Q4 2019 Earnings Call
All participants are any listen only mode. Please note that this conference call is being recorded I would now I'll turn the call over two senior Vice President Investor Relations and Finance Mr., Jason Armstrong. Please go ahead Mr. Armstrong.
Thank you operator, and welcome everyone. Joining me on this morning's call or Brian Roberts, My Cabot steep Burke, they Watson and Jeremy Darroch.
Right It Mike will make forward.
Steve Steve and Jeremy will also be available for queuing <unk>.
As always let me now refer you to slide number two which contains our safe Harbor disclaimer remind you at this conference call May include forward looking statement subject to certain risks and uncertainties.
In addition in this call we will refer to certain non-GAAP financial measures. Please refer to our 8-K and trending schedules for the reconciliations of non-GAAP financial measures to gap.
With that let me turn the call over to Brian Roberts for his comments Brian .
Good morning, everyone.
Before we get to the result.
I'd like to embarrass my friend, Jason Armstrong, just for a moment and thank you for your incredible hard work. These past six years as head of Investor Relations.
And on behalf of everyone at Comcast and I believe all the investors say, thanks for a great Ron and we wish you terrific success in her new role is group Chief Financial Officer Sky.
Also like to welcome Marci Ryvicker who's joining to take over Investor relations or she's got a talented and successful pay offs and welcome to Comcast.
2019 was a busy productive an exciting year for our company capped off by a strong fourth quarter.
And we've already jump right into 2020 with the debut of our exciting new streaming service Peacock.
As you heard last week, it's a truly differentiated approach to streaming.
But just capabilities.
From all across our company.
As we look to the future I'm confident that the company. We have built has all the necessary components to succeed.
And our guiding principles remain the same <unk>.
The leaders in our markets continuously improve our products and experiences.
And bill deep highly valuable recurring customer relationships.
Our world class teams are executing an operating at a high level.
All of which allows us to invest in our businesses and deliver consistent results.
The success of our strategy is demonstrated in our consolidated financial performance.
We delivered another year of terrific results with growth in pro forma EBITDA of 5.9%.
Record free cash flow generation of 13.4 billion.
Growth in adjusted EPS of 14.7%.
Since year of double digit growth in the last 11 years.
These results were driven by cable.
As the team successful pivot to a connectivities centric strategy and investment in X Y continue to pay off.
Cable deliberate broadband net additions of 1.4 million.
Best in the last 12 years, finishing off with an exceptional fourth quarter, which included 442000 net additions a 26% increase over the prior year.
In addition, we continue to reap the benefits from our ongoing investments to improve the customer experience setting all time fast for many key metrics, including agent contact Crete and first call resolution.
We're increasing customer satisfaction and driving unnecessary costs out of the business.
Well in this drove 1.1 million net customer relationship additions in 2019.
Our best year on record.
As well as outstanding EBITDA growth of 7.3% net cash flow growth of 18% for the full year.
Thank you, Dave Watson and your incredible team you're doing a phenomenal job.
And then B C. Our content continues to resonate with consumers.
The most watched media company in the U.S. in 2019.
NBC ended the 52 week season, it number one in the key demo for the six consecutive year and tell them window is number one for the third straight year in weekday prime.
Our film business grew EBITDA by double digits to 833 million, making it the third most profitable year and Universal's history, providing further evidence that our strategic slate approach is working.
A theme parks, we had a challenging fourth quarter, but overall it was a solid year during a particularly competitive period and we're looking forward to new attractions in parks to drive growth in the coming years.
In its first full year as part of Comcast despite difficult European market conditions Sky had a good year under Jeremy Darroch, and his team delivering healthy customer additions and 12% EBITDA growth on a constant currency basis.
Exclusive sports and award winning original content or resonating with our customers in Europe with viewership up year over year.
Hi has been a great addition to Comcast and positions us to better compete in a world where global scale matters.
As I mentioned at the outset, we have all the pieces in place for long term success.
True to our guiding principles in 2020, we were leaning into investments to further improve our products and experiences across the company.
First we'll continue to strengthen our already leading position in broadband.
A cable, we're launching or fastest gateway delivering true multi gig speeds with unprecedented Wi Fi range.
And we're providing our customers with added protection by offering new features like X fight advanced security for free.
Sky, We're building on our success in broadband into UK and cables continued success with X y into U.S.
The launch broadband in Italy this year.
Second.
We will focus on the emerging growth areas of streaming content aggregation by launching Peacock, an accelerating our deployment of flex and Sky Q.
Consumers are watching more and more video driven by growth in streaming and as we highlighted last week, we believe that Peacock a premium AD supported service hits, the mark for both consumers and advertisers.
And this app driven world consumers increasingly overwhelmed by content fragmentation, an endless scrolling.
So with X, one and Sky Q, we enable our customers to aggregate all their apps and linear channels Wonder TV.
Seamlessly search access and view all their content.
A table, we leveraged X one to launch our newest service flex to better serve the segment of our broadband customers prefer streaming only.
Our early results with flex show that our customers love it.
Our first month, we could not keep enough inventory in stock and we're deploying flex as fast as we can.
Based on the proven success, we had with X one in the United States.
At Sky, we're now accelerating the deployment of Sky Q.
