Comcast Corporation
Q3 2015 Earnings Call Transcript

Published: 27 Oct 2015

[Operator:]

Good morning, ladies and gentlemen, and welcome to Comcast's third quarter 2015 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:]

Thank you, operator, and 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 always, let me now refer you to Slide number 2, which contains our Safe Harbor disclaimer and reminds 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 Roberts:]

Thank you, Jason, and good morning, everyone. I am pleased to report very strong third quarter results. This is a real reflection of how well the various parts of our business are working and more importantly how well they are working together. In the quarter, we grew revenue by 11.2% and operating cash flow by 8.4%. Our performance was broad-based with broadband, business services, film and Theme Parks leading the way. Over in Cable Communications, our investments in our network, our X1 platform and customer service, are all paying off. Revenue and operating cash flow growth were each over 6%. We added a 156,000 customer relationships, up over 90% from the prior year. Our video results were the best for the third quarter in nine years and our broadband results were the best for the third quarter in six years. Similar to last quarter, churn was a stand out, as we saw an improvement across every category. We continue to push harder on X1, and have now accelerated our deployment to over 40,000 boxes per day. Roughly 25% of our video subscribers now have X1. And the reaction from our customers together with the financial benefits that we're seeing continues to indicate we should go even faster in taking that rate higher. Encouragingly, as we get further into our base, the magnitude of favorable impacts on churn, additional outlets, VOD viewing and DVR uptake remain at a high level. In addition, there was a deep list of initiatives that are adding to our value proposition for our customers. Last quarter we talked about launching a voice remote. Today, we've already deployed nearly 1.5 million of them. And we are confident that we have unrivaled content rights, which makes it much more important for us to facilitate the discovery of that content. The voice remote is exactly the type of solution, and the customer feedback has been terrific. In addition, we've scaled our XFINITY on Campus offering, nearly quadrupling the number of participating universities versus last year to 26. Business services delivered another excellent quarter, with revenue growth of nearly 20%. We continue our progress in small business, have established ourselves as a strong competitor in the mid-sized segment and recently announced that we created a new enterprise services group targeting Fortune 1000 customers where we've already had some good early success. At NBCUniversal, things continue to exceed our expectations. I am thrilled to report a 17% operating cash flow growth for the quarter, which is the same number for year-to-date. At film, the third quarter was remarkable in many ways and continued the terrific run we've had this year. Minions and Jurassic World sustained our box office streak into the third quarter. On August 5, we surpassed the prior record for the highest grossing year ever for a movie studio in worldwide box office. And this is the first time any studio has had three films cross the $1 billion mark in theatrical receipts in the same year. At our Broadcast and Cable Networks, while industry-wide ratings remain challenged, we had some real success in this past quarter. NBC was number one broadcast network for the fifth summer in a row and has continued the momentum into the fall, winning premiere week for the fourth straight year. The relative strength in Broadcast has diversified across sports, with the number rated show on TV and Sunday Night Football compared with the number one rated reality show, and we're number in nightly news and in late night. Now, we have the fall's top-rated new show with Blindspot. In our Cable Networks, NBC Sports Network put up its most watched third quarter ever. Thanks to NASCAR's debut and continued growth in viewership for the English Premier League. At USA Network, Mr. Robot was the number two new basic cable drama this summer. We're delighted about our progress in the Theme Parks, and more specifically about our ability to manage for growth and returns. Parks delivered another quarter of double-digit revenue and operating cash flow growth. Notably, we had record attendance, despite the anniversary of our launch of the new Harry Potter attraction in Orlando. Also, during the quarter we announced our intention to acquire a 51% stake in Universal Studios Japan. We believe that in Japan and in other parks, the combination of wonderful intellectual property and new attractions, along with great service and value for families translates into very strong performance. As we look at our overall results, the third quarter and year-to-date are reflective of a special company with businesses that are working well together and focused on execution. Our operating cash flow is increasing. We are reinvesting back in the businesses for growth and also looking for strategic investments along the way, such as Universal Studios Japan. And importantly, we're returning a significant amount of cash to our shareholders. We believe that we're on the right path to continue to successfully create value for our customers and shareholders and we're confident and excited about our future. I'd like to now turn it over to Mike, who with a full quarter under his belt has made a really seamless and excellent transition into Comcast. Over to you, for a more detailed review of the quarter.

