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INITIATING COVERAGE REPORT William C. Dunkelberg Owl Fund November 30, 2018

Daniel Pearson – Lead Analyst [email protected] | (484) 888-4552 Brendan Young – Associate Analyst Corp. [email protected] | (610) 620-3312 Andrew Connelly – Associate Analyst Exchange: NASDAQ | Ticker: CMCSA | Target Price: ~$45 [email protected] | (610) 308-5588

COMPANY OVERVIEW Comcast Corporation (NASDAQ: CMCSA) is a global media, Key Statistics (in M, except per share data) entertainment, and communications Share Price $39.01 52-Week Low $30.43 headquartered in , PA. The company is the second- Exp. Return ~17% 52-Week High $44.00 largest broadcasting and cable company in the world by revenue. It is also the largest pay-TV, cable TV, and Shares O/S 4,540 Div. Yield 1.98% Enterprise provider in the . CMCSA engages in the provision Market Cap $174,520 $238,926 Value of video, internet, and phone services through its two primary businesses, Comcast Cable and NBCUniversal. CMCSA breaks One-Year Price Graph: down operations into six reportable segments, including Cable Communications (~62% of FY’17 revenue), Cable Networks $45 100 M (~12%), Broadcast Television (~11%), Filmed Entertainment (~9%), Theme Parks (~5%), and Corporate & Other (~1%). $40 75 M The company will report 4Q’18 and FY’18 results before the $35 50 M opening bell on January 23, 2019. $30 25 M INVESTMENT THESIS CMCSA is currently trading at a 2-year LTM P/E multiple of $25 - 16.2x, representing a 12.1% discount to its median multiple of 18.4x. Despite consistently beating earnings the past four quarters with an average surprise of ~6.5%, the stock was unjustly discounted due to the acquisition process of Sky UK, Earnings (Adj.) / Revenue Surprise History one of Europe’s leading media and telecommunications Quarters EPS Revenue Δ Price companies. Investors were concerned about CMCSA paying 4Q17 4.48% 0.44% 1.30% too high of a premium as the company entered a fierce bidding 1Q18 5.26% 0.28% 2.73% war with over acquiring Sky’s assets. This drop in valuation was unwarranted as the premium CMCSA paid was 2Q18 7.97% (0.40%) 3.98% right in-line with similar media companies’ M&A deal premiums 3Q18 7.44% 1.38% 5.04% that companies like AT&T and DIS paid. Investors also overlooked the growth prospects of the deal as CMCSA Earnings Projections (Adj.) has a massive foothold in Europe and almost doubled its direct Q1 Q2 Q3 Q4 FY customer relationships to ~52M. In addition to the concerns 2017A $0.53 $0.52 $0.50 $0.48 $2.06 over an escalated premium, CMCSA’s multiple contracted once the company’s CFO announced the acquisition of Sky would be 2018A 0.61 0.66 0.63 0.62 2.55 paid in cash and CMCSA would be taking out debt to finance 2019E 0.65 0.70 0.70 0.70 2.78 the deal. This was another overstated drop in valuation as 2020E 0.66 0.70 0.77 1.03 3.16 CMCSA has a strong balance sheet and is generating significant Source: Bloomberg, FactSet, CapIQ COMMUNICATION SERVICES: MEDIA EBITDA growth which is creating FCF that will be able to pay down the debt. Given CMCSA’s growth opportunities from the The William C. Dunkelberg Owl Fund does and seeks to do business acquisition of Sky, its focus on expanding broadband growth, with companies covered in its research reports. Thus, investors should be and outperformance by NBCUniversal, we believe CMCSA aware that the fund may have a conflict of interest that could affect the should be trading at its fair value multiple of 18.4x. We predict objectivity of this report. All prices are current as of the end of previous trading session from date on which report was issued. that the company will return to fair value of ~$45, representing a return of ~15%. Fall 2018

THE COMCAST BUSINESS Comcast Cable: Cable Communications (~62% of FY’17 revenue) Cable Communications encompasses all of CMCSA Cable operations and the segment operates under the brand. Cable communications provides video (~44% of segment revenue), high-speed internet (~28%), voice (~7%), business services (~12%), advertising (~4%), and other (~5%). As of the end of FY’17, CMCSA has 29.3M total customer relationships, with ~27.2M being residential customers and ~2.2M being businesses without any single customer providing a large or significant portion of the segment’s revenue. Within video services, CMCSA offers access to a wide variety of video service packages that can include premium networks, pay-per-view, and services depending on the level of service the customer desires. CMCSA also provides, for an additional fee, HD and DVR advanced services that provide customers with a wider range of HD programming choices and the ability to record and store programs as well as pausing and rewinding them at any time. Video services also includes the set-top boxes CMCSA distributes under its X1 platform for its Internet Protocol (IP) and cloud-enabled video. This provides customers with a more comprehensive search that offers personalized search recommendations and access to all the popular third-party applications like Netflix and many others. Within the high-speed internet services, CMCSA offers downstream speeds that range up to two gigabits per second. CMCSA also provides wireless gateways that combine the wireless router, cable modem, and voice adapter to improve the performance of multiple IP-enabled devices being used at the same time. The wireless gateways create a Wi-Fi network that provides faster speeds whether inside, or outside using a hotspot. CMCSA offers its voice services using interconnected Voice over Internet Protocol (VoIP) technology. This technology does not require a landline and is much more cost effective for businesses, however it does require internet access. The voice services provide both unlimited and usage-based plans that can be local and domestic long distance with or without an option for international calling plans. As of the end of FY’17, ~20% of homes and businesses within areas CMCSA serves were subscribed to the voice services. Within business services, CMCSA primarily provides high-speed internet services and voice and video services, but also includes cloud-based solutions. CMCSA also provides Ethernet network services that offer higher speeds to medium and larger sized businesses as well as more advanced voice services. CMCSA also provides businesses with wireless backhaul to help manage network bandwidth. In other words, wireless backhaul is provides an alternative route when the normal route is unavailable or overworked so businesses can continue operations. In terms of advertising, CMCSA receives a portion of scheduled advertising time as part of distribution agreements made with cable networks. CMCSA sells this time through its advertising sales force to local, regional, and national advertisers. Other mainly includes revenue generated via security and automation services, cable franchise, and regulatory fees. The cable franchise and other regulatory fees are paid by CMCSA, however the company passed through the cost to its customer base.