Getting to X, one like penetration levels as quickly as possible.
This is good for our customers and generates very attractive financial returns.
Finally, we have some exciting new investments in our park business.
This year, we will open Super Nintendo World in Japan with launches in the U.S. to follow in the coming years.
Super Nintendo World combined one of a kind ride technology with iconic IP for a remarkable guest experience and we believe it has the potential to drive substantial incremental attendance at Universal Studios Japan.
On top of that we're also investing for long term growth with two amazing brand new parks.
Hope in Beijing in 2021, the largest park, we have ever built.
And have started construction on Universal's epic universe, a new World Class Park in Orlando opening in 2023.
The parks business is set up for growth for years to come.
The scale capabilities and talent across our company enable us to successfully execute our long term growth strategy, while also strengthening our balance sheet and returning capital to shareholders.
Earlier. This morning, we announced that we are raising our dividend by eight cents for 2020 up 10% over the prior year and our twelveth consecutive annual increase.
Before I hand, the call over to Mike.
I want to take a moment personally recognized steep burke, whose contributions have been instrumental in shaping not only my career with the company that we are today.
It's impossible for me to overstate, what a terrific partners Steve has been.
His leadership first to Comcast cable and later it nbcuniversal have been a critical component of our company's growth and success.
And maybe even more significantly.
His impact on our culture and personal integrity have been truly defining.
Steve is build a great team at Nbcuniversal led by Jeff Shell.
And I know, we're in good hands going forward.
Thank you Steve.
Mike over to you.
Thanks, Brian and good morning, everyone.
I'll begin by reviewing our consolidated results on slides four and five.
As a reminder, we completed our acquisition of Sky in the fourth quarter of 2018.
Our reported results includes guy from the acquisition date, while pro forma results are if the sky transaction had occurred on January Onest 2017.
Revenue increased 2% to 28.4 billion on a reported basis and was consistent with the prior year on a pro forma basis for the fourth quarter.
For the full year revenue increased 15% to 108.9 billion on a reported basis and was consistent with the prior year on a pro forma basis.
Adjusted EBITDA increased 3% to $8.4 billion on a reported basis and 2.1% on a pro forma basis for the fourth quarter and increased 14% to $34.3 billion on a reported basis and 5.9% on a pro forma basis for the full year.
Adjusted earnings per share increased 9.7% to 79 cents for the quarter and 15% to $3 or 13 cents for the year.
Finally free cash flow was $2.5 billion in the quarter and $13.4 billion for the full year.
Now, let's turn to our segment results starting with cable communications on slide six.
For the full year cable revenue increased 3.7% EBITDA increased 7.3% and net cash flow increased 18%.
Total customer relationships grew by 1.1 million to 31.5 million, an increase of 3.7% year over year.
On a per relationship basis, EBITDA grew 3.5% and net cash flow grew 14%.
For the fourth quarter cable revenue increased 2.6% to $14.8 billion.
EBITDA increased 5.4% to $5.9 billion and net cash flow increased 30% to $3.3 billion.
We generated 372000 customer relationship net additions in the quarter a record for any quarter.
These results reflect our commitment to innovation execution and driving profitable growth, including our continued focus on our high margin connectivity businesses residential high speed Internet and business services.
Together residential and business services generated 442000 broadband customer net additions in the quarter and 1.4 million net additions for the full year.
In fact on the residential side of the business high speed Internet revenue was the largest contributor to year over year growth a cable growing 8.8% in the fourth quarter and 9.4% for the full year.
We believe that are consistent and ongoing investment to extend our leadership in broadband through speed coverage control and now streaming as well as through security and privacy is unique among our competitors and across the industry.
We will continue to benefit from the growth in the overall market for broadband and we're taking share with the superior product.
On the business services side revenue increased 8.8% to $2 billion in the fourth quarter, driven by a 4.1% increase in business customers year over year, and a 4.3% increase in revenue per business customer as we've added new products, including Wi Fi Pro and security edge.
We ended the year at nearly $8 billion in business services revenue within addressable market just in our footprint of approximately $50 billion.
There was no shortage of new customers or additional revenue for us to capture in this margin accretive growth business.
In 2020, we expect to deliver another year of well over $2 billion in highly margin accretive revenue growth in residential broadband and business services on top of the 26 and a half billion dollars in revenue that we generated from these businesses in 2019.
Turning to video video is still a valuable for us to attached to our broadband centric customer relationships, but only to the extent that it helps us increased the lifetime value of those relationships.
We've consistently said that there was a segment of the market that either doesnt value a traditional pay TV service.
Isn't profitable for us to serve.
We're not chasing the segment of the market and we saw a fewer new connects with these customers.
With the rate adjustments that we are implementing in 2020 as well as the ongoing changes in consumer behavior, we expect higher video subscriber losses this year.
Within this environment, our X one platform enables us to compete well for customers, who want the most content and a premium experience, including their favorite streaming apps.
And now with flex, we're able to better serve the customer segment that prefers to stream over the top and we're prioritizing flex is a key initiative in 2020.
Moving onto our wireless business, we continue to be happy with what we're seeing with expanding mobile and its positive impact on the cable business.
