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A Detailed Strategic Analysis of

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T he Comcast Corporation is a media, entertainment, and telecommunications


company providing a variety of services throughout each sector. These include
but are not limited to: cable video, internet, and phone services. They operate
within multiple segments in order to deliver high speed subscribed services to customers, on both
a business and consumer level.

Comcasts multi-structured company makes them prime candidates for a strategic


analysis, as the Telecommunications industry is in the process of transformation. This overall
theme has brought about the task of growing Comcasts revenue by 25% before 2022. This paper
has provided a thorough and comprehensive answer to this question, ultimately strategizing to
acquire to T-Mobile to offer a cellular service and enhanced quadruple bundle subscription.

After briefly exposing the general history, purpose, and goals of the company, the
analysis begins in the external environment of the entire industry. This highlights the macro
factors that will impact Comcasts current and future operations. The industry is then structured
and viewed across the board. This showcases Michael Porters five competitive forces and the
attractiveness of the industry. Competitors actions; past, present, and future, are taken into
consideration in the strategic group mapping and a success factor analysis. Using a wall to wall
SWOT analysis, the strategic recommendations are proposed and justified. The
recommendations have been cross referenced with Comcasts value chain for further direction
and plausibility. For further accuracy, a net present value analysis has been conducted to show
the profitability of the strategic decisions.

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CONTENTS

INTRODUCTION ............................................................................................................................................... 6
General Introduction ............................................................................................................................................ 6
History of the Firm ................................................................................................................................................ 6
Mission and Vision ................................................................................................................................................ 7
Strategic Question ................................................................................................................................................ 7

EXTERNAL ANALYSIS ........................................................................................................................................ 8


General Environment................................................................................................................................................. 8
Economic .............................................................................................................................................................. 8
Socio-Cultural Environment.................................................................................................................................. 9
Demographics ..................................................................................................................................................... 11
Global .................................................................................................................................................................. 12
Natural ................................................................................................................................................................ 13
Political/Legal/Regulatory .................................................................................................................................. 14
Technological ...................................................................................................................................................... 15
General Environment Red Thread ...................................................................................................................... 16
Competitive Environment ........................................................................................................................................ 16
Industry Structure ............................................................................................................................................... 16
Industry Life Cycle............................................................................................................................................... 17
Michael Porters Five Forces .............................................................................................................................. 19
Industry Attractiveness Red Thread ................................................................................................................... 21
Competitor Environment ......................................................................................................................................... 22
Strategic Group .................................................................................................................................................. 22
Key Success Factors ............................................................................................................................................ 23
Impact Statement ............................................................................................................................................... 25
Competitor Dynamics ......................................................................................................................................... 25

INTERNAL ANALYSIS ....................................................................................................................................... 29


Culture and Leadership............................................................................................................................................ 29
Leadership .......................................................................................................................................................... 29
Culture ................................................................................................................................................................ 30
Organizational Structure ......................................................................................................................................... 31
Value Chain Analysis................................................................................................................................................ 34
Firm Infrastructure ............................................................................................................................................. 34
Inbound Logistics ................................................................................................................................................ 35
Operations .......................................................................................................................................................... 36
Outbound Logistics ............................................................................................................................................. 38
Marketing and Sales ........................................................................................................................................... 39
Customer Service ................................................................................................................................................ 40
Identifying a Core Competency .......................................................................................................................... 41
Financial .................................................................................................................................................................. 41
Liquidity Ratios: .................................................................................................................................................. 41
Efficiency Ratios: ................................................................................................................................................. 42
Profitability Ratios: ............................................................................................................................................. 44
Valuation Ratio ................................................................................................................................................... 45

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Determining Competitive Advantage ................................................................................................................. 45

SWOT ANALYSIS ............................................................................................................................................. 46


SWOT Overview .................................................................................................................................................. 46
SWOT Overview Impact Statement .................................................................................................................... 47
Strategic Orientation .......................................................................................................................................... 47
Attractiveness ..................................................................................................................................................... 48
Investment .......................................................................................................................................................... 49

STRATEGIC CHOICE......................................................................................................................................... 50
Generic Strategy ...................................................................................................................................................... 50
Restatement of Strategic Question ......................................................................................................................... 50
Recommendation & Justification ............................................................................................................................ 51
Corporate Level Strategy .................................................................................................................................... 51
Business Level Strategy ...................................................................................................................................... 51
Net Present Value .................................................................................................................................................... 54

MANAGERIAL IMPLICATIONS .......................................................................................................................... 59


Value Chain ......................................................................................................................................................... 59
Competitor Dynamics ......................................................................................................................................... 60
Stakeholder Consideration ................................................................................................................................. 60
Ethical Framework .............................................................................................................................................. 61
Marketing Communications ............................................................................................................................... 61

CONCLUSION ................................................................................................................................................. 61

WORD COUNT BREAKDOWN .......................................................................................................................... 62

BIBLIOGRAPHY ............................................................................................................................................... 63

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INTRODUCTION

General Introduction

Comcast Corporation (CMCSA) is the top cable provider in the nation, offering cable,
internet, and phone services. Comcast practices a culture that emphasizes both
entrepreneurialism and uniqueness. It is cross-organization connections that contribute to their
success is a combination that they call symphony. Symphony has assisted the growth and
development of the corporation, ultimately verifying that joining Comcast and NBCUniversal
was one of Comcasts best decisions. 1 The synergetic nature of the company sets the stage for
their prosperity in a dynamic industry.

History of the Firm

Ralph Roberts founded Comcast in 1963, as it started off as a single-system cable


operator located in Tupelo, Mississippi with only 1,200 subscribers. In 1965, Comcast acquired
Storecast Corporation of America, a marketing firm aimed to help various food companies to
advance their position and status of their products within different supermarkets.
In 1969, the company officially became Comcast after switching its name over from
American Cable Systems, in addition to erecting its headquarters in Pennsylvania. By the year
1974, Comcast had bought the Philadelphia Flyers hockey franchise, which had just won its first
Stanley Cup. At the same time, present day CEO Brian Roberts began his first job as an intern at
Comcast working on supermarket promotions with Storecast. Following Roberts debut in 1977,
HBO was provided for the first time to over 20,000 in the western Philadelphia area. The
following year, Comcasts revenue hit over 3 million for the very first time. 2
By 1990, Brian Roberts becomes the President of Comcast. In the years leading up to his
election, Comcast reached 25 years of operation, increased its number of subscribers to more
than 2 million, and began to be noticed as one of the top cable companies in the United States.
During this time, Comcast acquired American Cellular Network which allowed them to penetrate
the cellular field, thus creating the Comcast Cellular Communications division. 3
In January of 2011, Comcast purchased NBCUniversal from General Electric and named
Steve Burke as CEO of NBCUniversal. With the help of this new purchase Comcast created a
number of new streaming applications for users to access over 3,000 hours of different television
and movie content that could be viewed almost anywhere. Most recently in 2016, Comcast was
named a National Strategic Partnerthe maximum sponsorship level that a corporate sponsor
can attain.4

1 "2016 Letter to Shareholders." Comcast. February 06, 2017. Accessed April 15, 2017.
http://corporate.comcast.com/news-information/news-feed/2016-shareholder-letter.
2
Comcast Corporation. "Timeline. August 21, 2012. Accessed April 16, 2017. http://corporate.comcast.com/news-
information/timeline.
3
Ibid
4
Ibid

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Mission and Vision


Vision Statement:

As Comcast evolves, we continue to look to the futureseeking out new communications


technology, opportunities, and choices. We want to continue to provide people with
the communications products and services that connect them to whats important in their lives. 5

Mission Statement:

Comcast aims to drive innovation to


create the worlds best
entertainment and online
experiences.6

As their vision statement shows,


Comcast is focused on the future,
through encouraging
entrepreneurship, innovation, and
creativity. While focusing on their
potential, Comcasts values are
concentrated on its stakeholders:

As we shape the future of media and technology, our 153,000 employees strive to earn the
respect and trust of our customers, our shareholders and members of the communities we
serve..7

Strategic Question

How can Comcast grow its revenue by 25% by 2022?

5
Comcast. Our Company. http://corporate.comcast.com/our-company (accessed April 1,
2017).
6
Ibid
7
Ibid

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EXTERNAL ANALYSIS

General Environment

Economic
Opportunities
Shares in the Bloomberg Intelligence North America cable and satellite peer group have
risen 10% year-to-date, as cable operators have been able to maintain the levels of video
subscribers, even as they face growing threats such as cord-shaving and cord-cutting. Bloomberg
predicts a 4% underlying broadcast ad growth for the industry.8
The industry is expected to experience an increase in revenue due to more broadband
internet connections coupled with the implementation of cable Wi-Fi. In the near future these
returns are expected to continue to grow as a result of high-speed subscribers upgrading to
higher-margin digital cable services 9 This
increase in broadband internet connection is one
of the chief opportunities for the industry. 10
Threats
Industry revenue is expected to grow an
annualized 1.2% to $114.4 billion in the next five
years. This signals that the industry is not
experiencing growth and there is little room for
companies to easily gain more market share.
Revenue from cable television has decreased due
to the number of online video streaming
companies. The threat from these substitutes has
increased especially since these companies have
begun buying or creating original content.11
The saturation of the market and slow future
growth can force companies to engage in price
wars in order to retain and capture new customers.
GDP is expected to grow at an annualized
rate of 2.1% from 2017-2021. The fact that the
industry is in the mature phase and it has an
industry value added rate of 1.9% suggests that
the industry is growing off the pace of the US
economy.12

8
Bloomberg: BI Cable & Satellite Industry Outlook
9
Petrillo, Nick. "IBISWorld Industry Report 51711a Cable Providers in the US." IBIS World 43, no. 08 (October
2016). October 2016. Accessed February 16, 2017. doi:10.5860/choice.43-4410
10
Bloomberg: BI Cable & Satellite Industry Outlook
11
Petrillo, Nick. "IBISWorld Industry Report 51512 Television Broadcasting in the US." IBIS World 43, no. 08
(October 2016). October 2016. Accessed February 16, 2017. doi:10.5860/choice.43-4410
12
Petrillo, Nick. "IBISWorld Industry Report 51512 Television Broadcasting in the US." IBIS World 43, no. 08
(October 2016). October 2016. Accessed February 16, 2017. doi:10.5860/choice.43-4410

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Socio-Cultural Environment
Opportunities
A key area of growth in the telecommunications industry is the focus on the use of mobile
devices over traditional in-home methods of accessing data and content. As a method of
receiving distributed content, mobile phones are becoming a dominant presence. A Global
Consumer Market Survey carried out by Deloitte Consulting confirms this opportunity, as they
found that United States consumers are looking at their devices 13% more times a day compared
to 2016s frequency. Smartphones have seen penetration growths rates of over 10% each year,
and it is also worth noting that niche products such as wearables and VR have penetrated 12% of
the total market in 2016. 13 Found in the same study, the chart below shows the movement away
from relying on Wi-Fi towards using
cellular networks from 2015 to 2016.
Smartphone signal growth is another
opportunity for wireless carriers,
broadband carriers, and the
infrastructure companies within the
industry. Deloitte predicts that 2017 will
bring a shift from the emphasis on
providing more extensive connectivity
through a focus on enhanced content
and higher speeds. The prevalence of
wearables, self-driving cars, and
connected homesalso including
business solutions such as smart cities,
security, and fleet managementare
areas of growth in this sector. Although
these are not going to be an immediate
development for 2017,
telecommunications companies should
develop their position as it relates to
these advancements that will need
connectivity services to function.14
New 5G networks are bringing
changes to the industry, as most carriers are at least testing this technology in order to stay
competitive. Consumer based test markets are likely to emerge by the end of 2017, and full 5G
coverage will be achieved by approximately 2020. Finally, television and cable services had
been taking a back-seat to the on-demand streaming of content. Streaming devices also allow for
more personal and data rich information to be collected from consumers, thus companies will

13
2016 Global Mobile Consumer Survey: US Edition. Deloitte.
https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us-global-
mobile-consumer-survey-2016-executive-summary.pdf.
14
Deloitte US. "2017 Telecommunications Industry Trends | Deloitte US". 2017. Deloitte United States. Accessed
February 4 2017. https://www2.deloitte.com/us/en/pages/technology-media-and-telecommunications/articles/media-
and-entertainment-industry-outlook-trends.html