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NBCUniversal Cable Networks (~12% of FY’17 Revenue) The cable networks consist of a portfolio with a wide variety of national cable networks that mainly include , sports, and entertainment content. Cable networks also includes regional sports and news networks, international cable networks, studio production, and some digital properties which mainly consist of branded websites. Cable news and information networks include MSNBC, CNBC, and CNBC World. Entertainment networks include USA Network, , , and E! to name a few. Sports networks include NBC Sports Network, , and Olympic Channel. CMCSA markets and distributes its cable networks programming in the U.S. and internationally to multichannel video providers, virtual providers, and subscription video on demand service providers. To better understand what these are, examples of each would be Service Electric, Sling, and Netflix respectively. CMCSA’s cable networks provide their own programs or acquire rights to programming from third parties, including mainly sports programming rights. Broadcast Television (~11% of FY’17 Revenue) Broadcast television consists of the NBC and broadcast networks and also includes NBC and Telemundo local broadcast television stations, NBC Universo national cable network, broadcast television studio production operations, and a variety of digital properties. NBC Network distributes entertainment, news, and sports to nearly every household in the U.S. NBC Network also has valuable sports programming commitments, including the U.S. broadcast rights for the Olympic Games through 2032, Thursday Night Football through the 2018 season, Sunday Night Football through the 2023 season, and the 2018 and 2021 Super Bowl games. Telemundo is a Hispanic media company that, as of FY’17, owns 18 local broadcast television stations that reach ~60% of U.S. Hispanic television households. Telemundo develops orignal programming and also acquires the rights to programming from third parties and features original dramas, movies, news, and sports events. Filmed Entertainment (~9% of FY’17 Revenue) Filmed entertainment primarily produces, acquires, markets, and distributes content worldwide, but also produces live stage plays, distributes filmed entertainment produced by third parties, sells consumer products, and earns revenue via Fandango, a movie ticketing and entertainment service. Filmed entertainment is mainly produced under , , and DreamWorks Animation. CMCSA’s produced and acquired content is primarily theatrical that are distributed for exhibition at movie theaters, but also includes direct-to-video content and CMCSA’s library. Theme Parks (~5% of FY’17 Revenue) Within the theme parks space, CMCSA owns and operates the Universal theme parks with the main parks being located in Orlando, Florida and Hollywood, California. Universal theme parks are expanding internationally as well, as CMCSA has a theme park in Osaka, Japan and has plans to develop a theme park in Beijing, China. Corporate & Other (~1% of FY’17 Revenue) Corporate and other consists mainly of Comcast Spectator, which owns the and the Wells Fargo Center arena, and business development initiatives, which includes a wireless phone service CMCSA launched in FY’17.

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INDUSTRY OVERVIEW Cord-Cutting For many years, the only way to obtain TV entertainment in a U.S. household was through purchasing basic cable. Over the years, basic cable became less popular as providers started bundling larger cable packages with Internet for cheaper prices. Although prices of bundled services are cheaper than non-bundled services, they are still expensive. The average cost of basic cable in 2018 is ~$60/month and a bundled package that includes cable and internet costs ~$132/month. From FY’15 to FY’17, CMCSA, Charter, and AT&T have increased monthly prices by 3.5%, 6.4%, and 5.0% respectively. As many young consumers started becoming unsatisfied with prices, they began looking for cheaper alternatives. Since roughly FY’13, the industry has been under immense pressure from new competition arising mainly from online streaming companies. Companies like , YouTube, Netflix, and many more are offering online streaming services with an average monthly cost of ~$15/month for a small library of channels and ~$40/month for ~60 channels of live TV. With these cost savings, the industry has seen consumers begin cord-cutting at a very fast pace. From FY’16 to FY’17, the number of cord-cutters increased 43.6% YoY to 24.9M people. According to a survey conducted by TiVo, Inc., 86.7% of respondents said the main reason for cord-cutting is price. Also, Nielsen Holdings found that in FY’17, the average consumer received 189 channels, but only watched 17 of them. Rising prices for a service that consumers rarely fully utilize has contributed to many young consumers deciding to be, “cord-nevers,” a term given to consumers who have never paid for cable and likely will never in the future. As streaming services offer consumers the service they want at a cheaper price, the industry will likely continue to experience cord-cutting going forward. As providers realize the effects of cord-cutting, they have continued to raise monthly prices to offset subscriber losses. According to Pew Research, only 31.0% of consumers aged 18-29 pay for cable, while 52.0% between the ages of 30 and 49, 70.0% between the ages of 50 to 64, and 84.0% over the age of 65 continue to pay for cable. The cord-cutting phenomenon is largely fueled by millennials who are more familiar with streaming technology. Older generations are much more hesitant to switch to streaming services because they grew up with cable and, for the most part, do not mind paying the higher costs. The current state of the economy has contributed to the older generations’ willingness to pay for cable. With low unemployment and rising wages, disposable income increases, which creates the foundation for strong levels of discretionary spending. As long as consumer sentiment is high and discretionary spending is strong, cord-cutting among the older generations should continue to be much slower than that of the younger generations. This explains why the percent change in cord-cutting over the next five years will continue to decrease despite it being a popular trend amongst so many younger consumers. In addition, industry operators recognize the effects cord-cutting is having on them and are making adjustments to diversify revenue streams and minimize the losses. In particular, CMCSA has actually added ~743,000 net new customers so far this year, which compared to ~526,000 net new customers at this time last year is a 41.25% YoY increase. Cord-cutting is clearly taking place, however it is not having the effect on companies like CMCSA that was originally expected years ago. When discussing the topic of the cord- cutting phenomenon, people tend to forget that streaming services require high-speed internet, and CMCSA is the largest internet service provider in the U.S. CMCSA management has placed focus on growing the company’s high-speed internet, business services, and advertising while retaining as many cable subscribers as possible by bundling cable with internet and the newly introduced Xfinity Mobile. Xfinity Mobile is a mobile virtual network operator that offers CMCSA consumers wireless services. Although younger generations of consumers will likely continue cord-cutting for streaming services, they still require internet and wireless mobile services, and CMCSA is continually growing both of these offerings. Cord-cutting will continue to play a role within the industry, however, the rate at which it happens will likely be slower than anticipated.

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Industry Consolidation Within the media and entertainment industry, there has been a significant amount of pressure placed on media conglomerates to reach consumers directly as opposed to reaching them indirectly through distributors. Tech giants Facebook, Apple, Amazon, Netflix, and others have experienced very significant growth through content delivery and are spending billions of dollars on delivering digital content every year. To combat the increasing competition from tech giants, the media conglomerates industry has seen exponential growth in M&A deals over the past year. Valuation M&A deals have grown from $60.26B in 2017 to $323.39B in 2018, representing a YoY increase of ~436%. The M&A activity will help media conglomerates balloon corporate earnings and invest heavier in digital content. This year, AT&T acquired Time Warner, Inc. for ~$85B, Walt Disney acquired 21st Century Fox for ~$71B, Discovery Communications acquired Scripps Network Interactive for ~$14.6B, and CMCSA acquired Sky plc for $50.7B. There has also been talks of a merger between CBS and , which were previously one company until they split in 2006. As tech giants continue to put pressure on the industry, M&A activity is likely to continue. Growing digital content that can reach consumers directly will become increasingly important to media conglomerates going forward.

RISKS TO INVESTMENT THESIS

Witch Hunt from President Trump and ACA Recently, President Donald Trump has demonstrated disdain for CMCSA on the grounds that the company violates antitrust laws and harms consumers. CMCSA operates MSNBC, a left-leaning cable network that is highly critical of the President’s political agenda, and has led President Trump to accuse CMCSA of providing “fake news”. The President also referred to CMCSA being “public enemy No. 1” in a private conversation. On November 12, 2018, the American Cable Association (ACA), a lobbying group for midsize cable operators, sent a letter to the DOJ asking its attorneys to investigate CMCSA for repeatedly violating antitrust laws. The ACA believes that CMCSA cable

distribution, combined with NBC’s content, make it an anti-competitive threat. When CMCSA acquired NBCUniversal in 2011, the DOJ and FCC set specific guidelines that both companies must meet, however, the ACA believes that CMCSA disregarded these guidelines and has been committing antitrust behavior.