We launched expand any mobile tuna half years ago, and we ended 2019 with more than 2 million lines, including the 261000 net adds in the fourth quarter.
We are pleased with the acceleration in net adds in the fourth quarter and we expect this momentum to continue in 2020.
Our results to date indicate to adding mobile improves broadband customer retention and increases perspective customers consideration.
And importantly, we continue to see a significant improvement in the financial performance expanding mobile.
We reduced our quarterly adjusted EBITDA losses at expanding mobile to $116 million.
40% improvement compared to last year's fourth quarter, and we expect expanding mobile to be EBITDA positive for the full year in 2021.
And finally advertising revenue in the quarter decreased 19.1% due to a comparison to record political spending in prior year period.
Excluding political advertising revenue in the fourth quarter was consistent with the same period last year.
Moving now to cable expense in margin on slide seven.
Total cable expenses in the fourth quarter were relatively consistent with the prior year, despite our record growth and customer relationships as we continued to benefit from cost management, our connectivity centric strategy.
In a lack of programming renewals.
On a per customer relationship basis, non programming opex decreased 1.9% compared to the same period last year.
We're clearly seeing the benefits of our ongoing focus on operational improvements as we continued to make progress in providing a better overall experience and eliminating unnecessary activity and transactions.
Including through digital service tools on a full year basis non programming opex per relationship improved by 2% and we expect continued improvement in 2020.
Cable EBITDA margins were 39.8% in the fourth quarter of 2019 up 100 basis points year over year and 40.1% for the full year up 140 basis points.
For 2020, we expect higher programming expense growth due to a number of contracts scheduled for renewal during the year with the increase in expense back half weighted.
Despite this we expect to improve cable EBITDA margin by up to 50 basis points for the full year benefiting from growth in our high margin connectivity businesses continued operational improvements better performance at Ics Finnerty mobile as well as higher political advertising revenue.
We're also pleased with the efficiency of and returns on our cable capital expenditures.
Capex decreased 10.5% to $6.9 billion for the full year, resulting in cap ex intensity of 11.9% 190 basis points of year over year improvement.
Looking ahead, we will continue to invest in the business to extend our leading market position.
However, based on the size and consistency of our past investment.
And our leading scale, we can continue to improve our capital intensity.
In 2020, we expect approximately 50 basis points of year over year improvement, reflecting continued decreases in video centric CP spending partially offset by an increase in a level of investment in our network consistent with a broader shift in our business towards conductivity.
These are demand driven and success based investments and we're happy to make them.
In summary, we feel great about cables results in 2019, and we're confident that the business will continue to deliver healthy growth in 2020.
Now I'll turn to NBC Universal's results on slide eight.
NBC Universal's revenue declined 2.6% to $9.2 billion and EBITDA declined 4.7% to $2 billion in the quarter.
Cable networks revenue increased 1.2% to $2.9 billion and EBITDA declined 1.4% to $1 billion in the fourth quarter as solid growth in advertising and content licensing and other revenue was more than offset by higher programming and production costs and subscriber declines.
Yeah.
Advertising revenue increased 2% benefiting from the timing of returning series Golf Presidents Cup and improved MSNBC performance.
Content licensing and other revenue increased 3.4%, reflecting continued timing related licensing comparisons to last year, which was more than offset by the performance of some of our digital businesses.
Distribution revenue was flat year over year as the ongoing benefits of previous renewal agreements were largely offset by subscriber losses that modestly accelerated in the quarter.
Against a backdrop of continued subscriber declines it will be tough to grow affiliate revenue until our next round of renewals starting in 2021.
Overall higher revenue in the quarter was more than offset by increased expenses, primarily driven by the timing of programming and a couple of new sports contracts that will continue to impact our first half 2020 results.
Broadcast revenue increased 2.1% to $3.2 billion, and EBITDA increased 14% to $471 million driven by growth in retrans and content licensing, partially offset by lower advertising revenue.
Advertising revenue declined 1.5%, largely reflecting a difficult comparison to record political advertising last year.
Adjusting for this comparison advertising would have been up low single digits, reflecting strong NFL results and the benefits of higher upfront pricing, partially offset by ratings declines.
Retrans increased over 10% to nearly $500 million, bringing the full year total to $2 billion up about 15% compared to 2018.
Content licensing increased 5.8%, reflecting the delivery of content under our existing licensing agreements as well as new licensing deals.
Last we expect to benefit from a profitable Tokyo Olympics, this summer and anticipate robust political advertising in the back half of the year.
Turning to film revenue declined 21% to $1.6 billion and EBITDA declined by $88 million to $91 million, reflecting a tough comparison to the size and timing of our slate in the fourth quarter of 2018, which included the successful releases of Green.
Each and Halloween.
Overall, we had a great year in film highlighted by key franchise animated hits, including Dreamworks how to train your Dragon hidden World and secret life pest too.
The summer spin off of our tent pole fast and furious franchise Hobson Shaw successful original movies, such as glass in us as well as Downton Abbey, which was focused features top title of all time.
For the full year film EBITDA increased 14% to $833 million.
Looking ahead to 2020, we're excited about our film business and outlook for growth underscored by a continuation of our strategic slate strategy.
