Falco touts NBC-U deal to investors

Merged assets value to top $15 bil over first 5 years

NEW YORK — NBC Network prexy Randy Falco strutted the Peacock stuff to a group of GE investors at a private Prudential Financial conference in Vermont on Friday, touting a company that could boast among the highest operating margins in the film and TV business after its merger with Vivendi Universal Entertainment.

As part of a daylong review of GE’s myriad industrial and service businesses, Falco told investors that the VUE acquisition will add to its earnings and cash flow from its second full year. The conglom has also indicated to investors that it believes it can create $15 billion in additional value from the combined media assets of the two companies over the first five years.

In the presentation, Falco disclosed that without the Olympic ad windfall, NBC’s total 2003 revenues will clock in at $6.7 billion, down from $7.1 billion in 2002. Nevertheless, operating income from the TV network, station group and cable nets is expected to jump 10% to $1.9 billion. With some $800 million in earnings coming from the network alone, that makes the Peacock one of the most profitable TV ops in the business, a benchmark it hopes to sustain when it closes the VUE deal early next year. The two companies are expected to sign a definitive agreement in early October.

Critically, the addition of Universal will ultimately shift NBC’s revenue stream from 90% advertising to 55% advertising and 45% in licensing and subscriber fees.

The NBC TV Network expects earnings before interest, taxes, depreciation and amortization of $800 million-$850 million this year, making it easily the most profitable among the Big Four nets. CBS’ 2003 estimated EBITDA is just over $300 million.

The NBC TV station group also touts the highest operating margins at 52%.

Falco’s presentation also singled out the success at Bravo. Since NBC bought the cabler from Cablevision last year, the net has grown primetime ratings by more than 20% while adding some 3 million homes to reach 72 million U.S. households. Breakout hits like “Queer Eye for the Straight Guy” have helped the channel boost its nightly ratings by more than 33%, with a $3 million second half sales upside compared to its estimates in May. Increases in both subscriber fees and ad revenue are expected to lift Bravo revenues by 43% this year to $190 million.

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