THE W REPORT™ sponsored by CAPGEMINI

Media & Telecom 2009

MOST COMPETITIVE COMPANIES in AMERICA

Copyright © 1999-2009 wRatings Corporation. All rights reserved.

No part of this publication may be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of the wRatings
c Corporation. The research methods used in this report are protected by US patent 6,658,391 and certain patents pending that are under license to wRatings
Corporation from Gary A. Williams. “Moat Maker”, "Competitive X-Ray", and "The W Report" are trademarks of Gary A. Williams. All other trademarks used in this
report are property of their respective owners.
 ABOUT THIS REPORT

FORWARD-LOOKING STATEMENTS

Forward-looking statements in this presentation are subject

CONTENTS ABOUT wRATINGS
to known and unknown risks, uncertainties and other
factors which may cause actual results, performance, or
achievements to be materially different from any future 2 ABOUT THIS REPORT Our business is to measure companies worth buying from.
results, performance, or achievements expressed or implied We offer a single version of the truth so consumers and
by such forward-looking statements. 3 Past Findings from wRatings Studies
investors can make better, smarter decisions.
These forward-looking statements were based on various
4 Key Findings 2009
factors and were derived utilizing numerous assumptions 5 Most Competitive 2009: Media Through our patented system, consumers rate how well
and other factors that could cause actual results to differ companies are meeting their expectations and their
materially from those in the forward-looking statements. 6 Most Competitive 2009: Telecom
willingness to pay more, if any, to have their expectations
Readers are cautioned not to place undue reliance on these
7 The ! Ratings System met. We combine the consumer ratings and pricing power
forward-looking statements because they involve known 8 Measuring Competitive Advantage with financial analysis to measure each company's risk and
and unknown risks, uncertainties, and other factors that competitive strength.
are, in some cases, beyond our control and that could 9 Media Coverage
materially affect actual results, levels of activity,
performance, or achievements.
10 Telecom Coverage The research group was originally co-founded in 1998 by
11 INDUSTRY COMPETITIVENESS Gary A. Williams and became wRatings in 2004. Studies
from Gary A. Williams have been featured in Harvard
12 Revenue & Profit 10-Year Trends
Business Review (May 2002) and his first book, The 5 Paths
13 Competitive Strengths & Projections to Persuasion (Warner Business, 2004). His data and
14 Customer vs. Financial Performance analysis have been cited in 800+ publications worldwide,
and his reports are available to thousands of institutions
15 Customer Expectations & Pricing Power and funds via the investor platforms at Factset Research
16 Unfair Share of Economic Profits and S&P Capital IQ.
17 COMPETITIVE SPOTLIGHTS
For more information on the wRatings Corporation, see
18 Apple iTunes the Appendix or go to www.wratings.com.
19 AT&T Wireless
DISCLAIMER
20 Embarq Phone
The information contained herein is provided on an “as is”
21 FairPoint
basis. There is additional information that has been
prepared by wRatings Corporation which is not included in 22 Paramount Pictures
this report. Neither the use of this report nor its contents is
intended to confer upon any person any rights or remedies, 23 USA Today
nor should any person rely solely on this report in making a
24 APPENDIX
purchasing decision with regard to any company, stock,
product or service. 25 Terminology

In addition to historical information, this report contains 26 Why Our Ratings Work
US 6,658,391 HBR Cover Warner Business
forward-looking statements that reflect projections, 27 Prioritize Spending to Build Advantage Dec 1999 May 2002 Apr 2004
objectives and expectations as of the date hereof. The
wRatings Corporation assumes no responsibility or liability 28 Our Industry Coverage
for any damages resulting from the use of the information
contained herein. 29 CONTACT US

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 2

This report covers the Media & Telecom
Industries. We define the Media Industry as
those companies delivering content via
books, newspapers, magazines, television
and the web to consumers. In 2009, we've
expanded our coverage to include companies
with business customers such as advertising
firms and data publishing firms.
We define the Telecom Industry as those
companies providing services for wireline
phones, wireless phones, internet and
cable/satellite. In 2009, we've expanded
our coverage to include companies with
business customers such as telecom
equipment and telecom services.
NOTE:
Past findings are from Gary A. Williams and his research
team published for Miller-Williams, Adjoined Consulting and
Kanbay. All data is owned by Gary A. Williams and licensed
to wRatings Corporation.
THE W REPORT™
PAST FINDINGS FROM wRATINGS STUDIES
DATE OUR PUBLISHED FINDINGS
August 2002 The wireless industry has very low pricing power as consumers
are unwilling to spend additional dollars on their technology
until their basis services work more reliably. New 3G mobile
phones will not be the instant hit wireless companies desire.
January 2003 In order to monetize their content, media and telecom
companies must work together to expand services such as
Video on Demand. These type of offerings promise to deliver
advertising messages to a highly targeted audience, thereby
increasing ad revenues.
January 2005 Over 92% of consumers see the benefits of a single provider for
all of their telecom needs: wireless, wireline and
cable/television. Price remains the most critical buying driver,
thus perpetuating the difficulty in finding pricing power.
May 2006 For Media Content providers to succeed in the future,
consumers want them to use technology to distribute their
content in more ways. What is critical though is to match the
device with the content length, where consumers won't
typically watch video on mobile devices for more than 10
minutes at a time and on PCs for more than 60 minutes.
June 2007 In 2007, the business models underneath media & telecom
providers are improving to show positive economic profit on
average but more work must be done. While media content
drives demand, providers continue to struggle with monetizing
their shows.
July 2008 Telecom players continue to struggle to build durable
advantages that rivals find difficult to duplicate, and price wars
continue to be the norm. Consumers are still searching for
innovative ways from media companies to meet their
expectations, and will pay for them. Old (print) and new (web)
media remain in transition to monetize their content.
© 2009 wRatings Corporation. All rights reserved.
WHAT HAPPENED NEXT
By Summer 2003, Cingular and other providers abandon any
thought of price hikes and the price wars begin. They change
their advertising to focus on network coverage, reliability and
customer service.
In 2004 alone, Comcast reports that video-on-demand
viewership grew from 20 million shows in January to 75 million
shows by December. Yet, the Media & Telecom industry as a
whole continue to struggle on how to convert this demand
into sustainable economic profit.
Since 2005, the "triple play" (and now quad play) becomes a
standard bundling technique by telephone and cable providers
alike. The war for the consumer begins for which companies
can best meet expectations across all communication types.
The Apple iPod continues to integrate video into select
versions, yet content providers are slow to adapt. By the end of
2006 though, Media Content providers start offering TV shows
for download at their own website and/or third-party sites in a
growing number.
The writer's strike delays the introduction of new shows as the
industry struggles to split the oncoming profits of digitized
content. Media providers use the delay to optimize their
content processes to lower costs and stagger their new show
introductions.
Struck by the economic downturn, advertising revenues in
both old and new media decline due to lack of consumer
demand. Broadcast networks remain at the top in advertising
revenue, but the web is increasingly important but still not
large enough to support traditional volume. Telecom
continues to struggle to make money consistently.
Media & Telecom 2009 3