Keep in mind, the first quarter, we'll have a tough comparison to the release of how to trend you're dragon, but we have several exciting films opening later this year, including more animated franchise titles with tools World Tour. This spring minions to this summer and crudes to at the end of the year along with another.
Our summer installment in the fast and furious franchise.
Wrapping up the TV in film segments, we are confident and optimistic in our ability to continue monetizing our vast portfolio of new and existing premium content.
As we've said before we will sponsor abroad, and very distribution environment by continuing to license to third parties. When it makes sense and Nbcuniversal went benefit from selling to new buyers of content, including our very own peacock.
As we discussed at our Investor event last week, we believe that Peacock will be a fantastic product for consumers and advertisers alike, and a new channel to better monetize our content.
Theme parks revenue increased 3.2% to $1.6 billion, and EBITDA declined 4.5% to $636 million, reflecting steady results at our domestic parks.
Offset by some softness at our Japan Park.
Looking ahead, we remain confident in our outlook for growth in the parts business, which will benefit from our robust pipeline of new attractions.
At our domestic parks will have a new Jason Bourne themed live action stents show and over 2000 hotel rooms coming online in Orlando This year as well as a secret life of pets themed ride in Hollywood.
And we're especially excited for the opening of Super Nintendo World Universal Studios in Japan, which will be opened new ready during the summer coinciding nicely with the Tokyo Olympics.
Pre opening expenses for this new land in Japan will weigh on results in the first half of 2020, but we expect Super Nintendo World to to be a meaningful driver of our parks results in the second half.
We're also looking forward to the opening of our park in Beijing, and 2021, which will be a major milestone for us and we'll see sums preopening expenses throughout this year.
Even longer term, we're excited for epic universe, which will transform our already successful Orlando Park.
Now, let's move onto Sky results on slide nine.
As a reminder, I will be referring to our pro forma results as if the Sky transaction has occurred on January Onest 2017, and growth rates on a constant currency basis, consistent with what's reflected in our earnings release.
Sky revenue increased 1.4% to $5 billion as growth in direct to consumer and content revenue was offset by lower advertising.
Overall macro headwinds have persisted, but sky continues to perform well in a challenging environment.
Direct to consumer revenue increased by 2.3% to $4 billion driven by growth in customer relationships.
Sky added 77000 customers during the quarter ending the year with 24 million total customer relationships and average revenue per customer remained stable.
As expected, we delivered improvement in net ads compared to the third quarter.
Sky delivered customer growth in all three territories in the fourth quarter and continued to make good progress in growing key products, including broadband and mobile.
Content revenue grew by 2.7% to $371 million with growth driven by the wholesaling of programming.
Importantly, viewership on Sky channels was impressive.
In the fourth quarter total viewership on skies branded channels was up 5%, while total TV viewership on non sky channels was flat.
Viewership across Sky sports channels was up 8% driven by the performance of Formula One in Italy, and the Premier League in the UK.
On advertising the market remains soft across all of our territories, reflecting continued macro weakness as well as the impact of a change in legislation related to gambling advertising in the UK, Italy, which began impacting our results in Three Q1 9.
Against this backdrop advertising revenue in the quarter declined by 4.1% to $647 million.
Skies fourth quarter EBITDA of $765 million was consistent with the prior year as revenue growth was offset by higher costs in part driven by our efforts to accelerate the deployment of Sky Q.
In 2020 will continue the accelerated deployment and we're coming out of the gate quickly as a reminder, like X one sky Q enables the aggregation of streaming apps and other advanced features functionality that's not available on our legacy platform.
Our sky to customers have higher viewership.
Better retention levels, better product attachment and higher ARPU and therefore, we want more of our customers to habit and quickly.
We're pleased with the progress guys, making by delivering growth in customer relationships and creating award winning popular content.
We expect these tailwinds to continue in 2020 keep in mind. We also expect our results will continue to be impacted by the challenging macroeconomic environment and changes in gambling legislation.
All in before the few hundred million dollars of investment Weve previously outlined for Sky Q in broadband in Italy, and using todays foreign exchange rates, we expect skies 2020, EBITDA to be consistent with our reported 2019 results.
I'll wrap up with free cash flow and capital allocation on slide 10.
We generated a record $13.4 billion in free cash flow and paid $3.7 billion in dividends to our shareholders in 2019.
We also made great progress in leveraging ending the year at 2.8 times net leverage down from 3.3 times at the end to 2018.
Deleveraging will remain a top focus for us in 2020.
Which we will balance with the key investment priorities, we have outlined across cable nbcuniversal and sky.
On return of capital as Brian mentioned, we raised our dividend by eight cents to 92 cents a share.
A 10% increase marking our twelveth consecutive annual increase and in 2021, we expect that we will be well positioned to resume share repurchases.
In summary, 2019 was another fantastic year for Comcast and the fundamentals of our business remains strong.
We feel good about our outlook for 2020 and expect our overall performance to accelerate through the year.
Jason over to you.
Thanks, Mike, Let's open up the call for Q and I place.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then the number one on your Touchtone phone.
We should be removed from the Q. Please press the pound key if you are using a speaker phone you may need to pick up the handset first before pricing the numbers. Once again. It there are any questions Press Star then number one on your Touchtone phone. Our first question comes from the line of Ben Swinburne Morgan Stanley . Please go ahead.