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become more accurate in their future targeting. 15 In essence, the push towards all around mobile
connectivity will garner innovation for the 2017 telecom sector.
Threats
The year of 2017 will bring the demand
for an upgrade to the infrastructure of
carriers as over half of cellular users
believe that these speeds are worth the
investment. For providers, offering the 5G
networks will be an expensive endeavor. In
addition, the telecom industry overall needs
to improve digitally in areas of customer
care, sales, and billing, such as using social
media channels to tend to customers in lieu
of call centers.16 Carriers need to offer
expanded services in order to stay
competitive, according to Deloitte, this
includes installing more fiber
infrastructure, adding more cells to serve
more customers, and improving the
spectrum efficiency. 17 The rise of on-
demand content persuades advertisers to
use social media in order to advertise
products to millennials. This would mean a
move away from television placements and the task of reimagining advertising for new
platforms. The use of these streaming services is increasing, as 20% of viewers are using mobile
devices over television broadcasts. By 2021, these users are expected to amount to 209 million
from the current 181 million. 18
The likelihood for mergers or acquisitions to occur will become more frequent as
government regulations are prospected to be reevaluated and loosened. 19 This would mean that a
key player being obtained by a larger provider would be something to prepare for in 2017. Yet
another threat would be the market pushing the boundaries of oversaturation. As baby boomers
retire, they will reside in efficient, digitized communities and states where they will inevitably be
exposed to technologies that the later generations are using. As the final missing pieces of the
market will become new users, full saturation will be achieved, resulting in bandwidths that
exceed the capabilities of the providers.
15
Future of Television. 2017. Ey.Com. Accessed February 4 2017.
http://www.ey.com/Publication/vwLUAssets/EY_-_6_trends_that_will_change_the_TV_industry/$FILE/EY-6-
trends-that-will-change-the-TV-industry.pdf.
16
Deloitte US. "2017 Telecommunications Industry Trends | Deloitte US". 2017. Deloitte United States. Accessed
February 4 2017. https://www2.deloitte.com/us/en/pages/technology-media-and-telecommunications/articles/media-
and-entertainment-industry-outlook-trends.html
17
Deloitte US. "2017 Media and Entertainment Industry Trends | Deloitte US". 2017. Deloitte United States.
Accessed February 4 2017. https://www2.deloitte.com/us/en/pages/technology-media-and-
telecommunications/articles/media-and-entertainment-industry-outlook-trends.html
18
Deloitte US. "2017 Telecommunications Industry Trends | Deloitte US". 2017. Deloitte United States. Accessed
February 4 2017. https://www2.deloitte.com/us/en/pages/technology-media-and-telecommunications/articles/media-
and-entertainment-industry-outlook-trends.html
19
Ibid

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Demographics
Opportunities
The total advertising expenditure in this industry has experienced a downfall of around
6% since 2010 but it was projected an increase in 2016.20 Adverting expenditure in this
industry is what generates a significant amount of the revenue in this industry. Since the
expenditure in advertising is projected to increase during 2016 and be stable during the next
couple of years, cable companies wont lose as much revenue if the numbers of subscribers
fall.
The number of households make up for the number of Cable TV subscribers that will be
lost over the years. The number of residential households is increasing which potentially
increases the market opportunity for cable companies. Since 2006, the number of household
have been increasing from
around 115 million
households to 120 million
household in 2016 and a
projected 131 million
households by 2020.21 This
is important for cable
companies because the
diversity of services offered
does not only include cable
TV subscriptions, but also
broadband and satellite
subscriptions. The more
households in the US, the
bigger the market
opportunity will get since
each new household will
require either Cable TV,
Broadband or Satellite.
The number of
Broadband subscribers has
increased while cable TV
subscribers have decreased.
The first quarter in 2014
showed that 50.3 million
were Broadband
subscribers while 50.4 million subscribers were cable TV subscribers. By the second quarter
of 2014, Broadband subscribers exceeded the Cable TV subscribers by almost 1 million.
Lastly, the first quarter of 2016 shows that Cable TV subscribers fell to 49.1 million while
Broadband subscribers have grown to 56.3 Million. 22

20
IBIS World Industry Report 51521
21
IBIS World Industry Report 51711a
22
Meola, Andrew. "Broadband subscribers continue to climb, while cable sees mixed subscriber trends." Business
Insider. May 23, 2016. Accessed March 29, 2017. http://www.businessinsider.com/cable-companies-lose-more-
subscribers-as-cord-cutters-grow-2016-5

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Internet users have also increased during the last decade. The percentage of adults that
used the internet in 2006 was only 71% compared to 88% in 2016. 23 More people use
internet overtime which is an opportunity for Cable companies since Internet and TV are now
being put together in a package. At the same time, broadband also includes internet which
has also being increasing during the years. In 2006 only 41% of adults had access to
broadband in their home while in 2016 73% of adults have broadband internet at home. 24

Threats
Along with advertising expenditure, what also generates most revenue in the cable
industry are the total number of subscribers. This is also a number which represents the total
size of the market. The total amount of cable TV subscribers in 2013 increased until 2016.
However, it is projected a constant decrease of subscribers indefinitely. This means that the
industry will lose market size as well as revenue over the years. 25
While the mobile phone industry is increasing, the fixed telephone industry is
decreasing.26 This is a threat for the industry since telecommunication companies such as
AT&T are acquiring Cable and Content Companies. Now Cable companies will be more
likely not only to offer packages with Cable TV, Broadband and Satellite but also Phone.
This could be a potential threat to Cable companies that cant offer the extensive variety of
services.
The growing trend of adding a wireless addition to the traditional bundle may force
companies that do not currently have wireless capabilities to acquire them or face the risk of
losing market share27

Global
The cable industry predominantly caters to the domestic market such as households and
businesses although big industry players such as Time Warner Inc., Walt Disney Company, and
Fox offer international services such as pay-TV services. Majority of the content licensed by
these networks to foreign broadcasters include internationally acclaimed television shows, sports
events, and news stories.

Opportunities
Globally, the resources required to distribute content are becoming more readily available.
The industry faces a very low level of globalization. This is due to the fact that the majority of
the competitors within the distribution industry operate within the United States 28. That being
said, this leaves a lot of room for the industry to grow outside of US borders.

23
PRC. "Internet/Broadband Fact Sheet." Pew Research Center: Internet, Science & Tech. January 12, 2017.
Accessed March 29, 2017. http://www.pewinternet.org/fact-sheet/internet-broadband/.
24
PRC. "Internet/Broadband Fact Sheet." Pew Research Center: Internet, Science & Tech. January 12, 2017.
Accessed March 29, 2017. http://www.pewinternet.org/fact-sheet/internet-broadband/.
25
IBIS 51521
26
Fixed telephone subscriptions (per 100 people)." Fixed telephone subscriptions (per 100 people) | Data. Accessed
April 05, 2017. http://data.worldbank.org/indicator/IT.MLT.MAIN.P2?locations=US&name_desc=false.
27
Bloomberg: BI Cable & Satellite Industry Outlook
28
IBIS 51521

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Threats
Although on a global scale, there are not many a large number of threats due to a lot of
the industrys business being done domestically in the United States, an increase in global
technology may pose an issue. From a distribution standpoint, streaming content is a new major
player within the industry29. It is easy to access and does not require a lot of manpower to put
into place.30

Natural
Opportunities
Major industry players have been trying to promote the reduction of greenhouse
emissions and deforestation acts through encouraging consumers to instead make use of
paperless billing services. Ecobill, used by corporations such as Comcast, allows cable
subscribers to pay their bills online. This is further encouraged through incentives, such as
reductions in consumers monthly billing charges that are made possible through the digitization
of billing.31 According to Alacriti, making the switch from traditional statements to electronic
statements can help businesses take a step towards greater environmental sustainability. For
customers, electronic statements help reduce unwanted clutter and paper waste. 32

Threats
A significant component of the cable and satellite industry is distribution. Cable
providers deliver content to subscribers through the installation of cable boxes, in-home help
with troubleshooting, dish installation, among other things. Natural threats to the distribution

29
IBIS 51521A
30
"Netflix versus cable." Netflix versus cable / Netflix customer service. Accessed March 28, 2017.
http://zabawyweroniki.tk/wufes/netflix-versus-cable-toz.php
31
"Go Green with Ecobill And Pay Your Bill Online | XFINITY ". 2017. Xfinity.Com. Accessed April 1 2017.
https://www.xfinity.com/ecobill.
32
"Paperless Billing: Why Make the Switch?". 2017. Alacriti.Com. Accessed April 1 2017.
http://www.alacriti.com/benefits-of-paperless-billing.

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process would include disasters preventing travel, weather preventing travel, and well as rising
gas prices.33

Political/Legal/Regulatory
Opportunities
The Federal Communications Commission (FCC) recently stated that it is legal for cable
companies to do-away with unscrambled channels. With that said, companies are not required to
convey certain channels which can be retrieved by anyone, only cable subscribers with set-top
boxes. Even though there are still regulations against it, which will make the previously decoded
channels accessible, due to the time cable providers will now be able to gather more income due
to the rise in the need of cable subscriptions. 34
Historically, the level of regulation within the cable providers industry is high. These
regulations are constructed to oversee ownership in the industry and prevent companies from
dominating the market. The Federal Communications Committee is responsible for monitoring
fair cable pricing, as well as basic cable rates. Regulation of high speed internet services by the
FCC is another hindrance to revenue growth in the industry. The 2015 FCCs reclassification of
high speed internet as a telecommunications service was made to ensure the non-blockage of
content and to further ensure that the internet is not divided into slow and express lanes. 35
With the January 20th inauguration of Donald Trump, large corporations shared a positive
outlook on the future of possible leniency with regulations. Newly elected FCC Chairman Ajit
Pai was quoted saying, During the Trump administration, we will shift from playing defense at
the FCC to going on offense. We need to fire up the weed whacker and remove those rules that
are holding back investment, innovation, and job creation. 36 Additionally, companies in the
industry who had previously backed out of merger and acquisition deals due to older laws and
regulations are now re-opening doors to new ideas. 37 Current net-neutrality regulations prevent
telecommunications companies from charging high prices for content and managing what
content is put out to subscribers. A change in these regulations is highly likely during the Trump
Administrationthis could greatly benefit cable providers.38

33
"Analysis of 2016 Fleet Fuel Spend and 2017 Forecast". 2017. Automotive-Fleet.Com. Accessed April 1 2017.
http://www.automotive-fleet.com/channel/fuel-management/article/story/2016/11/analysis-of-fleet-fuel-spend-in-
2016-and-the-forecast-for-2017.aspx.
34
Maxwell, Adrienne. "Home Theater Review." HomeTheaterReview.com. Home Theater Review, 11 Mar. 2013.
Web. 23 Mar. 2013.
35
IBIS World Industry Report 51521
36
Kauffman, Gretel. "Trump's FCC begins to roll back Obama-era internet data regulations." The Christian Science
Monitor. February 06, 2017. Accessed April 19, 2017. http://www.csmonitor.com/USA/2017/0206/Trump-s-FCC-
begins-to-roll-back-Obama-era-internet-data-regulations.
37
Blumenthal, Eli. "T-Mobile CEO: Sprint merger isn't off table." USA Today. January 06, 2017. Accessed April
19, 2017. https://www.usatoday.com/story/tech/2017/01/05/t-mobile-ceo-sprint-merger-isnt-off-table/96218508/.
38
Bhattacharya, Ananya. "Donald Trumps FCC appointments are great news for your cable provider, awful news
for Netflix." Quartz. November 22, 2016. Accessed April 19, 2017. https://qz.com/843999/donald-trumps-fcc-
appointments-jeffrey-eisenach-and-mark-jamison-are-great-news-for-your-cable-provider-awful-news-for-netflix/.

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Threats
The Department of Justice and FCC would investigate and review more in the big market
share owned companies that are proposed to merge. No company should monopolize the
market.39
The FCC has standards expected to improve the quality of customer service provided by
cable companies. Even though the regulations were issued by the FCC but the local authorities
enforce them as well such as: companies must give 30 days-notice before changing any rates,
cable companies must show any fees associated with the right of providing the service. 40
FCC chairman lifted a suggestion that would eliminate the cable companies monopoly
over set-top boxes; which means cable companies are forced to make their signals open
sourced so that other companies can also make the devices that control the signal. If the
suggestion succeeds, it would mean that any device could incorporate cable programming with
streaming programming. It would allow the individual to find, choose, and record any
programming all at once. 41

Technological
The level of technological change in the industry is high. Distributing video, data and
voice services over the same substructure is typically done by cable providers. Therefore,
technological innovation in these areas affects the industry. In the past years, VOD, DVR, and
HD TV have secured themselves as essential services that most consumers need to offer on their
cable services. As these services are becoming more important, companies decide for two-way
channel capability, that allow consumers to communicate with a cable providers programming
facility. Also, most companies in the industry invested in content delivery networks. CDN offers
a way to transport programming through their networks using internet protocol technology. 42

Opportunities
Availability of short form videos is a key factor in technology growth for cable, telecom and
satellite providers. Technology has been growing rapidly recently with regards to cable, telecom
and satellite, which is expected to generate more revenue than before. There are many categories
that range from personalization to games. There are several factors involved in driving
technology growth, especially videos and the demand is increasing for these specialized
technological needs.43
Internet speed is another factor in increased technology popularity regarding cable, telecom
and satellite. Internet speed allows for faster load times of movies and videos, and reduced lag
time.