A few decades ago, being a media or
telecom executive was relatively easy
(although many probably didn't see it that
way at the time). Consumers had just a few
choices of broadcast networks and a
smattering of cable channels to watch. Basic
and long-distance phone service were
oligopolies, and PCs only connected to
electrical outlets.
Today, content choices are abundant,
delivery is complex and competition is
everywhere. Hundreds of cable channels
and endless websites all compete for
consumer engagement (i.e. how involved
people are with your content). Google and
Yahoo! get 20% more unique visitors per
month than the Super Bowl gets viewers.
Multi-tasking is the norm for viewers, and
making money has become ever so elusive
as consumers expect everything for free.
New challenges mean change, and change
requires trial and error. No wonder media
and telecom profits are difficult to keep
consistent from year to year.
This report provides an update on the
competitive strength and opportunities in
these two industries, and details what's in
store for companies as we move towards
2010.
THE W REPORT™
KEY FINDINGS 2009
! Size and uniqueness drive much of the competitive strength for media companies in 2009. Ten of the top 20 spots are controlled by
just three firms. Multiple media properties under one umbrella help control operational expenses, and can share inventory when
advertising dollars decline. Four of the remaining top 20 spots are occupied by small firms with less than $650 million in revenue.
These firms are carving out niches through their unique content and proprietary distribution channels.
! Historically, the Telecom industry remains one of the most challenging industries to build a consistent level of competitive strength.
Much of this is due to the constant need to invest large amounts of capital to build infrastructure. Even so, the Top 20 in 2009 had a
50% turnover since last year, with eight of the top 20 serving business (B2B) companies.
! Although revenues continue to rise for both Media and Telecom over the past decade, net income has been inconsistent and
economic profit (i.e. return on capital minus cost of capital) has been even worse. The future will be dominated by those companies
willing to test the limits of their business models, and introduce new forms of revenue and profit generation.
! Since 2002, media and telecom competitive strength has been relatively stagnant. Overall, the media industry is more competitive
than telecom by almost 50%. But in stark contrast to the growth in strength for retail and consumer goods companies in Q1-2009,
media and telecom show little or no growth in strength in Q1-2009.
! Business models are in flux as companies seek out predictable profit streams. Only four categories are generating negative economic
profit, and three of those four are re-building strength with their customers. A turnaround in Advertising, Entertainment and Telecom
Service firms show promise by end of 2009.
! As the economy continues to struggle and unemployment rises, consumers seek out free or inexpensive content. This means the top
advertising firms are in higher demand, as the ad-supported model to making money remains a viable force in 2009.
! Given the high year-over-year volatility across most categories though, both media and telecom companies struggle with how to best
serve customer needs. Virtually all of the telecom service providers (telecom, internet, cable/satellite, wireline and wireless) show a
decrease in customer expectations and pricing power from one year ago. Commoditization is rampant for these categories.
! Profits are shifting to those categories with rising expectations and pricing power, such as firms in advertising, entertainment, web
content and publishing. Consumers remain willing to spend money with traditional media such as broadcast, cable and news/tv
channels.
! Media and telecom companies gravitate to just a few competitive moats (e.g. scale, cost and network effect), which in turn causes
fleeting economic profit. Copycats arise quickly and few are building a barrier to entry to protect their profits. Future profits will not
come from consolidation, but from innovative business networks that connect supply and delivery chains, as well as non-Media and
non-Telecom companies to each other.
This report illustrates the data behind these findings.
© 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 4
 MOST COMPETITIVE 2009: Media

Rankings within industry only Trailing 12 Months as of Q1-2009 W Ratings and Scores at national level

Our rankings are highly unique. Most lists 2009- 2008-

TTM Rev
rank companies by either financial (e.g. Q1 Q1 Business Segment Ticker Parent Company in $M
W Rating W Score™
Rank Rank
Fortune 500) or consumer performance (e.g.
Brands, Reputation, Satisfaction). With our
1 1 Google Tools GOOG Google Inc. $21,796 !!!!! 91.8
scores, we combine the two performance 2 18 Arbitron ARB Arbitron Inc. $369 !!!!! 84.6
areas into a single metric centered around a 3 44 Morningstar.com MORN Morningstar Inc. $503 !!!!! 83.1
core concept: durable advantage.
4 2 TheStreet.com TSCM TheStreet.com Inc $72 !!!! 79.4

A ! Rating represents a company’s ability to 5 23 Apple iTunes AAPL Apple Inc. $33,038 !!!! 77.1
earn a consistent profit above their cost of 6 12 VH1 Channel VIA/B Viacom Inc. $14,625 !!!! 76.6
capital, and their ability to protect that profit 7 20 USA Today GCI Gannett Company $6,768 !!!! 75.1
through multiple sources of competitive
advantage with customers.
8 7 Nickelodeon VIA/B Viacom Inc. $14,625 !!!! 75.0
9 40 DreamWorks DWA Dreamworks Animation Inc. $649 !!!! 74.4
In 2009, size is driving much of the 10 19 Google News GOOG Google Inc. $21,796 !!!! 74.4
competitive strength for media companies.
Ten of the top 20 spots are controlled by
11 9 Ticketmaster TKTM Ticketmaster Entertainment Inc $1,455 !!!! 74.0

just three firms: GE, Google and Viacom. 12 22 YouTube GOOG Google Inc. $21,796 !!!! 72.9
Multiple media properties under one 13 3 Google Search GOOG Google Inc. $21,796 !!!! 72.4
umbrella helps control operational expenses, 14 32 MTV Channel VIA/B Viacom Inc. $14,625 !!!! 71.9
and share sales and marketing impact when
advertising dollars are down.
15 11 Paramount Pictures VIA/B Viacom Inc. $14,625 !!!! 70.8
16 33 BusinessWeek MHP McGraw-Hill Companies $6,355 !!!! 69.1
Four of the remaining Top 20 spots are 17 25 Moody’s Credit Ratings MCO Moody’s Corporation $1,755 !!!! 68.8
occupied by small firms with less than $650
million in revenue: Arbitron, DreamWorks,
18 35 MS-NBC Channel GE General Electric Company $182,581 !!!! 68.1

Morningstar and TheStreet.com. These 19 6 Food Network Channel SNI Scripps Networks Interactive Inc. $1,591 !!!! 66.4
firms are carving out niches through their 20 39 Universal Theme Park GE General Electric Company $182,581 !!!! 65.4
unique data and distribution channels. 100 = Best Possible W Score

W Scores are blended percentile ranks of the company's 5-Year Weighted Average Economic Profit and the ability of the Business Segment to meet consumer expectations

Margin of Error ±0.27 for all ratings

FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

NOTE: For comparison with our 2008 report, this year's report ranks a larger number of companies due to expanded wRatings coverage so ranks may not align.