Thanks, Good morning.
Two questions. Brian you mentioned in your prepared remarks sort of the benefits of global scale across the company I think theres certainly a debate.
In the market about that a bit. So I was curious if you could sort of touched on it in two ways. One how does this scale Comcast to grow faster overtime. Obviously, we've seen some very strong results across the company recently, but I'd love to get more thoughts from you on how that plays out and secondly, how do you assess sort of the optimal level of scale.
Sure Theres a lot of interest from shareholders about where you think about future acquisition opportunities or how you think about deploying capital longer term.
And then what why you think about that Mike you mentioned some comments about free cash flow at a conference last year.
Comcast delivers pretty consistent double digit earnings growth.
And you've raised the dividend consistently double digits.
Free cash flow overtime generally follow earnings.
And the overall dividend growth because obviously you guys are pretty heavy investment year. This year and I think people are obviously interest in the free cash flow profile over time.
Thank you. Thank you both.
Well, let me let me begin thank you Ben I do think we have.
Consistent growth across all parts of the business Skywards a unique asset.
And don't want to look backwards more than just for a moment here to your question.
And I think it.
You know happened I am really thrilled we bought it I feel better about that decision today the nature of our company.
We displayed the great technical team at the Peacock day, the ability for cable to help with broadband chasing going over to be CFO .
Gentlemen, running Germany Dovish was our head of strategy. There's it's we're better company and it says it's a longer conversation happy to habit of I think to the essence of your question if I might.
Might be will.
Feel you have to go to other countries and what are you thinking about a one of the points. We tried to make throughout this year is that if you take the four countries us plus the three principal UK, Germany, and Italy, where sky principally operates that represents 50% of the world's broadband and video revenues.
And that's pretty extraordinary so our strategy with now.
60 million or $55 million so relationships.
And growing those relationships and we had a great year in growing customer relationships with a terrific ARPU north of $100.
These are these are exceptional opportunities. So I don't want to say, we won't look at other things and consider other things, but it's there was nothing quite like Sky was unique Mike.
Savannah free cash flow it certainly.
Our stated objective and belief that weaken healthy get healthy growth of free cash flow of flow over the long term set up before the recent conference and continue to believe that's the case, we don't focus on it on the in the near term and this year coming up obviously, we talked about the many investments in our.
Gannett growth that will benefit that long term free cash flow growth growth trajectory.
We'll have that pressure in some Olympics working capital in 2020.
But the dividend increase is absolutely an indication that we feel very confident in the long term growth trajectory of free cash flow.
Thank you both.
Thanks, Ben next question please.
Next question comes from the line of Doug Mitchelson with Credit Suisse. Please go ahead.
Thanks, So much I wanted to focus on streaming so both flex and Peacock for micro Dave with.
Mike you talked about prioritizing flex in 2000, Twentys sort of what specifically does that mean and.
Are you both what's your vision as to what Thats service will look like in a few years and I guess I'm thinking not just.
Everything that you bring to bear, but also third party apps and other authenticated integrated into flex as well and then for Steve on Peacock I think the pickup at analyst day was well received but I'm getting the question a lot as to what's the difference will be between the premium and free tiers and mostly in the question that if it's free.
What would the friction be sign up other distributors other than the other than Cox. Thank you all.
Hey, Doug This is Dave So let me start with flex and.
I think flex shows and in particular, the flex in Peacock combination just shows how uniquely positioned we are for screaming and flexes a natural extension of two things our broadband innovation and also the fact that we've been investing steadily and next one.
So we're flexes.
Going to help fuel broadband over time.
As with its free as Brian has said.
And we'll continue to innovate around broadband so you look at what's coming up and we have tons of apps that are available right now.
Please with the roadmap ahead, good progress coming up for flex in terms of content Kulu, we've talked about.
Yes, all access will be the first to do that.
But we're in particular, we're really excited about the prospects of flex and Peacock together.
So that's that is I think a real opportunity. In addition down the road and of course, the main consideration is broadband growth.
Flex, but I think it opens up other opportunities, whether its app participation or and or advertising. It's a great long term platform for us.
So if you include Dave's broadband business, plus flex and Peacock I think our company is better positioned as of worlds moves to streaming.
Than any other company in the World and I think you could argue in the next 10 or 20 years.
If you look at all those three businesses combined.
We could make more money in streaming than anyone else by a lot.
If you then move to Peacock the idea behind Peacock and Matt Strauss mentioned Spotify is a little bit like spot defy we have an entry level of Peacock, which is about 7500 hours, which is completely free for anyone.
We then have a 15.
Thousand our version of Peacock at cost $5, if you're not a member of the.
Participating cable or satellite company that provides multichannel video that universe is still about 80%. So 80% of the people in America. I think eventually are going to be able to get that $5 product for free.
So your question about other cable companies in satellite companies, it's such a great value to be able to give all of your customers a product it's $5 a month in value or $60 a year for free that I think eventually we will get the vast majority if not all of cable and satellite it'll take some time in a lot of tons.
The Peacock discussion will be tied to the ongoing MPPD discussion and we have a lot of big deals up in this year, but I think by the end of this year youre going to see the $5 Peacock product be offered for free to a lot of cable and satellite customers.