39
Turn it off." The Economist. March 15, 2014. Accessed April 20, 2017.
http://www.economist.com/news/leaders/21598997-american-regulators-should-block-comcasts-proposed-deal-
time-warner-cable-turn-it?zid=292&ah=165a5788fdb0726c01b1374d8e1ea285.
40
Regulation of Cable TV Rates." Federal Communications Commission. October 25, 2016. Accessed April 19,
2017. https://www.fcc.gov/consumers/guides/regulation-cable-tv-rates.
41
Analyst, Greg Miller Senior. "FCC to End Cable Companies' Monopoly of Set-Top Boxes." Wall Street Daily.
February 01, 2016. Accessed April 19, 2017. https://www.wallstreetdaily.com/2016/02/02/cable-companies-set-top-
boxes/.
42
IBIS World Industry Report 51521
43
Baya, Vinod. Morrison, Alan. Big Bets for the U.S. Cable Industry Key Opportunities for Future Revenue
Growth. Connectedthinking. Jan 2005

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Targeted videos have been on the rise recently and it focuses on certain traits on the
consumers. Companies have access to information about consumer behavior and what motivates
them. This helps companies develop interest-focused contents. These companies generate more
income for cable telecom and satellite by showing their advertisements. Targeted videos not only
generates profit for the companies, but also indirectly generate business for their sponsors. 44
Live events are becoming an important source of revenue for cable, telecom and satellite
companies. Also, live events strengthen the relationship between consumers while companies
bring new subscribers to the firm.

Threats
Failure to stay on top of the trends and constantly updating their technology will cost
companies their subscribers and ultimately their business. 45
Security concerns can paralyze a company and cause irreparable damages and revenue loss.
Security defense can be costly for companies but they should embrace ongoing defense and
detection to prevent security breaches.46

General Environment Red Thread

The key drivers of the distribution sector of the telecommunications industry are the
demand for cord-cutting and the implementation of up to date technology in the future. These
trends have accounted for an overall loss of subscribers that will affect the industry as a whole.

Competitive Environment
Industry Structure

The telecommunications industry is involved with three different segments, including:


Cable Providers, Satellite TV providers, and Internet Service Providers. The incumbents main
activities include providing third party distribution system for public broadcast programming,
video services by coaxial cable, internet access via cable infrastructure, internet-protocol
telephony and renting out cable boxes and digital voice recorders. The cable provider industry
has a total of $104.2 billion in revenue in the 2016 fiscal year, and its annual growth from 2012
to 2017 is 0.6%. However, it is projected an annual growth of 0.9% for the next five years. The
main players in this industry are Charter Communication Inc. with 16.5% of the market share,
Comcast Corp. with 14.3%, Verizon Communication Inc. with 5.9%, Altice with 4.2% and Cox
communication Inc. with 4.5%. The industry is labeled as tight oligopoly due to the close market
share between the three major companies. 47
Another important segment of this industry is Internet Service Providers. The main
activities for this industry are the following: Providing broadband and narrow brand internet

44
Ibid
45
Dowling, Blake. New Technology Bring New Threats. Biz Tech. May 5, 2015
46
Springer, Philip. The Internet Looming Threat to Cable TV Companies. Investing Daily, Aug 9, 2013.
https://www.investingdaily.com/18052/the-internets-looming-threat-to-cable-tv-companies/
47
Ibid

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17

access, carrier services, as well as web hosting. In 2016, the total revenue of this industry
segment was $97.0 billion while the annual growth for the period of 2011 to 2016 was 4.3%.
Furthermore, the total annual growth is projected to slightly decline to 4.0% until 2021. The
Internet Service Provider market share for 2016 was the following: AT&T with 27.1%, followed
by Comcast with 15.4%, Verizon with 12.4%, Time Warner Cable with 10.1% and Century Link
with 8.9%. The Internet Service Provider Industry is also considered a tight oligopoly. 48

Industry Life Cycle


The Cable Providers sector of the Telecommunications industry is in late maturity. In the
coming years to 2021 industry value added is projected to grow at an annualized rate of 1.0%
while GDP is expected to increase at an annualized rate of 2.2%. 49 This justifies classifying
the sector in late maturity as the market is so established that it lags the rate of domestic
growth. Additionally, consolidation is on the rise as there is a 3.2% average decline in
enterprises along with the replacement of non-digital cable services by premium services. 50
The main driver for the industry has been the standard of offering bundled services. This
has been a major factor for the industry's growth over from 2011 to 2016. Basically, the trend
in increasing demand for high speed internet has been able to save telephone and cable
services, since they are all purchased in a package. 51
The higher price point of these new premium services has hedged revenue loss from the
loss of subscribers. In addition, the sector is experiencing a growing trend of M&As that
stimulate vertical integration. 52 In addition the Cable& Satellite industrys ROE in 2015 was
18.5%53 which indicates reaffirms the industrys reliance on debt financing It is a result of
these three factors that the sector extended maturity and avoided decline. Due to the nature
of the industry each sector has been able to provide similar services. This has heavily
saturated the market, resulting in increased competition for subscribers. In this late maturity
stage incumbents have resulted to price based competition and innovative marketing
efforts.54

48
Ibid
49
Petrillo, Nick. "IBISWorld Industry Report 51711a Cable Providers in the US." IBIS World 43, no. 08 (October
2016). October 2016. Accessed February 16, 2017. doi:10.5860/choice.43-4410
50
Ibid
51
Ibid
52
Ibid
53
Bloomberg Terminal <BI> <Credit>
54
Ibid

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18

Telecom Life Cycle

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19

Michael Porters Five Forces

Threat of Entry: Low


Large economies of
scale
Government regulations
Restricted subscriber
base

Bargaining Power of Buyers: Rivalry: Moderate to High Bargaining Power of


Low Competitors push one Suppliers: Low
Low price sensitivity another to grow Depend on cable
Little product Competition stems from networks
differentiation price, advertising, and Vertical
Low price sensitivity new product offerings Integration
Must be innovative to Limited options
stay competitive for cable networks

Threat of Substitutes: Moderate, Increasing


Increase in streaming services
(Netflix, Hulu, Amazon Prime)
Satellite Television

Barriers to Entry - High


With a medium industry concentration, a significant barrier to entry is created. Those companies
that already exist command very large economies of scale. Because of this, operators in this
industry are able to command large customer bases without using a lot of monetary capital.
Investment in infrastructure as well as the need to secure programming rights also pose as a
challenge for new entrants. With the grounded establishment of existing operators, it is difficult
for new entrants to acquire subscribers; therefore, it is also difficult for them to become
successful. In addition, cable providers face a large number of regulation roadblocks when it
comes to operation on top of the high capital requirements needed to start operations. 55 The
average gross and operating margin for the industry was 72.6% and 19.7% respectively in 2015,
in addition to average total programming costs in 2016 of $8,502.7 million and programming
costs per subscriber per month in 2016 of $39.6 million.

55
IBISWorld Industry Report 51512

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20

Threat of Substitutes Moderate to High


Threat of substitutes in the cable provider industry is moderate and increasing due to factors such
as alternative forms of entertainment. Satellite television services and broadcast television are
both substitutes for the industry, although the threat of broadcast is decreasing due to lower
viewership. Satellite television still remains an important substitute that has continued to gain
popularity. Online streaming services such as Netflix, Hulu, and Amazon Prime, and even
YouTube are also a major growing threat, especially with the growing original content they
distribute at a lower price. Further declines in costs of cable packages in order to compete with
these other services will eventually lead to a decline in revenue.

Bargaining Power of Suppliers Low


Suppliers in this industry have a moderate bargaining power. Cable providers depend on
suppliers such as television producers, and cable networks for their content. Some players in the
industry have become vertically integrated with their content suppliers. With vertical integration,
the supplier begins to lose power. With there being such a low number of players, suppliers such
as television stations do not have much room to bargain with as there are a limited number of
operators for them to display their content. 56

Bargaining Power of Buyers - Low


The bargaining power of buyers is considerably low because buyers in this industry have very
little say when it comes to pricing of cable subscription packages. There is very little product
differentiation between competitors in the industry, therefore giving consumers less power in
making decisions. Additionally, there is low price sensitivity when it comes to the product. The
number of consumers in the cable provider industry is relatively high in comparison to the
number of choices as far as providers. With consumers relying on limited options for their TV,
phone, and Internet bundle services, they have the ability to research various bundles, but very
little room to bargain.

Competitive Rivalry - Medium to High


Competitive Rivalry in the cable industry has historically been medium, but this is perhaps the
most powerful and damaging of the Porters Five Forces. 57 The competitive Rivalry is at its
tensest when one cable competitor tries to attract the customers of the other cable provider, so
companies feel pushed by one another to grow. There can be several ways that a cable company
can be competitive, and it could be based on price, advertising, new products and services
provided to its subscribers. Cable companies must constantly come up with innovative ways to
provide best and most cost effective services for their subscribers. Competitive rivalry can even
end up harming the industry because companies can retaliate against one another. 58 Industry

56
IBISWorld Industry Report 51711a
57
Simister, Paul. Competitive Rivalry: The Most Powerful of the Five Forces? Differentiate Your Business. Oct
13, 2011. http://www.differentiateyourbusiness.co.uk/competitive-rivalry-the-most-powerful-of-the-five-forces
58
Wilkinson, Jim. Intensity of Rivalry (One of Porters Five Forces). The Strategic CFO. July 24, 2013

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21

players are challenged with constant pressure to offer bundles that include wireless service. The
demand for streaming has led incumbents to create mobile offerings in addition to their
services.59

Industry Attractiveness Red Thread

The Telecommunications Industry is a tight oligopoly in the late maturity stage of development.
High barriers to entry protect incumbents as they capture value.

Thus,

Industry attractiveness is for new entrants is low, as incumbents hold the majority of the
market share and there are significant entry barriers. These include large capital
requirements and government challenges.

Industry attractiveness for incumbents is moderate, as future success is heavily reliant on


their actions as the industry inevitably changes. Industry leaders have already established
economies of scale.

Industry attractiveness for Comcast is high, since the current makeup of the company,
specifically their diversification, puts them in a prime position to capitalize on the
direction in which the industry is heading.

https://strategiccfo.com/intensity-of-rivalry-one-of-porters-five-forces/
59
Bloomberg Terminal. BI. North America Cable & Satellite 2017 Outlook

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22

Competitor Environment

Strategic Group

60 61 62 63 64 65

For the SGA analysis, we have broken down the largest participants in the Broadcasting
sector of the entertainment industry. This subdivision can be described as the channels by which
content is delivered to the final source, the consumer. This can be done through satellite,
telecommunications, and cable/internet connections. The sector was formulated based on our
analytical findings, as we combined competitors who have different competencies and

60
AT&T Incorporated 2017. Corp.Att.Com. Accessed March 1 2017. https://www.corp.att.com/ndr/pdf/cpi_5181
61
Innovative Environmental & Social Solutions | AT&T Corporate Responsibility
62
Verizon Communication Inc. 2016 Form 10-K
63
Thurman Dunn. 2017. Seekingalpha.Com. Accessed February 28 2017. http://seekingalpha.com/article/3996897-
verizon-internet-things-mass-media.

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23

specializations. Companies involved in these activities include: Comcast, AT&T, Verizon,


Altice, Time Warner: Spectrum, DISH Network, Cox, and Century Link. The size of the circles
representing each company roughly corresponds to their market share in our defined sector.
In order to determine the metrics used to find Comcasts strategic group, we sought out
the factors that drive the industry, including level of vertical integration as well as extent of
services offered. Level of integration fits for distribution because not every company is limited to
providing connection exclusively. Companies such as Comcast and Verizon have ties to content
creation as well as distribution. For this reason, the axis leaves room for the sector companies
that specialize in solely connection, solely content, and a mix of both. Next, extent of services
applies to our sector because consumers typically choose a provider based on this metric, as the
degrees of plans and services can easily be curtailed to their personal needs. Consumers might
prefer a single service rather than a conglomerate, or might need less data, speed, and options in
their plan.
After analysis, it appears that Comcast operates within the strategic group of distribution
companies with content creation abilities, offering a high variety of services. Inhabitants of the
group include Comcast, Verizon, and AT&T. In short, this group denotes full range integrated
distributers and will be the focus for our competitive analysis.

Key Success Factors

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24

66 67 68 69 70 71 72

Overview
Distribution Network, Access to Infrastructure, Operating Margin and Numbers of
Subscribers are the Key Success Factors chosen to rate each company in Comcasts strategic
group. They are first individually graded based on their importance in the industry and
specifically this strategic group. Next, each player in the group receives a rating 1-5 based on
their level of success in each category. To find the total overview score of each player, the
individual score is multiplied by the overall weight as displayed in the chart above.

Distribution Network (.4 Weight)


The first and highest weighted KSF factor is the extent of distribution networkshaving
an extensive distribution network entails owning and maintaining a well-developed, robust
digital network. This enables companies to provide service to a significant number of households
and businesses. This is measured in the number of households that each company is within reach
of as far as delivering content.

