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CMCSA.OQ - Comcast Corp at UBS Global TMT Conference (Virtual)

EVENT DATE/TIME: DECEMBER 07, 2021 / 3:00PM GMT

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DECEMBER 07, 2021 / 3:00PM, CMCSA.OQ - Comcast Corp at UBS Global TMT Conference (Virtual)

C O R P O R A T E P A R T I C I P A N T S

David N. Watson Comcast Corporation - President & CEO of Comcast Cable

C O N F E R E N C E C A L L P A R T I C I P A N T S

JohnChristopherHodulikUBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst

P R E S E N T A T I O N

John Christopher Hodulik - UBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst

Great. Good morning, everybody. I'm John Hodulik, the telecom and media analyst here at UBS, and welcome to the second day of the UBS' Global TMT Conference.

Very pleased to announce our next guest is Dave Watson, the President and CEO of Comcast Cable. Dave, thanks for joining us this morning.

David N. Watson - Comcast Corporation - President & CEO of Comcast Cable

Good to be with you, John.

Q U E S T I O N S A N D A N S W E R S

John Christopher Hodulik - UBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst

So we got about 40 minutes for Q&A, and I've got a bunch of questions here that I've worked to put together. And I figure we'll just dive right into it. You guys have given a number of updates and guidance in terms of how you expect the year to play through. I mean, is there anything you can share with us as it relates to, say, the current operating environment? And any change since your last comments on the third quarter earnings call?

David N. Watson - Comcast Corporation - President & CEO of Comcast Cable

Sure. It starts with a consistent point that what hasn't changed is we have a terrific business. We continue to invest in innovation in the network and a real focus around connectivity. And the big drivers during this period continues to be, we have multiple growth drivers against a variety of large addressable market areas, so we're going to continue to focus on that.

These -- the shift towards connectivity continues to improve margins, and we're doing this in a way that, while we're going to aggressively and appropriately invest in our network and innovation, we have stable CapEx intensity, and we expect that to continue. And a core part of our go-to-market approach is packaging and taking multiple products surrounding broadband with it and really driving down churn. Churn is terrific right now. I'll talk about that in a second.

So when you add all these things up, to give you perspective financially where we are for the fourth quarter, we now expect that for EBITDA, we're going to be in the 7% to 8% range for the fourth quarter. When you look at [net] (corrected by company after the call) cash flow, we expect [net] (corrected by company after the call) cash flow to be in the low double digits. And so the formula is working. We continue to have really consistent, solid performance.

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DECEMBER 07, 2021 / 3:00PM, CMCSA.OQ - Comcast Corp at UBS Global TMT Conference (Virtual)

And when you go just a step down in some of the drivers that get to that EBITDA growth, you look at business services, kind of right out of the gate, that we're at a $9 billion annual run rate of revenue. And for the fourth quarter, business services is going to be in the low double digits. Organic growth for the fourth quarter, business services, when you remove Masergy, then you look at it's high single digits. So business services is doing terrific. And one of the things, John, that we look at, can't help it that we -- when compared to peers, respectively, to peers and/or most certainly our telco competitors, we're best in class in business services.

Wireless, another key driver that we had a solid Q3, 285,000. We will beat that in the fourth quarter, so we'll set a record for wireless lines that we'll add.

So -- advertising, solid, better than we thought, including the political comparisons, so really solid there. We're getting a lot of our programming deals. There were big renewals behind us, so we'll see stable -- a more moderate level of increases tied to just regular -- the escalators.

And then we have platform opportunities, Flex and XClass.

So you go then to broadband. In broadband that -- we're going to have wrap up the fourth quarter and deliver with the fourth quarter a really solid year. We're going to be around 1.3 million net broadband additions for the year. And so it's another overall year. And to your question, in this environment, there's no -- it certainly has been -- the second half has been different than the first. We started off with a lot of the similar activities through '20, a lot of move activity, and then we saw a real shift in terms of move patterns. We looked at seasonal patterns that were different and a little bit of the low-income-constrained segment that there's a different pattern there and I think, in particular, influenced by the potential for government subsidies. So when you look at all those things together, it was a different second half than the first half, for sure, but still a solid overall year.

