Comcast Q1'16 Earnings Conference Call: Full Transcript

Operator:

Good morning, ladies and gentlemen and welcome to Comcast's First Quarter 2016 earnings conference call. At this time all participants are in a listen-only mode. Please note that this conference call is being recorded. I will now turn the call over to Senior Vice President, Investor Relations, Mr. Jason Armstrong. Please go ahead, Mr. Armstrong.

Jason Armstrong:Senior Vice President, Investor Relations:

Thank you, Operator. Welcome, everyone. Joining me on this morning's call are Brian Roberts, Mike Cavanagh, Steve Burke and Neil Smit. Brian and Mike will make formal remarks and Steve and Neil will also be available for Q&A.

As a reminder because of the SEC anti collision rules for the broadcast incentive option we cannot discuss or answer any questions related to the option or spectrum today. No one will be commenting about recent rumors or speculation about any M&A transaction.

As always, let me now refer you to slide number 2, which contains our Safe Harbor disclaimer and remind you that this conference call may include forward-looking statements 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 for the reconciliation of non-GAAP financial measures to GAAP.

With that, let me turn the call to Brian Roberts for his comments. Brian?

Brian L. Roberts:Chairman and Chief Executive Officer:

Thank you Jason and good morning everyone. We are off to a great start in 2016. We increased revenue and operating cash flow in the first quarter, while continuing to prudently invest in the businesses to further strengthen our competitive position and drive growth.

I believe our cable business, is really differentiating itself all stream real innovation that is translating into the strong momentum you see in these results. We are demonstrating notable improvements in customer service, investing to put the industry’s fastest Wi-Fi in home and to be the first to bring customers wide spread access to gigabits speeds through DOCSIS 3.1 technology and with X1 delivering a platform and a breadth of content that's unrivaled. As this quarter once again shows our customers responding to all of this.

We increased to our customer relationship growth by 36% from the first quarter 2015 and now have achieved 50% penetration of our homes past. We added 53,000 video customers in the quarter making us video net add positive over the past 12 months. This important milestone has eluded us for nearly a decade and we have now accomplish it within the context of an unprecedented pace of change in this industry including the steady drum beat of new competitors and new offers.

Our voice remotes are the latest example of how we are differentiating ourselves in the market. In a short period of time we have deployed 6 million of these new remotes. Thanks to Tony Werner and his technology team’s great customer experience we're getting wonderful feedback from our customers already. We added another 438,000 broadband subscribers in the quarter, the best first quarter we've had in four years.

Much like our improvement in video the progress we are making is largely result of improvements in churn. We are opting speeds delivering best-in-class Wi-Fi access and investing in more ways to add value to our customers. As results they are staying with us longer. Business services delivered another excellent quarter with revenue growth of nearly 18%.

This growth comes with very attractive margins for us as you know. We continue to take share in small business and bring new competition and choice for mid-sized businesses as well as enterprise customers.

Just as important as our strong service and subscriber matrix the team are demonstrating terrific balance driving revenue per customer relationship forwarded at a healthy clip along with solid operating cash flow growth. At NBCUniversal even his team delivered another strong quarter, operating cash flow increased by 10% benefiting on particularly strong performance in broadcast and our recent acquisition of Universal Studios Japan. Our TV businesses has performed well and had some good momentum. The advertising environment remains robust which we believe sets up Windy Acreno and her team for a strong upfront.

This year we are unifying the upfront for NBC broadcast Telemundo and cable networks reflecting the way we go to market as a strong and comprehensive portfolio. We feel great about our position which will be strengthened as we now add Thursday Night football to go along with an already strong list of sports properties.
Speaking our strong sports properties, we recently surpassed $1 billion in national advertising sales for the Rio Olympics achieving this milestone far earlier than the London Olympics. This is a very promising result which reinforces our view of the attractiveness of this event.

Meanwhile, MSNBC continues its impressive performance with its best ratings in three years and primetime up over a 100%. Andy Lack and the news team are doing a wonderful job with the news organization particularly through the early stages of the selection cycle. In our Theme Parks we delighted about our trajectory the momentum that we've created and our roadmap with new investments and new attraction and additional hotel room capacity.
Universal Studios Japan set tenants records indeed just ended fiscal year and performed well in our first full quarter of ownership.

Additionally we just launched Harry Potter at Universal Hollywood and we expected to follow the strong success we have seen with our other Potter attraction. We have got unique and wonderful set of asset which provides Comcast NBCUniversal with many opportunities. All of this will be on display this summer when we put the full weight of the company behind the Olympics. I am amazed what we've accomplished in the short period of time as a combined company just five years in and I think we are not only five years wiser and stronger, but really better together.

We are confident we remain on the right path to creating value for our customers and shareholders that couldn't be more excited about our future.