Access to Infrastructure (.2 Weight)


The next factor, access to required utility infrastructure includes the providers access to
cable lines and propensity to maintain and develop the infrastructure by which they offer
services. This is measured in the miles of fiber cable in the United States. Comcast leads in this
factor with 145,000 miles while AT&T has access to 76,000 miles and Verizon has 33,000 miles
of cable line.

Financial Leverage (.1 Weight)


Financial leverage is a good measure of a firm ability to adapt to new technology
because it shows the degree to which the company finances using debt. High financial leverage
results in high interest payments which can decrease the bottom line along with the fact that it
can be harder for the company to issue more debt in the future. 73 By utilizing this ratio, it shows
which firms will be able to access debt financing more easily should the need/availability of new
technology arise. In addition, this ratio indicates the firms ability to engage in mergers or

66
AT&T Inc. 2016 Form 10-K
67
Comcast Corp. 2016 Form 10-K
68
Comcast Corporation. "Comcast Addelivery Launches A New Integrated Solution For Managing Television
Viewership Promotions | Comcast Technology Solutions".
69
John Celentano. 2017. Aglmediagroup.Com. Accessed February 28 2017. http://www.aglmediagroup.com/selling-
infrastructure-to-verizon-wireless-lets-go
70
Petrillo, Nick. IBISWorld Industry Report 51512 Television Production in the US. IBIS World, October
2016.Accessed February 28, 2017.
71
Sales and Distribution Channels for Verizon_Communications (VZ)"Sales And Distribution Channels For
Verizon_Communications (VZ)". 2017. Wikinvest.Com. Accessed February 28 2017.
http://www.wikinvest.com/stock/Verizon_Co
72
Straus, Matt. "Bringing More Video On Demand Choices To More Customers Through The Comcast-TWC
Transaction". 2017. Corporate.Comcast.Com. Accessed March 1 2017. http://corporate.comcast.com/comcast-
voices/bringing-more-video-on-demand-choices-to-more-customers-through-the-comcast-twc-transaction.
"Innovative Environmental & Social Solutions | AT&T Corporate Responsibility". 2017. Att.Com. Accessed March
1 2017. https://www.att.com/gen/corporate-citizenship?pid=17921.
73
Investopedia. "Financial Leverage." Investopedia. June 03, 2014. Accessed April 07,
2017. http://www.investopedia.com/walkthrough/corporate-finance/5/capital-structure/financial-leverage.aspx.

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25

acquisitions should management decide to buy an established company rather than create a
department dedicated towards the new technology.
Comcasts 3.35% and AT&Ts 3.28% received a score of 5 as their low financial
leverage ratios indicate lower interest payments along with future potential to issue debt more
easily when compared to Verizon which has a financial leverage ratio of 10.84% 74

Numbers of Subscribers (.3 Weight)


Fourth, the number of total subscribers tell us the amount of consumer data available in
addition to their network of customers. This amount differs from the number of households in the
distribution network since the household holds indicate the available reach of their services,
while the number of subscribers indicates the customers in paid use of the service.

Impact Statement

Comcast leads the strategic group with the largest distribution in addition to leading the
group in cable miles. Although they trail in the number of subscribers, their healthy financial
leverage places them in a position to adapt to new technology or engage in other strategic
activities.

Competitor Dynamics

Reduce negative Reduce carbon footprint


Goals emissions and switch to intensity by 50% for
alternate energy by 2020
2020 Launch tests for 5G
Expanding access to services by mid 2017 in
technology 12 US markets
Achieve 80% rating for Customer service
supply chain improvements to
sustainability eradicate below average
Expand all fiber internet ratings
service to 13 million

74
"Growth, Profitability, And Financial Ratios for Comcast Corp ADR (CMCS) From Morningstar.Com".
2017. Financials.Morningstar.Com. Accessed April 7 2017.
http://financials.morningstar.com/ratios/r.html?t=CMCS&region=ARG&culture=en_US.

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26

locations and provide


speeds of 45Mbps by
2019

AT&T believes that Verizon believes that


Assumptions their organization will they have always had a
continue to increase 2-year jump on their
revenue and benefit competitors in the
from the Time Warner category of innovation,
acquisition and they assume this
will continue as they
continue to invest

Strengths Strengths
Capabilities Reach of 300 million Largest American
with LTE services wireless carrier
Satellites that provide Offering Fiber Network
Ultra High Definition cables with extremely
video across North high speeds
America Brand is valued 6th in
the world
Fios and FiosTV

Weaknesses Weaknesses
Profits suffer from price Highest prices in the
wars between wireless industry compared to
providers competition
Overspending on Not capitalized on the
updated infrastructure global market, as the
has accumulated more only operate within the
debt United States

Difficulties adapting to
the changing wireless
market due to their
complex structure and
consumer group

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27

Deliver a fully Deliver wireless and


Strategy integrated customer lined service through
experience with superior networks
multiple touch points Capitalize on the
Enhance global Internet of Things and
capabilities with Time integrate it into a
Warner platform of on demand
Disrupt the current content
model of paid television Invest 28 Billion in
by offering new licenses to
subscriptions based on accommodate future
content growth

AT&T believes their Verizon enjoys their


Satisfaction strong cash flows and position as the
2017 strategy will technological leader in
contribute to revenue the Telecom industry
growththe short term they anticipate the first
success has allowed the release for 5G and the
company to venture to returns in which it will
more long term produce
investments such as the
Time Warner
acquisition.

Bringing Time Global expansion


Next Move Warners content into opportunities
the value chain Deliver 5G capabilities
Changing FCC before the other
regulations will offer strategic group
methods to gain members
spectrum Work towards the
enhancement of
customer service
ratings

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28

Sprint has developed T-Mobile and AT&T


Vulnerability plans for customers to providing strong
switch from AT&T competition and taking
specifically to cut costs market share
Expenses needed to Depending on results
keep up with new of FCC auctions,
technology and Verizon could lose
spectrum to stay their wireless
competitive stronghold by 2018

Possible acquisition or Verizon is likely to


Retaliation merger diversify from the
Catalyze the wireless business
development of 5G Prices are likely to
services as well as become more
offering premium competitive,
content specifically in the
unlimited plan division

*Contents of chart shown above 75 76 77 78 79 80

Competitor Response

Both AT&T and Verizon are experiencing the stress from the merging of the
telecommunications industry and the media/entertainment industry. Both companies place an
emphasis on keeping up with their strategic group by becoming sustainable, delivering 5G
speeds, finding new ways to deliver content, and ultimately working to produce a quadruple
bundle offer. Staying competitive in this industry will no longer be possible without high quality
wireless, wireline, cable, and internet offerings in addition to innovation by differentiation.

75
2025 Goals - AT&T People | Planet | Possibilities. 2017. About.Att.Com. Accessed March 31 2017.
http://about.att.com/content/csr/home/2025-goals.html.
76
Lawson, Stephen. 2017. "Verizon Plans 5G Trial Service In 11 Cities This Year". Pcworld. Accessed April 1
2017. http://www.pcworld.com/article/3173157/internet/verizon-plans-5g-trial-service-in-11-cities-this-year.html.
77
Bhasin, Hitesh. 2016. "SWOT Analysis Of Verizon - Verizon SWOT Analysis". Marketing91. Accessed April 1
2017. http://www.marketing91.com/swot-analysis-verizon/.
78
Publishing, Value. 2017. "AT& T: A Short SWOT Analysis". Valueline.Com. Accessed April 1 2017.
http://www.valueline.com/Stocks/Highlight.aspx?id=16855#.WPkzK1PytQI.
79
Verizon Form 10-K. 2016.
80
AT&T Form 10-K. 2016.

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29

INTERNAL ANALYSIS

Culture and Leadership

Comcast Corporation sustains an interconnected relationship between company leaders in


order to achieve the companys shared vision, to bring to life the best of what's to come in
media and technology. This credo is led by chairman/CEO Brian L. Roberts and senior
executive vice president/CFO Michael J. Cavanaugh. 81

Leadership
Brian L. Roberts became President of Comcast
Corporation in 1990 before becoming Chairman/CEO in 2002.
He has received numerous awards such as being named one of
the worlds 30 best CEOs by Barrons. He was the recipient of
the Ambassador for Humanity Award from the USC Shoah
Foundation Institute recognizing visionary leadership and
philanthropic work in education and technology, in addition to
being chosen as one of Americas top CEOs by Institutional
Investor magazine nine times.

Under his leadership, Comcast has seen its annual


revenue grow from $657 million in 1990 to $80.4 billion. 82 His devotion to excellence and
commitment to the corporation is what keeps Comcast at the
top of the industry.

Michael J. Cavanaugh left his position at The Carlyle


Group, where he was Co-President and Co-COO in New York
in 2015 to join Comcast as Senior Executive Vice President
and CFO.83 With having held previous positions at both The
Carlyle Group (an investment firm) 84, as well as JP Morgan,
Cavanaugh was hired in the wake of Comcasts
Failed $45.2 billion proposed merger with Time Warner Cable
Inc.85

81
"Comcast." Comcast - Executive Officers. Accessed April 09, 2017. http://www.cmcsa.com/management.cfm.
82
"Brian L. Roberts." Comcast Corporation. Accessed April 09, 2017. http://corporate.comcast.com/news-
information/leadership-overview/brian-l-roberts.
83
"Michael J. (Mike) Cavanagh." Executive Profile | Comcast Corporation | Michael J. (Mike) Cavanagh | Customer
Intelligence. Accessed April 10, 2017. https://www.boardroominsiders.com/executive-profiles/5182/Comcast-
Corporation/Michael-J.-(Mike)-Cavanagh.
84
"Homepage." The Carlyle Group. Accessed April 09, 2017. https://www.carlyle.com/.
85
"Comcast's New CFO Cavanagh Awarded $29.7 Million Pay Package." Bloomberg.com. May 11, 2015. Accessed
April 10, 2017. https://www.bloomberg.com/news/articles/2015-05-11/comcast-names-new-cfo-michael-cavanagh-
from-carlyle-group.

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David N. Watson is the President and CEO of Comcast Cable, and Senior Vice President
of Comcast Corporation. Watsons responsibilities include all business aspects of Comcasts
cable operations. Having worked for over 30 years in the cable
industry, Watsons leadership was essential in the initial rollout
if high-speed data as well as the delivery of gigabit speeds
which led to the growth of in-home products, and services that
aid commercial business.

David Watson was the leader of the sales marketing and product
teams for Comcast products and services like Xfinity Internet,
Xfinity X1, Xfinity Voice and Xfinity Home. The success of all
of these services has helped Comcast become one of the top
video providers and Internet service providers nationwide. 86

Culture
Comcast is an American success story and today is shaping the future of media and
technology. Comcast strives to provide the best content and constantly is looking for innovations
to please their customers. Comcast was founded in 1963 by Ralph Roberts and he was a
visionary. Comcast has always been seeking entrepreneurial spirit to achieve its best. Comcast is
now one of Americas leading companies and it brings TV, high-speed Internet and digital phone
to millions of people due to hard works of Ralph Roberts. Comcast brings together the best in
media and technology and they strive to provide the best entertainment and online experiences
for everyone. Comcast and the U.S. department of Housing and Urban Development work
together to connect low-income families to the Internet at home. 87
Comcast also believes that they should comply with the law promoting the highest ethical
standards and that this is a responsibility shared by all employees. Code of Conduct provides
standards of business conduct to all employees. Comcast is invested in innovation and
diversity.88

86
"Stocks." Bloomberg.com. Accessed April 10, 2017.
http://www.bloomberg.com/research/stocks/people/person.asp?personId=9571860&privcapId=173341.
87
Company Overview Comcast. http://corporate.comcast.com/news-information/company-overview
88
50 iconic moments from Comcast and NBCUnivarsal Comcast. http://corporate.comcast.com/our-company/our-
story

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Organizational Structure

Comcast Corporation organizational structure falls under the multidivisional structure


category. The board of the directors of the company is at the top of the structure. The board of
Directors of Comcast has a total number of 13 members: Brian L. Roberts, 56, Chairman,
President & Chief Executive Officer (CEO) of Comcast Corporation. Asuka Nakahara, 60,
Independent Director David C. Novak, 63, Director. Sheldon M. Bonovitz, 78, Director. Edward
D. Breen, 60, Lead Independent Director. Johnathan A. Rodgers, 70, Independent Director was
the President and CEO of TV One and was president of CBS Television Stations Division.
Jeffrey A. Honickman, 59, Independent Director. Eduardo G. Mestre, 67, Independent Director.
Gerald L. Hassel, 44, Independent Director. Joseph J. Collins, 71, Independent Director. Kenneth
J. Bacon, 61, Independent Director. Judith Rodin, 71, Director. Lastly, Madeline S. Bell,
Director. The board contains experience from different sectors which brings knowledge for the
company.89
Comcast Corporations Board consists of four different committees, which are included:
Audit Committee, Compensation Committee, Finance Committee, Governance and Directors
Nominating Committee. The purpose of the Audit Committee is to control the accounting and
financial reporting processes of Comcast Corporation and NBCUniversal. 90 The Compensation
Committee is responsible to manage the Company's recompense and benefits policies generally;
evaluate senior executive performance; supervise and set benefit for the Company's senior