And the fundamentals of where we're at, penetration just above 50%, very, very good churn rates. And so the key for us is to be in position when things begin to normalize on the connect side because it really is a connect-related issue. When those things do occur, then we're going to be in position to compete, and we're prepared to do that. But overall, when you look at the entire year financially, the growth drivers, including broadband, we're quite pleased with how the year is shaping up, in good position to continue to go at it next year.

And one other perspective, John, when you look at the last -- this whole pandemic period and you look at broadband, in particular, for a 2-year period, we will add 3.2 million broadband customers over the last couple of years. It's very strong total performance over a long period, and so it's one of the stronger 2-year periods we've ever had.

So I think when we look at revenue, EBITDA, free cash flow per relationship, those are the key tenets. We're going to continue to stare at that. I think there's still a lot of upside across the board.

John Christopher Hodulik - UBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst

Fantastic. So it sounds like financial results sound very good to slightly better. Maybe -- and a lot of great info there, Dave. Fantastic, and we're still sorting through all of it. The -- maybe let's focus on the broadband and competition. There's a view in the market the broadband industry is becoming more competitive, especially as you're -- the telcos get more aggressive, both in terms of fiber and what we heard yesterday, fixed wireless. Do you have a view as to how the overbuild from both fiber and fixed wireless might look specifically in your footprint?

David N. Watson - Comcast Corporation - President & CEO of Comcast Cable

Yes, absolutely. Watching it closely as always. But we've been watching it closely for about 15 years now, and Verizon launched in 2005. We've been at it in modifying and evolving our playbook. From the moment we see a block become more competitive with a different kind of technology or a new overlay, we've been at it. And when you look at those 15 years, we've tripled our broadband base. We added 22 million customers.

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DECEMBER 07, 2021 / 3:00PM, CMCSA.OQ - Comcast Corp at UBS Global TMT Conference (Virtual)

And just the last 4 years alone, where they've added more homes, we've added 6 million broadband customers, where they've added next to nothing. So certainly, I understand it, and we take it very seriously every step of the way. But I think history is important. We're staring at a pretty competitive environment will continue to be so. So our focus is how do we redefine the category. We've done that. We've kept up and then some with speed. We have ubiquitous plant capability. We deliver a ubiquitous 1.2 [gigabit] (corrected by company after the call) downstream. We have very solid upstream with a great road map that continue to increase speeds, both down and up.

And it's one of the advantages of the cable architecture. We have one plant. We have one go-to-market approach. We have one solid, great product we keep adding to. We're not making trade-offs between DSL, fixed and different geographic areas. We're not making trade-offs between core wireless, which they -- awfully important to them, and fixed wireless. So we're extremely focused on just delivering constantly a better product than anyone else.

And one of the keys is WiFi for us in that because it's speed, but it's beyond speed. It's great coverage in the home. So one of the things that we're

• we've been doing is delivering just a better WiFi solution in the home, better gateways, and we have great gateways today that can do great downstream. We will be delivering, early next year, a new gateway that is the first tri-band gateway device that includes the 6-gigahertz band. So we'll have 2.4, 5 gigahertz, 6 gigahertz, plenty of bandwidth, and it really is a terrific way to make sure proactively as we grow and go towards multi-gig symmetrical down the road that we have the right CPE because our entire approach is to make sure that we're not going to customers and having them replace a bunch of devices.

So we are very focused competitively. The fixed wireless side, we're looking at. It's not a material issue still at all from our perspective. It's -- we anticipate things. Right now, we are at 40% of our footprint that's been overbuilt from the fixed -- the fiber overbuild between the major telcos. And when you read all of their announcements and everything that came out yesterday and then some, you look at another 15 points. So you get from the 40% goes to 55% over time. That still leaves 45% that's not -- that we have not addressed and that we're still going at it hard. There's still DSL that's out there. There's still non-fiber footprint that we will go at.

