD 29 General entertainment HD programming Subscriber data is based on The Nielsen Company’s January 2014 report, which is derived from information available during the period December 22, 2013 through December 28, 2013, except for Universal HD, which is derived from information provided by multichannel video providers.

Source: Comcast Form 10-K 2013 - 51 - Comcast Corporation

In addition to its national networks, Comcast owns 11 regional sports networks that serve over 35 million subscribers in the U.S. within key markets including Atlanta, Baltimore/Washington, Boston, Chicago, Philadelphia, Portland, Sacramento and San Francisco. NBCU also owns or has an interest in various digital media properties including Fandango and Hulu and brand aligned websites.

We have long been attracted to cable networks and their dual revenue stream (affiliate fees and advertising) business model. This model has become even more attractive in recent years with many cable networks also adding a third revenue stream as they monetize older programming over alternative platforms including OTT services (e.g. Netflix, Hulu, etc.) and video on demand platforms of video distributors.

NBCU Cable Networks Revenue Composition ($MM) 2010 2011 2012 2013 Distribution $3,965 $4,398 $4,604 $4,905 % change 11% 5% 7% Advertising $3,084 $3,316 $3,389 $3,536 % change 8% 2% 4% Content licensing and other $630 $732 $734 $760 % change 16% 0% 4% Total $7,679 $8,446 $8,727 $9,201 % change 10% 3% 5% Note: 2010 and 2011 results are pro forma and reported by Comcast

While NBCU’s Cable Networks (66% of NBCU EBITDA) are its crown jewel, we would note that a disproportionate amount of NBCU’s recent profitability improvement has come from its other segments. Although results at NBCU’s cable networks have lagged the improvement at the other segments, management believes there is a significant opportunity to improve the Cable Networks’ already robust profitability (2013 EBITDA margin: 38%). A portion of the relative underperformance at the Cable Networks reflects the more stable revenue base, which helped these properties hold up better during the 2008/2009 downturn. However, it should be noted that the distribution and advertising growth rates posted by NBCU’s Cable Networks have also largely trailed the gains posted by its cable network peers.

Distribution - 3 Year CAGR Advertising - 3 Year CAGR

12% 11.26% 20% 18.57% 10.60% 18% 9.68% 10% 16% 14% 8% 7.08% 7.35% 7.42% 12% 5.89% 9.45% 6% 10% 8.85% 8% 6.67% 4% 6% 4.08% 4.66% 4% 2% 2.16% 2% 0% 0% Time Discovery NBCU Disney Scripps Viacom AMC Viacom Disney NBCU Time Discovery Scripps AMC Warner Media Networks Media Warner Networks Networks Networks

Note: NBCU 2010 and 2011 are proforma combined; Discovery results are U.S. operations; Viacom results are media networks; Scripps results include its lifestyle media networks; AMC results are for its national networks. Disney results are for year ended September 2013 and include the media networks segment; TWX results are for the Turner segment; 2010 Advertising revenue Time Warner is the Old Networks and includes HBO, which generated an insignificant amount of advertising revenue; 2010 Time Warner Results assume Turner accounted for ~54% of total Networks revenue.

