Did Comcast Overpay for Sky?


One of the stand out sessions of this year’s New Video Frontiers was our analysts panel, where Arete Research’s Will Milner and Liberum’s Ian Whittaker gave the city’s view on the wave of M&A activity we’ve seen in our industry. Milner and Whittaker gave their frank takes on the motivations behind the mega deals we’ve seen over the past year, including Disney/Fox, AT&T/Time Warner, and Comcast/Sky, asking whether Comcast overpaid for the British broadcaster. The pair also discussed the tech giants, and argued why many of their stock are massively overvalued. Below is a transcript of their discussion, which was moderated by MTM’s Jon Watts.

Watts: What’s going on with this wave of M&A activity sweeping the industry?

Milner: What is driving all of these deals? The first point I guess is they’re all being driven out of the US, so you probably need to start at the US. I’d say the second point, no big surprise, but fragmentation of viewing, particularly amongst younger audiences, is particularly acute in the US. We’re seeing studies that viewing of traditional TV amongst under 25s is probably down 40 percent since 2010. There’s lots of data and surveys around that, people can dispute the data, I think Nielsen might dispute that, but that’s a big issue in terms of how you fill the funnel of new TV users in the US. And I think the whole business model in the US, the big bundle, the linear bundle of 200 networks has become far too expensive over the years. The business models of wholesalers bundling together networks, selling those networks to distributors, getting annual escalator fees for their content despite ratings down in high single digits every year is a business model that needs change ultimately. It’s been amazingly successful, four out of five US homes take pay TV, they pay over $100 a month for it, but with all the other alternatives out there that model needs to change, and you’re now seeing cord cutting running at between three and four percent a year, so structurally there’s some big issues in US pay TV.

Watts: So fundamentally your view is that the wave of mega deals, driven from the US predominantly, is being driven by the weakness of the US market?

Milner: The weird thing is you can’t yet really see it in a lot of the financials. So affiliate fees continue to be very healthy in terms of revenue growth. For the content owners advertising’s held up very well. But there’s just this sense that we are nearing a tipping point, and a fear that there might be faster acceleration of customer losses ahead. So these companies ultimately are, I think, trying to preserve the traditional TV business model that’s a hugely cash generative cash cow. And they’re trying to buy new companies, acquire new skills sets for the new world that media is going to become over the next ten to twenty years.

Watts: Do you think investors are generally positive about the impact of these deals? Do they see them as a sensible response to the current predicament of these businesses?

Milner: Every deal is obviously a bit different, and clearly the price paid is hugely important. I think the investment community understands the issues with the traditional TV model in the US, I think they understand the issues around affordability. I think they’re baulking at the prices that are being paid. And I think the prices that are being paid signify a problem around the corner that we can’t yet see. I think that’s the fundamental issue.

Whittaker: I think much of what Will has said I’d be in agreement with. I think there’s a couple of points I would add – I think it’s absolutely right that the M&A activity has really been driven by the States. To a degree a lot of that is just because of the nature of the European market. Content tends to be very local, so you’ve obviously got different nationalities and it doesn’t really make that much sense to have brand European free-to-air broadcasters. There’s not that much in the way of synergies, there are some in terms of pay TV as you’ve seen with Sky, but again not necessarily a huge amount when it comes to the business model and so forth.

I‘d perhaps be a little more optimistic than Will on the traditional media side and what’s happening there. I think in terms of the M&A side it definitely is being driven by fear and uncertainty as to where the business models are going in the future. If you look for example at the bid for Sky, Comcast and Disney has slightly different approaches as to why they wanted that assets. So if you were Comcast, you wanted to increase percentage of revenues that come from outside the US cable business, so you’re diversifying your revenues. If you look at Disney, it’s a very interesting model that they’re now formulating, which is to go direct to consumer. So they say we’ve got this range of content, traditionally we’ve sold everything through this the traditional pay TV operators, but now we’ve got to be as it were a Netflix style model, where we actually have that interaction with customers.

I think one question which will be interesting over the next five to ten years is: is it that essentially younger audiences are moving away from TV style content, or is it that they’re just watching it in different formats? So for example if you take the BARB research that was published recently in terms of Project Dovetail, if you look at the audience uplift that you get when you account for device, tablets, mobile, PCs etc, take sports and dramas, you’ve probably got about four to five percent uplift at most. If you take something like Love Island, you get a 25 percent uplift in terms of the audience once you take into account the devices. And this I think is one of the big problems for the TV industry.