[Michael Cavanagh:]

Good morning, everybody. And let me begin by briefly reviewing our third quarter consolidated financial results starting on Slide 4. As Brian highlighted, consolidated revenue for the third quarter increased 11.2% to $18.7 billion, with consolidated operating cash flow increasing 8.4% to $6.2 billion. The primary drivers of this growth were high-speed data and business services at Cable, and film and parks at NBCUniversal. Earnings per share for the third quarter was $0.80, an increase of 9.6% when you exclude $724 million of tax adjustments and $49 million of transaction-related costs that were in last year's third quarter results. Free cash flow for the quarter increased 6.8% to $2.7 billion and free cash flow per share of $1.06 was up 11.6%, driven by strong operating cash flow growth, partially offset by higher capital expenditures and cash taxes. On a year-to-date basis, free cash flow increased 13.5% to $7.3 billion and free cash flow per share of $2.90 has grown 17.9%. Now, let's go into the results of the businesses in more detail, starting with Cable Communications on Slide 5. We are very pleased with the strength of our Cable Communications results. Cable revenue increased 6.3% to $11.7 billion, as we added a 156,000 customer relationships, a 90% improvement compared to last year's third quarter and increased total revenue per customer relationship by over 4% to $143 per month. These results demonstrate the strength and health of our business, and were driven by strong growth in high-speed data and business services as well as higher video revenue. Taking a closer look at our video business. Third quarter revenue increased 3.3% reflecting rate adjustments and an increasing number of customers adding advanced outlets and services like high-definition TV and DVR services. In fact, we added nearly 2.5 times the number of advanced customers in the quarter compared to last year, as customers are recognizing the value in our innovative X1 platform and extensive amounts of programming. This also contributed to us, improving our customer losses by 41% over the last year's results. We lost a combined 48,000 video customers in the quarter, primarily driven by another quarter of improved churn. We're pleased with the progress we've been making in rolling out X1, which accounted for nearly 60% of video connects in the quarter. We added nearly 1 million X1 customers in the quarter, including both new customers and existing customers upgrading to the platform. X1 net adds increased more than 20% from the second quarter and were up nearly 50% compared to last year, with X1 customers now representing roughly one quarter of our total video customer base. The positive benefits from X1 continued in the third quarter. X1 customers have significantly lower voluntary churn, over 50% higher DVR penetration and take a greater number of advanced outlets. This results in higher average revenue per customer for X1 base. As the X1 customer base expands, we see the positive impact on our overall video results. A final comment on video. We're responding to different customer preferences, segmenting the market effectively with a variety of video packages and offers, like our Internet Plus offering to appeal to customers that might otherwise choose to purchase only broadband from us. Providing the right introduction to our products allows us to better retain our customers and potentially migrate them to higher-end packages overtime, improving our customer lifetime value. The strong momentum in our high-speed data business continued. Revenue increased 10.2% during the quarter making it again the leading contributor to overall cable revenue growth, driven by impressive growth in our customer base as well as rate adjustments and an increasing number of customers taking higher speed services. We added a combined 320,000 data customers during the quarter with 73% of our customers now receiving speeds of 50 megabits per second or greater. We continue to differentiate our product through speed upgrades and the fastest in-home Wi-Fi with our advanced wireless gateways. Over 70% of our residential high-speed data customers now have one of our gateways, which are also fueling our impressive growth in Wi-Fi hotspots. Our hotspot now number more than 11.7 million across our footprint compared to 4.9 million in last year's third quarter. Voice revenue declined by 1.4% in the third quarter. As we expanded eligibility of X1 to Double Play customers, our combined voice customer net addition slowed to 17,000 and ARPU had declined modestly. However, voice remains an important product for our customers and we believe adds value to the bundle. Turning to business services, it has been the second largest contributor to overall cable revenue growth for 18 over the last 19 quarter, with third quarter revenue increasing 19.5% to $1.2 billion. This rate of growth is especially impressive, given that business services is approaching a $5 billion run rate business annually. Over 70% of that revenue was generated by small businesses, where our performance is especially strong, with growth driven by customer additions and higher rates. At the same time, the contribution from mid-sized businesses continues to increase. We feel great about our run rate for growth in business services, even more so with the recently announced creation of a new division that will target Fortune 1000 companies and other large enterprises. If look under the hood at many of the businesses we are targeting, they resemble an aggregation of small business, those with branch system, such as banks, retailers and restaurant chains. In these cases, the needs of the local branches look very much like the small and medium-sized business customers we serve so well today. We are in the early stages of pursuing the enterprise opportunity, but believe it as yet another avenue of growth for this already robust business. And lastly, on Slide 5, cable