- 52 - Comcast Corporation

The Cable Networks’ underperformance seems curious given the Company’s strong portfolio, which included 3 networks (USA, SyFy and Bravo) that ranked in the top 20 in terms of total viewers during 2013. During a September 2013 sell side conference, Steve Burke, President/CEO of NBCU, noted that there is a disconnect between the ratings profile at NBCU and its affiliate fee and advertising revenues. While the Company has made some progress in closing the gap since it acquired the businesses from GE in 2011, Mr. Burke stated that there is a 20%-25% monetization gap between its affiliate fees and the ratings at its cable networks. Meanwhile, on the advertising side Mr. Burke noted that the CPMs it receives at USA, which is the Company’s highest rated network, were below those of similarly positioned networks. According to data from SNL Kagan, USA networks receives just $0.71 per month for each of its subscribers while TNT, a network with a similar profile, garners $1.24. While USA still remains the number 1 basic cable network in terms of total viewers, we would note the network has experienced some recent ratings weakness that is worth monitoring. Total viewers declined by 8% at USA during 2013 and were down 22% on a YoY basis during 1Q 2014. We would note that it is not uncommon for cable networks to experience periods of strength and weakness in ratings and we wouldn’t read too much into the 1Q 2014 decline as results were undoubtedly impacted as the winter Olympics captured viewer attention during the quarter. It is worth noting that programming expenses during 2013 and 2012 at the Cable Networks had increased by 5.2% and 8.1%, respectively, which could help improve future ratings. NBC’s broadcast resurgence (discussed below) should also give the Company more negotiating leverage with its portfolio of cable networks (typically bundled together in affiliate agreements) as it negotiates upcoming carriage agreements. In addition, distributors are increasingly looking to capture digital rights to programmers’ content, which will also likely benefit NBCU’s future distribution revenues in upcoming affiliate fee negotiations.

While distributor consolidation may create investor unease, we believe programming companies clearly have the upper hand in today’s environment. After announcing the CMCSK/TWC transaction, Comcast’s regulatory guru David Cohen stated his belief that that the merger wouldn’t give distributors undue influence and noted that “The balance of power has tilted pretty decisively on the programmers’ side.” 8 While some may choose to view Cohen’s remarks skeptically, we would highlight the programming expense increases within Comcast’s Cable Communications segment, which have increased at a 9% CAGR over the past 3 years amidst ongoing video customer losses. Comcast expects its 2014 programming expenses to increase by ~10% as it continues to secure ancillary rights (streaming, video on demand, etc.) from content companies. Further reinforcing our view of programmer expense leverage are the high profile and contentious affiliate fee agreements including CBS/TWC in 2013 and DTV/VIA in 2012 where the content company in each case was believed to have extracted significant value from the distributor.

NBCU Broadcast Television – Ratings Improvement and Retrans Fees Should Bolster Profitability The Broadcast Television segment consists primarily of the NBC and Telemundo broadcast networks, 10 NBC and 17 Telemundo owned local broadcast television stations, and the associated television production properties. This segment generates revenue through advertising sales, content licensing, and retransmission agreements. Competition for quality content remains strong as scripted dramas and reality programming from cable networks continue to capture share from broadcast. However, recent results from NBC in the profitable 18-49 prime time demographic have been encouraging. After several years spent trailing their network peers, NBC has pulled into the #1 slot in this space, and is said to be making an aggressive push for increased advertising rates at the 2014 upfronts, which should be finalized in May of 2014. While full year 2013 ratings based on total viewers indicate that NBC continues to trail CBS and ABC, in our view recent prime time success is reason for hope, and there is opportunity for continued success in other demographics.

8 The Wall Street Journal, February 13, 2014, “Comcast, Time Warner Deal to Spark Regulatory Debate” http://online.wsj.com/news/articles/SB10001424052702304703804579380453221890292 - 53 - Comcast Corporation