Cord Cutting Phenomenon

Over recent years, millions of Americans have been scrapping their cable subscriptions and signing up for over-the- top (OTT) media services. In CY’18, the number of cord cutters will climb to 33 million adults, a 43.6% increase from 2017. In 2017, traditional cable and satellite TV subscriptions dropped 3.7% to 94 million households, a trend that is expected to grow in the near term. The main driver for this movement can be attributed the rising cable and satellite

TV subscription fees, which have grown at a 5.5% CAGR from 2000-2017. From 2018-2022, the number of cord cutters is projected to grow from 33 million to 55.1 million a CAGR of 8.92%. This trend could threaten cable-related revenues for companies throughout the industry, and firms must be willing to proactively adapt their business models. MOATS Economies of Scale

CMCSA is the largest cable TV provider with 20.98 million subscribers in 40 states. CMCSA is also the second largest internet provider with 14M subscribers through the United States. With its recent acquisition of Sky, CMCSA will add UNDERVALUATION23M subscribers and will expand its footprint in Europe. Through its ownership of NBCUniversal, CMCSA owns and operates Universal Parks & Resorts, the third-largest amusement park organization in the world. In addition, CMCSA

owns some of the most popular cable-television networks in the world including MSNBC, CNBC, and Telemundo.

The scale and reach of CMCSA will allow it to succeed in one of the most competitive industries in the world.

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UNDERVALUATION

2-Year LTM P/E Valuation 25x CMCSA proposes to buy Outbids Fox 23x Sky for $31B by $3.6B, will pay ~31% premium for 21x Sky

19x

17x CFO confirmed an all cash 15x deal

13x Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18

CMCSA is currently trading at a 12.1% discount to its average 2-year LTM P/E multiple of 18.4x. CMCSA’s undervaluation began on February 26th, 2018, when the company announced it would enter the bidding process to buy Sky for $31B. This announcement started a bidding war with 21st Century Fox who already declared a bid a few months prior. Investors saw this war between rival media companies as harmful to the deal, as they felt either company was going to have to pay a severe premium due to the fierce competition. Although this deal would add 23 million subscribers to CMCSA’s portfolio and expand the company into a massive new market, investors were unjustly concerned about the lack of clarification about the possible acquisition and that CMCSA was going to pay too high of a premium. Over the next five days, CMCSA’s stock dropped 8.3% and its P/E multiple contracted ~5%. The second part of CMCSA’s undervaluation began on April 25th, 2018, when the company beat earnings by 4.4% and added 379,000 high-speed Internet (HSI) customers, a QoQ increase of 8.3%. In addition, revenue from NBCUniversal grew ~21% YoY, far outpacing analysts’ expectations. On the earnings call, CMCSA CFO Michael Cavanaugh confirmed that the Sky acquisition would be all cash deal and that the company would borrow debt to finance the purchase. Even with an exceptional quarter, CMCSA’s stock price dropped 10.71% over concerns surrounding the debt that the company would be taking on. This fear was unwarranted as CMCSA has a strong balance sheet and a total debt to EBITDA ratio of ~3x, which is on par for a giant media conglomerate. Investors were ignoring that CMCSA is experiencing significant growth in EBITDA which will allow the company to create additional FCF to pay down the debt. During this time, its P/E ratio contracted from 16.0x to 14.3x. The last part of CMCSA’s undervaluation occurred on September 25th, 2018, when CMCSA officially outbid Fox for a $39B takeover of Sky. Investors reacted poorly because the final offer of £17.28 per share, which was over 25% more than its previous offer. Then, 21st Century Fox conceded and announced it would sell its 39% stake in Sky to CMCSA. CMCSA’s multiple once again contracted severely due to investors believing the final premium was too high. CMCSA outbid Twenty-First Century Fox by $3.6B and paid a final 31.73% premium for Sky. A ~30% premium is normal in large media M&A deals as AT&T and DIS paid very similar premiums at around 30%. All of these drops in valuation ignore the opportunities this acquisition presents. CMCSA will now have a massive foothold in the U.S. and Europe. CMCSA will be brought back to fair value by significant growth opportunities from the Sky acquisition, shifting its focus to broadband growth, and continuing outperformance from NBCUniversal.

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CATALYSTS Sky High On October 9, 2018, CMCSA announced its intention to acquire Sky Limited at $22.08 per share after a superior cash proposal against 21st Century Fox. On November 7, 2018, the deal was completed for $24.08 paid for in cash. The final transaction value of the deal was ~$50.7B, representing a TTM TV/EBITDA of 18.79x, which was a 31.73% premium to its prior multiple in October. Sky is one of Europe’s leading media and telecommunications companies. CMCSA issued $27B in unsecured bonds that will mature over the next 40 years to assist in financing the acquisition. CMCSA faced a substantial amount of negative sentiment regarding the acquisition from when the original bid was placed in February all the way to the close in November. Most, if not all, of the negative sentiment regarding the acquisition was revolved around the sense that CMCSA overpaid. Since CMCSA was in an intense bidding war with 21st Century Fox over Sky’s assets, investors felt the company was going to severely overpay for the acquisition. CMCSA did pay a full price but it falls in line exactly with industry norms for major acquisitions. For example, AT&T’s acquisition of Time Warner faced similar negative sentiment during the time of its negotiations. AT&T, like CMCSA, faced pressure from regulation and pushback from the DOJ. AT&T paid a 38.8% premium in its acquisition of Time Warner, which is 7.1% higher than CMCSA’s premium. We view the acquisition of Sky as a rare opportunity for CMCSA to capture a world-class company with a similar business strategy and we see the premium paid as necessary to sustain long-term growth in this industry. Having the largest foothold in the U.S., one of the biggest markets in the world, and now a giant presence in Europe sets CMCSA up to be a global dominator in media. The main question from this acquisition is: What does CMCSA get from Sky that is worth the premium paid? Sky will provide CMCSA with diversification outside the U.S. in strong European markets that are less developed and less penetrated than those in the U.S. Sky gives CMCSA the ability to diversify away from traditional cable which continually is the biggest worry in the industry. CMCSA, backed by its strong balance sheet, is in a great position to build one of the largest media & distribution businesses in the world. With numerous challenges for global telecommunications companies, from negative consumer trends to increasing regulation, we see scale as increasingly crucial to reach customers. With already the largest cable/broadband footprint in the U.S., this large stake in Europe is a massive growth driver for CMCSA. CMCSA now has a clear path for expanding its broadband and cable services to a new market, while also diversifying its revenue streams through Sky’s unique businesses. Sky presents an incredible opportunity for CMCSA. Sky is an attractive company with market leadership, solid financials, top franchises, and strong growth prospects. Sky serves over 23M customer relationships with 100% of revenue from outside the U.S., whereas, CMCSA provides services to 29M customer relationships with 91% of revenue in the U.S. The two companies together will now have 52M direct customer relationships, which is almost double what CMCSA had previously. Sky is the most prestigious media company in Europe whose brand is famous all around the world. CMCSA now has access to Sky’s elusive partnerships in Europe with HBO, Showtime, and Warner Brothers. The company now has more access to content creators as it now has ‘Sky Original Productions’ which has over 50+ original productions already. Sky and NBCUniversal now officially have the rights locked down together to exclusively broadcast the English Premier League soccer matches from 2019-2022. Sky is a top pay TV provider in the U.K, , and Italy, which gives CMCSA an international customer base to boost cable capabilities. Sky owns NOW TV, a OTT streaming service, with approximately 2M subscribers. This gives CMCSA a solid hedge against cord-cutting trends and helps diversify revenue streams. is a top European cable news network followed by Sky channels for sports, art, and entertainment. is the second largest broadband provider in the U.K and Ireland. This is especially exciting for CMCSA as expanding broadband services and capabilities is one of its core initiatives. Combining the businesses of Sky and CMCSA will help retain and gain customers because they will have access to even higher quality content. Sky is a diverse business serving numerous industries, niches, and markets, and puts CMCSA in a position to grow steadily and healthily as an international media giant. Although CMCSA paid a premium for Sky, the ROIC the company will see from the transaction will add significant value. Sky’s projected revenue is expected to grow 5.5% YoY from $16.4B to $21.4B from FY’17-FY’22 and will be added to CMCSA’S top-line. Sky will be immediately accretive to CMCSA’s EBITDA, adding an average $2.9B for next three years. Sky will also contribute an average $1.4B to CMCSA’s FCF. Ultimately, Sky will help CMCSA boost its EPS at a 16.0% CAGR going forward and allow the company to continue beating analysts’ estimates.