advertising revenue was relatively flat during the third quarter, due to lower political revenue. Excluding political, our cable advertising revenue increased 8%, primarily driven by increased media advertising and ahead of the launch of the fall TV season. This level of increased spending was timing related and should be lower in the fourth quarter. Also keep in mind, we will have a difficult comparison in the fourth quarter, as we had $110 million of political revenue during last year's fourth quarter fueled by election year spending. Turning to Slide 6. Third quarter Cable Communications operating cash flow increased 6.4% to $4.7 billion. During the second quarter call, we detailed our plans to increase our investment in the customer experience as well as continue our aggressive X1 rollout, which will drive higher customer service and technical operation expense. While this is reflected in what we saw in the third quarter, our better revenue performance and lower program expense growth allowed us to deliver flat margins at 40.4%. Third quarter program expenses increased 6.4%. This rate of growth is lower than the 9.6% increase we reported in the second quarter, due to the lower pay-per-view costs and timing of programming deals. We expect fourth quarter program expense to increase at a similar rate of growth. And as a result, our full year 2015 program expenses growth will be slightly lower than our previous guidance of about 8%. As we look beyond 2015, we expect programming cost growth to remain elevated, driven in part by continued increases in retransmission consent fees and higher sports programming cost, as well as our commitment to further expand our content rights for our on-demand and TV Everywhere platforms. We plan to continue to add more content out of home rights, stacking rights and back seasons, and showing that we have the most compelling and competitive video product on the market. In the third quarter, non-programming cost continued to bear the impact of the X1 rollout and our investment in the customer experience, with technical and product support cost up by 8% and customer service expenses up 8.4%. At the beginning of the year, we indicated stable margins were expected. Through the first three quarters we've delivered on that with our year-to-date margin of 40.7%, right around last year's result of 40.9%. We feel confident, we can continue to largely offset these higher expenses with an improving business mix, as high-margin businesses like high-speed data and business services continue to grow, and ongoing improvement and efficiencies as our investment in X1 and customer service begin to pay off. Overall, Cable's results prove we are executing well and competing effectively with innovative products and services that provide a great value to our customers. We're focused on continuing to deliver strong and profitable growth along with healthy customer results. Now, let's move on to NBCUniversal's results. So on Slide 7, you can see NBCUniversal delivered exception results in the third quarter, as revenue increased nearly 21% and operating cash flow increased 17%, driven by film's record breaking theatrical slate and strong parks result. At Cable Networks, third quarter revenue increased 7%, primarily driven by an 8.6% increase in distribution revenue, which partially reflects higher affiliate fees, associated with the premiere of NASCAR on our NBC Sports Network during the quarter. The first quarter in our new 10-year deal. In addition advertising revenue grew 2%, as the positive contribution for NASCAR advertising more than offset what would have been a modest decrease in advertising revenue overall, since ratings declines across many of our networks more than offset increases in prices and volume. Last, we benefited from higher content licensing revenue, reflecting the timing of content delivered under our licensing agreements. Cable Networks operating cash flow declined 3.9% due to higher programming expenses that include the timing of our NASCAR rights fees. In Broadcast, we did well this quarter with entertainment, sports, news and Telemundo all contributing the revenue growth of just over 11%. This growth was driven by strong retrans and content licensing revenue, which reflects the timing of content provided under our licensing agreements, as well as new syndication deals for Law & Order. In addition, advertising revenue increased 3% despite the difficult comparison created by one less NFL game this quarter compared to last year. The fact that we were still able to report modestly positive advertising growth speaks to the strong scatter market with the third quarter trending better than the first half of the year. Importantly, this higher demand in the scatter market has continued into the fourth quarter. Finally, operating cash flow at Broadcast increased 6% as expenses increased in the third quarter primarily driven by higher studio production costs. At film, our focus on well-known intellectual property is delivering exceptional results. In the third quarter, film delivered revenue growth of 64% and operating cash flow of more than double to $376 million compared to last year, driven by the record breaking performances of Minions and Jurassic World. This was the second most profitable quarter in Universal's history, topped only by our second quarter 2015 result. In the fourth quarter, we have fewer theatrical releases, but we will continue to benefit from our successful films slate, as these films move to home entertainment and content licensing windows. And at Theme Parks, record attendance this summer fueled 14% revenue growth despite lapping the July 2014 opening of Harry Potter Diagon Alley and Hogwarts Express. Three quarters of our Orlando guest now purchase park-to-park tickets. Hollywood also contributed to our third quarter growth driven by the success of Fast and Furious

[Jason Armstrong:]

Thanks Mike. Regina, let's open up the call for Q&A please.