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 5
 MOST COMPETITIVE 2009: Telecom

Rankings within industry only Trailing 12 Months as of Q1-2009 W Ratings and Scores at national level

Historically, the Telecom industry remains 2009- 2008-

TTM Rev
one of the most challenging industries to Q1 Q1 Business Segment Ticker Parent Company in $M
W Rating W Score™
Rank Rank
build a consistent level of competitive
strength.
1 22 Embarq Phone EQ Embarq Corporation $6,124 !!!!! 82.3
2 1 Hughes Network HUGH Hughes Communications Inc. $1,060 !!!! 76.2
Much of this is due to the constant need to 3 33 Harris HRS Harris Corporation $5,654 !!!! 73.5
invest capital for building out infrastructure.
The Top 20 in 2009 had a 50% turnover
4 10 Qualcomm QCOM Qualcomm Inc. $11,210 !!!! 72.3

since last year, although our coverage this 5 12 Windstream Phone WIN Windstream Corporation $3,172 !!!! 70.2
year was expanded to include business-to- 6 5 Juno/Netzero UNTD United Online Inc. $670 !!!! 61.7
business companies as well. Eight of the top 7 7 FairPoint FRP Fairpoint Communications Inc. $1,275 !!!! 61.2
20 are B2B companies.
8 9 DISH Network DISH Dish Network Corporation $11,617 !!! 58.1
This year's list does include a 5W company 9 48 CommScope CTV CommScope Inc. $4,017 !!! 57.9
in telecom, Embarq Phone. We spotlight 10 47 Earthlink ELNK Earthlink Inc. $956 !!! 57.4
Embarq later in this report.
11 4 Cincinnati Bell CBB Cincinnati Bell Inc. $1,403 !!! 56.1
12 25 ADC Telecom ADCT ADC Telecommunications Inc. $1,382 !!! 55.6
13 2 Frontier Phone FTR Frontier Communications Corporation $2,237 !!! 54.9
14 23 Brightpoint CELL Brightpoint Inc. $4,646 !!! 51.2
15 40 Brocade BRCD Brocade Communications Systems $1,551 !!! 51.1
16 27 EchoStar SATS EchoStar Corporation $2,151 !!! 48.8
17 18 Cricket LEAP Leap Wireless International Inc. $1,959 !!! 48.7
18 13 Time Warner Cable TWC Time Warner Cable Inc. $17,200 !!! 48.7
19 52 Cablevision CVC Cablevision Systems Corporation $7,230 !!! 47.2
20 45 Skype EBAY Ebay Inc. $8,541 !!! 46.4
100 = Best Possible W Score

W Scores are blended percentile ranks of the company's 5-Year Weighted Average Economic Profit and the ability of the Business Segment to meet consumer expectations

Margin of Error ±0.27 for all ratings

FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

NOTE: For comparison with our 2008 report, this year's report ranks a larger number of companies due to expanded wRatings coverage so ranks may not align.

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 6
 THE ! RATINGS SYSTEM

Approximate % Distribution of Companies in 2008

The ! Ratings are similar to a five-star PREDICTABLE RESULTS

rating system used for hotels. We rate
10%
companies 1 through 5 !’s, where the !"
represents Winners, with 5 the most and 1
the least competitive.
Most Competitive Delivering higher economic profits (EP) on a consistent basis requires companies
!!!!! to meet consumer expectations better than rivals and build moats to protect their profits.
The ! Ratings System blends ranks of EP and Total Moats into a single rating.

The Competitive Outlook quadrant shows

how our ratings are based on historical
results and future ability to perform. The High Competitive
historical is a 5-yr weighted average of
25%
!!!!

5-YR Economic Profit

DURABLE
economic profits. The future is the total Narrowing
!!!!!
moats (i.e. barriers to entry) of how well a
company is beating its rivals by meeting COMPETITIVE
consumer expectations in the current year.
OUTLOOK
Changes in a company’s ! Ratings can be
caused by: Vulnerable Emerging

1) Increased Economic Profits (EP)

2) Increased performance with consumers,
Competitive
30%
resulting in higher Total Moats (TM) !!! Total Moats (Barriers to Entry)
3) Rivals that increase their EP or TM faster
than the company

Because the ! Ratings are relative,

LEADING INDICATOR TO FINANCIAL RESULTS
companies can shift up or down without Bottom Quintile 20th Quintile 40th Quintile 60th Quintile TOP Quintile Total Moats
changing their performance. 15%
10%
We continually backtest our algorithms, and Low Competitive
a company’s Total Moats are a leading 25% Economic Profit
5%
(ROIC - WACC)
indicator to their ability to generate EP. In
!! 0%
our backtests, companies able to sustain a -5%
high TM score (in the top quintile) have -10%
generated the highest EP every year. -15%
-20%
Least Competitive -25%
10%
! 2002 2003 2004 2005 2006 2007

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 7
 MEASURING COMPETITIVE ADVANTAGE

We measure competitive advantage in a Stages of Competitive Life Cycle

highly unique, but completely logical way. 1 Competitive Life Cycle INVESTMENT PERIOD

Our turn-key, patented system combines Emerging ROIC with High Investment
INVESTMENT CAP PRICE-EFFICIENCY
financials, behavioral psychology and COMPETITIVE ADVANTAGE PERIOD (CAP)
statistics to measure the durability of a ROIC High Economic Profit with continual Fade Rate
company's advantages with consumers. The
WACC PRICE-EFFIENCY PERIOD
ratings serve as a leading indicator to the Durable
sustainability of company's economic profit. Advantage Capital Low or Negative Economic Profits
The three steps are:

1. Calculate a company's Economic Profit Narrowing 3 Competitive Strength

(EP), ROIC (return-on-invested-capital)
minus WACC (weighted average cost of Emerging
Current W Scores Projected W Scores Projections with Mgmt Impact
capital). Companies with 5+years of superior
100
EP have built some form of protection –
Vulnerable
what famous investor Warren Buffett calls a
"moat." 80

2. Moats are barriers to entry a company

W Scores
60
builds to protect their economic advantage. 2 Barriers to Entry: MOATS
The precursor to every economic advantage
40
is a consumer advantage, and we've
statistically determined that nine moats Economies of Scale
exist. SUPPLY 20
Economies of Skill
CHAIN
3. By blending the percentile ranks of a Cost Containment
0
company's ability to sustain EP and protect it Design Dominance 02 03 04 05 06 07 08 09e 10e 11e
with consumers via Total Moats, we score PRODUCTS Brand Perception
the competitive strength of every company
Routine Reliance
in the wRatings coverage.
Channel Lock-Out
For more information on the wRatings DELIVERY The Moat Maker™ database
Switching Lock-In
approach, see the Appendix. CHAIN utilizes multiple patents
Network Effect

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 8
 MEDIA COVERAGE

The wRatings company coverage is determined by company size (market cap), brand awareness and subscriber requests. Some companies listed here for historical purposes.