Thank you both.
Thank you Doug next question. Please your next question comes from the line of Gen. Scarlett with Bank of America. Please go ahead.
Thanks, Dave.
Three questions for the three divisions.
Peacock can you talk a little bit about how you see what will the impact the on your legacy businesses, including TV stations cable networks, and I guess, the other Comcast businesses.
Going back to flex, yes, it's such an interesting product keeping customers engaged on the Comcast platform can you talk about a little bit more detail about what the benefits would be for.
It seems like there might be benefits for advertising as well as the other parts of your business.
And then on Sky. This 300 million dollar a step up in investment.
Can you talk about how that will drive growth in the various businesses in 2020 and beyond if there's anything more specific you could say that growth.
Great.
Let me start with peacocks effect on the other businesses. If you imagine a television show were 70% of the viewing comes from someplace other than linear television with Peacock is designed to do is to go after that 70% get it on our platform in a place where were AD supported and we.
We get a 100% of the AD revenue that's that's the intent.
And if you look at it from that perspective, I think peacock is going to be very good for our company.
We're going to make more money from the television ecosystem and that will allow us to continue to invest in the linear platform. So.
If I were talking to an affiliate if I were talking to a cable company I would say Peacock is a way to make us a better stronger competitor in a way that's good for all of our businesses not just streaming.
So in regards to flex Jessica the.
Starts with our strategy and I think it gives us real choice in the marketplace and we will continue to compete I think very well for the many segments that value X, one and everything that that brings but for this growing streaming segment.
It really positions us well, it's a great proposition being able to use all the attributes of X one voice capability the integrated data being able to find what you went very quickly. So in terms of the drivers to your point is a good when you look at the first one is going to help us compete continued.
To do well with broadband so we're going to look at broadband share growth and flux will be part of that one of several things that we're doing.
Do look at additional revenue opportunities, whether it's everything from the when we sell an app on this platform. We participate in that economically there is going to be I think long term a platform you can think about advertising.
And in addition, there syndication we have great partners that we have with X one and I would anticipate that will continue and make progress in syndication with flex with these partners. So I think it's we will use it as a growth platform at primarily focused on broadband, but we'll be opportunistic going.
Forward into other areas.
Sure.
Yes, and then on Sky investments, we're making here so sky Q.
We think thats the best TV service.
In Europe , so we want to.
Accelerate its penetration in our base, Russia holding costs for really relevant spending additional cost plan calls for in offline to get Skype Q penetration of more quickly the benefits really a twofold to shorten benefit so Paul so purely financial really as Mike alluded to we see low attrition that higher viewing.
Hi, all COO and of course, as we sell sky Q into our because of the guys space. It gives us the opportunity to cross sell until the product or more products or the phone, which we do that.
In the second thing to say is we felt sky keeping the based up for some time. So good line of sight in terms of the financial returns the flow from those investments I was the number okay. So, but it's all customer by customer. So if you don't get the cost from the if you will get the benefits you don't give guidance on the cost upfront.
The second one that is brought in Italy, obviously, that's a big new adjacent category for us, but 7 billion dollar market in Italy.
We've got a very strong incredible brand, we know that.
Roughly two to step into the broadband market I think we would all the skills that we need across the company to be able to do that.
Longer term.
Investment profile, a very very strong want again, given that it's a new new category and then beyond that I think the the real benefit as we've seen here in the UK. His thoughts of business that we think we can grow significant scale over time. It was probably the single biggest thing we did in the UK to step change out business growth in the UK. So I think the tale of growth will.
See from broadband or the ability for brought on to reset the size of our business in this lease is pretty strong.
And then finally I'd say just operating in Europe , one of the great things about being part of the broader cone costs grew from my point of view is of course, we can keep a full in the got costs and accelerate these investments will we see strong returns profiles at a time when many in Europe , all probably being a bit more cautious in in a more challenging consumer environment. So I think this is a good.
Example of how as part of the broader group, we can really think about the medium term returns from Sky and drive those hard we'll see those benefits progress really come through in 2000 ton isn't into 2021.
Thank you.
Thank you Jessica next question. Please your next question comes from the line of John had liquid DBS. Please go ahead.
Great. Thanks, maybe some questions for Dave.
You've had some solid results this quarter in this year and your connectivity businesses, maybe first starting with broadband the 1.4 million subs accelerated second time in ROE on a year over year basis is that a decent numbers for 2020.
And can talk a little bit about the pricing power that you may have that business given that the deceleration we're seeing in high speed data revenues and then over wireless again, another solid quarter, you talked about momentum continuing into into 20, what's driving the growth. There is improved distribution is it handset availability I think your pricing has been the same but the sub numbers.
To beat our view so some commentary there would be great too. Thanks.
Well thanks John .
And I won't give specifics in regards to 20, but.
I would say that.
That was 1.4 million does demonstrate.
Just consistency broad base growth strength across our entire area. When it comes to broadband so pleased with the quarter pleased with the year and pleased with momentum going forward. So yes that starts with.
We're going to grow relationships with broadband. This is our top priority is what we focus on when it comes to innovation that talked about flex.