[Operator:]

[Operator Instructions] Our first question comes from the line of Craig Moffett with MoffettNathanson.

[Craig Moffett:]

Brian, I wonder if you could update us a bit on your thinking about wireless, I mean how it fits into the longer-term business plan. There have been reports this quarter about exercising the option for the Verizon MVNO, and we're I guess about a month away from filing a short-form for the 600 megahertz auction. Could you just talk about those two things and what your thinking is at the moment for how wireless fits?

[Brian Roberts:]

Well, we don't have any new news today. So let me just say that we believe that wireless obviously is an important area for consumers and how they are in the future and today. We have incredible success with our Wi-Fi network, which is the largest in-home Wi-Fi network, as well as terrific out-of-home Wi-Fi. We're seeing a majority of bits travel over that Wi-Fi network. But it takes about six month to activate the MVNO. We've had told everybody that before that we were going to trial some things and test some things after we activate, and we'll update people as that progresses. But it's an opportunity to take the network and the investments we made a successful investment that we've made, and try and see if we can continue relationships and product innovation that the team is working on. Regarding the auction, again, no news today. We have seen some of the opportunity for NBC in that part of the auction and it's certainly something that we're likely to participate in. And beyond that, we're starting it and we always look at all the options for the company, but we're pretty excited about the roadmap that we're trying to develop. Neil, anything you want to add?

[Kornelis Smit:]

No, I think you covered it, Brian. We're in test and learn mode, and I think it's a natural part of the evolution of our entry or our participation in the mobile space beyond Wi-Fi, but we're testing and learning and nothing new to report.

[Craig Moffett:]

Would you think that longer-term an MVNO is a satisfactory endpoint or would you think of it more as a starting point and then eventually you'd want to have owner's economics, if you pursue that business?

[Brian Roberts:]

We don't know. We're evaluating opportunities.

[Stephen Burke:]

I think we've always felt it's a part of a product set. I don't think we feel that we have to necessarily in any way seek owners' economics. And just to clarify, what I was -- make sure it was clear. At the NBC side, we intend to participate, the Cable side something we'll continue to study.

[Operator:]

Your next question comes from the line of Ben Swinburne with Morgan Stanley.

[Ben Swinburne:]

I will try two. Mike, can you talk about the leverage comfort zone for the company around that 2x? In other words, how high would you go if you saw something really compelling on the acquisition front? And how low would you drift before you would sort of default to buybacks if you didn't see anything out there? And then I will ask my second question to Neil. You guys talked a lot about X1 in the prepared remarks. Can you talk broadly about your customer segmentation that's allowing you to put out kind of 2% customer growth every quarter, things like Internet Plus, Internet Pro? And I believe you have been testing a stream product that's sort of pure over the top. Any color on sort of the ongoing customer segmentation activities and new product pipeline? Thanks, thank you both.

[Michael Cavanagh:]

So on leverage, we used to say, and I changed this in the last quarter, that we'd be at the 1.5x to 2x net leverage was the range that the company was drifting down towards from being at a higher level post-GE. I think we sit now at 1.9x net leverage at the end of third quarter, but as I said earlier, when you pro forma for the deal we did in Japan parks, that takes us right at 2x. We feel quite good at around 2x that that gives us the ability to do all we need to do to return lots of capital to shareholders, to invest in the businesses organically and give us some flexibility around things like Vox, BuzzFeed, parks and so forth. So in that range, right around 2x is fine to allow us to do all that. And I won't speculate on any larger M&A. As Brian said before, we're pretty comfortable with the portfolio businesses we have.