89
"Comcast." Comcast - Board of Directors. Accessed April 20, 2017. http://www.cmcsa.com/directors.cfm.
90
Comcast." Comcast - Audit Committee Charter. Accessed April 19, 2017.
http://www.cmcsa.com/documentdisplay.cfm?DocumentID=8134

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executives; recommend non-employee director reward; and run succession planning for
Comcast's senior management. 91 The purpose of the Finance Committee is to deliver guidance
and assistance to the Company, including as requested by the Board from time to time included
the acquisitions, banking activities and relationships, capital allocation initiatives, capital
structure, cash management, equity and debt financings, investments and share repurchase
activities.92 The Governance and Directors Nominating Committee is responsible to recognize
individuals qualified to become a Board member, and recommend to the board director
candidates for election at the next meeting of shareholders and develop and implement director
orientation and continuing education programs.93
Comcast Corporation operates under mainly two different businesses: Comcast Cable and
NBCUniversal. According to their company overview, Comcast Cable is one of the nations
largest video, high-speed Internet and phone providers to residential customers under the
XFINITY brand and also provides these services to businesses. NBCUniversal operates news,
entertainment and sports cable networks, the NBC and Telemundo broadcast networks,
television production operations, television station groups, Universal Pictures and Universal
Parks and Resort.94 The other divisions of the company are Comcast Spectacor, the ultimate
hospitality firm with a wide range of disciplines, including professional sports, entertainment,
event management, and more and Comcast Ventures, the venture capital affiliate of Comcast
Corporation, invests in innovative businesses that represent the next generation of entertainment,
communications and digital technology by partnering with entrepreneurs who have the vision,
passion and tenacity to succeed.95
Comcasts organizational structure is a combination of SBU m-form and competitive m-
form due to related linked and divisional performance. Comcast and NBCUniversal operate as
separate entities, however they are linked to Corporate SBU and division performance. 96
Comcast Corporations organizational structure supports centralized strategic planning due to the
high involvement level of executives in operations. In 2013, after Comcast purchased the
NBCUniversal, the NBCU was expected to have a new organizational structure. Within that
situation, it is very complicated for both companies to be combined due to their different board
of directors and executives. The question for the company was what role should Jeff Gaspin,
previous chairman of NBCU, play in the new combined company. Since then, Comcast has been
trying to restructure the organization as a whole; however, the announcement could interfere
with da-day business.97

91
Comcast." Comcast - Audit Committee Charter. Accessed April 19, 2017.
http://www.cmcsa.com/documentdisplay.cfm?DocumentID=8135
92
Comcast." Comcast - Audit Committee Charter. Accessed April 19, 2017.
http://www.cmcsa.com/documentdisplay.cfm?DocumentID=6132.
93
Comcast." Comcast - Audit Committee Charter. Accessed April 19, 2017.
http://www.cmcsa.com/documentdisplay.cfm?DocumentID=8184
94
Company Overview." Comcast. August 22, 2012. Accessed April 20, 2017. http://corporate.comcast.com/news-
information/company-overview
95
Ibid
96
Fact Sheet." NBCUniversal Media Village. Accessed April 19, 2017. http://www.nbcumv.com/corporate/fact-
sheet.
97
Organizational Structure." Deadline. November 10, 2010. Accessed April 19, 2017.
http://deadline.com/2010/11/comcastnbcu-organizational-structure-coming-80062/.

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Value Chain Analysis

Firm Infrastructure

As of fiscal year end 2016, the Comcast Corporation reported $80.40 billion in operating
income and 8.695 billion in net income which increased 7.91% from the $74.510 billion reported
in 2015. The firm also reported a return on assets of 5.01% and a return on equity of 16.37%.
Comcast employs 159,000 full-time and part-time workers, 91,000 associated with cable
communications and 58,000 associated with NBC Universal98. Comcast has a history of
successful partnerships specifically partnerships with Verizon and IBM. Partnerships with
Verizon include the use of Verizons cellular network to run the companys proposed wireless
services.99 The IBM partnership will give business customers direct links to IBM Cloud's data

98
Comcast 10-k Annual report 2016
99
Reese, Hope. "Comcast Offers 10 Gbps Private Connection To IBM Cloud For Business Customers -
Techrepublic".2017. Techrepublic. Accessed April 19 2017. http://www.techrepublic.com/article/comcast-offers-10-
gbps-private-connection-to-ibm-cloud-for-business-customers/

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centers, which contains multiple choices for cloud enablement.100 Comcasts value chain reflects
their culture summarized by The entrepreneurial spirit and diverse talents of our people enable
us to create businesses that reshape industries.101

Inbound Logistics

Primary Activities:
The Telecommunications sector of the value chain takes advantage of the NBC Universal
and DreamWorks acquisitions. They are not a part of the distribution operations because they are
curating the content for which the telecom sector distributes.
Third party suppliers make up the foundation of Comcasts networks. They license
segments of their programming from other cable and broadcast networks in addition to the
television stations within their areas of operation. Securing official agreements with these
providers in addition to licensing is a goal for 2017.102 These are all secured in order to achieve
methods to offer content through all forms of delivery, including mobile apps, streaming, and on
demand service. A few of the suppliers that fulfill this need for Comcast are Nexstar Media
Group, Radio One Inc, Neogen Group, and Akers Biosciences Inc. 103 Internet software licenses
are paid to suppliers including Arista Networks, Copsync Inc., and Digi International on a fixed
fee basis in order to obtain high speed service. 104 Telephone features are also sourced from
individual suppliers paid in advance through multiple year contracts. Some of these suppliers are
Brekford Corp, Avx Corp, and Houston Wire Co. 105 Materials, such as those necessary for cable
boxes and network equipment, are purchased from Clearone Inc, Ciena Group, Oculus, Netgear,
and Zoom Telephonics Inc. 106 The header for the supplier chapter of Comcasts 2016 10-K form
states that they are developing technology and tools in order to improve the overall customer
experience. An example of this action in inbound logistics would be the third party vendors used
to handle the billing experience for both consumers and business customers.

Human Resources: Comcasts talent acquisition channel includes thirteen individual


programs for students to intern and rotate through the sectors of their base as well as through
NBC Universal. All new talent comes from their target universities and are placed in various
positions including marketing, finance, tech, analytics, and communications. A push for
increased campus relations and diversity has set the path for future hires. They value internship
programs as well, as they have employed 432 students this past year. As CEO Brian Roberts
states "There is no more exciting company in media or technology that touches all parts of where

100
Knutson, Ryan. "Comcast Jumps Into Wireless Wars." The Wall Street Journal. April 06, 2017. Accessed April
19, 2017. https://www.wsj.com/articles/comcast-jumps-into-wireless-wars-1491471003.
101
"Culture." Comcast. August 15, 2012. Accessed April 08, 2017. http://corporate.comcast.com/careers/culture.
102
Comcast Form 10-K 2016
103
"Comcast Corp's (CMCSA) Suppliers By Company, Division And Industry - Csimarket". 2017. Csimarket.Com.
Accessed April 8 2017. http://csimarket.com/stocks/suppliers_glance.php?code=CMCSA.
104
"Computer Networks Industry Revenue Growth Rates, Income Growth Rates - Csimarket".
2017. Csimarket.Com. Accessed April 8 2017. http://csimarket.com/Industry/Industry_Growth.php?ind=1003.
105
"Electric & Wiring Equipment Industry Revenue Growth Rates, Income Growth Rates - Csimarket".
2017. Csimarket.Com. Accessed April 8 2017. http://csimarket.com/Industry/Industry_Growth.php?ind=411.
106
"Communications Equipment Industry Revenue Growth Rates, Income Growth Rates - Csimarket".
2017. Csimarket.Com. Accessed April 8 2017. http://csimarket.com/Industry/Industry_Growth.php?ind=1001.

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36

the future is going than Comcastfor the next 10 years, hiring great young talent might be the
single most important thing that we can do."107

Operations

Primary Activities: In the 2016 annual report Comcast reported the existence of 12
national data centers along with 145 thousand miles of fiber optic cables. 108 This report supports
the companys claim of being one of the countrys largest cable service providers and operates
under the XFINITY brand. Through these operations the company reported 22.5 million video
customers, 24.7 million high-speed Internet customers and 11.7 million voice customers; and
reached more than 56 million homes and businesses.109
The company places a high importance on eco-friendly operations and this is supported
by their existing infrastructure and other operations. To execute the distribution of their services
Comcast has developed a fleet of 7,500 hybrid and flex-fuel vehicles.110 Existing buildings such
as the corporate headquarters is LEED certified, being constructed of primarily recycled
material, and through the engineering of the building less is spent on lighting and cooling in
addition to saving 3 million gallons of drinking water per year, 41% less than the average office
building.111 Warehouses across the country have or are installing equipment for cardboard
recycling which resulted in reduced waste, in addition to increasing the efficiency of servers
rather than installing new ones. 112 During the April 2017 FCC auction, Comcast was the third
highest bidder by spending $1.7 Billion in a total of 73 licenses.113

107
"Comcast University Relations: Finding the Future of Awesome." Comcast. October 20, 2014. Accessed March
06, 2017. http://corporate.comcast.com/news-information/news-feed/comcast-university-relations-finding-the-
future-of-awesome.
108
1)"Smarter Operations." Comcast. October 03, 2012. Accessed March 05, 2017.
http://corporate.comcast.com/our-values/environment/smarter-operations
109
Comcast 10-k Annual report 2016
110
"Smarter Operations." Comcast. October 03, 2012. Accessed March 05, 2017. http://corporate.comcast.com/our-
values/environment/smarter-operations
111
Ibid
112
Ibid
113
Kastrenakes, Jacob. "T-Mobile just spent nearly $8 billion to finally put its network on par with Verizon and
AT&T." The Verge. April 13, 2017. Accessed April 2017. http://www.theverge.com/2017/4/13/15291496/tmobile-
fcc-incentive-auction-results-8-billion-airwaves-lte.

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Procurement: Through its cable communications segment the company also sells
advertising. The scheduled advertising time is sold through its own advertising business,
Spotlight, to local, regional and national advertisers. 114 Revenue is also generated through the
sale of online advertising and through their On Demand service. 115

Human Resources: The firm employs 91,000 employees in the cable communications
segment. These employees are supported by enhanced training programs which has helped
increase efficiency and successful customer interactions. Comcast also promotes diversity
reporting a 59% diversity in their workforce in 2014. In order to increase retention rates of
minorities the firm has
implemented employee
resource groups and
mentorship programs116
In the cable
networks segment other
operating and
administrative costs and
expenses which include
salary and employee
benefits, along with
other factors, increased
by 18.91% from 2015
which can be attributed
to an increase in
employee related costs. 117

Technology: Through the partnership with Xfinity Comcast has allowed customers to
access their cable services through any device so long as they have the Xfinity app. As of April
20, 2016 the app had been downloaded more than 23 million times. 118 Comcast created a
partnership with Samsung Electronics to implement the Xfinity app on smart TVs and plans to
collaborate with additional companies in the future. 119 The firm has established partnerships with
apple and android to provide users with the app and has announced a partner app agreement with
Roku which allows customers to access the customized app on TVs using a Roku streaming
player or directly via a Roku TV120

114
Comcast 10-K Annual report 2016
115
Ibid
116
"Our Workforce, By the Numbers." Comcast. May 28, 2015. Accessed April 08, 2017.
http://corporate.comcast.com/news-information/news-feed/di2014-our-workforce-by-the-numbers.
117
Comcast 10-k Annual report 2016
118
Mark Hess, Senior Vice President, Office of the Chief Technology Officer, Business and Industry Affairs,
Comcast Cable in TV. "Comcast Seeks TV and Other Consumer Electronics Partners to Bring Xfinity TV Cable
Service to More Retail Devices." Comcast Corporation. April 20, 2016. Accessed April 08, 2017.
http://corporate.comcast.com/comcast-voices/comcast-seeks-partners-to-bring-xfinity-tv-cable-service-to-more-
retail-devices
119
Ibid
120
Ibid

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38

Through the XFINITY brand Comcast provides customers with video services which can
range from basic packages of 20-40 channels to full service options with more than 300
channels. Video services are adjusted to meet the needs and regulation of each geographic area.
With each video subscription customers have access to on demand services, HD quality, and the
option to purchase premium channels or special packages. These services are supplied through
the X1 platform which is a cloud enabled video platform that connects customers with third party
applications, integrative searching, and personalized video recommendations.
Recently the Xfinity system has been revolutionized with the creation of the Xfinity X1
platform. Which is described as a system that is revolutionizing the way customers watch TV
specifically increasing/bettering search options and even recommending shows or channels for
customers to watch. 121Additionally, this system includes a special partnership with Netflix and
allows users to experience the app, along with live streaming and customizable live scores and
stats for sports.