We have many other examples of innovation, including the advanced security product that we are rolling out for free to those that lease our gateway device and another example of that speed increases we continue to do so very very focus we'd wakeup everyday thinking about how are we going to grow and sustain.
And broadband and so and it's working I think X Fi when you combine the best of speed the best of control coverage, Brian mentioned, great New Gateway device were leading in regards to the gateway devices that are in the marketplace. We feel in terms that a combination of speed Wi Fi speed and why.
If I coverage and combine that with the pods that we have in the marketplace. So all these things I think position us well going forward.
So our our game plan is to continue to lead with.
With broadband I think it it is very sustainable you look at the macro conditions the marketplace is growing.
Penetration, we have upside and we're taking share so and we're balancing the share growth with finished strong financial performance for the year. We're pleased.
One point in terms of the quarter to quarter revenue performance system make sure.
There is some context there that we did move out a couple of rate increases of Q4 into the early part of 2020. So you look on a go forward basis, I think you're going to see good strong runway for growth in share growth in revenue.
On a per subscriber basis and for the whole category. So real pleased with our momentum going forward.
And wireless.
I would say the keys, there are little bit of maturity, we talked about the reasons why we're doing it we're real pleased with broadband retention.
The area Thats beginning to pick up.
We're really pleased that we wanted to focus on is just growing consideration using wireless because I think it does help broadband.
Again people into retail stores.
They didn't really think about doing that before beginning to see real traction in retail most certainly when you see a solid Protestant introduction like Apple They had in other wireless devices I think we benefit we're in a good position for bring your own device I think we're uniquely positioned in the ability to have.
A combination of unlimited and by the gig pricing. So you add all those things up and we're really pleased with our overall wireless momentum as well.
Okay. Thanks.
Thank you John next question. Please your next question comes from the line is Brett Feldman with Goldman Sachs. Please go ahead.
Yeah. Thanks actually ended a follow up here on wireless two questions one.
The big National operators are getting increasingly making fiveg part of their marketing throughout the year I'm interested if you can give us some context and how youre thinking about the fiveg opportunity for your mobile business.
And then obviously alliance that you'd have to EBITDA breakeven next year is a key milestone how do you think about maybe improving the profit profile of your wireless business, even more from there. So for example, how much of a priority. If at all is it to get better NVNO terms or find more NVNO vendors and then you're going to have a few mid band spectrum auctions coming up.
Over the next couple of months.
Into next year. It had are you interested in maybe looking to acquire spectrum to see if you can bring traffic onto your on infrastructure. Thank you.
Well, thanks, Brad So in regards to Fiveg and one of the great things about our existing relationship that we have with our partner that we have we will participate in fiveg mobile.
As that market matures and they start rolling it out and earn us. So we're I think we'll be right there and we'll evaluate that as it as it goes.
In regards to economics, we talked about we're right on track with the profitability trajectory that we talked about so were.
Absolutely pulling off what we thought we would in regards to the economics and what I would say, we're always going to be opportunistic when it comes to either a combination of the ability to do more with Wi Fi and the the LTE network and manage traffic flow between the two will all.
We see looking at that we'll be opportunistic on east spectrum.
Opportunity, but we like our capital light NVNO approach today, it's accomplishing what we need to will always be talking to our partner about opportunities, but I think we're in a really good position going forward.
Thank you.
Thank you Brett next question please.
Your next question comes from the line that Phil Cusick with JP Morgan. Please go ahead.
Hi, guys. Thanks.
Cable EBITDA margin guide a 50 basis points growth is similar to what you said a year ago and it came in nearly three times that level. If I think about your price increase which is similar to last year and the trajectory of declining mobile losses. It seems like this is fairly conservative how should we think about about programming as a headwind. This.
Your next or anything else going on.
And then second of a Ken parks can you talk about the environment for customer traffic overall at any feel for share shift.
And if we look forward to those new gates and parks in the next few years, what should we think about for the cadence of both Capex and revenue. Thank you.
Phil I'll start off.
As Mike mentioned earlier as expected what we're going to have a number of programming renewals in 2020. So we had a couple of years, where it was lower number and that is picking up.
In 2020, and in particular, it'll ramp more towards the back half of 2020, so despite that.
The part, we even with that we expect to improve.
Cable margins up to the 50 basis points that Mike talked about for the full year and.
The strategy and the expectations are built around our focus on the conductivity businesses, which are margin accretive we're going to continue to drive that that pivot has happened and we're making great progress. There we're going to continue to focus on the non programming opex were going to be.
Taking a lot of transactions out.
Whether their truck rolls are telephone calls the customer experience Approvement Theres, a big runway ahead for us to continue to take out those transactions, we're always going to be disciplined on cost control.
And I think you look at what we talked about earlier Ixinity mobile economic improvement. If you look there's going to be a pretty big year for political advertising. The tail end of this year all those things considered I think put us on a pretty good position to.
Overcome whatever programming renewals that are going to occur in 2020.
So regarding parks if you look over the last five years are our EBITDA rose CF in the park business has.
Almost exactly doubled to about two and a half billion dollars parks or about a third.
Nbcuniversal, 30% of Nbcuniversal and when you have that kind of growth you're used to parks being a driver of the overall NBC universal growth profile, which they were not this quarter.