Mike over to you.

Michael J. Angelakis:Vice Chairman and Chief Financial Officer:

Good morning everybody let's go right to the first quarter on Slide 4 and cover the key financials. Overall, we delivered consolidated revenue growth of 5.3% and operating cash flow growth of 6.9% for the first quarter. At cable, the primary drivers of growth were high speed data, video and business services.

While NBCUniversal's results were driven by broadcast, cable networks and Theme Parks which was positively impacted by the inclusion of Universal Studios Japan.

Moving down to the income statement, adjusted earnings per share for the first quarter was $0.84 a share, a 6.3% increase compared to a year ago. The cash flow was $2.8 billion in the first quarter, a decline of 11.9% or free cash flow per share declined 8.8% to a $1.14. We will go into greater detail on these results on Slides to come, now let's review the results of our businesses in more detail starting with cable communications on Slide 5. Cable communications delivered a solid first quarter, revenue increased 6.7% to $12.2 billion as we increased customer relationships and grew total revenue per customer relationship by 4% to $146 per month.

We added 269,000 customer relationships at 36% improvements in net adds compared to last year's first quarter driven by growth in two product and three product customers and a reduction in churn across all products. In fact, video and high speed data have each improved churn for 26 consecutive months.

High speed internet continues to be the largest contributor to overall cables revenue growth. Revenue increased 7.6% to $3.3 billion in the quarter, reflecting strong customers growth customers subscribing to higher levels of service and more modest rate adjustments compared to the prior year. Customer growth was strong as we added a combined 438,000 net data customers in the quarter which includes residential and business customers. We continue to differentiate and improve our product by increasing our speeds on existing tiers as well as offering the fastest in-home Wi-Fi with our advanced wireless gateways.

At the end of the quarter, 77% of our residential customers receives speeds of 50 megabits per second or greater and have one of our wireless gateways both up significantly from the prior year. Video revenue remained healthy increasing 3.9% to $5.5 billion in the quarter primarily due to rate adjustments as well as customers subscribing to additional services including premium channels HD DVRs and additional outlets. We added a combined 53,000 net video customers are best first quarter results in nine years driven primarily by another quarter of improved churn.

We continue to make great progress rolling out X1 to new and existing customers adding 1.1 million customers in the quarter, a 53% increase in net adds compared to last year. Nearly 35% of our total video customers have X1 which we believe is a real competitive differentiator. Coupled with the X1 technology is the breadth of content we offer customers both on demand and with the compelling TV everywhere offering. By X1, 86% of subscribers are using XFINITY on demand monthly viewing 25 hours month on average and 42% of subscribers are using our mobile TV Everywhere platforms monthly up 32% from last year during 7 hours of month on average.

We think this as great utility to our video service.

Grounding out our residential products voice revenue declined by 1.1% to $896 million in the first quarter as customer additions were offset by a modest decline in ARPU. In the first quarter, we added a combined 102,000 net voice customers, up 30% versus the year ago.

Now let's turn to business services which continues to deliver excellent results. Revenue increased 17.5% to $1.3 billion with small business segment accounting for about 75% of our revenues and 60% of our growth. Revenue for the mid-sized business segment is growing at a faster rate than the small business segment increasing its contribution as a percentage of total business revenue. Overall, business services has strong positive momentum and continued continues to represent a large and attractive growth opportunity for the Company.

Finally cable adverting revenue increased 12.1% to $559 million excluding political revenue our cable adverting revenue increased 7.6% in the first quarter.

Turning to slide 6. First quarter Cable Communications operating cash flow increased 5% to $4.9 billion resulting in a margin of 40.1% compared to 40.7% in the first quarter of 2015, driven by higher expenses primarily related to increase in programming cost and the investments we are making to improve the customer experience. Programming expenses grew 9.4% reflecting programming contract renewals as well as higher retransmission consent fees and sports programming cost.

As we have noted before, when we negotiate programming deals we continue to value expanded content rights for our on-demand and TV Everywhere platforms. We continue to have more content out of home rights, stacking rights, and back seasons which helps to ensure we have the most compelling and competitive video product on the market. Non programming expenses increased 6.9% reflecting our planned investment to improve the customer experience and to continue the rollout of X1. We have added technicians and service personnel to strengthen our dispatch teams and operations and invested in training tools and technology.

As a result technical and product support cost grew 6.3% and customers service expenses increased 8%.

We continue to expect our 2016 cable operating margin to be flat to down 50 basis points compared to 40.6% in 2015 as programming and other expense growth should be offset by modest rate adjustments growth in high margin businesses like high speed data and business services and continued overall cost discipline.