Is it a question that younger audiences aren’t watching their content? I think that’s not so much of an issue as the measurement issue. They’ve not been able to measure the watching on these devices, and therefore because you’re not able to measure it you can’t monetise it properly.

So the evidence that seems to be coming so far is that it’s not as though younger audiences and millenials have suddenly decided they’re going to watch videos of dancing cats 24/7. They still want that content, the question is how they’re watching that content. And one question I would have in terms of the disruptors, the FAANGs and so forth, is I think it all looks OK at the moment (though there are some questions marks about their business models), but for the three to five year view, the real question is for the FAANGs, can Facebook’s valuation be justified by the amount of advertising revenues it can gain? There’s a case to be made that it can’t. For Netflix, can it continue to have that level of subscriber growth? Answer: probably not.

Watts: Let’s look at Comcast/Sky, the obvious mega deal that’s just taken place. Has Comcast massively overpaid? It’s a huge premium over share price as was.

Milner: I think on any normal financial measure they’ve overpaid. They’ve paid £30 billion for a business that generates £600-800 million of cash a year. That’s forty times cash flow. That the sort of multiple you would put on a high growth startup. Sky is a fantastic company and highly innovative, but it’s a mature satellite distribution in large part across its markets.

So I think for Comcast it’s purely about diversification at this stage,they’re not going to change the business model, they wanted direct customer relationships, they are intrigued by the Now TV platform, they are impressed with AdSmart. But the multiple paid ignores some of the risks inherent in Sky’s business model. A lot of its content is rented it’s not owned, the cost of Premier League rights depends on another BT or somebody emerging to drive those costs up in the future. HBO is a big supplier of content, what happens with with HBO content going forward and AT&T’s intentions there. And obviously we know that Disney Fox is going to put its arms around its content going forward and that content is going to become more restricted.

So there’s some risks around Sky’s business model and the sources of Sky’s content which Comcast will look at and say “that’s fine, we will invest more in original productions, we’re going to backstop that and use our financial heft to support it,” which i think is great. But I think ultimately have they overpaid? We’ll find out in a few years but it’s a big old price that they’ve paid.

Watts: Ian I read your notes every morning with great interest and I know you’ve been fairly bearish about Sky for a while. Presumably you agree with Will’s analysis which just raises the obvious question: why had they paid such a huge price?

Whittaker: Again, if you look at any financial metric it’s hard to justify the price.

Watts: So what explains it?

Whittaker: It’s strategic. Again it comes back to this point: if you are Comcast you are worried about the trends that you’re seeing within the US market and you want diversified revenue streams. I heard recently that the story which everyone mocks, that the Comcast CEO was in a taxi and sort of thought “Sky’s such great product” is apparently true. So there you go, you make a big deal based on that.

But I think if you if you are Comcast, it’s not just necessarily the Sky business itself, it is this whole thing of what you can bring back to the US. I guess if you were to look at European market that’s closest to the US in terms of the structure and nature of households, you’d say the UK is closest. And you’d argue Sky’s done a reasonably good job of blunting the impact of what’s happened with Netflix. I mean it’s still seeing mid-single digit revenue growth, it’s still seeing double-digit operating profit growth in an environment where the pay-tv market in its three core markets, Germany, Italy and the UK, is stagnating. And it’s becoming harder to get more money from customers.

Watts: It’s lot of money to spend for something that you hope will transform your US business and Comcast has on-boarded Netflix as well onto their TV platform. So do you really think they’re expecting that somehow owning Sky and the Sky management team will transform a Comcast business back at base and help them deal with some of the weaknesses in their domestic market?

Milner: I think initially no. I think the Comcast cable business in the US is seven times bigger than Sky, it’s hugely cash generative. Sky is as far as we can see a chip, and the context of this is obviously Comcast and the Roberts family have rolled up cable companies for 50 years in the US. In 2015 they lost out on Time Warner Cable, they lost out to Disney on the Fox assets. The moment they backed down from that and you just got the feeling that there was no way they were going to walk away from the Fox carve up with nothing. So there’s some context in terms of where the deals come from.

Watts: And I guess to Ian’s point, is this partly about the scarcity value of assets like Sky? If you’re Comcast and you’re very cash generative, you’re a huge business you’re looking for homes for that cash and ways to transform your business and find and unlocked new growth, there’s not much else you can do with that money. Sky is one of the last assets left.