And again, I go back to the point with fixed wireless, we take it seriously. It's a real issue, but we're not having to make trade-offs between a core service, which I imagine is very important to them, their main wireless product. And they say things like, "Well, we haven't had to yet make any trade-offs." I think the yet is pretty important. So we're going to continue. We're not standing still.

And we are adding -- we've added to our footprint -- our homes passed around 60 million because we added last year alone over 870,000 new homes passed. So we also are growing and adding more capability. Our total addressable marketplace will continue to increase, and so we're not standing still.

John Christopher Hodulik - UBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst

As a follow-up, can you talk a little bit about -- you talked about a couple of different changes from a competitive standpoint. Can you talk about how your broadband sort of franchise has been performing in markets where you do compete with fiber versus areas where you don't? Are there any sort of differences in those markets?

David N. Watson - Comcast Corporation - President & CEO of Comcast Cable

Well, we compete very aggressively early on and throughout, and so this has been an evolution of the playbook. But when you look at the core basic point, we're growing. Whether it's fiber or non-fiber, we continue to grow. So it's a bit of an issue where people say, "Well, are you not growing?" No, we absolutely are, our pricing approach, our packaging approach of surrounding broadband with multiple products.

And again, remember, one of the play offense key parts of our business is wireless and that we now have mobile to be able to add to it. We have Flex. We have the platform capability. We have control, security. We have many things that we have, whether that's fiber or whether that's non-fiber.

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DECEMBER 07, 2021 / 3:00PM, CMCSA.OQ - Comcast Corp at UBS Global TMT Conference (Virtual)

So we are redefining the category. So when we go up against fiber, it's a much bigger set of options for consumers that they have to look at and other than just speed.

So we're seeing good results in terms of market share growth. We're still growing in fiber, and we're seeing our pricing approach remain very consistent across our entire footprint, very little differences. We'll go in and out competitively based on what's going on in the marketplace with certain offers, but we pretty much are consistent that we are going to hold and stay very focused on the overall value and giving customers a lot of choice around speed tiers and different product options, whether it's fiber or not fiber.

John Christopher Hodulik - UBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst

Got it. So from a pricing standpoint, a new connect standpoint, maybe from a churn standpoint, not a major difference between markets where you see fiber overbuild versus where you don't.

David N. Watson - Comcast Corporation - President & CEO of Comcast Cable

John, it's a great point on churn. Churn is very consistent. And churn -- we have a great product. Again, customers keep it. They value it, and we keep adding to it. Again, many years now, 20 years of speed increases and so we're whenever -- and that's just a ubiquitous thing we do everywhere.

John Christopher Hodulik - UBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst

Great. In fixed wireless, you said you haven't seen any really any impact yet. I think it's early days from what we heard yesterday. I mean, do you think, longer term, that the cable infrastructure is just -- has fundamental sort of advantages over the wireless infrastructure in terms of giving customers what they want, not just today but in the future?

David N. Watson - Comcast Corporation - President & CEO of Comcast Cable

I think one of the key parts that I mentioned earlier, John, is just the straightforward and less complicated set of options around our architecture of cable in that our DOCSIS protocol puts us in position to the most effective and efficient road map to get to multi-gig symmetrical. Today, ubiquitous, 1.2 down, and then we're constantly adding capabilities. We have a really good game plan. As we've talked about, we're going to spend a little bit more but keep it within the capital intensity range that we talked about, stable, but we're going to invest

(technical difficulty)

John Christopher Hodulik - UBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst

Sorry about that, everyone, but we're back. And Dave, why don't I just wrap up on the sort of broadband stuff? Just -- can you give us a sense for your confidence and what gives you confidence that you still have a nice long runway for growth and that you can continue to maybe not just sort of grow the TAM? And what are the key drivers of that growth?

David N. Watson - Comcast Corporation - President & CEO of Comcast Cable

You got it. You start -- I start looking at the penetration levels being just above 50% and such a big opportunity. The constant investment, our focus around innovation, our network and doing it one way, being able to have one road map, no trade-offs within our footprint, a ubiquitous approach towards it, surrounding broadband, playing offense with mobile and having mobile being a big part of the growth for broadband.

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