MEDIA CATEGORIES A&E Channel (Private) Google News (GOOG) MTV Channel (VIA/B) Thomson (TOC.TO)

ABC Network (DIS) Google Search (GOOG) MySpace (NWS) Thomson Reuters (TRI.TO)

Advertising Firm Animal Planet (DISCA) Google Tools (GOOG) NBC Network (GE) Ticketmaster Entertainment (TKTM)

Broadcast Network AOL Search (TWX) Harris Polls (HPOL) NetRatings (Private) TLC Channel (DISCA)

Cable Channel AOL.com Content (TWX) Harte-Hanks (HHS) New York Times (NYT) TNT Channel (TWX)

Entertainment Firm Apple iTunes (AAPL) HBO Channel (TWX) Nickelodeon (VIA/B) Travel Channel (DISCA)

News Company Arbitron (ARB) Headline News (TWX) Omnicom (OMC) Twitter (Private)

News TV Channel Ask.com (IACI) HGTV Channel (SNI) Paramount Studio (VIA/B) Universal Music Group (VIV)

Publishing Firm BusinessWeek (MHP) Home Shopping Network (IACI) Playboy (PLA) Universal Theme Park (GE)

Web Content Firm Carmike Cinemas (CKEC) Hoovers (DNB) QVC Channel (LBTYA) USA Today (GCI)

Web Search Firm CBS Network (CBS) Houghton-Mifflin Harcourt Books (Private) R H Donnelley (RHDC) ValueClick (VCLK)

Cinemark Hldgs. (CNK) IBD Newspaper (Private) Rackspace Hosting (RAX) VH1 Channel (VIA/B)

CKX (CKXE) IDC (IDC) Regal Entertainment Group (RGC) Vocus (VOCS)

Clear Channel (CCO) Interpublic Group (IPG) Reuters (RTRSY) Vogue & Glamour (Private)

CNBC News (GE) John Wiley & Sons (JW/A) Rhino Records (WMG) Wall Street Journal (NWS)

CNN News (TWX) Lamar (LAMR) Scholastic (SCHL) Warner Music (WMG)

Discovery Channel (DISCA) Lexis Nexis (ENL) Showtime (CBS) Washington Post (WPO)

Disney Channel (DIS) Lions Gate Entertainment (LGF) Shutterfly (SFLY) World Wrestling Ent. (WWE)

Disneyland & Disneyworld (DIS) Live Nation (LYV) Simon & Schuster Books (CBS) WPP (WPPGY)

DreamWorks Animation (DWA) Martha Stewart (MSO) Sirius XM Radio (SIRI) Yahoo! Content (YHOO)

ESPN Channels (DIS) Meredith (MDP) Six Flags (SIX) Yahoo! News (YHOO)

Facebook (Private) MLB (Private) Sony Pictures (SNE) Yahoo! Search (YHOO)

Food Network Channel (SNI) Moody’s Credit Ratings (MCO) Speedway Motorsports (TRK) YouTube (GOOG)

Forbes Magazine (Private) Morningstar.com (MORN) The CW Network (CBS)

Fortune Magazine (TWX) MSN Search (MSFT)

FOX Business Network (NWS) MSN.com Content (MSFT)

FOX Network (NWS) MS-NBC Channel (GE)

FOX News (NWS)

Check our website for the most up-to-date coverage.

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. 9

 TELECOM COVERAGE

The wRatings company coverage is determined by company size (market cap), brand awareness and subscriber requests. Some companies listed here for historical purposes.

TELECOM CATEGORIES 3Com (COMS) DirecTV (DTV) Rogers Communications (RCI)

ADC Telecom. (ADCT) DISH Network (DISH) SBA Communications (SBAC)

Cable/Satellite Provider Adelphia (Bankrupt) Earthlink (ELNK) Shaw Communications (SJRB.TO)

Internet Service Provider Alcatel-Lucent (ALU) EchoStar (SATS) Skype (EBAY)

Telecom Equipment Provider Alltel (VZ) Embarq Phone (EQ) Southwestern Bell (Bought)

Telecom Service Provider Amer. Tower (AMT) Ericsson (ERIC) Sprint Nextel (S)

Wireless Phone Provider AOL Broadband (TWX) FairPoint Communic. (FRP) Symmetricom (SYMM)

Wireline Phone Provider AT&T Telephone (T) Frontier Phone (FTR) Telephone & Data (TDS)

AT&T Wireless (T) Global Crossing (GLBC) Tellabs (TLAB)

BCE (BCE) Harris (HRS) Telus (TU)

BellSouth (Bought) Hughes Communications (HUGH) Time Warner Cable (TWC)

Black Box (BBOX) iBasis (IBAS) TiVo (TIVO)

Brightpoint (CELL) IDT (IDT) T-Mobile (DT)

Brocade Communic. (BRCD) JDS Uniphase (JDSU) U.S. Cellular (USM)

Cablevision (CVC) Juniper Networks (JNPR) Verizon FiOS (VZ)

CenturyTel (CTL) Juno/Netzero (UNTD) Verizon Phone (VZ)

Charter Cable (CHTR) Level 3 Communic. (LVLT) Verizon Wireless (VZ)

Ciena (CIEN) Loral Space & Comm (LORL) Vodafone Group (VOD)

Cincinnati Bell (CBB) Mediacom Communications (MCCC) Vonage (VG)

Comcast Cable (CMCSA) Metro PCS Communic. (PCS) Windstream Phone (WIN)

CommScope (CTV) Nextel (S) XO Communications (XOHO)

Corning (GLW) Nortel Networks (NRTLQ)

Cox Cable (Private) Qualcomm (QCOM)

Cricket (LEAP) Qwest Telephone (Q)

Crown Castle Int'l (CCI) Road Runner (TWX)

Check our website for the most up-to-date coverage.

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. 10

 INDUSTRY COMPETITIVENESS

Revenue & Profit 10-Year Trends

Competitive Strength & Projections

Customer vs. Financial Performance

Customer Expectations & Pricing Power

Unfair Share of Economic Profits

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 11
 REVENUE & PROFIT 10-YEAR TRENDS

NOTE: Charts show companies in wRatings coverage only.

This chart shows the 10-year historical
trends in revenue (left axis, green bars),
Media Telecom
income (right axis, gold line) and economic
profit (right axis, black line) for the wRatings
TTM Revenues in US $ Millions (left axis)
coverage in this report. Data was for each
company's trailing twelve months (TTM) as TTM Net Income as % of Revenue (right axis) NET INCOME & ECONOMIC
REVENUES in US $ Millions
of the last Friday of each year. TTM Economic Profit as % of Revenue (right axis) PROFIT
$800,000 30%
Although revenues continue to rise for both
Media and Telecom over the past decade,
$700,000 20%
net income has been inconsistent. Worse
yet, the ability to generate a positive return
on capital versus cost of capital -- what is
called economic profit -- has been severely $600,000 10%
inconsistent. A few companies have caused
wild swings positive and negative, but even
when we eliminated them, the inconsistent $500,000 0%
trend remained significant.

This makes sense considering the impact of $400,000 -10%

the web as both a content source and
distribution channel. Many investments have
been made in an effort to generate profits, $300,000 -20%
with some working and many failing.

The future will be dominated by those $200,000 -30%

companies willing to test the limits of their
business models, and introduce new forms
of revenue and profit generation. $100,000 -40%

$0 -50%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009-Q1

1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009-Q1
FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. 12

 COMPETITIVE STRENGTH & PROJECTIONS

MEDIA INDUSTRY

A W Score measures a company's ability to W Scores Projections (Baseline) Projections (Management Impact)
More
earn a consistent return above their cost of 100 Competitive
capital AND protect that profit through

------------------------->
competitive advantages with consumers.
80
Higher scores mean greater predictability
and financial durability over their rivals.