Milner: Yeah, I think if you if you’re looking for international diversification and a platform from which you can build that has an established customer base (23 million customers) the list is very very short.

Whittaker: I think what’s important as well in terms of Comcast is that there’s the the business that you

have at the moment and the business that you can have in the future. And that 23 million customer base is huge. If you look at a traditional pay TV business you would say it faces challenges. But if you’re Comcast and thinking on a five-ten year view, and thinking more more of the content providers are going direct to the consumer, that has a risk and possibly also has an opportunity in terms of saving costs on the side of things, but having that direct relationship in the future are there any more ways I can monetise this content?

It’s interesting, you take free-to-air broadcasters – increasingly if you listen to them, the argument is “we have our content, we monetise through TV advertising revenues, we may have done a bit in terms of content sales”. You look at their argument now, it is “we have TV advertising, we have online video advertising which is an entirely new market, retransmission revenues, content, addressable TV, direct to consumer, selling products etc”. So I think for Comcast that’s probably how they’re looking at things in the future. There are more and more things to sell to these customers, the key thing is you need that customer base in the first place. Sky really gives you that, it’s one of the few assets that does.

Watts: Let’s have a little look at what’s really happening in terms of the deals in the States. You will sometimes hear people in the industry talk about the fact that lots of these deals are basically being driven by cheap credit. The strategic rationale is not something that really stacks up, or at least it is a kind of post-hoc rationalisation – this is all about low interest rates, people looking for home, too much money sloshing around the system. Is there any truth in that or is it a complete red herring?

Milner: I think tax reform in the US has been a massive driver of these deals. I mean Comcast was already a fabulously cash generative cable company. I think to then slash corporate tax rates to give a full deduction for the investment they make in their cable network every year, that has probably boosted their cash flow two or three billion dollars every year. So if you’re sitting there as Comcast and you’re generating twelve thirteen billion dollars of cash a year, and you’re thinking about making an acquisition, you’re seeing interest rates going up which is now what’s happening, money is still very very cheap and these deals are generally debt financed.

Obviously Disney/Fox is a bit different, but now is the time to do them, you’ve been given a windfall, you’ve got interest rates going up. There’s a lot going on in the industry that we’re talking about in terms of how you make a shift from traditional to direct-to-consumer, but you’ve kind of got to go now.

Watts: Ian, are you on the same page?

Whittaker: Yes I would say the cheap credit is an enabler, rather than necessarily the primary driver. What it’s probably allowed these companies to do is actually do deals that maybe they wouldn’t have done in the past because the economics wouldn’t have worked. These companies could have used the cash for other things – they could have used it to buy back shares which is increasingly popular, they could have paid it out in dividends, in some cases they could have increased the wages for employees and so on. So they’ve not just thought “we’ve got this cash, let’s go and spend it on something”. Some companies do because some managements are incentivised by earnings per share growth, and in an age of cheap credit if you can borrow low and buy some assets you naturally boost that number.

Watts: So it’s not unhelpful. Now let’s turn and look at the different types of deals. So the obvious big deal which has taken place is AT&T/Time Warner, it’s got the Department of Justice’s clearance so the deal is now going ahead. There seems to be a lot of confusion over what this deal is actually about. You can certainly read analyst reports saying that it seems very hard to take a horizontally distributed business which sells its content to everyone and somehow withhold their content to benefit your own TV business. In other words you’re probably just going to destroy more value than you create. We heard views earlier today that this deal is really about advanced advertising, it’s about unlocking the potential of addressable TV around those assets. AT&T/Time-Warner – what’s really happening there, what’s the logic?

Whittaker: I think there’s a mixture of things. First of all it’s convergence, in the sense that if you are telco company and you’re thinking about where things could go, you’re thinking is there a risk to my customer base from people deciding to go with a cable operator rather than telco operator. Traditionally cable operators, though in the US their reputation is bad, have had a bit better service quality than telco operators.

If you look in the UK, BT got into content because Sky was cannibalising its customer base when it was able to offer triple play. That is definitely an aspect. Again there’s a bit of a fear factor sort over where things go, the market penetration is high so again essentially if you want to make more money effectively you’ve got to consolidate the market.

I’m sceptical about addressable TV. It gets talked up a lot, but it’s very interesting when you go back to when Sky were talking about addressable TV a number of years back, what they were very clear about and they’ve always been clear about is saying addressable TV doesn’t really cannibalise TV advertising revenues.

Watts: Because it’s new advertisers.

