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Burke: Fox Assets In Better Shape than NBCU’s Were

Steve Burke, who has had a lead role in integrating assets that Comcast has bought over the years, says most of the businesses it wants to buy from 21 Century Fox are well run, unlike the situation it found when it bought NBCUniversal seven year ago.

Speaking on a conference call to brief analysts on Comcast’s $35 a share bid for Fox assets including its TV studio, movie studio and entertainment cable networks, Burke, CEO of NBCUniversal, said parts of NBC, including its broadcast network, movie studio and Spanish-language business Telemundo were “real turnaround situations” when they were acquired. “A lot of our efforts were in turn businesses around and reinvesting in getting them going.”

By contract, “II think the Fox assets, many of them, are very well run and we have tremendous respect for the executives that are running the Fox businesses,” Burke said.

“To me Fox is different in its more about complementarity. It’s about the fact that we’re very strong in distribution and content in the United States and not as strong in places like India or Europe. A lot of it is making the most of that complementarity and looking for opportunities,” he added.

“Integrations are not easy, but with NBCU I believe we’ve proven we’re good at them at scale. Our team knows and understands the Fox businesses and has delivered outstanding results,” Burke said.

The international business is one big opportunity for Comcast, should it be successful I wresting the Fox assets away from Walt Disney Co., which has already agreed to buy the same Fox assets for stock.

Burke said that about 70% of Fox’s revenue comes from outside of the U.S. Adding the Fox businesses to Comcast’s would raise the share of revenue it gets from international from 9% to 27%, he said.

Comcast CEO Brian Roberts said that his company is building “the entertainment company of the future, a company with vision, assets, leadership, resources and aspirations to help shape our industry and deliver value to consumers and shareholders for decades to come.”

After a court decision on Tuesday cleared AT&T’s acquisition of Time Warner, the media business is poised for further consolidation.

“We firmly believe the truly great media companies of the next century will be large, integrated entities with multiple growth engines across a wide swath of the global entertainment industry,” Roberts said.

Putting together Comcast with Fox also makes sense financially.

Comcast CFO Michael Cavanagh said Comcast’s analysis includes $2 billion in cost synergies. Cavanaugh said that number does not “factor in revenue synergies, which we expect to see, providing some upside to our analysis.”
The acquisition would boost Comcast’s debt substantially, but temporarily, executives said, but would also lead to accretion in cash flow and earnings per share.

“The combined company will have tremendous strategic and financial strength,” Cavanagh said. For 2018, the combined company would have $130 billion in revenue and $40 billion of EBITDA on a pro-forma basis.

“Within the next few years, the combined company will likely exceed $20 billion of free cash flow,” he said.

Burke said it was hard to predict the future, but “one thing we know for certain is that today there’s more video being consumed across more platforms than ever before. We think that’s likely to be the case for many years to come.”

“We think there’s three fundamental tenets of how media will evolve,” Burke said.

“First we’re in a golden age of content with more video consumed than ever before. That will continue as demand for great content keeps increasing.

“Second, the best media companies will create their own content at scale and distribute it very broadly. We won’t be limited to one or two means of consumption. Multiple outlets and technologies will thrive, from pay TV to subscription video on demand to over the top services. And we will have our content on all of these outlets, providing consumers with more choice and value.

“Third, audiences will no longer be confined in individual regions or countries, but rather be truly global. Major IP will seamlessly cross boarders complimented by high quality professional local content tailored to the needs of the specific market,” Burke said.

“We have plenty of scale already. But the Fox assets will make us stronger,” he said.