[Kornelis Smit:]

Concerning segmentation, X1 was about 60% of our connects this quarter, and so we're seeing a healthy growth of X1. We offer different products based on the segment, for example, the Internet Plus applies well to millennials who want a great internet product and a lighter video product. On those customers, after churn is considered, we upsell about 30% of those, so we're able to get new people into this system and then upsell them or upgrade them. The On Campus product has been a great success. We're on 26 campuses now and continue to grow. It's a great product. It serves the video to where the customer, in this case the student, wants to consume it, which is in their dorm room, we stream direct. We launched a stream product in a trial market, and that also applies to millennials or younger audience. And finally, Watchables, we launched earlier this month. And that's about 32 providers of semi-professional content, so it's getting the content that's not normally what we've been carrying in the past and we think that will attract another segment. So we're very careful on how we segment the audiences and we're getting a better quality customer and holding on to them for longer.

[Operator:]

Your next question will come from the line of John Hodulik with UBS.

[John Hodulik:]

Maybe for Neil. Can you comment on the strategy and timing of the DOCSIS 3.1 rollout? And if we look back, you've been adding about 1.2 million, 1.3 million new HSD subs per year for the last few years. Does this initiative sort of help you maintain that growth or could we see some acceleration again on the sub side, or ARPU, as you get further down the path there?

[Kornelis Smit:]

Well, as you've said, we've continued to add have over 1 million customers for nine years now and that we've done 16 speed increases in the past 13 years. So we continue to increase speeds and that's the value that customers are receiving. We've also, as Mike mentioned in his comments, increased the wireless gateways through our in-home Wi-Fi, as a very strong value add. In terms of DOCSIS 3.1, it's what we have it in the labs. We have plan on rolling it out early next year and we think that will give us more speed capability. And we're also working on products that will increase, let's just call, the smartness of the internet, not just speed. So we think we can continue to grow market share. And the market is growing. Only 70% of customers have a high-speed connection, so there's market growth opportunity there as well.

[Operator:]

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

[Jessica Reif Cohen:]

I guess two questions. First, can you talk about what you're doing in terms of mining data and driving targeted more relevant advertising across all your platforms, so across Comcast Cable and also NBCUniversal businesses?

[Brian Roberts:]

Well, let me start by just saying that we see the two parts of the company working together is really part of what's powering these earnings results and across the board. And one of the areas that we have identified as a management team is that question, there's that importantly, how do we improve the technology so we have a better targeted information, what's the data that can assist the advertisers and the networks in having the right relation with what they're offering. And it's an important area to the company because of both parts of the company have lot of advertising dollars. It's nice to see the spot market being very successful right now and supportive of this space. So I think there's a lot of chance for us to perform well. The other thing with data is sort of measurement and having buyers be more knowledgeable to whatever means would that that data gets to the marketplace. And so we're looking at all those opportunities across the company. Steve or Neil, you please jump in.

[Stephen Burke:]

Our advertising group, which is now unified under Linda Yaccarino for all the cable channels, all broadcast and all digital, she is currently not only allowing advertisers to sell across all those platforms, but to do so in a way that's informed by information or complimented by target ability on the Comcast side, which is obviously a very, very unique product in a world where advertisers want to marry the proven story telling of a television's spot with the target ability of the internet. So she is in the market with those products right now. They're doing very well. And those products are going to get more sophisticated, as we complement them with more information, more set top box data, et cetera.

[Operator:]

Your next question comes from the line of Phil Cusick with JPMorgan.

[Phil Cusick:]

If I can squeeze in a clarification and a question. First on, following up on Ben's question on the balance sheet size, in the past you have talked about the size of the balance sheet being as important as leverage, and the $50 billion range being sort of the high level. But with more and more companies at a $100 billion debt balance, are you more comfortable that you can ladder out maturities enough to take the balance sheet substantially higher? And then second, you mentioned programming expense coming in below 8% this quarter, and the comment about continued investment rights. How should we think about that for 2016? What could accelerate growth, or we should we think about that 8% as a reasonable run rate?

[Michael Cavanagh:]

On the balance sheet size or the size of the dead issuance of the company, I think that continues and should continue to be a factor that we think about. We're a large issuer and we want to make sure that through the course of time, we're always able to carry the balances at good rates through time.

[Stephen Burke:]

And concerning the programming costs, this was a lower quarter than usual in terms of percentage of increase. We do see that increasing. Will be slightly below our 8% number that we've given previous guidance on and I think we're not done with the budgeting process yet for '16, so we're not prepared to comment on that yet.