Whittaker: What it essentially cannibalises is direct mail. It’s essentially another way of targeting the customer directly just as you would with a mail shot. That’s fine, it pulls in SMEs that you wouldn’t have got before with TV advertising. But direct mail is not a huge market, it’s not a game-changer. So it’s nice to have but not necessary. The more interesting point I think for that and again it goes back to the you know the Facebook’s and so forth, you look at Facebook in terms of our ad revenues and what is really their strength is a long tale of SME customers. What you’re increasingly seeing now in addressable TV similar to what the broadcaster’s are talking about with their video on demand products, what the likes of JCDecaux are talking about with some of their digital screens: a lot more effective targeting at particular times of the day. And what they’re saying is that then allows them to actually target SMEs by saying for 10 or 15 minutes you can buy this screen.

Watts: Just to be clear what you’re saying is that we can’t explain a sort of AT&T/Warner mega deal by saying it’s about addressable advertising, it’s about buying up some again scarce assets as a hedge against future risk?

Milner: I would agree. Those owning content and distribution under one company has always been a tough act to explain. I mean Comcast obviously bought NBC from GE at a knockdown price, one of the best deals in media for years and years and years. AT&T bought DirecTV and now obviously Time Warner, its got a hundred and eighty billion dollars in debt which it can service because debt’s cheap, it’s doing it because they’re cash generative, and those businesses can then support AT&T’s dividend which has gone up every year for 30 years. So you know the motivations I think are very different. I think AT&T faces a problem because it’s basically using video to support the wireless business, it’s bundling DTV with Wireless, it’s discounting DTV very very aggressively to the point that video gross profit having bought DTV has gone from nineteen billion to fourteen in two years.

That’s a catastrophic that level of discounting. So to kind of explain this deal away as “its advanced advertising” – you look at the numbers and you think this is not washing. You’ve basically shored up the dividend for these massive acquisitions and you’re now trying to back-fill it with an explanation around advanced advertising which I think people are rightly sceptical of, given the track record AT&T has.

Watts: And the other explanation which is very commonly referred to in the press is that companies are buying up assets which can fuel their desire to create international Netflix style direct to consumer subscription businesses. Disney/Fox is probably going to roll out a kind of Netflix wannabe, AT&T is doing the same. Do you buy that as a rationale for these deals?

Whittaker: Yes I think that’s what the company managements are thinking. Again there is this whole fear factor. They’re wondering where the traditional pay TV model goes, where do I actually get the route to my customer, so therefore you had to go more direct-to-consumer. Again there’s a question mark though of how many subscription services the customer will take, and how much they’re prepared to pay. And I think the other thing that also gets missed in this debate, and it’s probably a feature of the fact that we are not representative of the general population by any stretch of imagination, is services such as pay TV tend to be a lot stickier because when it comes to TV people are actually quite passive in their forms. I think there’s a stat that I once saw that if you take for example time shifted TV, more than half of Americans actually sit through the ads even though they could fast-forward, and I’m sure for the UK it’s the same. You come home, you sit in front of the TV, it’s quite easy to do.

Watts: These have become very entrenched behaviours.

Whittaker: And that’s very very difficult to change. And sure it can change, and it can change over time, but you’ve really got to have a gangbuster product.

Milner: I think the other thing is to build that direct consumer business, you’re faced with a decision as to whether you cut off the licensing of content, know which currently has been gravy for these companies. So NBC makes about 200 million dollars a year licensing content. What Disney are doing is saying “we’re going to stop licensing to Netflix, we’re going all-in. “We’ve bought the Fox Studios, we bought the cable networks, we’re going to fill out our Disney direct-to-consumer app Hulu and ESPN. Plus and we’re we’re wearing the hit on abandoning those content licensing revenues, which are nearly 100 percent margin, and build this business for the future.”

Watts: Disney/Fox feels very unique in a sense because they have such an enormous range of channels and film labels and production businesses. They have enough assets to keep selling to the US pay TV industry, and globally, as well as rolling out their own OTT.

Milner: I think the really interesting thing with Disney is whether they can defend the traditional model while they’re investing more and more outside it in direct-to-consumer. Because the traditional model is built on an agreement between Disney and Comcast that Comcast pays them more every year for their content, but if you can get that content outside of the traditional TV bundle, why would you sign up to pay more for it every year, which has been the basis of the US TV model for the last two or three decades?