Recent Primetime Market Share Performance

30.50% 30% 29.30%

28.70% 27.10% 26.60% 26% 25%

23.60% 24.30% 22.70% 22%

21.10% 21.30% 19.70%

18% 2011‐12 2012‐13 2013‐14

Source: Nielsen ratings via buzzfeed.com, April 2014

In addition to the potential for higher advertising revenues, the attainment of higher retransmission fees represents another attractive growth opportunity. According to SNL Kagan, total U.S. retransmission fees are expected reach $7.6 billion by 2019, versus $3.3 billion in 2013 (projected as of 11/13).9 At the time of the acquisition, NBC’s retransmission fees generated less than $10 million in revenue. However, this revenue stream has quickly ramped to $240 million in FY 2013, and is expected to increase to $350 million in 2014. While much of this growth can be explained by industry trends (rising per-month sub fees for station owners in recent negotiations and consolidation) continued improvement in programming quality and investment in attractive sports programming (NFL, NHL, NASCAR, etc.) should also give the network leverage in upcoming retrans negotiations. Longer term, we believe the Company’s Telemundo property, which is a leading Spanish- language broadcast network, should also help improve the segment’s prospects in the coming years. According to Nielsen, Telemundo is the fastest growing broadcast network in primetime regardless of language in the US. An estimated 90% of the approximately 50 million Hispanic Americans now have local access to Telemundo, 24 million of them speak more Spanish than English, and 14 million of them are in the important 18-49 age demographic.

NBCU Filmed Entertainment The Company’s Filmed Entertainment segment produces, acquires, markets and distributes both live- action and filmed entertainment worldwide. Films are produced primarily under the Universal Pictures, Focus Features and Illumination banners. NBCU’s content library includes theatrical films, direct-to-video titles and its film library, which includes over 5,000 titles. NBCU’s filmed entertainment segment had a record year at the box office during 2013 and contributed to strong segment results with EBITDA of $489 million, up from $79 million in 2012. The strong 2013 results were driven by Despicable Me 2 and Fast and Furious 6. Results in the Film segment have historically been lumpy as they are a function of the hit/miss nature of feature films. Nevertheless, the Company’s renewed focus on franchises and the animation genre should help reduce the volatility of future results.

Management notes that it has a strong slate for 2015 including Jurassic Park 4, Fast and Furious 7, Minions (a Despicable Me sequel), 50 Shades of Grey and potentially Ted 2. While Filmed Entertainment has had to contend with the ongoing industry decline of high margin DVD sales, it has been able to offset weakness in the category with digital licensing. One promising potential for the filmed entertainment segment is EST, which could provide a nice boost to the Company’s revenue and profitability in the coming years.

9 http://www.prweb.com/releases/2013/11/prweb11360552.htm - 54 - Comcast Corporation

NBCU Theme Parks The Theme Parks segment consists primarily of 2 locations, Universal Hollywood, and Universal Orlando. The parks create rides and attractions based on owned and licensed brands such as Harry Potter, Transformers, Spider-Man, Men In Black, Shrek, and The Simpsons as well as titles from the Universal Studios catalogue. This segment generates the majority of its revenue through ticket sales and concessions. In our opinion the Theme Park business complements the content production businesses and provides an additional venue to monetize this content, as well as build brand loyalty.

Since 2010, revenue (pro forma for the NBCU’s 2011 acquisition of the 50% of Universal Orlando that the Company did not own) has grown from $1.6 billion in 2010 to over $2.2 billion in full year 2013 while EBITDA margins have expanded from 36.9% in 2010 to 44.9% in 2013, demonstrating the segment’s considerable operating leverage and resulting in a 67.3% increase in EBITDA. While some of this improved performance is simply tied to a rebounding economy, the Company has also spent aggressively to upgrade their offerings in recent years, with Harry Potter (2010-Islands of Adventure) and Transformers (2012-Universal Studios Hollywood, 2013-Universal Studios Florida) themed attractions each contributing to 20+% increases in attendance in the months following their debut. Overall attendance since the time of the merger is up more than 40%. According to the Themed Entertainment Association and industry consultant AECOM, Universal Studios Orlando grew its share of the Florida theme park market to 20.8% in 2012 (the most recent year of statistics) from 16% in 2009.10 Going forward the plan is to continue this trend by introducing at least one new major attraction per year, and management has guided for ~$600 million in annual capex to meet this goal. A long- planned extension of the Harry Potter franchise within Universal parks is due to come online by Q4 2014 and a Harry Potter attraction is also currently under construction in conjunction with Universal Hollywood, with a planned opening day set for 2016. In our view, these investments should help the segment sustain its momentum.

