Digital TV Transition 2009

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EQUITY RESEARCH

Digital TV Transition 2009:Learning from Wilmington, NC

December 12, 2008The Economics of the Digital TV TransitionColumbia Institute for Tele-Information (CITI)

Alan MilesTel: 212-526-4744

Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that thefirm may have a conflict of interest that could affect the objectivity of this report.

Customers of Barclays Capital in the United States can receive independent, third-party research on the company or companies covered in this

report, at no cost to them, where such research is available. Customers can access this independent research at www.lehmanlive.com or can call1-800-253-4626 to request a copy of this research.

Investors should consider this report as only a single factor in making their investment decision.

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 23.


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Agenda

Key findings

Barclays Capital and our interest in the Digital TV Transition

Our Research in Wilmington

Potential implications for the national transition in February

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Key findings

1. Barclays Capital has made investment recommendations in several companiesbased on the transition, but most players are so large relative to the impact ofthis one-off event that the effect is not material

2. Robust demand for converters may exceed NTIA coupon program

3. Digital over-the-air (OTA) reception concerns are well-founded in our view

4. Consumer confusion and frustration is mounting and customer service options

are limited

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Agenda

Key findings




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Barclays Group overview

Barclays PLCBarclays PLCBarclays PLCBarclays PLC

BarclaysCapital

BarclaysGlobal

InvestorsBarclays Wealth UK Retail Banking

BarclaysCommercial Bank

Barclaycard

GRCBWestern Europe

GRCBEmerging Markets

GRCBAbsa

Bob DiamondBob DiamondBob DiamondBob DiamondPresident, Barclays PLC andPresident, Barclays PLC andPresident, Barclays PLC andPresident, Barclays PLC and

Chief Executive, IBIMChief Executive, IBIMChief Executive, IBIMChief Executive, IBIM

Investment Banking &Investment Banking &Investment Banking &Investment Banking &Investment Management (IBIM)Investment Management (IBIM)Investment Management (IBIM)Investment Management (IBIM)

Frits SeegersFrits SeegersFrits SeegersFrits SeegersChief Executive, GRCBChief Executive, GRCBChief Executive, GRCBChief Executive, GRCB

Global Retail & Commercial BankingGlobal Retail & Commercial BankingGlobal Retail & Commercial BankingGlobal Retail & Commercial Banking(GRCB)(GRCB)(GRCB)(GRCB)

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Barclays Capital 16%

Barclays Wealth 6%

GRCB Western Europe 4%

BGI 8%

Barclaycard 12%

UK RetailBanking 21%

Revenue by Business Unit

Barclays CommercialBank 22%

GRCB Emerging Markets 2%

GRCB Absa 9%

H1 2008 PBT split by business. Excludes head office loss.

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Source: Barclays Capital


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Role of Sell Side Equity Research

Our clients are mainly investors such as hedge funds, mutual funds, pensions and

other large institutional investors

Ourfundamental research is the more familiar kind where our analysts makeinvestment recommendations for specific equities (stocks) and sectors

Our non-fundamental research (e.g., this study) looks at broader trends to

improve the quality of fundamental research and to create baskets of securitiesthat let investors buy (or short) a trend rather than buy (or short) the affectedstocks.

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Some questions our clients are asking about the Digital TV Transition

What is the demand for converter boxes?

Which manufacturers will benefit?

Which component suppliers will benefit?What is the demand for antennas?

Indoor antennas who benefits from their manufacture, sales, and service?

Outdoor antennas who benefits from their manufacture, sales, and service?How many over-the-air only households will switch to pay-TV and what will they pay?Can they be served profitably? What about OTA TVs in Pay-TV households?

What will be the effect on broadcasters?