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Connectivity & The Broadband Path Ahead As the largest cable provider in the country, CMCSA faces the most scrutiny for an industry-wide trend in cord-cutting. The trend away from cable has been a major headline in the news since the rise of streaming eleven years ago. While the trend will continue, CMCSA is in a unique position to take advantage of the change in the industry through its superior execution and massive footprint. CMCSA is well-positioned through its in focus in its business model from a traditional cable business to a connectivity business. The company’s new connectivity focus is based on a new broadband- focused strategy which includes initiatives like broadband-only concentration. Broadband is defined as wide bandwidth data transmission that transports multiple signals and traffic types, but in terms of this report broadband refers to High- Speed Internet (HSI) access and specifically Xfinity Internet. While this broadband-focus is relatively new, you can distinctly see the great results it is already producing for the company. In 3Q’18, CMCSA saw 363,000 net new broadband customers which was the best third quarter in over ten years. Connectivity will bring other positive factors for CMCSA’s cable business such as improving margins, lessening CapEx intensity, and in a result of those two factors, a higher net cash flow for the cable business. Over the next five years, we predict FCF to grow from $14.1B to $22.4B as CMCSA’s EBITDA expands through Sky acquisition and margins improve from the shift to connectivity. This FCF will be utilized by CMCSA to continue to invest and stay ahead as large media companies tend to compete on technological innovation. As fears of cord-cutting grow unreasonably, one major fact for CMCSA continues to be overlooked. The company still continues to grow its overall residential customer relationships year after year. In FY’17, CMCSA added more than one million new net customers for the twelfth year in a row. In 3Q’18, CMCSA once again displayed its ability to grow subscribers in the broadband segment as the company saw the net 363,000 customer increase. However, the main question CMCSA faces from skeptical investors is if the broadband growth is sustainable moving forward, and if the growth is enough to continue to offset losses in cable video subscribers. We see broadband growth exponentially growing over the next few years, with more than enough growth to offset cable losses for several reasons. First, CMCSA has proven its ability to repeatedly grow subscribers year after year and we see broadband with plenty of room to grow. CMCSA’s broadband penetration in the U.S. is ~47%, which demonstrates the company has attractive growth prospects ahead. CMCSA is leveraging its leading market position in broadband evidenced by the company’s Internet average revenue per user (ARPU) grew at a healthy +4.4% YoY for 3Q’18. Second, CMCSA will continue to differentiate in Broadband with the deployment of DOCSIS 3.1. DOCSIS 3.1 is a modem that provides the fastest possible service speeds at up to 10 gigabits per second. This software is the platform CMCSA is using to offer 1-Gig downstream speeds across its footprint of over 58M homes and businesses. CMCSA just completed its network rollout of this service in accordance with the company’s strategy of whole-home connectivity and is the first company to have a 100% rollout. Through this roll out and a strong reaction around CMCSA’s xFi Pod (a WiFi enhancer), we see a clear path to retaining customers and gaining new ones who are looking for faster Internet speeds. CMCSA’s superior execution in the cable business along with its now industry-leading Internet speed will have a significant impact in the offsetting of cord-cutting. Third, broadband has strong growth prospects in the business services segments. The business services segment grew 11% in 1H’18 and is up 6.5% YoY in 3Q. It is ~$40B market and CMCSA is currently at $7B. Management is very bullish over the future of growing broadband in businesses. CEO Brian Roberts discussed this topic in the Goldman Sachs Investor Conference in September and he highlighted management’s success with winning small businesses. He stated Verizon and many other large broadband providers were so focused on gaining big businesses, the companies missed out on the smaller competition. In result, CMCSA has ~65% market share over all small businesses. CMCSA has dominated small businesses and now the company is shifting its focus to gaining more medium-sized businesses as the company is more attractive now with the faster, high-quality broadband services. CMCSA is already acting on its new initiative as it was revealed the company won the business of a national bank with 2,000 branches and a national wholesale grocery retail store chain that both will be using the broadband services. CMCSA now has more sophisticated managed data networks and fiber networks that businesses are looking for. In addition, CNBC reported this past month that CMCSA is developing a video-streaming platform for broadband-only customers launching next year. While CMCSA management has not yet confirmed this, we view it as an exciting opportunity for CMCSA customers to have access to numerous streaming apps while still being a loyal customer. With these exciting growth prospects in play, according to our DCF analysis, we are in-line with street expectations and predict net additions for HSI will grow at a CAGR of 3.5% YoY for FY’18-FY’22.

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Fall 2018

NBCUniversal is Set Up for Success CMCSA acquiring NBCUniversal has been considered one of the most successful and prominent acquisitions in recent merger history. Since CMCSA acquired NBCUniversal in 2011, the stock has returned over 300% which is more than double the return of the S&P 500 over the same period. NBCUniversal has been nothing but a fantastic performer under CMCSA as the company went from a growing media company to a multinational media conglomerate. NBCUniversal offers CMCSA unique penetration in to several markets that most large cable companies don’t have access to such as broadcasting, local media, film, TV studios production, digital businesses, and theme parks. NBCUniversal has been continuing to grow backed by strong financials and world-class content. NBC broadcasting recently completed the 52- week television season finishing #1 in total viewers for the first time in 16 years, along with another first place win among adults 18-49 viewership for the fifth year in a row, and NBC’s Telemundo finishing in first again in Spanish language primetime. NBCUniversal is a defensive play in the effort to offset cord-cutting. The company had cable net losses of 106,000 in 3Q’18, which was much less than the predicted 152,000 and went against Verizon & AT&T’s trend of losing more than expected cable subscribers. This demonstrates that NBCUniversal, like CMCSA, is in a solid position in the market to hedge itself against cord-cutting. NBCUniversal will see growth through a healthy film slate in 2019 & 2020 in Film, better than expected performance in Parks, and a robust ad market, offsetting ratings pressure and driving top-line. Through these drivers for the company, we predict through our DCF analysis that NBCUniversal will show a solid 10% YoY revenue growth for FY’18-FY’19. NBCUniversal is the fastest growing media company organically in terms of both revenue and EBITDA. Filmed Entertainment NBCUniversal’s film segment displayed a decent 3.8% YoY revenue growth in 3Q’18. For the film segment, it Filmed Entertainment Revenue was a very quiet quarter. This is because the film segment $15.0 is facing tough YoY comparisons due to the most 30.0% $10.0 profitable year in NBCUniversal’s film business, 20.0% exceeding over $5B at the box office. This record year $5.0 10.0% was led by hot films such as 3 and The