Balance Sheet , Free Cash Flow and Returns to Shareholders Comcast maintains a strong balance sheet with leverage (debt to EBITDA) of just ~2.2x at March 31, 2014. The Company’s leverage levels are slightly above the Company’s near term targets of 1.5x-2.0x reflecting the recent NBCU acquisition. The Company’s strong free cash flow should allow the Company to both quickly delever and continue returning capital to shareholders through dividends and repurchases. During 2013, Comcast generated $8.5 billion in consolidated free cash flow (6% FCF yield), which was up 7% vs. the prior year (+9% on a FCF/per share basis). While free cash flow may be pressured in the near term as Comcast accelerates investments in promising initiatives, management remains committed to continue returning a significant amount of its excess capital to shareholders via dividends and repurchases. Between 2007 and 2013, Comcast returned approximately $22 billion to shareholders (16% of current market cap) including $7 billion in dividends and $15 billion in share repurchases. During early 2014, Comcast increased its dividend by 15% and its annual payout now stands $0.90 a share (1.8% yield) on an annual basis. Comcast has increased its dividend by more than three fold since 2008 when it initiated an annual dividend of $0.25 a share.

Dividends Share Repurchases

Percentages represent y/y growth rates for dividends per share. Source: Company presentation, January 2014

10 http://articles.orlandosentinel.com/2014-04-19/business/os-universal-orlando-market-share-20140419_1_universal- orlando-wizarding-world-theme-park-attendance - 55 - Comcast Corporation

Repurchases have also become a more meaningful component of the Company’s robust return of capital to shareholders initiatives with the Company repurchasing nearly $15 billion of shares since the beginning of 2007, reducing shares outstanding by 15% (average price paid of ~$24 a share, 54% below the current price). In conjunction with the Company’s 1Q 2014 earnings call, Comcast noted that it would be increasing the amount of stock it expects to repurchase in 2014 by $2.5 billion when it receives shareholder approval for the TWC merger. Comcast expects to repurchase a total of $5.5 billion during 2014.

Potential Impact from Time Warner Cable Transaction Comcast’s leverage will be impacted by the proposed TWC merger due to TWC’s outsized leverage position (debt/EBITDA 3.1x). Despite, the increased debt assumed from TWC (combined entity will have ~$70 billion of debt), Comcast still expects its leverage to be ~2.2x when the transaction closes and is maintaining its medium term leverage target of 1.5x-2.0x. Comcast should be able to delever rapidly and its decision to increase its buyback authorization by $10 billion when the transaction closes reinforces our view.

Valuation and Conclusion At current levels, Comcast trades at 8.3x trailing EBITDA and just 7.2x our projection for 2016E EBITDA. In our view this valuation is inconsistent with the Company’s first rate media properties, which include the nation’s largest multichannel video provider and a collection of well regarded cable network properties and entertainment assets. We suspect a portion of the disconnect represents a discount accorded to the Company given its conglomerate structure. In addition, we believe that investors continue to remain skeptical of cable distributors given the threats posed by new distribution platforms. While the media landscape continues to evolve, and its developments are worth monitoring, we continue to believe that OTT threats are overblown and largely represent additive services rather than replacement products.

In determining our estimate of Comcast’s intrinsic value, we have employed a sum of the parts approach. We believe that the multiples utilized and our future projections are conservative. Based on our projections, we estimate Comcast’s intrinsic value to be $71 a share, representing 39% upside from current levels. We would note that the implied blended EV/2016E EBITDA is 8.9x, which represents a discount to both publicly traded comps and the implied multiple of Comcast’s recent purchase of the remaining NBCU stake.