Keep in mind, for the second quarter, we face tough comparisons to last year’s -- successful -- versus on pay per view. However growth in high margin political advertising revenue should provide more significant support for margin in the back half of the year.

Now let's move on to NBCUniversal results. On slide 7 you can see NBCUniversal delivered solid results in the first quarter as revenue increased 3.9% and operating cash flow increased 10%. Adjusting to include the acquisition of Universal Studios Japan and last year’s results, pro forma revenue was relatively flat and operating cash flow increased 1.8% more than offsetting the difficult comparison to a profitable Super Bowl and our strong film results last year. This quarter's growth was driven by strong TV results filled by higher retransmission and affiliate revenues and the underlying strength of the advertising market.

Cable networks revenue increased 4% and operating cash flow increase 6.4% to $956 million reflecting higher distribution revenue, strong ad revenue, given the best advertising market we have seen in sometime and a modest increase in programming and production cost. Distribution revenue increased by 5.9% driven by contractual rate increases and contract renewals, partially offset by a slight decline in subscribers at our cable networks. Advertising revenue was flat compared to the first quarter of 2015 which included a benefit from a reduction in deferred advertising revenue. If we exclude this benefit, advertising growth would have been about 4% driven by strong pricing partially offset by audience rating declines at our cable networks. At broadcast television, while revenue declined 7.3% we delivered outstanding operating cash flow growth of 56.5% even with the profitable Super Bowl included in last year's results.

This growth was driven by few factors, first the underlying strength of the adverting market. Excluding the Super Bowl adverting revenue increased 9.6%, reflecting strong scatter pricing as well as one additional NFL game compared to last year's first quarter. Excluding the extra NFL game, adverting growth was still up high single-digits. Second strong retransmission revenue growth was driven by recent step ups and last programming and production cost were lower compared to last year which included not only the Super Bowl, but also more expensive primetime programming due to series finales.

Film revenue declined 4.3% and operating cash flow declined 43.1% to $167 million, reflecting the difficult comparison to last year's strong filmed performance. Most notably, the actual revenue decline 35.4% compared to last year's first quarter which included the very successful 50 shades of grey. In addition home entertainment revenue decline 24.4% due to the strong performance of several releases last year including --. Partially offsetting this lower revenue was higher content licensing revenue and strong consumer products growth due to Minions and Jurassic franchises.

Theme Parks revenue increased 57.5% to $1 billion and operating cash flow increased 53.6% to $375 million in first quarter of 2016. On the pro forma basis revenue increased 9.6% and operating cash flow increased 3.3%. These results reflect the timing of spring break this year table guest attendance and higher per capital spending partially offset by an increase in operating expenses including pre opening cost to support Harry Potter and Hollywood and the Flying Dinosaur in Japan.

Now let's move to Slide 8 to review our consolidated and segment capital expenditures. Consolidated capital expenditures increased 9.2% to $1.9 billion in the first quarter. At cable communications capital expenditures increased 9% to $1.6 billion for the quarter equal to 12.9% of cable revenue versus 12.6% in the first quarter of 2015. The increase reflects a higher level of investment in scalable infrastructure to increase network capacity and an increased investment and line extensions as well as higher spending on customer premise equipment related to the deployment of the X1 platform and wireless gateways. Also included in the each of these growth rates is the continued expansion of business services.

In 2016, we will continue to invest in each of these areas as they are driving positive results in our business. For the full year, we continue to expect capital intensity to remain flat 2015 at approximately 15%. At NBCUniversal, first quarter capital expenditures increased 10% to $295 million driven by the inclusion of Universal Studios Japan. We continue to expect NBCUniversal's CapEx to increase approximately 10% this year.

I will now finish up on Slide 9, as I mentioned earlier consolidated free cash flow declined 11.9% to $2.8 billion in the first quarter reflecting growth in consolidated operating cash flow offset by increased working capital as well as higher capital expenditures and cash paid for capitalized software and other intangible assets. We are successfully executing our plans for returning capital to shareholders including dividend payments during the quarter totaling $611 million up 6.9% and share repurchases of $1.25 billion in the quarter which are tracking to our $5 billion annual target.

We ended the quarter right at two times net leverage in line with our stated target.

That concludes our summary of the quarter. I hope that everyone now has a good sense for how pleased we are with our results. As well as our momentum. Now I'll turn it back to Jason to lead the Q&A.

Jason Armstrong:

Thanks Mike. Let's open up the call for Q&A please.

Question & Answer

Operator:

Thank you we will now begin the question-and-answer session. If you have a question please press star and then the number one on your touch tone phone. If you wish to be removed from the queue please press the pound key. If you're using a speaker phone you may need to pick the handset first before pressing the numbers. Once again if there any questions press star then the number one on your touch tone phone.