Watts: Let’s talk about the next bit of the equation. What lots of people in the incumbent or traditional media industry would love to believe is that we’re right in the middle of a massive bubble for the FANG companies – that they are ridiculously overvalued by the investment community and rewarded with sky-high share prices. We have trillion-dollar companies, at least one of them. Is there any truth in this?

Whittaker: I don’t think you could put them all as one.

Watts: Which one is most overvalued?

Whittaker: I would say it’s a choice between Facebook and Netflix. Facebook in terms of what you have to assume about their share of advertising moving forwards, the numbers just don’t stack up. You already look at the metrics, you look in terms of what’s happening particularly with younger demographics moving out of the product. The key problem also for them you can now start to see, as has happened if you look on a historical path, they’re now in that sort of vicious circle where effectively they’re being targeted. People complain about their adverts, they come out with more measures, it reduces the efficiency of the product and so on. One comment I had heard was that Facebook for example in the UK in June actually hadn’t seen any growth. Whether that’s true or not I don’t know, but it would suggest the bigger advertisers are perhaps losing faith with the product. SMEs at the moment are still fine.

If you are Netflix, your problem here is that you’re like a hamster on the wheel, you need to actually get your subscriber growth continuously moving forward at high rates, so you have to invest in these big new dramas that attract people into the into the arena. The problem with that is it only takes one or two times when you don’t and essentially your business model then starts to fall apart, your cash flow is very high.

Watts: So these stocks are clearly being valued as momentum stocks, they have to keep showing growth in subscriber numbers revenues and so on. Which one do you feel is the most fairly valued of the FANG quartet?

Milner: I would say probably at this stage Google. I’d slightly disagree, I think Facebook certainly has sold off a lot on the back the data scandals that we’ve seen.

Watts: Biggest ever one day market cap loss.

Milner: Correct, it’s been enormous, the sort of adjustment in Facebook, and actually the multiple doesn’t look horrendous. But I think there’s to your point there’s a massive sense that 40 percent growth which might become 30 percent revenue growth, it might become 20,  actually when you step back you know you can’t support that growth going forward. And what’s built in over the next three years in terms of incremental sales for Facebook is quite scary. So I think people look at it and are pausing for thought. I think with Netflix, Netflix is going burn three to four billion in cash this year, it’s got a hundred and sixty five billion market cap, so you somehow need to go from minus 3.5 burn to over ten of cash for it to make any sense.

Watts: I certainly talk to broadcasters who say this is just not a level playing field. These companies are able to spend money in ways that we can only dream of, they’re awarded with sky-high valuations despite making almost nothing. Is that a fair complaint?

Milner: Well I didn’t buy Netflix because I thought that. But at the end of a day with Netflix, there’s very few media companies that are going to add four billion in incremental sales this year. Netflix will. Equally there’s very few that are going to burn three and a half billion in cash, so your bet on Netflix becomes this slightly tiring debate as to whether 130 million subs becomes 200 or 300 or 400, and whether their RPU [revenue per user] is truly going to be ten dollars in India in ten years time. It becomes an opinion debate rather than anything substantial.

Whittaker: What’s got to be remembered in all this is that Netflix’s model is different from let’s say ITV’s. If you’re ITV you’re essentially looking for a big mass-market audience in your home country: Coronation Street, Emmerdale etc. If you are Netflix, essentially what you have to produce in terms of your hit shows is content that appeals to a global niche. So a Netflix user in the UK, US, Italy, Germany, India, Japan etc, they would undoubtedly have similar characteristics in terms of how they use technology, how they use services and so forth. You don’t necessarily need to get a mass-market audience with those products in each market. All you need to do is essentially build up that niche, and the numbers quickly stack up.

Watts: And the challenge for Netflix specifically is obviously that to justify that valuation they have to keep showing momentum in subscriber growth, and that’s more and more gonna come for international markets because the US is maturing. Does that start to become problematic, can we expect as subscriber growth slows, as it has with Facebook user growth for example, to see their valuation plummet?

Milner: From that valuation absolutely. I think the challenge for Netflix is they’re spending more per customer this year than they were last year. Now if you ask people whether that was the case three or four years ago they’d have been absolutely shocked. But you know Reed Hastings will stand up and tell you that the more cash I burn, the more successful I am. That’s what you’re dealing with, and Netflix is a story stock, you’ve got to jump on and believe. But financial analyses will not get you to that valuation.