Comcast - Estimate of Intrinsic Value Value ($MM) Cable Communications @ 8x 2016E EBITDA $164,038 NBCU: Cable Networks @ 12x 2016E EBITDA $51,860 Broadcast Television @ 5x 2016E EBITDA $4,327 Filmed Entertainment @ 8x 2016E EBITDA $2,727 Theme Parks @ 9x 2016E EBITDA $9,036 NBCU Subtotal: $67,950 NBCU Minority Interest ($2,718) Corporate Expenses @ 8x 2016E Amount ($12,354) 2016E Net Debt ($35,361)

Equity Value $181,555

2016E Shares Outstanding 2,562

Estimate of Intrinsic Value (Per Share) $70.86

Implied Upside to Intrinsic Value Estimate 39.4%

- 56 - Comcast Corporation

The following table illustrates Comcast’s valuation at various multiples for the Company’s Cable Communications and Cable Networks segments.

Multiple Applied to 2016E EBITDA for Cable Communications Segment $70.86 5.0x 6.0x 7.0x 8.0x 9.0x 10.0x 11.0x 9.0x $41.99 $50.00 $58.00 $66.00 $74.01 $82.01 $90.01 10.0x $43.61 $51.62 $59.62 $67.62 $75.63 $83.63 $91.63 11.0x $45.23 $53.24 $61.24 $69.24 $77.25 $85.25 $93.25 12.0x $46.85 $54.86 $62.86 $70.86 $78.87 $86.87 $94.87 13.0x $48.47 $56.47 $64.48 $72.48 $80.48 $88.49 $96.49 Networks

NBCU Cable 14.0x $50.09 $58.09 $66.10 $74.10 $82.10 $90.11 $98.11 2016E EBITDA for 2016E EBITDA Multiple Applied to 15.0x $51.71 $59.71 $67.72 $75.72 $83.72 $91.73 $99.73

Overview of Key Valuation Assumptions  Cable Communications – We have applied an 8.0x multiple to our 2016E EBITDA for the Cable Communications segment. While this multiple is in-line with recent precedent cable industry transactions (see Appendix p. 61), we believe the Company deserves to trade at a premium due it its unrivaled scale, strong operating results and meaningful avenues for future growth. We project mid single-digit revenue growth for the segment, which will largely be driven by growth in non-video products and services. We estimate that margins will expand by ~70 basis points by 2016 from 2013 levels due to an increase in higher margin non-video sources, which we estimate will represent approximately 54% of total segment revenue, up from 51% in 2013. In our view, segment margins should also benefit from lower programming expense. While we project programming expenses will increase by 10% in 2014, we believe they will moderate to a 5% increase by 2016 as the Company anniversaries recent step ups to add ancillary rights (streaming and digital) from its programming partners. Our projections for the Cable Communications segment are detailed below.  NBCU – In valuing the NBCU Cable Networks, we have applied a 12.0x multiple to our 2016E EBITDA representing the low end of precedent industry transactions. As we have demonstrated in previous AAF reports, cable networks, with their attractive dual revenue streams and long term revenue visibility provided by affiliate fees, have typically commanded mid- to high-teens multiples in acquisitions (see Appendix p. 61 for a summary of recent transactions). In deriving our 2016E EBITDA we project that distribution and advertising revenues increase by 7% and 6%, respectively on an annual basis over the next 3 years. While this represents a slight increase from recent results, we believe these growth rates are appropriate given the disconnect between ratings and advertising revenues of similar cable properties. We would also expect the Company’s Cable Networks to generate additional revenue from ancillary rates provided to distributors as affiliate fee agreements are renegotiated. We project that margins at the Cable Networks will expand by ~200 basis points by 2016 driven by the increased revenue and modestly lower programming expenses. In determining our value for the Company’s Theme Parks, we have applied a 9.0x multiple, which represents slight premium to recent comparable transactions though it is a discount to publicly traded comparables including SeaWorld, Six Flags and Cedar Fair, which trade at an average multiple of 11.3x (see Appendix p. 62). The fairness opinion in connection with the Apollo’s March 2012 purchase of Great Wolf Resorts examined 15 transactions and determined an EBITDA multiple in the range of 7.0x-8.5x was appropriate. We note however that the vast majority of past theme park transactions included in this analysis occurred either under distress or were due to an otherwise motivated seller. We believe the NBCU Theme Park business deserves a premium multiple to comps based on better access to new content through Universal Studios, access to a stronger balance sheet which enables future park upgrades, limited weather risk due to the parks being located in temperate climates, planned expansion of lodging options adjacent to theme park facilities, and superior profitability. Accordingly, we believe the multiple that we have applied to the Theme Parks segment represents a conservative approach, especially in light of its large discount to publicly traded comps. Given the uniqueness of NBC’s broadcast properties, it’s admittedly difficult to come up with a good comp. In deriving our projected multiple for the segment we looked - 57 - Comcast Corporation