Boss Baby which generated $1.1B and $528M in the box Revenue($ B) in $0.0 0.0% office. The first three quarters of FY’18 haven’t seen as YoY Growth Rate strong as a movie slate which led to the slowing growth. However, that is about to change as a new strong movie Film Revenue YoY % lineup is releasing through 4Q’18-FY’20. This strong movie slate is coming from NBCUniversal’s diverse media resources and content creating . Scale is crucial in the film industry. It matters in two ways: cost structure and ability to produce constant quality movies. NBCUniversal is now in a unique position where, through its acquisitions of DreamWorks Animation and Illumination, can launch three to four high-quality movies a year instead of the usual two. For example, in 4Q’18, Dr. Seuss’ The Grinch was released and it will be followed by three highly-anticipated films (The Secret Life of Pets 2, Abominable, and How to Train Your Dragon: The Hidden World) in the first three quarters of FY’19. NBCUniversal already has ten movies lined up until the end of 2022 with more to still be announced. The company will see significant growth starting next quarter as it ramps up the number of animation and live-action movies without losing any quality. NBCUniversal is also seeing opportunities to make and sell more movies to streaming services like Netflix and Hulu. It is taking advantage of the rise in streaming by creating partnerships with streaming services to continue to sell its films to the fastest growing video segment. This also creates a nice hedge for the company’s cable business as the rise in streaming obviously scares traditional pay-tv suppliers. NBCUniversal is also seeing growth from a rise in the consumer products world from adoration of animated movie icons like ‘Minions’. Animation tends to drive consumer products. NBCUniversal has three animated movies rolling out in FY’19 and management’s goal is to solidify four per year starting in 2021. In the past three years, NBCUniversal’s consumer product’s revenue went from ~$40M to ~$500M. If you look at Disney, who has ~$2B of EBITDA in its consumer products business, there is a clear runway for growth for the consumer products business for NBCUniversal. We see the film segment growing ~15% YoY in FY’19 and FY’20 driven by this incredible upcoming movie lineup and the opportunities in streaming and consumer products.

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Theme Parks NBCUniversal owns numerous parks and resorts in Orlando, Hollywood, Osaka, Singapore, and many Theme Park Revenue more cities. Until NBCUniversal launched Universal Studios in Orlando, Disney essentially had a monopoly $10.0 30.0% on the theme park industry. Theme parks have been a solid driver for NBCUniversal growing at a CAGR of 20.0% $5.0 ~3% from FY’18 to FY’21. However, Theme parks had 10.0%

a rough quarter in 3Q’18 as revenue decreased 1.4% Revenue($ B) in $0.0 0.0% YoY. This is due to devastating typhoons and a deadly YoY Growth Rate earthquake hitting Osaka, Japan, negatively impacting attendance. EBITDA growth in the segment also Theme Park Revenue YoY % decreased 6.5% YoY, but management estimated that without the natural disasters EBITDA would have displayed low-single-digit growth. A big key driver for the theme parks will be a link up of the company’s iconic brands to attractions at the park after seeing Disney’s success with the strategy in its parks. CMCSA’s management explained in an investor conference this past summer how NBCUniversal’s many subsidiaries like Universal Pictures, DreamWorks Animation, and Illumination Entertainment, are creating major global brands that are starting to be represented at the company’s theme parks. For example, NBCUniversal is launching a new theme park in China in late 2020-early 2021. Through NBCUniversal’s acquisition of DreamWorks, it has the rights to Kung Fu Panda and the company will be opening a massive Kung Fu Panda attraction, as the movie had record success there. The company will also be launching a new Harry Potter rollercoaster in 2019 in the ‘Wizarding World of Harry Potter’ in Universal Studios Orlando. Since Resort opened the ‘Wizarding World of Harry Potter” in 2010, attendance has increased over 120% and it has been the most visited attraction in the park since 2011. These iconic brands are helping Universal Studios emerge as a worthy competitor to Disney’s Park Business. Disney started this trend when it originally opened its theme parks in the 1960s with the brand and it has continued all the way today to famous brands like Universal Studio’s Transformers. CMCSA CEO, Brian Roberts, stated in July that they are looking at expanding NBCUniversal’s parks in Orlando by building new gates to Universal Studios Florida to draw guests to stay longer to compete with Disney. NBCUniversal is taking the right steps to catching up with Disney’s theme park advantage. We predict to see a better than expected recovery of 7% YoY growth in 4Q’18 and an annual growth rate of 17.4% from FY’18-FY’22 from improving operating margins and new attractions. Advertising NBCUniversal had solid results in TV ads in 3Q’18, as advertising revenue grew 9.2% YoY in the Broadcast segment and 4.2% YoY in Cable Networks. We see NBCUniversal’s solid results in TV ads reflecting not only solid content but a robust economy. Advertising economy is strong because it continues to be lifted by favorable economic trends. Industrial production rates and personal consumption expenditure growth rates are up 1.2% YoY & 1.7% YoY via the St. Louis Fed. These economic factors are the two most tightly correlated with advertising growth, so the increase in these figures leads to the acceleration in ad spending trends. We expect many of these favorable trends to continue through 4Q’18 and we predict advertising sales to increase 4.1% YoY for 4Q’19. CMCSA & NBCUniversal revealed at the Advanced Advertising Summit in NYC that the companies are turning its advertising optimization efforts internally to cut costs and boost revenue. The companies are offering more attractive and advanced advertising methods in the overall effort to make NBCUniversal’s advertising inventory more “API-able”. NBCUniversal is already seeing a high retention rate for 500+ advertising clients and the goal is to bring more on board. With the advanced advertising softwares combined between CMCSA and NBCUniversal the goal is to give advertisers and agencies new capabilities for addressable advertising. Addressable advertising is a steady growth opportunity worth more than ever due to DTC and SVOD. As NBC networks are climbing the rankings, ad revenue will follow upwards. Management expects 3.2% advertising growth in FY’19 and our prediction falls in-line with that.

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FINANCIALS Revenue CMCSA reports its revenue into five segments: Cable Communications, Cable Networks, Broadcast Total Revenue Television, Filmed Entertainment, and Theme Parks. 30.0% From FY’15-FY’17, CMSCA revenue grew at a 6.5% $120,000.0 CAGR from $75.7B to $85.7B. In 4Q’18, CMCSA 20.0% acquired Sky and subsequently added its revenue to its $90,000.0 10.0% books. We expect CMCSA’s revenue to be $106.9B for

FY’18 as a result of the transaction. During FY’15- $60,000.0 0.0% Revenue ($ Revenue($ B) in

FY’17, NBCUniversal, which is comprised of CMCSA’s YoY Growth Rate Cable Networks, Broadcast Television, Filmed Entertainment, and Theme Parks segments, grew at a Total Revenue YoY % 5.1% CAGR from $28.5B to $33.0B. This outpaced CMCSA’s Cable Communications segment revenue which grew at a 3.82% CAGR from $46.9B to $52.5B. From FY’18- FY’20, we expect CMCSA’s revenue to grow from $106.9B to $120.7B as the firm expands its footprint in Europe through the acquisition of Sky, bolsters its Filmed Entertainment and Theme Parks segments, and grow its broadband and wireless capabilities to offset cable subscriptions declines. Cable Communication (~62% of FY’17 Revenue) CMCSA’s revenue from its Cable Communication segment was $52.5B in FY’17, representing YoY growth of 4.9%. In addition, its revenue generated from its High-Speed Internet group grew 9.1% from $13.5B to $14.8 as the number of customers receiving higher level packages increased. We believe that CMCSA’s Business Services and High-Speed Internet groups will be vital in offsetting the anticipated decline in cable subscriptions. From FY’18-FY’22, we project revenue from this segment to grow 17.4%. Cable Networks (~13% of FY’17 Revenue) CMCSA’s revenue generated from its Cable Networks segment from $10.5B to $10.6B from FY’16-FY’17. Its Distribution revenue grew slightly as contractual rates charged under distribution agreements increased. In FY’18, we expect revenue from this segment to grow 5.0% as advertising revenue and content licensing fees increase from the 2018 midterm elections. We also expect this segment to perform well during 2020 due to the presidential election. Broadcast Television (~11% of FY’17 Revenue) FY’16-FY’17, revenue from CMCSA’s Broadcast Television decreased from $10.1B to $9.5B. This slight drop is mainly attributed to above average revenue generated by the 2016 Rio Olympics and presidential election. Like the Cable Networks segment, we expect this segment to perform better in 2018 and 2020 due to the spike in political coverage attributed to midterm and presidential election. Filmed Entertainment (~9% of FY’17 Revenue) From FY’16-FY’17, revenue from CMCSA’s Filmed Entertainment segment grew 9.73% from $6.4B to $7.7B. This is one of CMCSA’s fastest growing segments and will continue to be going forward. In FY’17, CMCSA experienced strong sales from several hit movie releases. During FY’19-FY’21, the release of films such as How to Train Your Dragon, Minions 2, and The Secret Life of Pets 2 will drive this segments top-line. Theme Parks (~6% of FY’17 Revenue) CMCSA’s Theme Parks segment is another one of the firm’s fastest growing areas. From FY’16-FY’17, this segment grew 10.0% from $4.9B to $5.4B as guest spending and attendance increased at The Wizarding World of Harry Potter. Going forward, we expect the Theme Parks segment grow at a double digit rate as CMCSA makes additions to its current parks and adds another Universal Studios Park in Shanghai, China in FY’20. Over the next five years, we expect revenue from Theme Parks to grow ~107% from $5.8B to $12.1B.