==========================

We are notprimarily interested in public policy, but the potential problems we haveuncovered as part of our study are such that we are making our work available to thepublic free of charge

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Our approach

Created a detailed model to test the effect of different assumptions on theanswers our clients wanted, build a base case, a bull case, and a bear case

Interviewed consumers and retailers in Wilmington, NC, prior to itsbecoming the first-in-the-nation to end analog OTA TV

Published Digital TV Transition 2009:Disruption for Consumers,Gains for Targeted Players on

September 8th. 2008, to coincidewith the end of analog broadcastsin Wilmington

Followed the news from Wilmington and public announcements from localPay-TV providers

Published Digital TV Transition 2009 II: Learning from Wilmington, NC, onNovember 24, 2008

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Agenda

Key findings




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Wilmington, NC, information

North Carolina

Wilmington City and DMA

Two market studies:

1) Channel checks, store visits, and in-store interviews in June, 2008

2) Close analysis of all public data from US government and interestedparties since Sept 8

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Source: Barclays Capital


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Wilmington, NC, information (contd)

DemographicsDemographicsDemographicsDemographics TV-related dataTV-related dataTV-related dataTV-related dataPopulation 413,724 TV households 180,000Density/square mile 110 Pay TV penetration 93%Area (square miles) 3,736 DMA rank 135Avg household size 2.42 Broadcasters 4Poverty rate 15.2% Cable providers 6Percent of US pop 0.14% OTA-only households 12,600Avg HH disposable income $44,741 Coupons ordered (as of 11/11) 25,000Income percent of US avg 83% Coupons redeemed (as of 11/11) 17,000

Source: Census Bureau, NTIA, Nielsen, and Barclays Capital

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Coupon redemptions (i.e., sales of converters) in Wilmington wereconcentrated in a short period

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

01-Jan-08

15-Jan-08

29-Jan-08

12-Feb-08

26-Feb-08

11-Mar-08

25-Mar-08

08-Apr-08

22-Apr-08

06-May-08

20-May-08

03-Jun-08

17-Jun-08

01-Jul-08

15-Jul-08

29-Jul-08

12-Aug-08

26-Aug-08

09-Sep-08

23-Sep-08

07-Oct-08

21-Oct-08

04-Nov-08

18-Nov-08

Coupons per week

Weekly avg daily orders Weekly avg daily redemptions

Wilmingtontest

announced

Wilmington endsanalog

broadcasts

~ 25% of coupons

redeemed in 21 daysaround the transitionday

~30% of coupons wereredeemed after the end

of analog broadcasting

Source: NTIA

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Some findings from our qualitative research

17% of the people we interviewed on the street expressed anger at the transition

in general. Our survey did not ask any questions about this

The small sample of people we found who had already bought and were usingconverters had lost one (of four) channels and were ok with that

The FCC lavished resources on Wilmington (i.e. every big retailer was visited by a

team from the FCC) but retailers routinely were mistaken about importantaspects of the transition in stores we visited

Awareness and community involvement were high

Source: Barclays Capital survey, June 2008

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Agenda

Key findings




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US TV Universe used in our models

Households in the US (millions) TVs in the US (millions)

Source: FCC, NEA, CEA, Nielsen, and Barclays Capital estimates

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Pay TV onlyPay TV with some OTA TVs

Over-the-air (OTA) only


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Finding #1: Robust demand for converter boxes and antennas

Converter demand scenarios (Millions) Antenna demand scenarios (Millions)

Source: Barclays Capital estimates

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The NTIA coupon program may have funding issues in February withdemand at the levels we project

0000

10101010

20202020

30303030

40404040

50505050

60606060

70707070

Nov 19 Dec 17 Jan 14 Feb 11 Mar 11 Mar 31

ExpiredExpiredExpiredExpired RedeemedRedeemedRedeemedRedeemed OutstandingOutstandingOutstandingOutstanding Requested but not mailedRequested but not mailedRequested but not mailedRequested but not mailedCoupons(millions)

50.0

45.3

40.6

35.0

54.7

58.2

50.5 millionlimit formailing

62%56%49%43% 68% 72%Percent ofredemption fundspent

February 17 transition

Source: NTIA data and Barclays Capital estimates

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Finding #2: No bonanza for Pay-TV providers

Pay TV scenarios (Millions)