Our first question comes from the line of Ben Swinburne with Morgan Stanley. Please go ahead.

Ben Swinburne:Morgan Stanley:

Thanks good morning. Neil the customers metrics obviously speak for themselves I'm just wondering if you could spend a minute talking about the kind of churn versus connect dynamic and how much of an opportunity is there to continue to bring churn down for example as X1 goes from 30 odd percent to 60 is that anything to drive churn lower is there anything you're thinking about to drive connects as you thinking about segment in the market that maybe you guys aren't doing today and then Mike on the non-programming cost growth which you called as 7% is that the kind of investment you need to sustain this top-line or is should investors think there should be some leverage in that broadcast bucket overtime? Thank you.

Neil Smit:

Hi Ben. I'll speak connects and churn. Connects have been strong I didn't want to say that this churn is the only driver that we have had strong connects and they are driven by segment good segmentation of the market we're segmenting a different base customer basis, we're rolling out great product X1 35% of the customer base now as well as the voice remote I think we've got a 160 million commands on the voice remote that we're seeing great usage there.

Were the customer experience we spend a lot of time and I think that's helping churn that's one is helping churn and I think also we've developed new sales channels like Amazon we announced earlier this quarter. So I think it's a combination of driving connects and reducing churn. The churns went down for 26th consecutive months as Brain mentioned and I see that trend continuing I think we're would doing the right things in the customer experience, we're doing the right things in the product side and we're doing right things in the channel development side. So I see good trends continuing.

Michael J. Angelakis:

And I will just follow on that. I mean we're on the investment and expense I mean we're just going with playing offense and strong the growth business progress that we're making which is all success base, so we will keep doing behind customer service, product, technology and you seen that non-programming side but leverage overtime as the customer service experienced settles down but we're not giving guidance today Ben.

Ben Swinburne:

Thank you.

Operator:

Your next question will come from the line of Craig Moffett with MoffettNathanson. Lease go ahead.

Craig Moffett:MoffettNathanson:

Hi good morning. Brian a question for you, I know you can't talk about M&A specifically but maybe more broadly it's now been about 7 years we're getting onto the 7 years since you first stepped in for NBCU. So wonder if you could just reflect on how you see the relative values of content and distribution and how you feel see the relative negotiating leverage of content distribution as we see more of these kinds of programming disputes like you wanted -- with Viacom

Brian L. Roberts:

Well first of all it’s been five years since we closed NBCUniversal and it’s been a wonderful experience in all regards and exceeded our expectations in almost every business and we've talked a lot about that. I also think that pre -- together we feel we will better together. I said that the formal remarks I think and almost every senior executive company sees a benefit from some other part of the company in their part of the company and that is part of symphony when I think about the Olympics I just touched on briefly in my opening remarks you will see XFINITYs coverage of the Olympics would be unlike any television on the X1 experience that's ever been presented to the consumer for live sporting event and NBC coverage itself will be unprecedented and if you just go back a few years you see how much this landscape is changed and the companies that are leaning in towards that end or well positioned I can't think we are better company than ourselves.

As to the relative value these things evolve and go up and down in the relationship between the two in terms of carriage disputes and other things. They are both great businesses and that was part of fundamental premise all long I think I first learned that thing on -- board when Comcast is purely a cable company. It's a worldwide business it grows all in different ways, but during the same sort of system were gathered the value is tends to head in the same direction and at any one time one part of ecosystem could be doing better and the another part of the ecosystem but in the end we are bringing great experiences to consumers you need that content you need innovative distribution technologies that's how we are running our company and I hope that's response to your question. Thanks.

Craig Moffett:

If you have -- would you rather have more of one than the other I mean you try to buy some more distribution and lot of these are some speculation we are interested in more content is that one that you find more attractive at the moment.

Michael J. Angelakis:

I am not going to comment on that regard and if you have more than one kid you love them equally and I don't know any other way to put it and they are both great businesses and everything is specific to the situation. But we have very rigorous returns or track record it comes down to the operating excellence and just looking at own Steve and their teams behind them and I think that's what is story today with these results both parts of the company forming as exceptional level in my opinion.

Craig Moffett:

Well said. Thanks Mike.

Jason Armstrong:

Thanks --. Next question please.

Operator:

Our next question comes from the line of John Hodulik with UBS. Please go ahead.

John Hodulik:UBS:

Thanks. May be a regulatory question for Brian. The FCC seems determined to fold cable on underneath special arrow what they are not going the business data services redeemed in which you could some more color on that on Thursday just what your thoughts on that and then maybe somewhat related questions Verizon has been making a lot of comments about eventual 5G rollout any sort of early thoughts on the competitive environment or how that's likely to evolve as 5G technology develops. Thanks.

Brian L. Roberts:

Let me let Nil start with the special access will go ahead Nil.