Outbound Logistics

Primary Activities: Comcast connects business and retail customers with its products
through its cable distribution system. 122 These services are sold to business customers through
contracts which range from a minimum of 2-5 years. While most residential customers do not
purchase though minimum contracts there are some that exist and are normally 2-years. To
terminate a contract,
the customer must pay
a termination fee. 123
As of December 31,
2016 Comcast reported
around 14 designated
market areas in which
they have 250,000 or
more customer
relationships
specifically through
cable services.

Procurement: Through its partnership with Roku customers XFINITY TV customers


can access cable services such as live and On Demand programming along with cloud DVR
recordings through Roku streaming devices or Roku TV.124

121
"XFINITY TV's Next-Gen X1 Platform: The Future of Television." Comcast. October 17, 2012. Accessed April
10, 2017. http://corporate.comcast.com/news-information/news-feed/xfinity-tvs-next-generation-x1-platform-the-
future-of-tv
122
Comcast 10-k Annual report 2016
123
Ibid
124
"XFINITY TV Beta App on Roku FAQs." XFINITY TV, Internet, Phone & Home Security Services by
Comcast. Accessed April 10, 2017. https://www.xfinity.com/support/xfinity-apps/xfinity-tv-app-on-roku-faqs/.

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Human Resources: Comcast employs technicians who install XFINITY products into
the homes/businesses of customers. 125

Marketing and Sales

Primary Activities: Comcast spent 462 million on advertising in 2016 for their
television broadcasting sector alone. This was a negative (11.9%) change since the previous
year.126 The release of the X1 platform has accounted for the bulk of their advertising expenses
since its release. This is a contrast to their previous efforts to promote fast internet speeds and
large variety of channels before the venture. Direct to business sales and packages are available
through their site as well. They use Facebook and Twitter to further target their customers and
give information about their services. These social channels have an emphasis on their current
customers, while general ads aim to gain customers after making them aware of their services. In
addition to these advertisements, Comcast sells their range of packages directly to consumers
through door to door sales. Their 10K describes their marketing efforts as direct to residential
and business through call centers, their site, retail outlets, telemarketing, direct mail, TV, and the
internet. They currently have 3,632 stores/service centers operating in 48 states in the US. Here,
packages and hardware are sold to consumers and service is provided. 127

Technology: A large part of Comcasts revenue is derived from the sale of advertising
they launched Project Canoe in conjunction with five cable companies with the goal of targeting
television ads for consumers. This has tripled the influence of cable companies as far as the
control of TV ad sales. 128 Canoe has produced eleven billion advertisement impressions within
its debut year of 2015. 129

Human Resources: As of February 2017, Comcast has heavily increased their number of
call center employees by a margin of 5,500. They have added five new centers based in Tucson,
Arizona, Albuquerque, New Mexico, Spokane, Washington, Charleston, South Carolina, and
Fort Collins, Colorado. The most recent addition, Fort Collins, will hire approximately 600
veterans in order to combat accusations of offshoring these positions to the Philippines. This was
a proactive response to the 2 percent decline in customer service expenses in 2016. 130

125
"Comcast Careers Communication Technician 1, Installation & Service in Murfreesboro, TN." Comcast Careers.
Accessed April 10, 2017. https://jobs.comcast.com/job-155531-communication-technician-1-installation-service-in-
murfreesboro-tn-entry-level
126
Comcast Form 10-K 2016
127
Ibid
128
Schonfeld, Erick. 2016. "Project Canoe: Cable Companies Paddle to Catch Up To Google In Targeted
TV Ads". Techcrunch. Accessed April 11 2017. https://techcrunch.com/2008/03/10/project-canoe-cable-companies-
paddle-to-catch-up-to-google-in-targeted-tv-ads/.
129
"Why Comcast Remains Optimistic About Advertising in 2016 - Market Realist". 2017. Marketrealist.Com.
Accessed April 11 2017. http://marketrealist.com/2016/02/comcast-remains-optimistic-advertising-2016/.
130
"600-Employee Comcast Call Center to Open in Colorado ". 2017. Philly.Com. Accessed April 11 2017.
http://www.philly.com/philly/blogs/comcast-nation/600-employee-Comcast-call-center-to-open-in-Colorado-.html.

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Customer Service

Primary Activities: Comcast provides community service through 27/7 call-answering


services. They also have technical services that install, maintain, and upgrade their cable
products to fulfill the orders of their consumers.131 From their site and phone lines, they offer
technical support, billing aid, and in home maintenance scheduling through the call center. 132
They have been subject to many negative ratings and bear a poor reputation when it comes to
customer service. As a video service provider, internet service provider, and for overall
experience, Temkin Customer Service places them in last place for service in their strategic
group.
Temkin CS ratings are comprised of 277 different organizations within 20 different
industries within the United States.133 Below are the companies with the highest and lowest
customer service ratings (CSR) according to a sample of 10,000 American consumers (left).
Unfortunately, Comcast has been ranked very last in the list of these companies with a total
rating of 15% satisfaction. Although the television service provider industry has the lowest
aggregate score, Comcast is well under the industry as they serve as the low outlier (right).

131
Comcast Form 10-K 2016
132
"Contact Us - Xfinity Online". 2017. Xfinity Online. Accessed April 11 2017. http://xfinityonline.com/contact-
us/?cpid=42481&gclid=CJSxlvulm9MCFdCCsw
133
"Dataset: 2016 Temkin Customer Service Ratings - Temkin Group". 2016. Temkin Group. Accessed April 11
2017. http://temkingroup.com/research-reports/dataset-2016-temkin-customer-service-ratings/.

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41

Technology: A function of Comcasts value chain accounts for the negative reputation
surrounding their customer service. In February 2017, they released Tech ETA, a technician
tracking update for the Comcast Account App. The update will provide a 30-minute warning for
when your tech is on the way as well as providing a profile with photo so customers do not have
to worry about letting any unwanted guests into their homes. The intent for this release is to
decrease the uncertainty surrounding the arrival times of their technicians, as they have been
scrutinized for their lateness and wide gap of arrival.134

Identifying a Core Competency

Comcasts success can be attributed to their established infrastructure, access to


subscribers, and their X1 system. Their core competency comes from their diverse supply chain
through the symphony achieved from previous acquisitions.

Financial

Liquidity Ratios:

Current Ratio:

Current Ratio 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 0.76 0.68 0.78 0.74 1.20
AT&T Inc (T US) 0.76 0.75 0.90 0.66 0.71
Verizon Communications 2.62 0.79
0.87 0.64 1.05
Inc (VZ US)
Strategic Group Average 0.80 0.69 0.91 1.34 0.90

Comcast Corporations ability to use their current assets to cover short and long term
obligations saw a drop from 2012to 2013 and since then has stayed relatively constant over the
next three years with an average of .74. Their numbers in 2016 are level with AT&T but trail
Verizon and the strategic group average. The fact that they are below one demonstrates that the
company unable to cover its current liabilities with its current assets. Despite the fact that the
corporation may have difficulty meeting current obligations they can still issue debt.

134
Cineas, Fabiola. 2017. "Comcast Launches App-Based Technician Tracker". Philadelphia Magazine. Accessed
April 12 2017. http://www.phillymag.com/business/2017/02/23/comcast-technician-tracker/.

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42

Quick Ratio:

Quick Ratio 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 0.52 . 0.51 . 0.62 0.62 1.07
AT&T Inc (T US) 0.45 0.46 0.62 0.46 0.55
Verizon Communications 0.67 0.52 0.90 2.46 0.60
Inc (VZ US)
Strategic Group Average 0.55 0.50 0.71 1.18 0.74

The quick ratio measures the companys ability to cover their liabilities using their
current assets less inventories to truly show how liquid the firm is. While this is the standard
calculation the Bloomberg Terminals use (Cash and Near Cash + Short Term Investments +
Accounts Receivables) / Current Liabilities as their formula. The rationale behind this is in the
case of Comcast, programming rights is included in the current ratio but not the quick and for
AT&T, prepaid expense is in the current but not included in the quick ratio 135. After accounting
for these changes Comcast reported a quick ratio of 0.5 which shows that after removing
programming rights the firm can cover about half their current liabilities with their current assets.
Comcasts quick ratio lags Verizon and the group average but lead AT&T.

Asset Turnover:

Asset Turnover 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 0.46 0.46 0.43 0.40 0.39
AT&T Inc. (T US) 0.41 0.42 0.46 0.47 0.47
Verizon Communications 0.52 0.55 0.50 0.48 0.51
Inc. (VZ US)
Strategic Group Average 0.46 0.48 0.46 0.45 0.46

Asset turnover has risen since 2012 but has stayed relatively constant over the five-year
period. The strategic group has experienced similar consistency and all report numbers below
1.00. The fact that the ratio is below one is alarming as for every dollar in assets they generate
only $0.46 in revenue. Despite the fact that these numbers have trended low across the five-year
period the company has remained strong and profitable which is reflected in other areas
Comcasts 2016 numbers beat AT&T, lag Verizon, and match the group average.

Efficiency Ratios:

Return On Equity:

Return On Equity 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 16.37 15.55 16.21 13.63 12.84
AT&T Inc. (T US) 10.56 12.58 7.14 19.91 7.34

135
Bloomberg Terminal Run HDSK<GO> Reference H#778195997

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Verizon Communications 67.40 124.48 37.65 31.94 2.53


Inc. (VZ US)
Strategic Group Average 31.44 50.87 20.33 21.82 7.57

Return on Equity demonstrates the return shareholders receive on their investment in the
company. Comcasts ROE rose from 2012 to 2014 then decreased in 2015, rebounding strong in
2016. Comcasts ROE of 16.37 in 2016 beats AT&T but lags Verizon who is the runaway group
leader. Despite the drastic difference from Verizons numbers, according to gurufocus.com
Comcasts ROE is ranked higher than 76% of the global pay TV industry136 The firms ROE of
16.37 indicates that Comcast generates a 16.37% profit on every dollar invested by shareholders.

Return On Assets:

Return On Asset 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 5.01 5.01 5.27 4.21 3.84
AT&T Inc. (T US) 3.22 3.82 2.24 6.63 2.68
Verizon Communications 5.38 7.50 3.80 4.61 0.38
Inc. (VZ US)
Strategic Group Average 4.53 5.44 3.77 5.15 2.30

Comcasts Return on Assets loosely followed the trend of ROE, increasing from 2012-
2014 then decreasing in 2014 to 5.01 which carried over to 2016. ROA measures the profit
earned per dollar of asset value and shows management efficiency in turning assets into profit.
The low levels of ROA across the strategic group are indicative of the industrys high capital
requirements. The fact that the ROA numbers are lower than ROE demonstrates the companys
reliance on debt to finance and this correlates to the information shown in the 10-ks specifically
the total debt portion which has increased every year since 2012. 137

Debt-to-Equity:

Debt-to-Equity 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 105.95 95.33 89.10 91.99 60.57
AT&T Inc (T US) 99.52 102.03 90.65 81.75 75.35
Verizon Communications 449.73 615.00 828.25 98.09 60.85
Inc (VZ US)
Strategic Group Average 218.40 270.79 336.00 90.61 65.59

Debt to equity on average has trended upwards since fiscal 2012 and this reflects the
companys issuance of debt recorded in each fiscal year. Comcasts debt-to-equity ratio numbers
mirror the trend seen in previous ratios of lagging Verizon and the strategic group average while
slightly leading AT&T. The firms high numbers indicate risk however, when compared to the
strategic group members the numbers are not as alarming as it indicates the industry as a whole
136
Comcast Corp (CMCSA) ROE %. Accessed April 12, 2017.
http://www.gurufocus.com/term/ROE/CMCSA/ROE-/Comcast-Corp
137
Comcast 10-k 2016

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44

heavily relies on debt financing. As compared to Verizons numbers Comcast has room to issue
new debt which can be used for future investments such as acquisitions or expansions.

Profitability Ratios:

Gross Profit Margin:

Gross Profit Margin 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 69.57 69.74 69.59 69.58 68.15
AT&T Inc (T US) 53.06 54.33 54.59 60.24 56.66
Verizon Communications 59.18 60.07 60.71 62.76 60.05
Inc (VZ US)
Strategic Group Average 60.60 61.38 61.63 64.19 61.62

Gross profit is simply the remainder once costs associated with revenue are deducted.
Revenue as shown on the income statement has trended upwards and this is reflected in the
companys gross profit. When compared to the peer group the firms numbers lead all members
including the group average. The numbers indicate than on average Comcast earns around 69%
of its sales revenue once costs are deducted.

