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OnScreen Media Summit: Reif Cohen Likes Comcast-NBCU Deal

New York - Bank of America Merrill
Lynch media analyst Jessica Reif Cohen called Comcast's potential deal
to acquire a majority interest in NBC Universal could create
"incredible" value for the MSO, but added that a failed deal could hit
the stock hard.

Published reports indicate that Comcast would acquire a 51% interest
in NBCU, for about $6 billion in cash and the inclusion of its own
cable networks into the partnership.

At the Second Annual Broadcasting & Cable/ Multichannel News OnScreen Media Summit
here Wednesday, Reif Cohen said that the deal on its face appears to be
"a very accretive, positive deal that will really drive growth." And it
appears to be structured in a way that minimizes the financial impact
on Comcast -- it involves little cash, they get to include their own
second tier networks at a healthy valuation and no stock is involved.

"This has [Comcast chief financial officer] Mike Angelakis's fingerprints all over it," Reif Cohen said.

While the mechanics of the deal seem to favor Comcast, Reif Cohen
said that the deal also removes a specter that has hung over Comcast
since its failed bid to acquire Disney in 2004 -- that Comcast would
spend big money to acquire a cable company. And if the deal falls
through, that overhang will return in spades.

"They [Comcast] have always made it clear they wanted to go into
content," Reif Cohen said, adding that if the NBCU deal falls through
"the cat is out of the bag," and the market will continue to focus on
the MSO's content aspirations. 

That added pressure can't be good for a sector that is already trading at historically low multiples.

Reif Cohen said that she is still bullish on cable stocks --
although they did disappoint a bit during the recession - adding that
their strong free cash flow and revenue growth belie the stocks' 4.5 to
5 times 2010 estimated cash flow multiples.

She pointed to Cablevision as a top stock, adding that its planned
spin of MSG will remove capex requirements for the Madison Square
Garden Arena and make the company more of a pure play cable issue.

On the programmers' side, the declining advertising market has hit
stocks hard, but there are signs of growth, especially those companies
that have an international presence.

The analyst pointed to News Corp., which derives about 45% of its
revenue from outside the U.S., as a top pick. And Discovery
Communications, which gets about one-third of its revenue from outside
the country, is on a strong growth track, she added.

While ratings and growth have been strong at Discovery's core
networks like Discovery channel and Animal Planet, its smaller networks
like Investigation Discovery and the Science Channel have even stronger
upside. She estimated that those smaller networks could see upside of
as much as $300 million in cash flow.