W Scores
60
By trending W Scores forward, we can
project two different views of their future: 1)
A baseline view (tan striped bar) of how well 40
the company is likely to do based on its last
5 years of results, and 2) A projected view
(green striped bar) that includes 20
management's impact over the past 2 years. Less
Competitive
0
The 2010e projections (generated at end of
2002 2003 2004 2005 2006 2007 2008 Q1- 2010e
Q1-2009) indicate a decrease in media
2009
competitive strength, and increase in
telecom strength by 2010. TELECOM INDUSTRY
Since 2002, media and telecom competitive W Scores Projections (Baseline) Projections (Management Impact)
strength has been relatively stagnant. The 100
More
Competitive
need for new, innovative business

------------------------->
frameworks is critical to increasing
strength. The media industry is more 80
competitive than Telecom by almost 50%,
although Q1-2009 shows some stress to the
W Scores

media environment. 60

40

20
Less
Competitive
0
2002 2003 2004 2005 2006 2007 2008 Q1- 2010e
2009
NOTE: Data as of 20-Feb-2009

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 13
 CUSTOMER vs. FINANCIAL PERFORMANCE

Economic Profit as % of Revenue, TTM Q1-2009 Customer Performance (Avg Total Moats 2009-Q1)
By ranking each category by their Total
Moats (TM) and Economic Profit (EP), we can 15 10%
better evaluate the overall competitiveness
of a category. 12 8.6% 8.6% 8%
8.1%
7.6%
The current quarter shows considerable EP 9 6%
improvement for media and telecom 6.0%
companies when compared to the past 10- 5.2% 5.3%
6 4%
years. Business models are in flux as

ECONOMIC PROFIT
3.7% 3.9%
companies seek out predictable profit
3 2%

TOTAL MOATS
streams. Only four categories are
generating a negative return on their capital, 0.4% 0.3%
and three of those are building strength with 0 0%
-0.6%
their customers. A turnaround in
Advertising, Entertainment and Telecom -3 -2%
-3.3%
Service firms show promise for 2009.
-6 -4%
As the economy continues to struggle and
unemployment rises, consumers seek out -9 -6%
-7.0%
free or inexpensive content. This means the
top advertising firms are in higher demand,
-12 -8%
as the ad-supported model to making money -9.2%
remains viable through 2009.
-15 -10%

Broadcast Network
Telecom Equipment Provider
Telecom Service Provider

Internet Service Provider

Cable/Satellite Provider

Wireline Phone Provider

Cable Channel

Wireless Phone Provider

News Company
Entertainment Firm
Advertising Firm

Web Content Firm

Web Search Firm

Publishing Firm

News TV Channel
The shift in competitive strength to the web
for both ads and content is well underway.
Traditional media such as broadcast
networks and even cable channels are
becoming less competitive. Wireless and
wireline providers have been commoditized.

With customer & financial strength aligned,

predictability is best found in web
content, publishing, web search, news
Most Competitive Least Competitive
companies and cable channels.
with Customers -------------------------------------------------------> with Customers
(Highest Total Moats) (Lowest Total Moats)

FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. 14

 CUSTOMER EXPECTATIONS & PRICING POWER

By looking at the year-to-year changes in Average Company Delivery 2008-Q1 x Customer Expectations
how companies deliver on consumer Average Company Delivery 2009-Q1 -- Pricing Power (Willingness to Pay X% More if Expectations Met)
expectations as well as their pricing power,
we can better understand how the
competitive landscape is changing. Expectations Pricing Power
(100=Median in 2004) (Willing to Pay % More)
The average pricing power increase across 110 6%
all 15 categories is 0.5%, indicating that
customers are willing to pay more if
companies can better meet their 105 5%
expectations. This is good news, especially
considering that customer expectation levels
have gone down by (21%) and company 100 4%
delivery is up by 45% since 2008.

95 3%
Given the high year-over-year volatility
across most categories though, the media
and telecom industries are struggling with
90 2%
how to best serve customer needs. Virtually
all of telecom (except telecom service
providers) show a decrease in customer
85 1%
expectations and pricing power from one
year ago. Commoditization and lack of
pricing power overall remains the norm. 80 0%

Broadcast Network
Telecom Equipment Provider
Telecom Service Provider

Internet Service Provider

Cable/Satellite Provider

Wireline Phone Provider

Cable Channel

Wireless Phone Provider

News Company
Entertainment Firm
Advertising Firm

Web Content Firm

Web Search Firm

Publishing Firm

News TV Channel
Profits are shifting to those categories with
rising expectations and pricing power, such
as advertising, entertainment, web content
and publishing firms. Consumers remain
willing to spend money with traditional
media such as broadcast, cable and
news/tv channels.

Highest Lowest
Pricing Power -------------------------------------------------------> Pricing Power
with Customers in 2009 with Customers in 2009

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 15
 UNFAIR SHARE OF ECONOMIC PROFITS

Which actions, programs and other initiatives PERCENT OF COMPANIES IN ECONOMIC PROFIT OF
generate an unfair share of economic TOP MOAT PERFORMERS* TOP MOAT PERFORMERS* IN 2008
profits? Certain aspects of a company's MOAT 20th Percentile Median 80th Percentile
business model generate far superior returns Media Telecom National
on capital than others.
Economies of Scale

SUPPLY CHAIN
In this chart, we segmented the top
High Volume in Focused Area
25.2% 8.3% 17.0% -13.2% 6.2%
performing companies (> 3Ms) for each
moat last year. We then percentile rank Economies of Skill
economic profits (EP). When the 80th Time-based Core Competencies
0.0% 1.4% 7.2% 5.3% 23.9%
percentile is high AND the gap with the 50th Cost Containment
percentile is also high, an unfair share of the 19.4% 1.4% 10.2% -14.4% 9.9%
Comparative Quality at Fair Price
EP is going to those advantages. The % of
companies in each moat are the # of Design Dominance
4Ms/5Ms divided by total companies PRODUCTS Real Functional Distinctiveness
3.9% 5.6% 10.4% -18.1% 10.5%
examined.
Brand Perception
Perceived Trusted Leader
5.8% 16.7% 10.6% -10.2% 15.8%
Media and Telecom companies gravitate
to a common set of competitive moats Routine Reliance
(e.g. scale, cost and network effect), which Regular Usage Built into Schedule
0.0% 0.0% 0.8% 6.8% 8.8%
in turn causes fleeting economic profit.
DELIVERY CHAIN

Copycats arise quickly and few are building a Channel Lock-Out

0.0% 0.0% 5.1% -5.1% 21.9%
barrier to entry to protect their profits. Control Distribution for Choice

Switching Lock-In
Future profits will not come from 7.8% 2.8% 7.0% -4.3% 20.0%
Fear Loss of Time/Money/Status
consolidation, but from innovative business
networks that connect supply and delivery Network Effect
26.2% 2.8% 13.9% -6.6% 10.2%
chains, as well as non-Media and non- Community Growth with Each Node
Telecom companies to each other.
Total Business Segments 103 72 1,436

MOAT KEY ## Weak Advantage

##### Most Competitive $" No Advantage

#### Strong Advantage " Non-Competitive

### Competitive % Disadvantage

* Top Moat Performers determined by those companies with a 4M or higher rating for each moat.