Operating Margin:

Operating Margin 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 20.97 21.47 21.67 20.98 19.46
AT&T Inc (T US) 14.87 16.88 9.22 23.67 10.20
Verizon Communications 21.48 25.12 14.42 26.52 11.36
Inc (VZ US)
Strategic Group Average 19.10 21.16 15.44 23.72 13.67

Operating costs reflects the costs associated with production and operating profit is
number remaining once these operating costs are subtracted from gross profit. Operating profit
divided by sales gives the operating margin and shows the rate of sales to operating costs.
Comcasts operating margin increased from 2012-2015 then slightly decreased into 2016, which
can be attributed to an increase in video programming costs, as a result of the timing of contract
renewals as well as higher retransmission consent fees and sports programming costs, technical
and product support expenses related to the development, delivery and support of the X1
platform, Cloud DVR technology and wireless gateways, and the continued growth in business
services and home security and automation services. Additionally, advertising, customer service,
marketing and promotion costs increased, reflecting increases in spending associated with
attracting new residential and business services customers. Customer service expenses increased
3.5%, primarily due to increased support for improving the customer experience and increases in
total labor costs.138 Despite these increased expenses Comcast still reported a decent operating
margin which beat AT&T and the group average, and only slightly lagging Verizon.

138
Comcast 10-K 2016

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Net Income Margin:

Net Income Margin 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 10.81 10.96 12.18 10.54 9.91
AT&T Inc (T US) 7.92 9.09 4.86 14.17 5.70
Verizon Communications 10.42 13.58 7.57 9.54 0.76
Inc (VZ US)
Strategic Group Average 9.72 11.21 8.20 11.42 5.46

The net income margin is the bottom line profit after all expenses, taxes, dividends, and
interest are accounted for divided by revenue. It shows how well a firm can convert revenues
into profit. Comcasts margin increased from 2012-2014 then experienced a decrease into 2015
and 2016. The numbers from 2014-2016 are a result of the firm reporting an effective income tax
rate of 37.0%, 37.1% and 31.1% in 2016, 2015 and 2014 respectively. 139 In 2014 the frim
reported a higher net income margin which correlates with its low effective tax rate and this is a
result of a reduction in accruals/related accrued interest for uncertain tax positions which reduced
income tax expense by $759 million 140 Comcasts 2016 margin leads the strategic group and the
average which shows the firm was the most efficient in retaining sales after deducting all
expenses.

Valuation Ratio:

Price-to-Sales:

Price-to-Sales 2016 2015 2014 2013 2012


Comcast Corp (CMCSA US) 2.2 2.0 2.2 2.2 1.6
AT&T Inc (T US) 1.6 1.3 1.3 1.5 1.5
Verizon Communications 1.7 1.5 1.4 1.2 1.1
Inc (VZ US)
Strategic Group Average 1.8 1.6 1.6 1.6 1.4

Price to sales measures a firms stock price as compared to its revenues. Comcasts ratio
has led the strategic group and the average every year from 2012-2016, this may suggest the firm
is overvalued and could result in a future drop in stock price.

Determining Competitive Advantage

Comcasts financials as compared to the rest of the strategic group are strong,
outperforming the strategic group in a number of profitability ratios specifically gross profit and
net income margins.

139
Ibid
140
Ibid

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46

SWOT ANALYSIS

SWOT Overview

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47

SWOT Overview Impact Statement

Comcast has the highest operating margin within their strategic group. This is a result of
the diversification within their supply chain from landmark acquisitions. Worst-in-class customer
service ratings hinder their overall brand image. The overarching threat is the push for cord
cutting within the changing industrythis brings new competitors and lowers subscription rates.
These threats stress the need for wireless capabilities for Comcast, as they are the only member
of their strategic group without this service.

Strategic Orientation

Conclusion: Diversification (Opportunities in other markets)

Comcast stands in a strong position due their extensive infrastructure, diverse supply
chain, and regional control. These strengths weigh more than the weaknesses, therefore Comcast
lies under the
strength axis.
Then, the threats
such as the rapid
growth of
streaming
services and the
fast decline of
subscribers to
the cable
industry
outweigh the
opportunities.
Comcasts
competitors
have extensively
adopted many of
the opportunities
listed. Therefore, Comcast must approach the related diversification in order to overcome the
threats.

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Attractiveness

Conclusion: Slow growth and Improving competitive position: Related Diversification

Despite the slow growth of the industry, Comcast possesses a strong competitive position
among other competitors.
Comcast has advantages with
their net income margin as
well as their operating
margin. For Comcast to
increase its revenue, a related
diversification strategy
would be very useful. One of
Comcasts recent ventures is
to offer a mobile device for
Comcast users. CEO Brian
Roberts describes it as a
world class wireless
service that will run on
Verizons network (where
Comcast Xfinity Wi-Fi is not
available).141
With this, Comcast
will be able to offer
quadruple play bundles and
provide phone services much
like a few of their competitors. A related diversification strategy will be fundamental as Comcast
begins to venture into options already involved within their value chain. This form of strategy
will guide the corporation in finding successful channels in which to focus their new ideas as
well as take advantage of their strong competitive position within the industry.

141
Ramachandran, Shalini, and Ryan Knutson. "Comcast to Launch Wireless Service by Mid-2017." The Wall
Street Journal. September 20, 2016. Accessed April 20, 2017. https://www.wsj.com/articles/comcast-to-launch-
wireless-service-by-mid-2017-1474378548.

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Investment

Conclusion:
External
Development &
Strength- Related
Diversification

As stated in
the core competence
statement, Comcast
has had a successful
history of engaging in
acquisitions and fully
incorporating both
companies to produce
above average
returns. As the
industry is
consolidating and
growing trends are
indicating a future
decline in cable as a
whole, the company
focus is should be on
developing externally. Comcast can use its experience in engaging with other companies along
with strong financials specifically a reported 2016 free cash flow of $8.419 billion.142 This, along
with competitive debt-to-equity levels among the strategic group that gives the firm access to
future borrowing opportunities.

142
"Comcast Corp Class A." Cash Flow for Comcast Corp Class A (CMCSA) from Morningstar.com. Accessed
April 18, 2017. http://financials.morningstar.com/cash-flow/cf.html?t=CMCSAion=usa&culture=en-US.

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50

STRATEGIC CHOICE

Generic Strategy

Comcasts CEO stated Our passion for creating and developing incredible technologies
and entertainment led to some of the best results in our history and enabled us to connect
millions of people to amazing moments and experiences.143 Comcast offers customers multiple
product options through its innovative X1 system. This innovation is seen through the companys
core competence and diverse supply chain as the firm built a unique reputation when compared
to competitors.

Restatement of Strategic Question

How can Comcast grow its revenue 25% by 2022?

143
"2016 Letter to Shareholders." Comcast. February 06, 2017. Accessed April 19, 2017.
http://corporate.comcast.com/news-information/news-feed/2016-shareholder-letter.

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51

Recommendation & Justification

Corporate Level Strategy

Cultural
Comcast has experience in dealing with acquisitions, and the acquisition of T-Mobile will
fit with the current culture. When following through with decision, Comcast should take into
account actions made in the acquisition of NBC Universal and use them as guidelines.
Specifically, T-Mobile will be treated as a strategic business unit with the much of the current
structure remaining in place. Although Comcast is constantly looking to improve company
culture, adapting the culture of T-Mobile will be immensely beneficial. With a shifting focus
towards being more customer oriented, Comcast's culture will fit well with T-Mobiles.

Why cultures wont clash


John Legere, T-Mobiles CEO is known for rebranding himself and being
uncharacteristically outspoken within the wireless communication industry. He left behind the
suits, and office style haircuts and resorted to a long mane and a mostly magenta wardrobe
representing T-Mobile from head to toe at all times. Legere believes in being in constant contact
with all of his employees, all the way down to customer service representatives at T-Mobile call
centers.144 After Comcasts failed acquisition of Time Warner Cable, CEO Brian Roberts vowed
to fix how things were done. All the way down to the call centers, Comcast aimed to focus on its
employees in order to create a better environment for their customers. The combination of
mindsets of both Leger and Roberts is sure to make for a successful acquisition. 145

Business Level Strategy

Comcast should engage in a related diversification


strategy in which the company seeks to acquire the T-
Mobile Corporation in order to stay competitive with
industry leaders who are releasing quadruple play bundles.
With the combination of T-Mobiles wireless capabilities
and Comcasts existing cable services the firm would be in a
prime position to offer these quadruple play bundles and
this could help increase number of subscribers while
retaining existing ones. Through this acquisition, Comcast
customers will experience a reduction in costs and Comcast
will experience an increase in revenue as a new revenue
stream is produced. Additionally, the firm can use this
acquisition to increase brand awareness, specifically by
144 Feloni, Richard. "T-Mobile's CEO says reinventing himself was key to transforming the company's culture."
Business Insider. October 17, 2016. Accessed April 17, 2017. http://www.businessinsider.com/t-mobile-ceo-john-
legere-company-culture-2016-10.
145
Michael Hiltzik. "Can a company do well by being nice? Comcast (and others) will try." Los Angeles Times.
Accessed April 17, 2017. http://www.latimes.com/business/hiltzik/la-fi-mh-can-a-company-do-well-20150605-
column.html.

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52

selling T-Mobile cellphones preloaded with the Xfinity app. By preloading the app, brand
awareness of the firm will be increased and it can help to promote the availability of the
quadruple play bundles to customers that currently do not have Comcast subscriptions. This
application will take away from the confusing suite of apps currently offered by Comcast and
provide a consolidated, permeant hub fort T-Mobile customers to use their Comcast X1
streaming services on the go.
In regards to the Xfinity application, the firm should engage in an update/consolidation as
there a numerous applications associated with Xfinity. By consolidating the app into one Xfinity
hub it will make the app more user friendly and can help with the weakness of customer service.
Lastly with this acquisition it gives Comcast access to T-Mobiles excellent customer service,
which was ranked by J.D. Power as highest in wireless customer care performance among full-
service carriers. 146 Based on this, Comcast should be compelled to promote T-Mobile executive,
Callie Field to take hold of all customer service needs. At T-Mobile, Field was EVP of Customer
Care, and was in charge of the strategic planning of their award-winning call centers. Field
places a large focus on customer experience as well as a great significance on reducing the
amount of strain a customer goes through when dealing with customer service and interacting
with employees.147

Legal Justification

During the last couple of years, it has been difficult for Companies such as Comcast,
AT&T, Verizon, Time Warner to participate in mergers and acquisitions due the tough
regulations from FCC. However, this year a new chairman (Ajit Varadaraj Pai) has been
appointed to the board and favors policies that will loosen the regulation imposed in the industry.
This past 6th of April, FCC announced the first meeting for the Broadband Deployment Advisory
Committee (BDAC). BDAC looks to work on Competitive Access to Broadband Infrastructure
and Removing State and Local Regulatory Barriers among other resolutions which will prevent
the breakup of the acquisition. 148 At the same time, members of this board include David Bon,
Vice President, Regulatory service of Comcast, Chris Bondurant, Assistant Vice President,
Construction and Engineering Operations of AT&T and Dr. John Saw, Chief Technology Officer
of Sprint.149 The fact that these members are on the board further improves optimism
surrounding the reduction of these regulations.

The Herfindahl-Hirschman Index (HHI) is used to measure the level of concentration


within a specific market. This index is calculated by squaring all the companies market share
and adding all the results to get an index. This index ranges from 1 to 10,000, and the closer the
index gets to 10,000, the more concentrated the market is. An Index of 2,500 or higher means

146
Robin. "2016 U.S. Wireless Customer Care FS NC Performance Studies Vol 1." J.D. Power. January 27, 2016.
Accessed April 20, 2017.http://www.jdpower.com/press-releases/2016-us-wireless-customer-care-fs-nc-
performance-studies-vol-1
147 T-Mobile. "Management & Board of Directors." Accessed April 15, 2017. http://investor.t-mobile.com/Board-of-

Directors.

148
"Fcc Announces The Membership And First Meeting Of The Broadband Deployment Advisory Committee."
Fcc.gov. April 6, 2016. Accessed April 19, 2017.
http://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0413/DOC-344397A1.pdf.
149
Ibid

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53

that the market is highly concentrated, an index of 1,500 to 2,500 means that the markets
concentration is medium and when the index is below 1,500, the market concertation is
considered competitive. This index is also used to see how much the index will grow in case of a
merger or an acquisition of between companies in this market. If the merger or acquisition makes
the index grow by more than 200 points, antitrust concerns may arise. 150 Since Comcast is
acquiring T-Mobile a company in a different market, the HHI wont raise to a dangerous degree
since T-Mobile does not own a significant market share of any of the markets that Comcast
operates in.