at pure play publicly traded broadcast comparables (average EV/EBITDA multiple of 12.0x) and precedent broadcaster transactions (see Appendix p. 62 ). We also examined NBC’s (4.8% EBITDA Margin) profitability relative to other broadcasters including ABC (14.7%) and CBS (23.4%). While we believe there are significant opportunities for profitability improvement at the Broadcast Television segment, we have chosen to err on the conservative side. While results in Filmed Entertainment business will be lumpy from year to year, we believe the 8x multiple that we have applied to the unit is appropriate. We believe that the filmed entertainment would command a significant premium due to its large and valuable content library.

Summary of Select Cable Communications Segment Assumptions REVENUES 2011 2012 2013 2014E 2015E 2016E Video Video Subs (MM) - 22.8 22.6 22.5 22.6 22.7 Video Subs additions (losses) (MM) - - (0.267) (0.113) 0.112 0.113 Total Video Revenues $19,464 $19,952 $20,535 $20,974 $21,603 $22,362 Video Revenue % change - 2.5% 2.9% 2.1% 3.0% 3.5%

High-Speed Internet Total H-SI Subs (MM) 18.1 19.4 20.7 21.9 23.0 23.9 H-SI Subs % change - 7.0% 6.8% 6.0% 5.0% 4.0% Net Additions - 1.22 1.30 1.24 1.10 0.92 % turbo subs 36.0% 38.0% 40.0% 42.0% Total High-Speed Internet Revenue $8,743 $9,544 $10,334 $10,941 $11,840 $12,511 H-SI Revenue % change - 9.2% 8.3% 5.9% 8.2% 5.7%

Voice Voice Subs (MM) 9.3 10.0 10.7 11.2 11.8 12.4 Total Voice Revenues $3,503 $3,557 $3,657 $3,759 $3,828 $3,899 Voice Revenues % change - 1.5% 2.8% 2.8% 1.9% 1.9%

Business Services Total Business Services Revenues $1,953 $2,565 $3,241 $3,970 $4,764 $5,598 Bus. Services Revenues % change - 31.3% 26.4% 22.5% 20.0% 17.5%

Other Total Revenue Total Other Revenue $1,562 $1,702 $1,880 $1,974 $2,073 $2,176 Other Revenue % Change - 9.0% 10.5% 5.0% 5.0% 5.0% Total Cable Communications $37,226 $39,604 $41,836 $43,917 $46,522 $49,081 % Change - 6.4% 5.6% 5.0% 5.9% 5.5%

EXPENSES Total Cable Communications Operating Costs $21,938 $23,349 $24,631 $26,101 $27,435 $28,580 % Change - 6.4% 5.5% 6.0% 5.1% 4.2%

Cable Communications EBITDA $15,288 $16,255 $17205 $17,816 $19,087 $20,501 EBITDA margin 41.1% 41.0% 41.1% 40.6% 41.0% 41.8%

TWC Transaction Presents Upside to Intrinsic Value Estimate The addition of TWC should provide meaningful upside to our estimate of intrinsic value provided above. As a starting point, applying an 8x multiple to the $1.9 billion in projected synergies (operating and capex) from the transaction would generate an additional $4-$5 a share in additional upside. However, we believe this represents the low end of potential deal benefits as this amount does not reflect revenue synergies, which are

