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Marci L. Ryvicker, CPA, CFA

Marci L. Ryvicker, CPA, CFA

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Marci L. Ryvicker, CPA, CFA

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  1. Cable: A Look At Trends & Opportunities Past, Present and Future Marci L. Ryvicker, CPA, CFA Harrisburg, PA April 2011 Please see page 82 for rating definitions, important disclosures and required analyst certifications. Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.

  2. AGENDA SUBSCRIBER TRENDS ARPU TRENDS 2010 THEMES OPPORTUNITIES FOR GROWTH INVESTOR FOCUS WHAT ABOUT…..? YOUR QUESTIONS Source: Company websites, and Wells Fargo Securities, LLC 1

  3. SUBSCRIBER TRENDS • BASIC VIDEO • HIGH SPEED DATA • TELEPHONY Source: Company websites, and Wells Fargo Securities, LLC 2 2

  4. BASIC VIDEO

  5. OVERALL VIDEO INDUSTRY Total video subs grew 8% from 2005 - 2010 71% 60% Market Share (Cable, DBS and Telco) 33% Total US Multichannel Video Subs (MMs) 29% 7% 1% Source: SNL Kagan and Wells Fargo Securities, LLC 4 4

  6. OVERALL VIDEO INDUSTRY We are forecasting another 4% growth through 2016 71% 53% Market Share (Cable, DBS and Telco) 34% Total US Multichannel Video Subs (MMs) 29% 13% 1% Source: SNL Kagan and Wells Fargo Securities, LLC 5 5

  7. OVERALL VIDEO INDUSTRY 2010: FIRST PAY-TV LOSSES EVER Market Share (Cable, DBS and Telco) Total US Multichannel Video Subs (MMs) Source: SNL Kagan and Wells Fargo Securities, LLC 6 6

  8. TOP CABLE VIDEO PROVIDERS 2010 Top Cable Provider Snapshot Note: Figures in thousands, except percentage data Source: SNL Kagan and Wells Fargo Securities, LLC 7 7

  9. TOP DBS/TELCO VIDEO PROVIDERS 2010 Top DBS/Telco Provider Snapshot Note: Figures in thousands, except percentage data Source: SNL Kagan and Wells Fargo Securities, LLC 8 8

  10. HIGH SPEED DATA

  11. OVERALL HSD INDUSTRY Cable Gained ~20M Subs 2005-2010 55%, 42M 58%, 26M 56%, 31M 55%, 39M 55%, 36M 56%, 45M 42%, 19M 36%, 28M Total US Broadband Subscribers (MMs) Market Share (Cable, DSL and Fiber) 8%, 6.7M 3%, 1.7M Source: SNL Kagan and Wells Fargo Securities, LLC 10 10

  12. OVERALL HSD INDUSTRY We forecast cable will gain another 15M HSD subs 58%, 26M 59%, 59M 42%, 19M 28%, 28M Total US Broadband Subscribers (MMs) Market Share (Cable, DSL and Fiber) 13%, 13M 3%, 1.7M Source: SNL Kagan and Wells Fargo Securities, LLC 11 11

  13. OVERALL HSD INDUSTRY Cable gained 3 M HSD subs in 2010 , 45M , 43M , 29M , 28M Total US Broadband Subscribers (MMs) Market Share (Cable, DSL and Fiber) , 7M , 6M Source: SNL Kagan and Wells Fargo Securities, LLC 12 12

  14. TOP CABLE HSD PROVIDERS 2010 Top Cable Provider Snapshot Note: Figures in thousands, except percentage data Source: SNL Kagan and Wells Fargo Securities, LLC 13 13

  15. TOP TELCO HSD PROVIDERS 2010 Top Telco Provider Snapshot Note: Figures in thousands, except percentage data Source: SNL Kagan and Wells Fargo Securities, LLC 14 14

  16. TELEPHONY

  17. OVERALL TELEPHONY INDUSTRY Total telephony losses were 10M 63% 86 36% Total Landline Phone Subs (MMs) Market Share (Cable, Telco and Wireless) 33% 18% 8% 5% Source: SNL Kagan and Wells Fargo Securities, LLC estimates 16 16

  18. OVERALL TELEPHONY INDUSTRY We are forecasting another 10M loss 63% 46% Total Landline Phone Subs (MMs) Market Share (Cable, Telco and Wireless) 18% 24% 8% 5% Source: SNL Kagan and Wells Fargo Securities, LLC estimates 17 17

  19. OVERALL TELEPHONY INDUSTRY 3M telephony subs LEFT in 2010 39% 36% 33% 28% Market Share (Cable, Telco and Wireless) Total US Landline Phone Subs (MMs) 18% 17% Source: SNL Kagan and Wells Fargo Securities, LLC estimates 18 18