Valuation of 1.7 million new subs = $3.7billion

Adding lifeline subs is a more or lessbreakeven proposition

Operational disruption and unforeseencapital expenses are risks that aredifficult to quantify

Source: Barclays Capital estimates

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Finding #3: Digital reception is a serious problem

Problem withconverter boxes 18%

Did not yet have acoupon 10%

Other problems 5%

Aware but had notyet acted 9% Reception

problems

53%

Unaware oftransition date 5%

Does not include calls made to first responders, local TV stations, city halls, etc

Breakdown of calls to the FCC Wilmington was supposedto be a layup

-It is physically small-It is flat-It lacks tall buildings- It has un unusually low

number of OTA-onlyhouseholds

Source: FCC and Barclays Capital

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The digital footprint covers a smaller area that the older analogsignals did

AtlanticOcean

SouthCarolina

North CarolinaGood analogcoverage butspotty digitalcoverage

Good digitalcoverage

25 miles

Wilmington DMA

FCC data excludesreception problems outsidethe Nielsen-defined DMA

Source: FCC and Barclays Capital

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DMAs with similar populations cover larger areas

Good analogcoverage but spottydigital coverage

Good digitalcoverage

No coverage

25 miles

Wilmington DMA

Amarillo, TX DMA superimposed on Wilmington DMA

Source: FCC, Nielsen, Barclays Capital

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Finding #4: Consumer confusion is mounting and customer service optionsare limited

Source: FCC , newspaper reports, and Barclay Capital estimates

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Calls recorded


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Important Disclosures (continued)

Stock Rating

1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-monthinvestment horizon.

2-Equal weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.

3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-month

investment horizon.

RS-Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or tocomply with applicable regulations and/or firm policies in certain circumstances including when Barclays Capital is acting in an advisory capacity ina merger or strategic transaction involving the company.

Sector View

1-Positive - sector coverage universe fundamentals are improving.

2-Neutral - sector coverage universe fundamentals are steady, neither improving nor deteriorating.

3-Negative - sector coverage universe fundamentals are deteriorating.

Sector View

1-Positive - sector coverage universe fundamentals are improving.

2-Neutral - sector coverage universe fundamentals are steady, neither improving nor deteriorating.

3-Negative - sector coverage universe fundamentals are deteriorating.

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Important Disclosures (continued)

Distribution of Ratings:

Barclays Capital Equity Research has 1077 companies under coverage.

39% have been assigned a 1-Overweight rating which, for purposes of mandatory disclosures, is classified as a Buy rating,

43% of companies with this rating are investment banking clients of the Firm.

46% have been assigned a 2-Equal weight rating which, for purposes of mandatory disclosures, is classified as a Hold rating,

40% of companies with this rating are investment banking clients of the Firm.12% have been assigned a 3-Underweight rating which, for purposes of mandatory disclosures, is classified as a Sell rating,

31% of companies with this rating are investment banking clients of the Firm.

Barclays Capital offices involved in the production of Equity Research:

New York, Barclays Capital Inc. (BCI, New York)

Tokyo, Barclays Capital Japan Limited (BCJL, Tokyo)

IRS Circular 230 Prepared Materials Disclaimer: Barclays Capital and its affiliates do not provide tax advice and nothing contained herein should beconstrued to be tax advice. Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is notintended or written to be used, and cannot be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support thepromotion or marketing of the transactions or other matters addressed herein. Accordingly, you should seek advice based on your particularcircumstances from an independent tax advisor.

This publication has been prepared by Barclays Capital, Inc., a US registered broker/dealer and member of FINRA. This publication is provided toyou for information purposes only. Prices shown in this publication are indicative and Barclays Capital is not offering to buy or sell or soliciting

offers to buy or sell any financial instrument. Other than disclosures relating to Barclays Capital, the information contained in this publication hasbeen obtained from sources that Barclays Capital knows to be reliable, but we do not represent or warrant that it is accurate or complete. The viewsin this publication are those of Barclays Capital and are subject to change, and Barclays Capital has no obligation to update its opinions or theinformation in this publication.

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