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 16
 COMPETITIVE SPOTLIGHTS

Apple iTunes

AT&T Wireless

Embarq Phone

FairPoint

Paramount Pictures

USA Today

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 17
 Business
Segment Apple iTunes
Stock Apple Inc. (AAPL)

The recent economic downturn has tested INVESTMENT OPPORTUNITY COMPETITIVE STRENGTH
the power of Apple's competitive edge, and
the company has weathered the storm to Stock Price Economic Profit W Scores Projections (Baseline) Projections (Management Impact)
become a leading indicator of the broader 250 30% 100
technology industry.
25%
200
Yet, most interestingly, two of the key 80
sources for their success comes from beyond 20%
their technology products: Apple retail stores 150

W Scores
60
and Apple iTunes®. The integration of 15%
electronics, retail and media content with its
100
software development platform provides 10%
40
Apple with a unique business framework,
what some call an ecosystem. 50
5% 20

In past reports, we've detailed how iTunes 0 0%

has helped build moats in Switching Lock-In 0
06-Q3

2007

2008

2009
2004 2005 2006 2007 2008 Q1-2009 2010e
and Network Effect to keep customers By Week
captive. Never willing to rest on past
success, Apple is now churning out profits
through its supply chain. With surgical level
control over pricing and costs, the company COMPETITIVE LIFE CYCLE BARRIERS TO ENTRY
can generate exponential volume growth
ROIC WACC Reinvest Rate
with only incremental costs. Percentile ranks within wRatings national coverage
50%
Moat 2009 Rating Nat'l Rank
Consumers still love the products and 45%
experience, but iTunes taps into non- 40% Economies of Scale #### 83.2%
traditional moats to keep and grow their 35% Economies of Skill ### 77.3%
edge.
30% Cost Containment ### 70.6%
25% Design Dominance ## 62.8%
20% Brand Perception # 45.1%
15% Routine Reliance % 0.0%
MOAT KEY ## Weak Advantage 10% Channel Lock-Out " 17.2%
5%
##### Most Competitive $" No Advantage Switching Lock-In ## 62.4%
0%
#### Strong Advantage " Non-Competitive Network Effect ## 61.4%
06-Q3

2007

2008

2009

### Competitive % Disadvantage

By Week TOTAL MOATS = 16

FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 18
 Business
Segment AT&T Wireless
Stock AT&T Inc. (T)

Stuck in one of the most commoditized INVESTMENT OPPORTUNITY COMPETITIVE STRENGTH

industries, what can a wireless service
provider do to build competitive advantage? Stock Price Economic Profit W Scores Projections (Baseline) Projections (Management Impact)
Why not partner with one of the coolest 45 12% 100
brands on a new product outside of the
40
media and telecom industries? 10%
35 80
AT&T Wireless (the old Cingular Wireless) 30 8%
did just that when they signed on to be the

W Scores
25 60
exclusive provider for Apple's iPhone. The 6%
costs to subsidize the product have been 20
high, but the rewards are starting to pay off. 15 4%
40
Consumers rank the AT&T Wireless brand at
about 60%, essentially transferring some of 10
2% 20
the Apple brand coolness to AT&T. 5
0 0%
So what could AT&T/Cingular offer Apple, 0
06-Q3

2007

2008

2009
2004 2005 2006 2007 2008 Q1-2009 2010e
besides money? In 2006, Cingular had built By Week
an advantage in the much coveted Routine
Reliance moat where consistent profits are
virtually guaranteed. Their impact on this
moat has diminished over time, but was COMPETITIVE LIFE CYCLE BARRIERS TO ENTRY
strong enough and unique enough to capture
ROIC WACC Reinvest Rate
the Apple iPhone partnership. Percentile ranks within wRatings national coverage
30%
Moat 2009 Rating Nat'l Rank
25% Economies of Scale % 0.0%

20%
Economies of Skill # 40.5%
Cost Containment % 0.0%
15% Design Dominance " 23.7%
Brand Perception ## 59.5%
10%
Routine Reliance " 11.4%
MOAT KEY ## Weak Advantage
5% Channel Lock-Out % 0.0%
##### Most Competitive $" No Advantage Switching Lock-In # 39.3%
0%
#### Strong Advantage " Non-Competitive Network Effect " 28.2%
06-Q3

2007

2008

2009

### Competitive % Disadvantage

By Week TOTAL MOATS = 1

FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 19
 Business
Segment Embarq Phone
Stock Embarq Corporation (EQ)

As the fifth largest wireline company in the INVESTMENT OPPORTUNITY COMPETITIVE STRENGTH
US, Embarq is on track to combine its
operations with CenturyTel this quarter. The Stock Price Economic Profit W Scores Projections (Baseline) Projections (Management Impact)
combined firms will operate in 33 states. 70 16% 100

As the rate of local access line losses 60 14%

continue to accelerate, cost cutting is key to 12% 80
50
survival. Yet, consolidation of the two
companies will help to build an even greater 10%
40

W Scores
60
competitive advantage than each alone. 8%
30
Embarq is a strong operator and has been 6% 40
able to generate consistent economic profit 20
4%
over the past 10 quarters. Having been 20
10
spun off from Sprint, the firm knows how to 2%
execute in two main sources of competitive 0 0%
advantage: economies of scale and network 0
06-Q3

2007

2008

2009
2004 2005 2006 2007 2008 Q1-2009 2010e
effect. By Week

Scale comes from their ability to control

costs while keeping service availability high.
Embarq also uses new technology behind the COMPETITIVE LIFE CYCLE BARRIERS TO ENTRY
scenes to their advantage, allowing them to
ROIC WACC Reinvest Rate
offer a better and more unique experience to Percentile ranks within wRatings national coverage
20%
their customer community.
18% Moat 2009 Rating Nat'l Rank

16% Economies of Scale ### 73.9%

14% Economies of Skill # 40.5%
12% Cost Containment # 30.4%
10% Design Dominance ## 62.8%
8% Brand Perception " 28.7%
6% Routine Reliance # 35.5%
MOAT KEY ## Weak Advantage 4% Channel Lock-Out # 34.7%
2%
##### Most Competitive $" No Advantage Switching Lock-In # 39.3%
0%
#### Strong Advantage " Non-Competitive Network Effect ### 75.2%
06-Q3

2007

2008

2009

### Competitive % Disadvantage

By Week TOTAL MOATS = 13

FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 20
 Business
Segment FairPoint
Stock Fairpoint Communications Inc. (FRP)

FairPoint is the eighth largest telecom INVESTMENT OPPORTUNITY COMPETITIVE STRENGTH

company, operating in 18 states and 32 local
exchanges. Recently, FairPoint took full Stock Price Economic Profit W Scores Projections (Baseline) Projections (Management Impact)
control over the Verizon wireline business in 25 6% 100
the New England local exchange. With this
change over finally implemented, customers 5%
20
are welcoming a fresh view and perspective 80
4%
from the new kid on the block.
15 3%

W Scores
60
Customers see the benefits of the FairPoint
approach already. Local, highly focused 2%
10
phone companies typically provide superior 40
customer service. By pressing forward and 1%
offering customers service bundles (phone, 5
20
0%
internet and television), FairPoint will extend
its economies of scale advantage with 0 -1%
consumers. Bundles are critical to the future 0
06-Q3

2007

2008

2009
2004 2005 2006 2007 2008 Q1-2009 2010e
of wireline providers as many consumers are By Week
forgoing their land lines altogether.