- 58 - Comcast Corporation likely to be substantial. As we noted above, the large enterprise market presents an attractive future growth opportunity that the combined companies should be able to capitalize on with their larger national footprint. In addition, Comcast has plenty of other opportunities to drive profitability higher from the merger including closing the large triple play gap, deriving higher advertising dollars as it rolls out its X1 operating system to acquired TWC subs, and through its newfound value proposition for national advertisers. Accordingly, the ultimate upside from the combination will likely be significantly higher in our view. With Charter gaining control of 3.9 million more subs, we would note that there could be an opportunity for Comcast to license its X1 platform to that Company. It is interesting to note that media mogul John Malone has recently suggested that cable companies need to work together, as they had done previously, in order to be competitive. With Charter set to become the second largest cable company in the U.S. (8.2 million owned or managed subs), we would not be surprised if this presented opportunities for Comcast. In fact during Liberty Media’s 2013 Investor Day Malone noted, “So the history of the business is replete with the industry solving it's balkanization and scale problem through joint effort. I think that that can be done again. I see no reason why a vehicle, whether it's Xfinity, or the equivalent, can't be syndicated.” Stay tuned…

Risks Risks that Comcast may not achieve our estimate of the Company’s intrinsic value include, but are not limited to, general economic weakness adversely impacting the Company’s advertising and subscription revenue; increased competitive pressures from established providers of video and broadband services (satellite companies and telcos) as well as new entrants (e.g. Google Fiber); an inability to successfully integrate recent acquisitions; and the potential for adverse regulatory rulings that negatively impact the Company’s businesses.

Analyst Certification Asset Analysis Focus certifies that the views expressed in this report accurately reflect the personal views of our analysts about the subject securities and issuers mentioned. We also certify that no part of our analysts’ compensation was, is, or will be, directly or indirectly, related to the specific views expressed in this report.

- 59 - Comcast Corporation

COMCAST CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) ($ in millions)

ASSETS March 31, 2014 Dec. 31, 2013 Current Assets: Cash and cash equivalents $ 3,054 $ 1,718 Investments 2,389 3,573 Receivables, net 6,151 6,376 Programming rights 863 928 Other current assets 1,586 1,480 Total current assets 14,043 14,075 Film and television costs 5,058 4,994 Investments 3,090 3,770 Property and equipment, net 29,588 29,840 Franchise rights 59,364 59,364 Goodwill 27,103 27,098 Other intangible assets, net 17,145 17,329 Other noncurrent assets, net 2,382 2,343 TOTAL ASSETS $ 157,773 $ 158,813

LIABILITIES AND EQUITY Current Liabilities: Accounts payable and accrued expenses related to trade creditors $ 5,534 $ 5,528 Accrued participations and residuals 1,256 1,239 Deferred revenue 776 898 Accrued expenses and other current liabilities 7,418 7,967 Current portion of long-term debt 2,819 3,280 Total current liabilities 17,803 18,912 Long-term debt, less current portion 44,581 44,567 Deferred income taxes 31,595 31,935 Other noncurrent liabilities 11,109 11,384 Redeemable noncontrolling interests and subsidiary preferred stock 1,053 957 Equity: Preferred stock – – Class A common stock, $0.01 par value 25 25 Class A Special common stock, $0.01 par value 5 5 Class B common stock, $0.01 par value – – Additional paid-in capital 38,985 38,890 Retained earnings 19,737 19,235 Treasury stock (7,517) (7,517) Accumulated other comprehensive income (loss) 33 56 Total Comcast Corporation shareholders' equity 51,268 50,694 Noncontrolling interests 364 364 TOTAL EQUITY 51,632 51,058 TOTAL LIABILITIES AND EQUITY $ 157,773 $ 158,813