Neil Smit:

Yes well the Chairman recently plan that there was limited competition in the business data services area and that's needed more regulation I can say that we compete everyday for that business and it seems kind of counter intuitive that the SEC would want impose regulations on a new entrance we've bringing more competition to the business. I think we haven't seen the proposed rule making yet so probably comment on any further on it though.

Brian L. Roberts:

Your second question was

John Hodulik:

That is on as you guys are probably heard horizons is talking a lot about rolling it out really starting in 2018 as sort of fix wireless replacement for cable plan I mean obviously it's a little bit down the road but just any early thoughts on 5G and picture analysis a potential competitors in cable?

Brian L. Roberts:

Let me start speak to that. We're 5G is going to it's an exciting new platform and it's still on the very early days we think it's the propagation distance is fairly short about 300 foot radius we're going to need space and power and back hole and it has spectrum doesn't really pass through objects like prism building very well. We think we're very well positioned because we have space and power and back hole as well as field force to be able to still and maintain the services and provide the back hole that require.

So we're going to continue to monitor it still away early in the game and we feel well position.

John Hodulik:

Great thanks.

Jason Armstrong:

Thanks John. Next question please.

Operator:

the next question comes from line of Phil Cusick - JPMorgan. Please go ahead.

Phil Cusick:JPMorgan:

Hey guys thanks. First a follow up churn is improving nicely you said it's been really sustained is there to made ease of fund marketing to offset the cost growth another parts of the business, if this continues and support margins a little bit and then second on the opening up for the China market for film next year, how you are working towards that as a real opportunity on the universal side? Thanks.

Brian L. Roberts:

To filling the churn side we have gotten very detailed we have a data department who that ever that it's very details and how much segment the customer base audience and which segments are going after and we're very specific about and go after the high value long customers.

So, I think where we see the opportunity we're going to spend the marketing dollars and we'll continue to provide great service and it's the churn is appropriate I think if the churn is accumulation of a lot of different things we're doing in the business, customer experience, better products and I just overall better service.

Michael J. Angelakis:

One of the things I just want to add as that I think that Neil and Dave Watson and the team have not calibrated not just subscriber results but also revenue and cash flow there is a balance that is pretty difference than I think I have seen anybody else quite have over a sustainable number of quarters and though the investment we're making in service, investments in innovation and marketing, it's all working but it's not as the expense of one or the other as you drive us forward I think Neil you making judgments everyday on that balance.

But that's what I personally find, feeling in some of the results specially not just going once by the other.

Neil Smit:

Everyday Watson and is teams have done a great job just driving the business on a consistent basis

Brian L. Roberts:

So, China is amazing how far we have come in the last few years we had no employees in China several years ago. We now have a very good team a movie team, consumer products teams and we spend a lot of time and have discussed on previous calls trying to get going on building a theme park in Beijing and that's going according to plan. So China represents a big, big opportunity to the company to use significant profit generator so I am curious for example we did over $400 million in China.

But as that market grows I think it's very important that we be there and I think we are doing all of the things that you'd expect us to do and have a lot of big movies coming out in China in the next year and we want to make sure that we are doing everything we can to grow that market as aggressively as possible.

Phil Cusick:

Thanks, guys.

Jason Armstrong:

Thanks Phil. Next question please.

Operator:

Your next question comes from the line of Jessica Reif-Cohen with Bank of America Merrill Lynch. Please go ahead.

Jessica Reif Cohen:Bank of America Merrill Lynch:

Thank you I have one for Steve and one for Neil. Steve on the upfront of love to get your you've had the soft turnout, you've coming to the market with a unified approach, which seems really logical but it's obviously never been done before and within that context that and so I am wondering what their advertisers response has been so far and within the context of the upfront --. Can you talk a little about -- doesn't get that much attention but you are solid 40% share of the market at this point and then to Neil you've talked a lot about the drivers of video subs which is phenomenal I just want to get you could -- them a little bit on what you doing in customer service that's difference this year versus last and what your plans are for next year for example like cyclical like App available across the footprint. Thank you.

Steve Burke:

So regarding the upfront, let me talk a little bit about the market. A year ago lot of advertisers pulled back and didn't spend as much in the upfront I think part of the thinking was we can always spend later and there is plenty of places to spend a money on digital I think the motion of the market has swung pretty dramatically over the last year. I think people are have come to the realization that broad television reach is very important in a campaign that digital has place but television has big a place and a lot people I think who did not come into the upfront market last year it significantly more and what has been one of the strongest scatter market I've ever seen.