FairPoint is also stepping up efforts to attract

business customers as well. In rural areas, COMPETITIVE LIFE CYCLE BARRIERS TO ENTRY
this approach can generate significantly
ROIC WACC Reinvest Rate
higher returns on the same capital deployed Percentile ranks within wRatings national coverage
18%
already.
Moat 2009 Rating Nat'l Rank
16%
14%
Economies of Scale #### 83.2%

12%
Economies of Skill # 40.5%
Cost Containment ### 70.6%
10%
Design Dominance ### 76.9%
8%
Brand Perception ## 59.5%
6%
Routine Reliance " 11.4%
4%
MOAT KEY ## Weak Advantage Channel Lock-Out ## 63.4%
2%
##### Most Competitive $" No Advantage Switching Lock-In ### 78.8%
0%
#### Strong Advantage " Non-Competitive Network Effect ### 75.2%
06-Q3

2007

2008

2009

### Competitive % Disadvantage

By Week TOTAL MOATS = 21

FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 21
 Business
Segment Paramount Pictures
Stock Viacom Inc. (VIA/B)

Although not immune to the advertising INVESTMENT OPPORTUNITY COMPETITIVE STRENGTH

slowdown, Viacom continues to remain
strong due to having multiple properties Stock Price Economic Profit W Scores Projections (Baseline) Projections (Management Impact)
such as MTV, Nickelodeon and VH1 under 50 12% 100
one umbrella. Paramount Pictures is its film 45
entertainment studio, which represents 10%
40
about 37% of Viacom revenues. 80
35
8%
With their long history of successful pictures 30

W Scores
60
such as Titanic and The Godfather series, 25 6%
Paramount is now transforming its business
20
to rebuild its economic strengths. 4%
40
Paramount has a 62.8% ranking in a Design 15
Dominance moat, showing how strong their 10
2% 20
movies are with consumers. Teaming up 5
with Dreamworks Animation, they recently 0 0%
made Monsters vs. Aliens and will release 0
06-Q3

2007

2008

2009
2004 2005 2006 2007 2008 Q1-2009 2010e
new movies to the Star Trek and By Week
Transformers series this summer.

Future strength for Paramount will come

from their delivery chain as they release the COMPETITIVE LIFE CYCLE BARRIERS TO ENTRY
power of their content via the web. The
ROIC WACC Reinvest Rate
studio owns thousands of pictures and, when Percentile ranks within wRatings national coverage
60%
unlocked in the new digital landscape, profits
Moat 2009 Rating Nat'l Rank
at Paramount will be re-energized.
50% Economies of Scale " 34.5%

40%
Economies of Skill % 0.0%
Cost Containment ## 55.5%
30% Design Dominance ## 62.8%
Brand Perception " 28.7%
20%
Routine Reliance " 11.4%
MOAT KEY ## Weak Advantage 10% Channel Lock-Out # 34.7%
##### Most Competitive $" No Advantage Switching Lock-In # 39.3%
0%
#### Strong Advantage " Non-Competitive Network Effect # 43.1%
06-Q3

2007

2008

2009

### Competitive % Disadvantage

By Week TOTAL MOATS = 6

FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 22
 Business
Segment USA Today
Stock Gannett Company (GCI)

Faced with declining readers, many of INVESTMENT OPPORTUNITY COMPETITIVE STRENGTH

today's major newspapers are struggling to
survive. USA Today is owned by the largest Stock Price Economic Profit W Scores Projections (Baseline) Projections (Management Impact)
newspaper operator, Gannett Company. The 70 8% 100
Gannett news and web properties reach
about 70% of the population in their 60 7%
locations, giving them a strong competitive 6% 80
50
advantage in economies of scale.
5%
40

W Scores
60
USA Today, with its innovative multi-color 4%
format and unique writing style, represents 30
one of the most competitive news properties 3% 40
today. Thinking of themselves as a clearing 20
2%
house of media content available around the 20
10
clock, the "paper" is building a formula to 1%
replace its traditional ad-supported revenue 0 0%
model. For example, they recently struck a 0
06-Q3

2007

2008

2009
2004 2005 2006 2007 2008 Q1-2009 2010e
deal to feed USA Today news articles directly By Week
into the Apple iPhone.

Finding ways to monetize their strong

network effect advantage remains a top COMPETITIVE LIFE CYCLE BARRIERS TO ENTRY
priority for Gannett and other newspaper
Series2 Series1 Series3
companies, but USA Today is already Percentile ranks within wRatings national coverage
60%
positioned well to weather this downturn.
Moat 2009 Rating Nat'l Rank
50% Economies of Scale #### 83.2%
Economies of Skill % 0.0%
40%
Cost Containment ### 70.6%

30% Design Dominance ### 76.9%

Brand Perception # 45.1%
20% Routine Reliance " 11.4%
MOAT KEY ## Weak Advantage
10%
Channel Lock-Out ### 79.4%
##### Most Competitive $" No Advantage Switching Lock-In ### 78.8%
#### Strong Advantage " Non-Competitive 0% Network Effect ##### 95.4%
1

27

53

79

105

131

### Competitive % Disadvantage

By Week TOTAL MOATS = 21

FINANCIAL SOURCE: Company Reports, Standard & Poor Compustat Database

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 23
 APPENDIX

Terminology

Why Our Ratings Work

Your Competitive X-Ray™

Our Coverage

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 24
 TERMINOLOGY
Delivery Scores
How well a company performs on each of 12 attributes. Each
score is indexed using 100 as the median across all national
desires in 2004. A score of 100 indicates the company is
delivering fully against consumer expectations. See Desires
Scores.
Expectation Scores
How high up consumer expectations and needs are on each of
12 attributes. Each score is indexed using 100 as the median
across all national desires in 2004. A score of 100 indicates the
company is delivering fully against consumer expectations.
See Delivery
Economic Profit (EP)
The difference between return on capital and opportunity cost
of capital. We define EP as ROIC minus WACC.
Moat or M Rating
A company’s ability to perform above the industry’s 65%
percentile on a unique set of attributes that define competitive
advantage. Moats are barriers to entry companies create to
sustain economic profits.
Pricing Power
The percentage more consumers are willing to pay if
companies met their expectations. A small gap between
Desires and Delivery scores with a high Pricing Power indicates
an increasing demand for innovative approaches.
THE W REPORT™ © 2009 wRatings Corporation. All rights reserved.
Return on Invested Capital (ROIC)
Return on Invested Capital is a non-standard accounting financial
measure that quantifies how well a company generates cash with
capital they invest in their business.
Total Moats (TM)
The sum of all moat ratings, which is not a simple count of M's.
Companies can receive a negative moat rating if performance is poor.
Weighted Average Cost of Capital (WACC)
Weighted Average Cost of Capital is the required return needed to
make an investment worthwhile in which each portion of capital –
common stock, preferred stock or debt – is proportionally weighted.
! Rating
Similar to a five-star rating system used for hotels, we rate companies 1
through 5 W’s, with 5 the most competitive and 1 the least
competitive.
W Score
A measurement of a company’s ability to earn a consistent profit
above their cost of capital and their ability to protect that profit
through competitive advantages with consumers.
Media & Telecom 2009 25
 WHY OUR RATINGS WORK