Financial Justification

The enterprise value of T-Mobile was $75.59 Billion As of April 18, 2017 151. While this
number might be seen as ambitious Comcast Corporation is more than capable of handling an
acquisition of this scale. As mentioned in the financial ratios the firm has a strong bottom line
which translates to a decent amount of cash on hand. Specifically the firm reported a 2016 free
cash flow of $10.105 billion. 152 Despite the fact that the firms cash on hand does not meet the
enterprise value of T-Mobile there are other options that can be used to finance the acquisition.
As mentioned in the price to sales valuation ratio Comcasts stock price is slightly overvalued or
correctly valued as compared to the strategic group. Based on this the company can leverage its
stock price by engaging in a new equity issuance in order to raise the funds necessary for the
acquisition.153 According to the 2016 annual report the firm has been actively buying back shares
with 81 million shares of the Class A common stock being bought back in fiscal 2016 alone. 154
Should Comcast opt against financing the acquisition with an equity issuance they can
turn to a debt issuance. As seen in the firms debt-to-equity numbers as compared to the strategic
group their financial leverage is neutral which gives them room to issue further debt. With the
current 10-year treasury risk free rate of 2.18% (as of 04/18/2017) and the companys current
credit rating of A-155, they can take advantage of the current low rates to issue more debt across
the entire firm with less interest expense. Lastly should the firm need additional capital beyond a
debt or equity issuance to complete the acquisition, and pay off T-Mobiles debt, they can utilize
the cash on hand in addition to the cash of T-Mobile once the acquisition is completed.

150
Staff, Investopedia. "Herfindahl-Hirschman Index - HHI." Investopedia. May 16, 2015. Accessed April 7, 2017.
http://www.investopedia.com/terms/h/hhi.asp.
151
"T-Mobile US Enterprise Value:." YCharts. Accessed April 19, 2017.
https://ycharts.com/companies/TMUS/enterprise_value.
152
Bloomberg Terminal CMCSA <FA>
153
Damodaran, Aswath. "Acquisition Valuation." Http://people.stern.nyu.edu. Accessed April 19, 2017.
http://people.stern.nyu.edu/adamodar/pdfiles/AcqValn.pdf.
154
Comcast 10-K 2016
155
Bloomberg Terminal <CMCSA> <CORP>

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54

Net Present Value

The Net Present Value formula (NPV) is used to determine the profitability of a projected
investment/project.156 The NPV formula was used to assess whether or not the proposed strategy
would result in a profit or loss for Comcast. To determine the NPV of the proposed acquisition,
first the cash flows were determined using the revenue from T-Mobile and Comcasts respective
income statements for the previous six years and calculating the geometric growth rate. 157 Next,
the calculated Growth rate of each firm was used to project the next five years of revenues.
These revenues were then used as cash flow inflows in a Net Present Value formula. The same
calculations are done for Comcast as well as T-Mobile to serve as a comparison between the two
companies. The calculations are as follows:

T-Mobile Revenue (In


Year Percent Change
Millions)
2016 $37,242.00 16.19%
2015 $32,053.00 8.42%
2014 $29,564.00 21.06%
2013 $24,420.00 53.01%
2012 $15,960.00 -22.60%
2011 $20,620.00
Arithmetic Average=15.22%
Geometric Average=12.55%

Comcast Revenue (In


Year Percent Change
Millions)
2016 $80,403.00 7.91%
2015 $74,510.00 8.34%
2014 $68,775.00 6.37%
2013 $64,657.00 3.34%
2012 $62,570.00 12.05%
2011 $55,842.00
Arithmetic Average=7.60%
Geometric Average=7.56%

156
Kurt, Daniel. "Net Present Value - NPV." Investopedia. April 25, 2016. Accessed April 20, 2017.
http://www.investopedia.com/terms/n/npv.asp.
157
Bloomberg Terminal TMUS <FA>

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55
T-Mobile Revenue
Year Percent Change
Projected (In Millions)
2022 $75,705.28 12.55%
2021 $67,263.17 12.55%
2020 $59,762.46 12.55%
2019 $53,098.18 12.55%
2018 $47,177.04 12.55%
2017 $41,916.20 12.55%
2016 $37,242.00

Comcast Revenue
Year Percent Change
Projected (In Millions)
2022 $124,521.92 7.56%
2021 $115,766.67 7.56%
2020 $107,627.01 7.56%
2019 $100,059.66 7.56%
2018 $93,024.38 7.56%
2017 $86,483.75 7.56%
2016 $80,403.00

To calculate the NPV formula: first the discount rate was calculated
using the weighted average cost of capital or WACC.

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<TMUS> Input Value <CMCSA> Input Value
56
RE cost of equity .042422 RE cost of equity 0.142586
RD cost of debt 0.053 RD cost of debt 0.046178292
E/V weight in equity 39.61% E/V weight in equity 46.91%
D/V weight in debt 60.39% D/V weight in debt 53.09%
Tc effective tax rate 37.26% Tc effective tax rate 36.98%
WACC/Discount Rate 3.88% WACC/Discount Rate 8.23%

<TMUS>Input Value <CMCSA> Input Value


BETA 0.21 BETA 1.23
RFR (10-YEAR U.S. 2.18% RFR (10-YEAR U.S. 2.18%
Treasury as of 04/18/2017 Treasury as of 04/18/2017
MR (large cap stocks) 12% MR (large cap stocks) 12%
CAPM/Cost of Equity 0.042422 CAPM/Cost of Equity 0.142586

= /

T-Mobile 2016

Income Tax Expense Pretax Income Effective Tax Rate


(in millions) (in millions)
$867.00 $2,327.00 37.26%

Comcast 2016

Income Tax Expense Pretax Income Effective Tax Rate


(in millions) (in millions)
$5,308.00 $14,353.00 36.98%

Capital Structure T-Mobile

Weighted Percent

Total Debt 2016 27,800 60.39%


Total Equity 2016 18,236 39.61%

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57

Capital Structure Comcast

Weighted Percent

Total Debt 2016 61,046.0 53.09%


Total Equity 2016 53,943 46.91%

Cost of Debt T-Mobile

Interest Expense, Net Total Debt Cost of Debt

1,469.0 27,800 0.053

Cost of Debt Comcast

Interest Expense, Net Total Debt Cost of Debt

2,819.0 61,046.0 0.046178292

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58

Once the Discount rate was calculated next the Net Present Value of the acquisition was
determined using the projected revenue cash flows for the next five years in addition to the
calculated discount rate and, (for T-Mobile) the initial investment which was determined by
looking up T-Mobiles US Enterprise Value of $75.69 Billion as of 04/18/2017.158

Value Value
Input T-Mobile In Millions of USD except Input Comcast In Millions of USD except
for Discount Rate for Discount Rate
Discount Rate 3.88% Discount Rate 8.23%
Enterprise Value/Initial $(75,690.00) Cash flow in year 1 $93,024.38
Investment
Cash flow in year 1 $41,916.20 Cash flow in year 2 $100,059.66
Cash flow in year 2 $47,177.04
Cash flow in year 2 $107,627.01
Cash flow in year 2 $53,098.18
Cash flow in year 4 $115,766.67
Cash flow in year 4 $59,762.46
Cash flow in year 5 $124,521.92
Cash flow in year 5 $67,263.17
NPV $195,238.64 NPV $424,442.63

NPV Red Thread:

After conducting an NPV analysis of both Comcast and of the acquisition of T-Mobile
the results show that should Comcast acquire T-Mobile the theoretical projected cash flows at the
end of five years for the entire firm would increase to $619.68 billion with T-Mobile accounting
for $195,238.64 or 45.9988% of projected revenue.

158
"T-Mobile US Enterprise Value:." YCharts. Accessed April 19, 2017.
https://ycharts.com/companies/TMUS/enterprise_value.

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59

MANAGERIAL IMPLICATIONS

Value Chain Analysis

Operations

During April 2017, T-Mobile purchased the most spectrum in the auction that FCC held,
spending a total amount of $ 7,993,361,993. This spectrum is categorized as the valuable low-
band which works more efficiently and faster in rural areas and indoors. The auction sold
spectrum bundles in seven 10Mhz Bands. Spectrum was sold in a bundle of seven 10Mhz bands
which operate for specific regions. The total amount of licenses that T-Mobile bought was 1,525
while AT&T only bought 23. However, the total amount of money that AT&T spent for these 23
licenses was $910 Million ($40 Million per License) while T-Mobile spent around $5.2 Million

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60

per license159.T-Mobile now has control of Spectrum nationwide which leaves them in a superior
position in the future compared to AT&T and Verizon. 160

Marketing and Service


Refer to the implications mentioned within the strategy. The acquisition will be the focus
of advertising efforts in addition to the quadruple play brought about by the purchase. The
customer service programs from T-Mobile will be carried over through the promotion of Callie
Field to the head of customer service.

Competitor Dynamics

With Comcast being just one of a few major companies looking to acquire T-Mobile,
competitors will be exploring every option to stay competitive. Now offering wireless phone
services, Comcast is jumping to the top of the quadruple play playing field. With its July 2015
purchase of DIRECTV, AT&T was able to provide customers with television, wireless internet,
home phone, and cellular phone services. 161 With there being difficult barriers to enter the
industry, Comcast can anticipate a strong reaction from other operators in the field. In order to
retain their current customers along with obtaining new ones, competitors may look into
reevaluating their pricing strategies and revamping their marketing communications strategies.
Additionally, players in the industry may visit incentive options attracting consumers to their
respective company and services. If Comcast can put together a strong marketing
communications strategy after the merger, they have a very secure chance of keeping their strong
competitive advantage in their current market, as well as creating one in their new market.
Due to the nature of competitors in the cable provider industry pushing one another to
grow, other major players may retaliate by engaging in similar acquisitions and mergers. With
majority of the firms competing with one another on the basis of new product offerings as a
marketing tactic to attract or retain customers, customers will be willing to pay for the increased
product offerings. With innovation being another competitive factor, competitors will also likely
be focusing more on research and development, with possible earlier releases of new
innovations. Wireless telecommunication service provider giants such as Verizon, and AT&T
may likely also retaliate through lowering of plan prices. A stronger, increased marketing
strategy by Comcast and T-Mobile will capture the attention of prospective customers and
leverage the acquisition.

Stakeholder Consideration

Employees: Comcast employees specifically will be positively impacted by the integration of the
acquired firms company culture. T-Mobile puts a special emphasis on taking care of its
employees, as well as promoting diversity with its employees.

159
Mills, Chris. "T-Mobile got an amazing deal on its $8 billion spectrum haul." BGR. April 17, 2017. Accessed
April 2017. http://bgr.com/2017/04/17/t-mobile-spectrum-vs-at-t-verizon/.
160 Mills, Chris. "T-Mobile got an amazing deal on its $8 billion spectrum haul." BGR. April 17, 2017. Accessed

April 2017. http://bgr.com/2017/04/17/t-mobile-spectrum-vs-at-t-verizon/.


161
Dallas, Texas, Jul 24, 2015. "AT&TNewsroom." AT&T Completes Acquisition of DIRECTV | AT&T. July 24,
2015. Accessed April 19, 2017. http://about.att.com/story/att_completes_acquisition_of_directv.html

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61

Consumers: Consumers will receive one of the most positive impacts with this recommendation.
One of Comcasts most prevalent weaknesses is their customer service reputation. Conversely,
Customer service is one of T-Mobiles greatest strengths. By implementing T-Mobiles customer
service methodology into its own current practices, Comcast customers will be much more
satisfied with the service they receive in that regard.

Shareholders: Assuming cultures dont clash and pricing strategies are correct, shareholders can
expect to benefit from the acquisition. They can expect a larger client base, therefore a rising
stock price.

Ethical Framework

Nowadays, in the changing business workplace, people often face unacquainted situations
that present ethical dilemmas. According to the ethical framework theories, the utilitarian theory
is the most suitable theory when it comes to Comcast Corp.s workplace. This theory highlights
the values of an action on the stakeholders (parties who are impacted by the outcome of the
actions) within the company. Based on the related diversification strategy, which involves an
Acquisition with T-Mobile, Comcast has taken stakeholders in consideration in making the
decision. The recommendation was made in favor of the company which allows it to be more
profitable for the next upcoming few years.

Marketing Communications

After acquiring T-Mobile, Comcast will have to advertise the current customers and the
new customers that T-Mobile will bring. Customers from T-Mobile will get a text and a
newsletter announcing the acquisition and the benefits of it. The customers will get an offer that
allows them to switch from the current services to the quadruple play that Comcast will launch.
Comcasts custom customers will also get an offer to switch their phone service to T-Mobile and
getting the Quadruple play. However, the Quadruple play is not a mandatory service and it will
only be available in the Areas that Comcast has cable reach. There will be an immediate
emphasis in communicating consumers that the T-Mobile brand will be under Comcast
ownership. These include both traditional digital and traditional print advertising channels.

CONCLUSION

Despite having a reasonably strong competitive position within the industry, Comcast
still has room to grow and increase their revenue. With the availability to emerge into new
markets by utilizing a related diversification strategy, Comcast has a great opportunity with
acquiring T-Mobile. Considering that the cable provider industry in a late maturity stage,
acquiring a wireless cellular service provider can open up a lot of doors as far as revenue
increases and expansion in subscriber base. Comcast should utilize the customer service methods
of T-Mobile to enhance their brand image, and turn one of their weaknesses into a strength.

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62

WORD COUNT BREAKDOWN

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63

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