So in terms of market dynamics, we're into the upfront season I think with the a lot of visitor our back and my predication is that it's going to be a strong upfront. We think we are in the whole position for that strong upfront we represent about 20% of the iBall in television if you add up broadcasting cable and be seasonal on its way to with third annual 18 to 49 victory we're doing very well in sports and news at NBC and then our cable channels are strong. pointed out Telemundo, Telemundo used to be a weak second we're bidding in unit vision most nights at 10 o'clock and have close the gap with the in vision and I think in a number of our channels we're still under priced relative to people that were bidding or close to or at least competitive to.

So I think we're going into upfront in a very strong position and as you said we sale our channels and all of our digital properties together under the unified direction of Linda Yaccarino our head of ad sales which an advantage for advertisers. But also given our position we tend to talk to people first and that's exactly where we want to be and as I think we're going into this upfront with a better upfront, a better more unified approach and more strength than we've ever had we'll see how it all plays out. I just concerning customers experience we're focusing on few things one is making the experience all-digital. So the customers they don't want to call an agent and doesn't have to.

They can do everything they need to do for customer service perspective online or --. We are working very closely on the first 90 days on the on-boarding experience making sure that's a perfect experience as a higher churn environment. We are focusing on reliability of the products and the network making sure there always up. We have said in fact a year ago we have the best product in market and I think we are delivering that now.

We have the lowest dating calling rate in years and that's which led out 11 million calls. We have the highest first contract resolution rate in years as well. So we're seeing the results but it's focused across the number of fronts and the team -- and his team is done a great job, getting organized around the five key journey and we are just delivering, we are changing the way we look at the business to through the customer land and its really change the way we go about doing things.

Jessica Reif Cohen:

Great. Thank you.

Jason Armstrong:

Thanks. Next question please.

Operator:

Your next question will come from the line of Jason Bazinet with Citi. Please go ahead.

Jason Bazinet:Citi Investment Research:

Just have a question for Mr. Burke. For years of street on willing to put multiple one on the studios division. Even that's things (inaudible) that seems to be changing a little bit as failure rate franchises been --. Would you say that in an explosive strategy of you studio that focused on franchises.

Steve Burke:

Absolutely. Five years ago we had one franchise Fast and Furious. Today we have eight franchises and we are harder work we are trying to build more and we spend a lot of time trying to figure out where films are in the arc of the franchise, the franchise eventually declines in and leads we are doing everything we can to make sure that the franchises that we have are strong as possible. We did the group five year plan review is just yesterday and we spent half of the time talking about how to take care of franchises make sure that they stay fresh create new ones, make sure that they are fully monetize and consumer products and around the world.

So it's a key, key part of our company and again we make tremendous progress in the last five years being in the position we are now what we can look forward to these franchises continuing to come back and succeed for many years to come.

Jason Bazinet:

Thank you very much.

CMCS

Thanks. Next question please.

Operator:

Your next question comes from the line of Brett Feldman with Goldman Sachs. Please go ahead.

Brett Feldman:Goldman Sachs:

Hi, thanks for taking the question I was be interested in hearing your comments on the future of the set-top box. If we look at what you are doing on the one hand you are making a big commitment to it through the X1 deployment but you are also out there with your partner program and your recent announcement with -- and Samsung and so may be just getting a view for how you think the market place is going to evolve and then were you surprises all by the SEC reaction to the announcement now that you had with -- would seem that it would aligned with their set-top box reforms at they came out somewhat harshly against it.

Brian L. Roberts:

Well we think the X1 platform is the best there is in the market right now and we are seeing great results from this, churn is down, BOT is up the more DBRs more additional outlets its heading and so also. We also want to make our content available to as --customers or potential customers as possible and we want to have best content available. So we give the -- we think the way they approach it is that are coming up with new hardware that will try the out dated over in a short period the apps space approach was the right approach and with the deals that you refer as -- and Samsung are based app that provides a full suite of services.

So set-top boxes will continue to be part of our ecosystem and as well apps. Brian.

Brian L. Roberts:

Go ahead what you are saying.

Brett Feldman:

I just wanted your comments on the --- set-top box proposed performs and their reaction to the partner program.

Brian L. Roberts:

Yes. I thought the reaction was unnecessary I think that we are working hard with our partners. We tied over 40 companies call us to sign up for the partner program since then and so which is great interest in the ecosystems to get assets to our Xfinity app and so I thought it was on call for.

Brett Feldman:

Okay. Thanks for taking the question.

Brian L. Roberts:

Thanks Brett. Next question please.

Operator:

Your next question comes from the line of Anthony DiClemente - Nomura. Please go ahead.