THE STUDY & BENCHMARKS THE MOAT MAKERS™

The Study. Ever since Gary Williams’
Macintosh® software company missed the ANHEUSER-BUSCH* MORGAN STANLEY
Microsoft Windows® market in the late CITIGROUP* NOKIA Economies of Scale
1980’s, he has been on a quest to discover COCA-COLA* PEPSICO High Volume in Focused Area

SUPPLY CHAIN
what truly drives a company’s competitive DELL TJX COMPANIES
advantage. GLAXOSMITHKLINE UNITED PARCEL SERVICE
HOME DEPOT WALGREENS* Economies of Skill
The Benchmarks. To see if a company built LOREAL YUM BRANDS Time-Based Core Competencies

a sustainable competitive advantage, we MICROSOFT

started with 2,628 companies and filtered
* Ten-Year ROIC & Market Share
them by market cap and revenue. We then Cost Containment
looked for two telltale signs of competitive Comparative Quality at Fair Price
advantage: 1) High market share and 2)
Market
High ROIC. Only 15 companies met the
65th percentile mark or higher for 5
1 Share Design Dominance
consecutive years. Real Functional Distinctiveness

PRODUCTS
The Moat Makers™. We then wanted to
see HOW those top companies built barriers 2 ROIC Brand Perception
to entry, or moats, to protect their Perceived Trusted Leader
advantages. Using the top 15 companies as
a starter set, we analyzed data from
135,000+ consumer interviews to Deliver on Routine Reliance
empirically find the nine sources of 3 Consumer Frequent Usage Based on Habit
competitive advantage. We call these
Desires
companies Moat Makers™.
Channel Lock-Out
The Results. Our ratings work because they
2001

2002

2003

2004

2005

Out-Perform

DELIVERY CHAIN
Control Distribution for Choice
use a core set of Moat Maker™ algorithms to 4 Competitors
determine the strength of a company’s moat
in comparison to Switching Lock-In
industry peers. Rolling 5-year analysis
starting in 1999 Fear Loss of Time/Money/Status

Network Effect
Exponential Growth with Each Node

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 26
 PRIORITIZE SPENDING TO BUILD ADVANTAGES

FROM MAIN STREET TO WALL STREET

MAIN STREET DEMAND CORPORATIONS WALL STREET DEMAND
Most companies today equate “demand” with
“lead” generation so they focus on internal
activities such as advertising, PR and How Consumers Buy How to Build Pricing Power: Competitive Advantage How Markets Evaluated
marketing materials.
EMOTIONAL NEEDS FAIR-PRICE + GROWTH
But in order to understand how demand is
generated, we must start by examining how Trust Locations SAMPLE AREAS Sales Revenue
consumers buy. Most researchers believe Precision FAIR-PRICE + Manufacturing Free Cash Flow
that decisions follow a logical process, where Connection Competence
SUPPLY CHAIN Logistics Earnings Per Share
consumers weigh the utility of an offering
Variety FAIR-PRICE + Business Process Equity & Book Value
against their budget to buy (or not buy).
Stability Usefulness
Decisions are far more complex, and require DURABILITY
a series of trade-offs between emotional,
FUNCTIONAL NEEDS LEADERSHIP + Market Share
functional and economic needs. These trade-
offs are where companies must create - Products: Quality SAMPLE AREAS Economic Profit
unique sets of advantages that cannot be Quality LEADERSHIP + Engineering Multi-Year Analysis
duplicated by competitors, what we call Usefulness Culture
PRODUCTS R&D
“moats”. Nine moats exist within three
UNIQUENESS LEADERSHIP + Product Lifecycles
business areas (Supply Chain, Products and
Delivery Chain). FAIR-PRICE Simplicity
- Management:
The wRatings' COMPETITIVE X-RAY™
LEADERSHIP UNIQUENESS +
provides a full 9-moat analysis to help
companies prioritize their spending needs Safety / Low-Risk Safety SAMPLE AREAS
based on their ability to build competitive Locations UNIQUENESS + DELIVERY Sourcing
advantage. Culture Consistency CHAIN Customer Relations
- Operations: UNIQUENESS + Communities
Competence Time-Sensitivity
Consistency
Simplicity
Time-Sensitivity

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 27
 OUR INDUSTRY COVERAGE

We cover companies that represent all 10

sectors of the US economy. To make 1,468 Business Segments Covered
company selection easy for customers to
rate them, we structure companies with a
more consumer-friendly nomenclature. Automotive 58

Because some companies generate revenue Consumer Goods 127

through multiple channels (e.g. Apple's
iPhone, iPod, Macintosh, etc.), we track Electronics 52
companies at the business segment level.
Ratings from individual business segments Financials 159
can be combined to form a single rating for
a stock. Since 1999, our historical database Health Care 108
contains 1,500+ business segments that
contribute to 1,200+ companies. About Home 53
100+ business segments are private firms
we track in order to accurately assess their Industrials & Materials 125
public rivals competitive strength.
Media 109
Our research team operates in 13-week
increments. During the course of that time,
we pre-qualify a panel, conduct interviews
Restaurants 79
with them and analyze the data on each
company in our database. Our analyst team
Retail 181
then writes and publishes individual reports
on many of the companies covered. Technology 134

For an up-to-date listing of the wRatings Telecom 72

coverage, go to www.wratings.com.
Travel 108
Utilities & Energy 103

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 28
 FOR MORE INFORMATION

ABOUT CAPGEMINI
CONTACT wRATINGS CONTACT CAPGEMINI
Capgemini, one of the world's foremost providers of consulting,
technology and outsourcing services, enables its clients to
transform and perform through technologies. Capgemini provides
Gary A. Williams Greg Jacobsen
its clients with insights and capabilities that boost their freedom to gawilliams@wratings.com greg.jacobsen@capgemini.com
achieve superior results through a unique way of working, the
Collaborative Business Experience. The Group relies on its global
delivery model called Rightshore®, which aims to get the right wratings.com capgemini.com
balance of the best talent from multiple locations, working as one
team to create and deliver the optimum solution for clients. Present
wRATINGS CORPORATION CAPGEMINI U.S.
in more than 30 countries, Capgemini reported 2008 global 2325 Dulles Corner Blvd. 623 Fifth Avenue
revenues of EUR 8.7 billion (approximately USD $12.74 billion) and
employs over 90,000 people worldwide.
Suite 500 33rd Floor
Herndon, VA 20171 New York, NY 10022
More information is available at www.us.capgemini.com.
703.788.6532 212.314.8000

THE W REPORT™ © 2009 wRatings Corporation. All rights reserved. Media & Telecom 2009 29