  20. TOP CABLE TELEPHONY PROVIDERS 2010 Top Cable Provider Snapshot Note: Figures in thousands, except percentage data Source: SNL Kagan and Wells Fargo Securities, LLC estimates 19 19

  21. TOP TELCO TELEPHONY PROVIDERS 2010 Top Telco Provider Snapshot Note: Figures in thousands, except percentage data Source: SNL Kagan and Wells Fargo Securities, LLC estimates 20 20

  22. ARPU TRENDS • TOTAL ARPU • BASIC VIDEO • HIGH SPEED DATA • TELEPHONY 21 21

  23. TOTAL ARPU

  24. TOTAL ARPU Total ARPU has been growing mid to high single digits Average Total ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC 23 23

  25. TOTAL ARPU We expect growth to stabilize in the mid single digit range Average Total ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC estimates 24 24

  26. TOTAL ARPU Total ARPU grew 8% in 2010 for the cable industry Average Total ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC 25 25

  27. TOTAL ARPU Note: N/A – Not available; CAGR is a 6-year CAGR between 2011E and 2016E Source: SNL Kagan and Wells Fargo Securities, LLC estimates 26 26

  28. TOTAL ARPU Source: SNL Kagan and Wells Fargo Securities, LLC 27 27

  29. BASIC VIDEO

  30. VIDEO ARPU Cable Video ARPU grew 17% v. 12% for DBS Average Video ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC 29 29

  31. VIDEO ARPU Video ARPU should moderate to MSD growth Average Video ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC estimates 30 30

  32. VIDEO ARPU Cable Video ARPU grew 5% v. 4% for DBS Average Video ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC 31 31

  33. VIDEO ARPU Note: N/A – Not available; CAGR is a 6-year CAGR between 2011E and 2016E Source: SNL Kagan and Wells Fargo Securities, LLC estimates 32 32

  34. VIDEO ARPU Source: SNL Kagan and Wells Fargo Securities, LLC 33 33

  35. HIGH SPEED DATA

  36. HSD ARPU HSD ARPU has been relatively stable Average HSD ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC 35 35

  37. HSD ARPU We are conservatively forecasting slight increases Average HSD ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC estimates 36 36

  38. HSD ARPU Cable HSD ARPU grew 2% in 2010 Average HSD ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC 37 37

  39. HSD ARPU Note: N/A – Not available; CAGR is a 6-year CAGR between 2011E and 2016E Source: SNL Kagan and Wells Fargo Securities, LLC estimates 38 38

  40. HSD ARPU Source: SNL Kagan and Wells Fargo Securities, LLC 39 39

  41. TELEPHONY

  42. TELEPHONY ARPU Telephony ARPU has trended down Average Telephony ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC 41 41

  43. TELEPHONY ARPU We anticipate further declines Average Telephony ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC estimates 42 42

  44. TELEPHONY ARPU Cable Telephony ARPU shrunk 2% in 2010 Average Telephony ARPU Y/Y Growth Source: SNL Kagan and Wells Fargo Securities, LLC 43 43

  45. TELEPHONY ARPU Note: N/A – Not available; CAGR is a 6-year CAGR between 2011E and 2016E Source: SNL Kagan and Wells Fargo Securities, LLC estimates 44 44

  46. TELEPHONY ARPU Source: SNL Kagan and Wells Fargo Securities, LLC 45 45

  47. 2010 THEMES • TITLE 2 • OVER THE TOP • THE ECONOMY • COMCAST-NBCU 46 46

  48. TITLE 2

  49. TITLE 2 • Section 202: Prevents “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services • Section 203: Requires that the FCC and public have access to information about rates and charges • Section 208: Gives the right to complain to the FCC about violations of any of the relevant sections • Section 254: Allows the FCC to promote universal service (to allow the migration of the Universal Service Fund to broadband) • Section 222: Protects confidential information received as part of the service • Section 253: Service must be accessible to people with disabilities Source: FCC documents and Wells Fargo Securities, LLC 48 48

  50. TITLE 2 LITE • Transparency Rule – The right to know basic information regarding broadband service including how networks are managed • No Blocking Rule – The right to send and receive lawful internet traffic and to use the devices of choice • No Unreasonable Discrimination Rule – The right to a level playing field; i.e. let the “marketplace” decide • Reasonable Network Management Rule – Broadband providers should take appropriate and tailored steps to address congestion and deal with unwanted traffic as well as traffic that is harmful to the network Source: FCC documents and Wells Fargo Securities, LLC 49 49