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Debt In FY’17, CMCSA recorded debt of $59.1B. For FY’18, CMCSA Debt Distribution we expect its debt level to increase 57% to $92.8B due to its acquisition of Sky. To finance the deal, CMCSA $15,000 sold $27B of unsecured bonds in October of 2018. $10,000 From FY’18-FY’22, we project CMCSA’s debt level to $5,000 decrease significantly from $92.8B to $63.9B. In FY’17, $- CMCSA’s D/E ratio was 0.91x, however, we project it to increase to 1.23x in FY’18 because of the Sky Debt in ($ B) acquisition. In FY’17, CMCSA’s Debt/EBITDA ratio Revolver Outstanding Bond Principal was 2.0x and will expand to 3.03x in FY’18. CMCSA’s Term Loan Outstanding strong, consistent revenue growth combined with its improved efficiencies will allow it to expand EBITDA and lower its Debt/EBITDA ratio to 1.47x by 2022. CMCSA received credit rating Moody’s and S&P of A3 and A-, respectively. Cash Flow/CAPEX From FY’16-FY’17, CMCSA’s FCF grew 11.2% from $10.7B to $11.9 as net income experienced double digit CMCSA FCF Growth growth. From the Sky acquisition and other initiatives $25,000 $21.4 B to improve efficiencies, CMCSA will be able to expand $19.8 B its EBITDA margins and grow its FCF. From FY’18- $20,000 $17.3 B $14.1 B FY’22, we expect CMCSA’s FCF to grow at a 12.56% $15,000 $10.7 B $11.9 B CAGR from $14.1B to $21.4B. In FY’17, CMCSA had $10,000 a Net PP&E of $38.5B. Its Net PP&E is expected to FCF B) in ($ jump significantly to $78.3B for FY’18 due to the $5,000 acquisition of Sky. Within its Cable Communications $- segment, CAPEX will decrease as truck rollouts become 2016 2017 2018E 2019E 2020E 2021E less prevalent. In every other segment, CAPEX will increase CMCSA expands into Europe from the Sky acquisition and improves its Theme Parks. Earnings CMCSA has historically delivered consistently strong EPS over the past five years, beating analyst estimates Adj. EPS Growth 15 out of the last 20 quarters with an average surprise

$4.00 80.0% Rate Growth YoY of 4.17%. From FY’13-FY’17, EPS grew at a 10.51% $3.00 60.0% CAGR from $1.25 to $2.06. In 3Q’18, CMCSA beat 40.0%

analysts’ estimates of EPS and revenue by 6.56% and $2.00 20.0% Adj.EPS 1.38%, respectively, increasing the price by ~5.0%. $1.00 0.0% During this quarter, CMCSA grew its adjusted EBITDA by 7.6% YoY, its fastest rate in the past six years and achieved 363,000 net new broadband customers, its highest net new broadband additions in Adj. EPS YoY % the past decade. Within cable, revenue increased 3.4% and EBITDA increased 7.6%, which increased margins by 1.6% YoY. This was mainly driven by growth in high-margin connectivity businesses, including high-speed internet and business services. High-speed internet grew 9.6% to $4.3B mainly due to 334,000 net new additions this quarter. Business services revenue increased 10.6% to $1.8B, increasing 6.0% YoY. Advertising revenue also increased 15.2% to $684M. In addition, the X1 platform is now deployed to ~65% of residential video customers, which has allowed CMCSA to decrease cable capex by 5.7% to $1.9B this quarter. Overall, expense management and growth in higher margin connectivity businesses, coupled with healthy top-line growth has

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Fall 2018 expanded EBITDA margins. Management guided towards the higher end of the original guidance of 50 to 100 bps of margin expansion. FY’18-FY’22, we project EPS to grow at 16.7% CAGR from $2.70 to $5.02. Our estimates are slightly higher than the streets, however, CMCSA has beat estimates every quarter for the past 11 quarters and we expect that trend to continue as its top-line and margins increase. Margins CMCSA has maintained steady profitability and is looking to increase margins through focusing on higher Adjusted Margins margin connectivity business and cost control. From FY’15 to FY’17, gross margin expanded from 70.1% to 70.0% 70.3%, while operating margin contracted slightly from 50.0% 22.7% to 20.0%. Despite this slight decline, 30.0% management remains optimistic that controlling costs 10.0% and growth in higher margin areas, including high-speed 2017 2018E 2019E 2020E 2021E residential internet and business services, will provide 50 to 100 bps of EBIT margin expansion by the end of EBITDA Margin Gross Margin FY’18. In addition, CMCSA will have a lower churn rate Net Margin within its Cable Communication segment as its cable subscribers continue to decline. As a result, SG&A expenses will decline YoY, allowing its margin to steadily increase. We expected EBITDA margins to expand 3.9% from FY’18-FY’22. From FY’15 to FY’17, net margin expanded from 12.0% to 27.2%, which was mainly due to a tax income benefit of ~$7.5B that arose out of the 2017 U.S. Tax Cut & Jobs Act. Going forward, management has reiterated guidance of between 50 bps and 100 bps of EBITDA margin expansion by the end of FY’19 due to a higher focus on higher margin business and cost control. Over the coming years, we expect CMCSA to expand net margins at a very steady pace as management delivers on these initiatives. Net margins should increase at 5 year CAGR of ~9.8% as CMCSA realizes benefits from the Sky acquisition and increases broadband growth. We believe these catalysts show management has a long term focus on higher margin business, controlling costs, and increasing profits. INSIDER TRANSACTIONS

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Fall 2018

MANAGEMENT

Brian Roberts – Chairman & CEO

Brian Roberts joined the company his father founded, CMCSA, in 1981 selling

cable door-to-door and worked his way up to President of the company by 1990. In 2002 Brian earned the title of CEO and in 2004 became Chairman of the Board. Since becoming President of the company in 1990, CMCSA has grown from $657M in revenue to ~$85B today. Brian has been named by Barron’s as one of the world’s 30 best CEOs and was also named “Business Person of the Year” by Fortune magazine. Brian is a Philadelphia native and earned a Bachelor of Science

from the Wharton School at the University of in 1981.