Anthony DiClemente:Nomura:

Good morning thanks for taking my questions I have one for Mike and one for Neil. Mike I think as a follow up from an earlier question from Ben's question but can you talk anymore specifically about the drivers of the 9.4% growth in programming expense in the quarter. I realize you had renewals on the content side you are adding more content right as you described in your remarks. But I think investors continue to wonder if this sort of 9% to 10% programming expense growth rate that we're seeing continues into 2017 or is it moderate as you get beyond some of the onetime renewals some of those onetime step-ups with your partners and then for Neil it looks like on the high speed data side that --- decelerated the touch in the quarter I know, you didn't have modem fee increases but I think pricing power on broadband is something investors assume that's an error that you have in your -- so, just wondering if you can update us on how you think about broadband pricing this year and in the longer-term and if you have anything to say about what the SEC said about not being to impose caps on data usage.

Any thoughts there would be appreciated. Thanks both.

Michael J. Angelakis:

Anthony it's Mike. On program expense what we are seeing as far and for this year is consistent with what we had said at the beginning of the year which is about 10% increase in program expenses and you hit the reasons. We have big certain renewals happening now and over the course of this year. As far as going beyond this year, you know long-term you would overtime and long-term trends been in the high single-digit so we are running a little higher than in the near term than that but that is again due to just having some of our big contracts coming back up for renewal.

Neil Smit:

And concerning HSD while we very pleased with the 7.6% growth and 438,000 stocks we feel good about the business it goes back to that balance that Brian refer to. We have increased this taking time for us 14 years we're rolling out DOCSIS 3.1. We have tons of millions of Wi-Fi, hotspot and a so we continue to add value to the business. I think there is pricing opportunity going forward as we continue to add value concerning the charter tabs I prefer not to comment on that it still pending.

Anthony DiClemente:

Okay, thanks a lot.

Operator:

your next question comes from the line of Bryan Kraft - Deutsche Bank. Please go ahead.

Bryan Kraft:Deutsche Bank:

Good morning, I have one for Mike and one for Mike and one for Steve. Mike I wanted to ask about cash paid for intangible assets. These investments have been growing in a pretty good rate over the past couple of years particularly in recent quarters. Can you talk about what's been driving the growth and how we should think about those investments going forward? And then Steve I was just wondering if you can comment on where the discourage negotiation stand and do you feel that your making any progress at this point? Thanks.

Michael J. Angelakis:

Yes, I will just comment if new once the you can, but on the software intangible side that's just the other side of the -- of investments we are making in X1 cloud DVR, our home products, smart internet, when we build software improved but in our backbone through some infrastructure investments some of that role through software and intangible. So, it's the same story as what's going on in CapEx and investing behind the growth resume.

Steve Burke:

I think we're in good shape with this. I think we have the meeting of the minds we don't have signed deal yet but I think we will have one and then two distinct future.

Bryan Kraft:

Okay, great fine. Mike if I could just follow up, I mean as you get through the X1 rollout which is on the CapEx side is more hardware driven I think most of its would expect the intensity to decline, but on the software side should we expect the same because it seems like the business is becoming more software driven. So, is that going to take on maybe a different trajectory as you get towards the end of the X1 deployment?

Michael J. Angelakis:

I would say that continues to be on a trajectory. We are investing a lot in innovation and that's the point of what we've been doing on the product side. So, that will continue it's a smaller, obviously much smaller amount than the hardware side. But it has been on a higher growth rate than I have expected to as long as we're seeing a great results continue to be biased towards innovating and getting right products out there.

Bryan Kraft:

Thank you.

Jason Armstrong:

Thanks, Brian. Next question please.

Operator:

Your next question comes from the line of Mike McCormack with Jefferies. Please go ahead.

Mike McCormack:Jefferies & Company:

Hey guys thanks. Nil maybe a quick comment on AT&Ts direct TV now announcement rolling out later this year sort of a true nationwide full bundled offering presume when they get if and when they get rights whether or not that changes your thought on the competitive landscape and I guess for Comcast's specifically could you do the same thing in other title 6 or LFA requirements that will prevent you from doing so. Let me guess for Mike cable margins can we just get a sense for how are you thinking about the pacing throughout the year on quarter.

Neil Smit:

So on AT&T announced products but there is no reason we couldn't do something very similar from our technology perspective or rights perspective we just have to go get the rights and deploy the product we thus far haven't seen an OTT model that really hunt and but we will continue to stay tune into the market and being prepare to respond accordingly.

Brian L. Roberts:

And on cable margins its quarter-by-quarter seasonality with drive things little bit I mentioned last year’s second quarter we have the --there was the depth in that what is usually a seasonally weaker quarter. But full year is as we have said last year was 40.6% cable margins in as we said it's beginning of the year to be flat to down 50 basis points and that's continues to be what we speak.

Mike McCormack:

Great thanks, guys.

Jason Armstrong:

Thanks Mike. Next question please.

Operator:

Your next question comes from the line of Vijay Jayant with Evercore ISI. Please go ahead.