- 60 - Comcast Corporation

CMCSK APPENDIX

Precedent Cable Transactions Forward Date Target Acquirer EV/EBITDA 6/14/2010 Bresnan Cablevision 7.6x 11/15/2010 Mediacom Management Buyout 7.3x 8/14/2011 Insight Time Warner Cable 7.3x 6/1/2012 Wave Oak Hill 7.4x 7/18/2012 Atlantic Cogeco 8.3x 7/18/212 Suddenlink BC/CPPIB 8.0x 2/27/2013 Bresnan Charter 8.0x Average 7.7x Source: Charter Investor Presentation January 2014

Precedent Cable Network Transaction Analysis % Enterprise Value EV/ Year Target Acquirer Seller Purchased ($MM) EBITDA 2012 A&E Networks Disney/Hearst Comcast 16% $ 19,200 15x 2009 Discovery Kids Hasbro Discovery 50% $ 600 19x 2008 Weather Channel NBCU/Private Equity Landmark 100% $ 3,500 15x 2008 Sundance Channel Cablevision Consortium 100% $ 496 14x 2007 Oxygen Network NBCU Consortium 100% $ 925 NM 2007 Travel Channel Cox Discovery 100% $ 684 18x 2006 Court TV Time Warner Liberty Media 50% $ 1,470 18x 2005 CSTV CBS CSTV 100% $ 325 17x 2003 USA Networks GE Vivendi Universal 80% $ 8,725 17x 2002 Bravo GE Cablevision 100% $ 1,250 24x Average: $ 3,712 17x Median: $ 1,088 17x

Broadcast Segment Data from Publicly Traded Media Conglomerates EBITDA Revenue EBITDA Margin CBS Local Broadcasting $ 2,696 $ 898 33.3% CBS Entertainment 8,645 1,758 20.3% Combined CBS 11,341 2,656 23.4% ABC 5,903 870 14.7% FOX 4,860 855 17.6% Average $ 7,368 $ 1,460 18.6%

- 61 - Comcast Corporation

Pure Play Broadcast Comparables EBITDA OIBDA EV EV/EBITDA Margin NXST $ 180 $ 2,250 12.5 35.8% GTN 108 1470 13.6 31.3% SBGI 546 5450 10.0 41.8% Average 278 3057 12.0 36.3%

Broadcaster Consolidation Transaction Data ($MM) Target Target Stations EV Paid EBITDA EV/EBITDA LIN Media 43 $2,568 $188.9 13.6x Belo Corp 22 2,215 235.6 9.4x Young Broadcasting 16 685 65.2 10.5x Allbritton Communications 7 985 92.1 10.7x Communications Corp of America, White Knight Broadcasting 22 270 35.1 7.7x Fisher Communications 24 355 28.6 12.4x Barrington Broadcasting 24 370 47.4 7.8x Cox Enterprises 5 115 18.6 6.2x Average 20 9.8x

Publicly Traded Theme Park Comparables EBITDA EV EV/Sales EV/EBITDA Margin SeaWorld 4,220.0 2.9x 11.5x 25.1% SixFlags 5,040.0 4.5x 12.1x 37.5% Cedar Fair 4,330.0 3.8x 10.2x 37.4% Disney Parks & Resorts – – – 25.5% Average (Ex DIS) 4,530.0 3.7x 11.3x 31.4%

- 62 - Cisco Systems, Inc.

Disclaimers

Asset Analysis Focus is not an investment advisory bulletin, recommending the purchase or sale of any security. Rather it should be used as a guide in aiding the investment community to better understand the intrinsic worth of a corporation. The service is not intended to replace fundamental research, but should be used in conjunction with it. Additional information is available on request. The statistical and other information contained in this document has been obtained from official reports, current manuals and other sources which we believe reliable. While we cannot guarantee its entire accuracy or completeness, we believe it may be accepted as substantially correct. Boyar's Intrinsic Value Research LLC, its officers, directors and employees may at times have a position in any security mentioned herein. Boyar's Intrinsic Value Research LLC Copyright 2014.