[Operator:]

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

[Vijay Jayant:]

Just continuing from one prior question in terms of the Internet Plus offering, can you talk about, because the step-up is pretty substantial, can you talk about what customers do after their one year promotional price given that you already have that experience? And I just wanted to get a sort of philosophical question about all thesis come to U.S. mainland. I'm talking about 40% margins for cable companies that are one-fourth the size of Comcast and you are already at 40%. So any thoughts about, is there opportunity on the margin side on Cable given some of the strategies they are contemplating?

[Kornelis Smit:]

Concerning Internet Plus, as I mentioned, when they roll off promotional rates, some people step up the higher level packages, more video, about 30% do. Some people role off or churn off and some people extend in the existing to step up in their pricing. So we find it's a attractive way of getting customers who are initially only interested in internet on to a video product, and then expand the package from there, get a foot in the door. Concerning Altice, it's good to see others recognize the value in the cable markets as we have. There is always things we can learn. They do some interesting things with self service, their IT consolidation, their structural approach, and we're always open to learning.

[Operator:]

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

[Brett Feldman:]

If we could just talk a little bit about your view on the competitive environment in the video market, because if we look at some of your biggest competitors it feels like their emphasis has shifted. Verizon is very focused on custom TV, AT&T is pivoting away from U-verse, DISH seems very interested in Sling versus its traditional product, and you have obviously invested a lot in some of your premium offers. And so the question is, sort of how do you feel about the competitive intensity? And then just in general, you have been showing improved trends year-over-year. Do you feel like that is sustainable?

[Kornelis Smit:]

I think the competitive intensity is much the same as it has been in the past. The base offers their attractive promotional offers, but the base rate remains in the same ballpark. I think different people are trying different things. We feel the X1 platform is something we can build on. There is greater viewer ship. There is more VOD consumption, both transactional and non-transactional. The churn reduction is significant, and there are more AOs, more DVR usage. So we're investing behind the X1 platform and we feel we can continue to -- our objective is to continue to improve year-over-year on an ongoing basis.

[Brian Roberts:]

I would just add that the thing that I feel good about is the video product that we're offering has tremendous momentum. It's the best in the market. People that don't live in Philadelphia or one of our markets, when they see it, they go, wow, wish I could get that. With the ease now, the voice remote, we'll put million of those out in the next several quarters and it just makes it even that much better. And our service initiatives and the improvements that are being made, the reliability, and on time and the network reliability, there's a tremendous focus here, and I think that's improving as well. So you put all together, I really think we have a great momentum and a good strategy.

[Kornelis Smit:]

I complement Dave Watson and the operating teams in the field who are really driving the X1 out and targeting selective segments in the offer.

[Brian Roberts:]

40,000 a day, that's a huge push.

[Operator:]

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

[Marci Ryvicker:]

I have two questions. The first, Mike, you talked about the enterprise unit being sort of an aggregation of small businesses. So it sounds like there will not be a need for a major upgrade to the network, and there is not going to be a need for major investment there. So just want to confirm that I am reading right from your comments. And then, the second question is for Brian. You mentioned I think during a press conference around Universal Studios Japan that this is going to be the beginning of your international expansion. So I just wanted you to just provide some more color around that comment.

[Michael Cavanagh:]

I'll start and Neil can finish. But on business services, enterprise growth, it's a continuation of what we're doing. The needs are similar and we are investing and it is a big source of capital investment that you've seen in the recent past and that's going to continue. But we're going to layer on businesses of a bigger scale that have the profile of the medium size enterprises that we already have.

[Kornelis Smit:]

And I'd just add that, we're targeting the Fortune 1000 companies and other large enterprises have 300 locations and more. And if you think about it, this type of enterprise customer, we're looking at entities with branches, such as banks, restaurants, retailers and those are small customers like an assembly of small customers. So we have managed services to more than 20 large enterprise customers already and have already assigned multiple eight-figure deals.

[Brian Roberts:]

So one of things that NBCUniversal does for Comcast, and I think Steve put a focus on it right from the get go when we moved Jeff Shell to London was to really use this as a way to have the company look at broader opportunities, not just in United States, but around the world. And we're really happy with the Osaka, in Japan, theme park 51% announcement. But as we've said, and I think that what I was really referring to was our China opportunity. We have a partnership that we're in the process of getting complete all the approvals necessary to go forward. But we are looking forward to building an entire new Universal in Beijing, and that's a continuation of -- because we're in the theme park business, when we bought the company there were no owned assets outside the United States, and we will have perhaps the largest or one of the largest theme parks will be China. And when you see Universal Japan, it's thriving business that we think we can grow. And we're in the process of putting in the management, coming from Florida is Chief Financial Officer of Universal Parks, he's going to move there. And the team is really ready for these kind of opportunities and can hit the ground running. So there is nothing else at this time that we're working on specifically like that, but this is a unique opportunity and it complements what we're going to do in Beijing.