A big part of it and Mike mentioned this in his introduction was Japan.
Where we faced a number of headwinds and actually went backwards.
If you look out I think the next big thing on the Horizon is Nintendo Nintendo based on our research is one of the biggest.
Potential drivers of attendance that that you could have of of any kind of IP. It's up there with Harry Potter, which in some of our parks Harry Potter drove incremental attendance of about 2 million people. So nintendo's in very rarefied air and the attraction that we're building in Osaka is spectacular from a creative.
Standpoint, it's really unbelievable and that opens sometime this.
Midyear this year.
Soc and then we're going to bring it to Hollywood and we're going to bring it obviously in the in the fourth gate in Florida. So I think Nintendo is going to be potentially a big accelerator of growth in the same park business and then once you get into 21, we haven't talked about it maybe as much as we should the fact that we're opening a park in Beijing and the fact that the park is so.
Miller from a from a design and creative standpoint, I think is going to generate a lot of growth and then Brian mentioned in his introduction the fourth gate, which opens in 2023. So when you when you look at the capital side of it. These are all high return projects that are all make a ton of business sense and I think if you look over that.
Next five years, it's likely our theme park business is going to be a driver of growth maybe not quite as much as it has been in the last five years because the growth has been so phenomenal and we're getting to a bigger base now, but I would look at the parks business as a real opportunity for us we still.
Don't have the share that I think we deserve given the quality of the experience, we're giving our guests and it's a lot of opportunity over the next 510 20 years.
Thank you.
Thank you Phil next question please.
Our next question comes from the line it's Craig.
Perfect Davidson. Please go ahead.
Hi, I wonder if I could return to the wireless business for a second.
With 18 T. having.
It's actually opened the door to at least have a discussion about NVNO terms.
Can you just talked about what that process is like are you engaged in discussions with other potential NVNO suppliers and it has any of the discussions with any of the.
Wireless operators.
Expanded two ways that they might leverage your wired infrastructure says you think about how you're wired infrastructure sort of brings value to wireless they're all different ways you could do it whether it's capitalizing that yourself through retail or doing something at a wholesale level or using it to get better terms with your NVNO just how do you.
Think about those opportunities.
A crack so I think it starts with that are very strong feeling that that we are the cable industry, Comcast where a great partner.
For the wireless industry. So I think we bring share we bring.
Customers over to them I think were a great investment for the long term, so thats kind of how we start our thinking and.
That.
With all the goals that I mentioned before from a process perspective, not much to talk about right now we are always.
Thinking about ways of improving.
Already good platform a good approach to the business. If there are opportunities, we'll explore them and if anything does develop will you know.
The only thing I want to add to that is simply that I think weve.
And we can get some scale, it's still early days and that previous question about keeps accelerating a bit.
I think we're seeing that now throughout the rest of the industry and others coming into wireless. So I think I just want to echo that point that.
We have a successful beginning and hopefully a very long runway that we're just getting started.
Alright, thank you.
Thank you Craig Regina will take one last question.
Our final question will come from the line of VJ Gerry with Evercore. Please go ahead.
Thanks, I have to once the Jeremy just wanted to understand in the UK.
Ascom is pushing to reduce what that thing that up.
The loyalty and LTE the difference between what new commitments band what existing out of contract customers may is that really any impact.
Do you all business from from that regulation and then for Dave.
At CES.
I think you guys should a new X by advance gateway.
Bullets 85 megahertz mid split really increasing the upstream part of the network. Obviously is one on Stan.
What business opportunity and Capex implications that may have as you scale that.
Thank you. Thank you.
Jeremy I want to go further I think no not majorly for us.
Even if you think about business, we've really I think led the way over the last decade really around.
Breaking as bringing breaking down the bundle, making pricing more transparent.
We're a leader in the in service according to off cold starts across all of our products and not just pay TV, but broadband and mobile.
Fixed line as well as the heart of that we have a belief.
About trying to rightsize customers to the products that they will.
And the price so they won't pay because we think thats.
Lots and that's important and is the most durable way and typically that full we moved a long time ago to essentially offering the same could the same deals right across our base substitute for new customers typically available for an existing customers. While so there'll be some transitional issues not will be some those to be noise as the market quickly loose, but I don't expect it would how the big effect on our business.
On on the new Gateway that we did talk about at CES.
We're excited about this I think there are several.
Steps forward with this gateway and in regards to Wi Fi speed.
The improvement improvements in terms of coverage both for the two dock for band as well as the five band improvements both in those areas improvements in latency.
Across the board of checks a lot of boxes and so like we do with great new product like this will package that and some of our higher tier packages and on a go forward basis. We'll compete you think about segments, where this matters is an ideal product for the gaming segment. So.
We're going to local segment and go after it but the fundamentals of being able to provide the best speed the best coverage.
Control.
All those aspects I think this gateway helps us and we are positioned very well.
And I think Mike let me just jump back in at the end here and Echo Brian's Thanks to adjacent Armstrong for great job. He's done for all of us any IR job.
I know will be a great add to the sky team a welcome Marci Ryvicker to the company and thank all of you for the sport and joining us on this call as we get 2020 kicked off so thanks, everybody have a great day.
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