Steve Burke – CEO, NBC Universal & SEVP, Comcast Corporation

Steve Burke joined CMCSA in 1998 as the President of CMCSA Cable. From there, Steve worked his way up to COO of CMCSA and assumed his current role

in 2011. In his current role, Steve mainly oversees and is responsible for the news and sports & entertainment networks. Prior to his time with CMCSA, Steve began his career at Disney and was responsible for developing and founding The Disney Stores as well as serving as President of ABC Broadcasting. Steve earned his MBA from Harvard Business School and is currently on the Board of Directors for JPMorgan Chase & Co. and Berkshire Hathaway, Inc.

Michael Cavanagh – SEVP & CFO

Michael Cavanagh joined CMCSA in 2015 and in his current role, he oversees all financial functions, corporate development, strategic planning, and CMCSA Ventures. Michael previously spent the majority of his career in the financial services industry in a majority of different executive leadership roles. Michael served as the Co-CEO of JPMorgan Chase’s Corporate Investment Bank from 2012 – 2014, and also served as their CFO through the financial crisis. Prior to

that, he was the Co-COO at the Carlyle Group. Michael earned his B.A. from Yale and J.D. from the University of and serves on the Board for Yum Brands.

Jeremy Darroch – Group CEO, Sky plc Jeremy Darroch has held his current position at Sky plc since 2007 and has helped transform the company into Europe’s leading media and entertainment company. Over the past 11 years as the company’s CEO, Jeremy tripled Sky’s market value and has positioned it for long term success. Jeremy has 25 years of experience working in consumer-focused businesses, mainly retail. Prior to his current

position, Jeremy served as the company’s CFO for three years. Prior to that, he worked at DSG International, plc where he was the Group Finance Director and before that he began his career working for 12 years at Proctor & Gamble.

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Fall 2018

PEER GROUP ANALYSIS: see Exhibit III in Appendix for comp table… 0

The Walt Disney Company (DIS): DIS is a worldwide and entertainment conglomerate headquartered in Burbank, California. The company owns many well-known brands, including ESPN, PIXAR, Lucasfilm, and Marvel to name a few. The company operates in four main business segments, including Media Networks, Parks and Resorts, Studio Entertainment, and

Consumer Products & Interactive Media. DIS derives the majority of its revenue from the U.S. and Canada, but it

also generates revenue in Europe, Asia Pacific, and Latin America.

Charter Communications Inc. (CHTR):

CHTR, headquartered in Stamford, Connecticut is the second largest cable operator in the U.S. and provides broadband communications services, including video, internet, and voice services. As of FY’17, CHTR had ~27.2M

residential and business customers. CHTR also provides video and online advertising inventory to local, regional, and

national customers and information technology solutions. CHTR also provides regional sports networks and local sports, news, and lifestyle channels.

Verizon Communications Inc. (VZ):

VZ, headquartered in , is a global leading provider of communications, information, and entertainment

products and services. The company owns notable brands, including HuffPost, Yahoo Sports, Yahoo Finance, Yahoo

Mail, AOL.com, Tumblr, Fios, and more. VZ operates in two main segments, including Wireless and Wireline.

AT&T Inc. (T): T is a global provider of communications and digital entertainment services, mainly in the U.S, Mexico, and Latin America that is headquartered in Dallas, Texas. T operates within four segments, including Business Solutions, Entertainment Group, Consumer Mobility, and International. T also operates three regional TV sports networks.

Market Valuation LTM Financial Statistics LTM Profitability Margins EV Multiples Price Multiples Net Equity Enterprise Sales Net EBITDA EBIT Income EV / NTM EV / EV / NTM NTM Company Ticker Value Value Sales Growth (%) EBITDA Income (%) (%) (%) EBITDA EBITDA Sales P/E P/E P/S

Comcast Corporation CMCSA 161,098.0 225,505.0 88,576.0 5.5% 28,404.7 9,861.1 32.4% 21.0% 27.3% 7.9x 7.6x 2.7x 16.0x 14.3x 1.8x

AT&T Inc. T 244,136.1 420,020.1 164,439.0 2.3% 50,047.0 19,032.9 28.5% 12.3% 20.4% 9.0x 6.5x 2.4x 10.4x 8.5x 1.2x DIS 175,410.0 197,328.0 59,434.0 7.8% 17,247.0 10,479.0 30.0% 24.9% 21.2% 11.1x 10.7x 3.2x 16.4x 16.0x 2.7x Charter Communications Inc CHTR 74,599.7 146,461.7 43,005.0 4.2% 15,164.0 1,232.2 36.1% 11.6% 24.4% 9.4x 9.3x 3.6x 62.3x 51.1x 1.8x Verizon Communications Corp VZ 220,608.3 332,604.3 130,537.0 4.9% 47935.0 18340.0 33.7% 20.3% 24.7% 7.6x 7.4x 2.7x 13.4x 12.7x 1.9x Mean 164,715.3 254,603.3 88,959.3 4.8% 267.4 188.8 31.5% 16.3% 22.0% 9.8x 8.8x 3.1x 29.7x 25.2x 1.9x Median 175,410.0 197,328.0 59,434.0 4.2% 178.2 126.0 30.0% 12.3% 21.2% 9.4x 9.3x 3.2x 16.4x 16.0x 1.8x High 244,136.1 420,020.1 164,439.0 7.8% 469.0 335.5 36.1% 24.9% 24.4% 11.1x 10.7x 3.6x 62.3x 51.1x 2.7x Low 74,599.7 146,461.7 43,005.0 2.3% 155.1 104.9 28.5% 11.6% 20.4% 9.0x 6.5x 2.4x 10.4x 8.5x 1.2x

General LTM Return on Investment LTM Leverage Ratios Coverage Ratios Credit Ratings Dividend Tot. Debt /Tot. Debt / Tot. Debt / EBITDA / (EBITDA EBIT / ROIC ROE ROA Yield Cap EBITDA Equity Int. Exp. -Cpx)/Int. Int. Exp. Company Ticker Tax Rate Beta (%) (%) (%) (%) (%) (x) (%) (x) (x) (x) WACC Moody's S&P

Comcast Corporation CMCSA 25.7% 0.98 19.7% 38.1% 12.5% 2.0% 47.7% 2.5x 91.2% 10.0x 6.6x 6.4x 8.0% A3 A-

AT&T Inc. T 24.7% 0.90 10.1% 21.7% 6.9% 6.6% 53.6% 3.9x 115.7% 6.8x 3.6x 3.2x 6.9% Baa2 BBB The Walt Disney Company DIS 11.3% 0.93 17.8% 28.0% 13.0% 1.5% 27.9% 1.2x 38.7% 28.2x 21.2x 23.5x 9.2% A2 A+ Charter Communications Inc CHTR 15.7% 1.12 11.5% 29.8% 7.1% - 59.6% 4.7x 147.8% 4.3x 1.8x 1.2x 7.6% Ba2 BB+ Verizon Communications Corp VZ 24.16 0.74 22.6% 79.3% 12.4% 4.1% 72.4% 2.6x 262% 10.2x 6.2x 6.3x 6.6% Baa1 BBB+ Mean 20.3% 0.98 13.2% 26.5% 9.0% 4.0% 47.1% 3.3x 100.7% 13.1x 8.8x 9.3x 7.9% - - Median 15.7% 0.93 11.5% 28.0% 7.1% 4.0% 53.6% 3.9x 115.7% 6.8x 3.6x 3.2x 7.6% - - High 25.7% 1.12 17.8% 29.8% 13.0% 6.6% 59.6% 4.7x 147.8% 28.2x 21.2x 23.5x 9.2% - - Low 11.3% 0.90 10.1% 21.7% 6.9% 1.5% 27.9% 1.2x 38.7% 4.3x 1.8x 1.2x 6.9% - -