[Operator:]

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

[Mike McCormack:]

Maybe we can just circle back on Brett's question on the competitive landscape, and more specifically talking about the recent combination of AT&T and DirecTV. AT&T is out there with pretty aggressive wireless and DirecTV bundles with pretty good bounties and sort of bill credits, if you will. Just trying to get a sense for if you've seen any significant change in appetite for that combined wireless video bundle? And then just secondly, on the retrans side, if you can give us an update on the pacing there and any risk to that trajectory?

[Kornelis Smit:]

I think on the competitive side, as I said, we haven't seen a meaningful difference in approach or sub-numbers. Our numbers are the best in nine years and it's driven by churn. So you think that if there was a very attractive offer you'd see higher churn, but our churn numbers remain lower. And concerning the retrans [multiple speakers] I think our retrans numbers, generally speaking, are continuing on a steady curve and there is no real lumpiness in that number.

[Operator:]

Your next question comes from the line of Bryan Kraft with Deutsche Bank.

[Bryan Kraft:]

There seems to be some elevated activity in Washington and also in local government arenas to facilitate more fiber to the home deployment. And like in some of the Google fiber markets, they seem to be increasingly leaning toward allowing redlining. And so I guess, the first, I was wondering if you have the same assessment? And second, how much of a concern is this for you that competitors might be able to sort of cream skim and not have to serve the higher cost areas? And if you have any expectations around how that could play out, I would just be interested in any thoughts you have on that?

[Brian Roberts:]

We've seen this is not a new thing. There were similar thoughts when the bells were building, that it was not universal. We can't per se control that. We obviously want to have as level a playing field as one can, but a pro-competitive strategy in our opinion is better than a pro-regulatory strategy. And if there is more competition, that's something that we've been facing for years, and nothing we're going to do to change that or want to change that. I think if anything it's a reminder to regulators, how competitive this industry is and will be in the future. And that's why it's so critical that we continue to perform well and sharpen our operating skills and we're showing that.

[Jason Armstrong:]

Regina, we've got time for one more question.

[Operator:]

Our final question comes from the line of James Ratcliffe with Buckingham Research.

[James Ratcliffe:]

Just to dig into the video churn improvement you've been seeing, how much of that is really X1 driven and how much of it is the benefit from the investment in customer experience? And so how much incremental run rate is there on that, both in terms of expanding X1 and in terms of the customer service investments?

[Kornelis Smit:]

I think it's been a combination of a number of factors. One is getting people on the X1 platform is having an effect on churn. Second is we have more people on contracts. And third is that there is more people using TV Everywhere, a-third of our customer is using TV Everywhere on a monthly basis. And finally, I think our customer experience improvements have helped significantly. I mean if we can get the right customers and keep them longer, it's going to impact churn. So our customer experience, things in terms of reducing phone calls, reducing truck rolls, getting things right the first time and really super-serving our customers is having an impact as well.

[Brian Roberts:]

I just want to sum up, from my perspective, what was so good about this quarter from where I've said is the company working really well together. It was a terrific first nine months of the year, this quarter being in video, the best in nine years; and broadband, the best in six years. NBCUniversal, we basically now have doubled the cash flow and run rate to do that. That strength is across so many different parts of the company that are participating in the technology change that's happening, as we've talked about the millennials, we talk also about NBC and investments in Vox and BuzzFeed. And the ability to now hopefully have advertising that can take some of our content and their content and bring out to advertisers. Doing all this, while still maintaining the leverage allows us to buyback shares and the dividend, and Mike Cavanagh, joining us here and changing sort of the trajectory of that buyback in anticipation of things. And ultimately it's giving customers what they want in having a company with a unique set of assets that can do that. And I think we really in so many different fronts of the company did that this quarter. So we're really pleased and thank you for your questions and support. End of Q&A

[Jason Armstrong:]

Thanks, Brian, and thanks everyone for joining us. That will conclude today's call, Regina, back to you.

[Operator:]

There will be a replay available of today's call, starting at 12