Vijay Jayant:Evercore ISI:

Hi, thanks two questions please. Steve just want get some color on cable net underlying private obviously we have some sense on what cost cutting is but on the -- saving side any color I mean I think we have been thinking it’s about a 2% decline on base that is that changing any color that will be great and then for Neil I understand that is big cost element on the operating cost side for set top box related cost was truck loads or customer care. So in a longer term environment where you set-top box the goes away if its that's the case how much cost can go up from that land that will be great to understand. Thanks

Neil Smit:

So in terms of cord-cutting cord-shaving we don't see much change at all the numbers you the 2% you talked about it is not far off from what we're seeing and some it is shaving and some it is cutting and the interesting thing about the cable network business is the overall resiliency if you look the affiliate stream and the advertising stream and the desire for advertisers to buy broadly distributed highly rated cable channels being stronger than ever. So as a business is not going to grow we've said before and we'll say again it’s not going to grow the way it did 10 years ago, but it still good business for us and we don't see any major change in terms of what's going on with the sub trend.

Michael J. Angelakis:

As we put more up in the cloud and go to IT video we think the cost up for the set-top box is hardware overall hardware and the house will come down. We still believe there is a need for hardware in the house at least to the gateways level and we will we got IT video in labs now and we'll continue to look at the right balance look at the best content and all the contents are customers is well managing the CapEx cost. In terms of CapEx CPE is in the 40% to 50% range of our CapEx then, that would be the amount overall would be under development.

Vijay Jayant:

Great. Thank you.

Thank you Vijay. Next question please.

Operator:

Your next question comes from the line of Marci Ryvicker with Wells Fargo. Please go ahead.

Marci Ryvicker:Wells Fargo Securities:

Thanks. Two quick questions. First, in terms of cable, is being asked over that 1 million broadband and looking at how big of an issue that making the since this is the first time cable operator lastly compete against each other. I know it's early if you have any thoughts about this you can share with us and then secondly within and this universally got in general.

We keep seeing declines in cable side but not broadcast. Can you talk about what's driving the difference.

Neil Smit:

I will comment on this charter over builds. I think it’s early to comment on it. Which we haven't seem to into the details but generally speaking Comcast is in urban markets and these urban markets have been overbuild by one or another and so we are in very competitive environment as it is and we think we are well position. So the broadcast business is a real positive I think in the overall and universal story if you look at where the company was five years ago and where it is today.

The most highly rated channels I think are going to be staying in the most bundles and are going to be watched by the most people continue to be watch by the most people and I put MDC obviously right at the top of that list. Retransmission consent has been a tremendous benefit to our broadcast business, both the retransmission we get from marks own stations and the share we get from our affiliates if you add those two numbers together, that was a number around zero, five years ago and is the number around $800 million today, something like that, and also on the advertising side, I think particularly, the if you have got Olympics coming up for 17 days, our ratings will be higher than all three all if you add the other three broadcasters together we will be a multiple of anyone else's ratings for 17 days. Imagine, how valuable that is to someone who is trying to build the brand or introducing new car, do something major in terms of changing the opinion of people in America. So, it's interesting, I would not have predicted this 10 or 20 years ago, but it feels like broadcast is getting stronger and stronger.

In this period we have to keep putting good shows on and it's tougher and tougher and fragmented well to get a rating but when you do, you do get rewarded for it significantly.

Marci Ryvicker:

Thank you.

Jason Armstrong:

Thanks Marci. We’ll take one last question.

Operator:

The last question will come from the line of Frank Louthan with Raymond James. Please go ahead.

Frank Louthan : Raymond James & Associates, Inc:

Great. Thank you. Can you comment a little bit more on the Amazon channel partnership and how important you feel that channel partners like Amazon and others will be to the products that you have gone forward?

Brian L. Roberts:

It's an early stages of the partnership, but it's work very well they have been a great partner and helping us understand how to better in other words you buy a laptop, you want an service you buy a television you want a video service. So, the actual sales aspects they've been very helpful and working with them. Concerning we've developed a number of other channels our stores are doing very well, Xfinity on campus is doing very well.

So, we continue to every years we speak to develop new channels and Amazon we see great promising.

Frank Louthan :

Okay great. Thank you.

Jason Armstrong:

Thank you. Thanks a lot Frank. We will wrap the call up there thanks everyone for joining us. Back to you.

Operator:

There will be a replay available on today's call starting at 11:30 AM Eastern time. It will run through Wednesday May 4 at midnight eastern time. The dial-in number is 855-859-2056 and the conference id number is 68923741. A recording of the conference call will also be available on the company's website beginning at 12:30 PM today.

This concludes today's teleconference thank you for participating. You may all disconnect.