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APPENDIX Exhibit 1: Valuation Methodologies & Consolidated Financial Statements

Valuation Method: Bear Base Bull Min Point 25th Point 75th Point Max Point 7.8% - 8.8% WACC and 5.5x - 7.5x Exit Multiple: $ 42.48 $ 50.31 $ 58.14 $ 42.48 $ 7.83 $ 7.83 $ 58.14 7.8% - 8.8% WACC and 1.0% - 2.0% PGR: 49.69 53.55 58.05 49.69 3.86 4.50 58.05

LTM P/E - 18.0x - 19.0x 41.72 45.14 48.68 41.72 3.42 3.54 48.68 NTM P/E - 16.6x - 17.6x 38.48 41.72 45.09 38.48 3.25 3.37 45.09 LTM EV/EBITDA - 9.0x - 10.0x 39.11 44.74 50.68 39.11 5.64 5.93 50.68 NTM EV/EBITDA - 8.5x - 9.5x 36.29 41.78 47.56 36.29 5.49 5.79 47.56

52-Week High/Low: 30.59 39.01 42.99 30.59 8.42 3.98 42.99 Owl Fund Assessed Range: $ 40.41 $ 44.94 $ 49.68 $ 40.41 $ 4.53 $ 4.74 $ 49.68 Implied % Price Return: 3.6% 15.2% 27.3%

Historical Projected Consolidated Income Statement 2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E

Revenue: $ 75,712.0 $ 81,965.0 $ 85,707.0 $ 106,982.5 $ 111,583.5 $ 120,731.5 $ 126,438.4 $ 136,391.7 % Growth: 8.3% 4.6% 24.8% 4.3% 8.2% 4.7% 7.9% Gross Profit: 53,162.0 57,502.0 60,323.0 74,780.8 78,443.2 85,477.9 90,150.6 97,929.2 % Margin: 70.2% 70.2% 70.4% 69.9% 70.3% 70.8% 71.3% 71.8% EBITDA: 26,078.0 27,979.0 29,234.5 36,267.1 38,831.1 43,221.9 46,529.3 51,556.1 % Margin: 34.4% 34.1% 34.1% 33.9% 34.8% 35.8% 36.8% 37.8% % Growth: 7.3% 4.5% 24.1% 7.1% 11.3% 7.7% 10.8%

EBIT: 17,398.0 18,421.0 18,967.5 24,132.6 26,155.6 29,581.0 32,215.9 36,167.2 % Margin: 23.0% 22.5% 22.1% 22.6% 23.4% 24.5% 25.5% 26.5% % Growth: 5.9% 3.0% 27.2% 8.4% 13.1% 8.9% 12.3% Net Income: 9,335.0 10,274.0 23,455.5 15,519.6 16,656.5 19,417.9 21,475.4 24,490.0 % Margin: 12.3% 12.5% 27.4% 14.5% 14.9% 16.1% 17.0% 18.0% % Growth: 10.1% 128.3% (33.8%) 7.3% 16.6% 10.6% 14.0% Diluted Earnings Per Share (EPS): $ 1.85 $ 2.11 $ 4.90 $ 3.34 $ 3.65 $ 4.35 $ 5.04 $ 6.03 % Growth: 13.7% 132.6% (31.8%) 9.2% 19.2% 15.8% 19.7%

Dividends Per Share: $ 0.50 $ 0.55 $ 0.63 $ 0.47 $ 0.51 $ 0.61 $ 0.71 $ 0.84 % Growth: 10.0% 14.5% (25.7%) 9.2% 19.2% 15.8% 19.7%

Historical Projected Ratio Analysis 2015A 2016A 2017A 2018E 2019E 2020E 2021E 2022E

Profitability: Gross Margin: 70.2% 70.2% 70.4% 69.9% 70.3% 70.8% 71.3% 71.8% EBITDA Margin: 34.4% 34.1% 34.1% 33.9% 34.8% 35.8% 36.8% 37.8% EBIT Margin: 23.0% 22.5% 22.1% 22.6% 23.4% 24.5% 25.5% 26.5% Profit Margin: 12.3% 12.5% 27.4% 14.5% 14.9% 16.1% 17.0% 18.0% Return on Assets (ROA): 5.5% 5.6% 12.4% 6.8% 7.1% 8.1% 8.8% 9.8% Return on Equity (ROE): 17.0% 17.1% 32.1% 19.8% 17.8% 19.8% 20.8% 22.5% Return on Invested Capital (ROIC): 9.0% 8.9% 17.7% 8.9% 9.4% 10.7% 11.6% 12.9%

Coverage: EBIT / Interest Expense: 6.4x 6.3x 6.1x 7.8x 7.3x 9.0x 10.2x 11.9x EBITDA / Interest Expense: 9.7x 9.5x 9.5x 11.7x 10.8x 13.1x 14.7x 16.9x (EBITDA - Capex) / Interest Expense: 4.1x 4.2x 4.0x 6.0x 5.5x 13.1x 14.7x 16.9x

Leverage: Total Debt / EBITDA: 1.9x 2.0x 2.0x 2.6x 2.2x 1.9x 1.8x 1.6x Total Debt / Equity: 89.0% 92.7% 80.9% 122.2% 90.1% 84.8% 79.4% 74.0% Total Debt / Total Assets: 29.1% 30.4% 31.3% 41.7% 36.0% 34.8% 33.7% 32.3% Efficiency: Asset Turnover: 0.5x 0.4x 0.5x 0.5x 0.5x 0.5x 0.5x 0.5x Days Receivable Outstanding (DSO): 33.2 35.4 36.4 35.6 35.6 35.6 35.6 35.6 Days Inventory Held (DIH): 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Days Payable Outstanding (DPO): 100.6 103.2 99.6 100.0 100.0 100.0 100.0 100.0 Liquidity: Current Ratio: 0.7x 0.8x 0.7x 0.9x 0.9x 0.9x 0.9x 0.9x Quick Ratio: 0.5x 0.5x 0.6x 0.7x 0.7x 0.7x 0.8x 0.8x Cash Ratio: 0.1x 0.2x 0.2x 0.2x 0.2x 0.2x 0.2x 0.2x

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Exhibit II: Football Field Analysis

Exhibit III: Comcast-Sky Businesses

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Exhibit IV: Sky TV Market Share

Exhibit V: Sky Content Portfolio

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DISCLAIMER

This report is prepared strictly for educational purposes and should not be used as an actual investment guide. The forward-looking statements contained herein are simply the author’s opinions. The writer does not own any Comcast Corp. (CMCSA) stock.

TUIA STATEMENT

Established in honor of Professor William C. Dunkelberg, former Dean of the Fox School of Business, for his tireless dedication to educating students in “real-world” principles of economics and business, the William C. Dunkelberg (WCD) Owl Fund will ensure that future generations of students have exposure to a challenging, practical learning experience. Managed by Fox School of Business graduate and undergraduate students with oversight from its Board of Directors, the WCD Owl Fund’s goals are threefold:

 Provide students with hands-on investment management experience  Enable students to work in a team-based setting in consultation with investment professionals.  Connect student participants with nationally recognized money managers and financial institutions

Earnings from the fund will be reinvested net of fund expenses, which are primarily trading and auditing costs and partial scholarships for student participants.

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