Watts: Let’s do European consolidations. Lots of folks here are sitting as employers of European companies, and I think what lots of them want to know is are we going to see more European consolidation in the media pay TV industry broadcast industry, or actually are prospects quite limited?

Whittaker: In pay TV you’ve already seen it. Sky has been doing it for years, same in the cable industry as well with Liberty global, so that that’s already happened. I think if you were to take the free-to-air space, the TV advertising space, then the answer would be no. What all the broadcaster’s will say is that the actual rationale for doing cross-border deals doesn’t really make sense yeah – content is local. Given that’s the biggest part of their spend it’s very hard to actually extract synergies from that, or indeed both on the advertising side and on the cost side.

What you’re more likely to see are deals like you’ve seen for example with RTL and ITV, and what you’ve seen Mediaset, TF1, Channel 4 and so forth, where essentially the broadcasters come together and find common areas that they can cooperate in and advance their interests. If you look at Mediaset and TF1, they’ve got a common advertising house in London which helps out with that. If you look at RTL an ITV, they’re talking more about essentially programmatic sales of TV advertising. What a lot of the video providers, and include the outdoor companies now increasingly, what they are increasingly talking about is the desire to actually go direct to the advertiser. This is not just one company, this is a consistent theme that is starting to come out: what they’re saying is “yes, the media buyers will still remain very important, but actually what we want to do is go direct to the advertiser. It’s a better proposition for us, we take more share of the of the revenues.” And also as well in some cases they feel as though the media buyers have not necessarily advanced their interests. So I think it’s more that aspect you will see.

Watts: Okay so lots of corporations and lots of joint ventures, but not much actual acquisitive or merged activity?

Milner: I think the reality is Europe, certainly when you compare it the US, is just an incredibly fragmented market. so to gain scale by acquisition is gonna take a very long time. And the track record if you look at Vivendi and TI and Mediaset, that didn’t end well. It’s a highly politicised environment, you’ve got regulators in Europe who are focused first and foremost on reducing prices in lots of areas. It’s a difficult area to do business in, so I think partnerships make a lot more sense, and you’re seeing more and more of them.

Watts: For at least for last 10 years people have talked about somebody pouncing on ITV, it hasn’t happened yet. Sky’s just gone – do we see ITV going in the next two-three years? Is the city expecting a deal or a bid?

Whittaker: I I think the city is expecting it is possible. If you were to ask what would be the advantage of doing so you, would say the the share price has come down, so it’s cheaper, and obviously the pound has come down. Those are enablers rather than necessarily big strategic drivers. But ITV gives you dominance in the TV advertising market in the UK, increasingly also in online VOD, increasingly it also gives you a large degree of content. I think a lot will come to the big companies’ views of TV advertising, whether it’s viable or not. And at the moment we’re in that strange pattern where certainly in the city, I think linear TV has been seen as dead for a couple of years, but now we’re maybe starting to see some slight changes in that attitude.

Watts: You’re famously bullish about the prospect of  the free-to-air broadcasters, you’ve got buy buy buy ratings all over them generally speaking, or at least on ITV. Do you think the view has changed?

Whittaker: It’s starting to shift. I think what starting to be realised is this is not just about linear TV. Effectively the broadcasters are TV content providers – and that may seem like a technical phrase, but the key there is that their content can increasingly be shown across all platforms. The advantage there is that essentially you dip into the TV advertising pot, increasingly they’re starting to dip into the online advertising pot.

Milner: I think any company that Liberty Global has a stake in is going to be seen as a target. I like the way ITV are positioning themselves at the moment, I think they’re much more on the front foot – they are aggressively going after some of the myths around digital advertising. I like that, I think that’s what broadcasters should be doing.

Watts: There’s lots of ad tech people here some of them may get bonuses at the end of the year they might have a hundred pounds let’s say optimistically to invest in buying some shares. If you could advise our audience here of a great listed company where should they spend their hundred pounds, lock it up for five years and then take it back having made a great return, what’s your advice?

Whittaker: I think we’ve got to be slightly careful here because otherwise we will be carted off to prison because of the regulators! What I always like in a company where the longer-term prospects are good, but it’s not been appreciated by by the market. I think the free-to-air broadcasters, it’s a very interesting space.

Milner: I would I personally prefer the broadband story over the TV story. It’s simpler, there’s still a lot more growth going in the US, and on that basis we would buy Charter. Second-biggest broadband provider in the US, lots of costs to come out of the business, lots of simplification after they integrate Time Warner Cable, and broadband is easier to understand than TV.


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