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CNBC Transcript: CNBC's David Faber Speaks with Discovery Communications President and CEO David Zaslav Today

Friday, 14 Dec 2012 | 11:34 AM ET

WHEN: TODAY, FRIDAY, DECEMBER 14TH

WHERE: CNBC'S "SQUAWK ON THE STREET"

Following is the unofficial transcript of a CNBC interview with Discovery Communications President & CEO David Zaslav today on CNBC's "Squawk on the Street." Following is a link to the video of the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000135477&play=1. All references must be sourced to CNBC.

DAVID FABER: DISCOVERY COMMUNICATIONS AS, CARL JUST SAID, ANNOUNCING A $1.7 BILLION DEAL TO ACQUIRE NORDIC MEDIA ASSETS, ADDING TO WHAT IS A GROWING INTERNATIONAL PORTFOLIO, AND OF COURSE A VERY SIGNIFICANT BUSINESS ALREADY IN EXISTENCE. DAVID ZASLAV IS PRESIDENT & CEO OF DISCOVERY AND HE JOINS US ON THE PHONE FOR AN EXCLUSIVE INTERVIEW. DAVID, ALWAYS A PLEASURE.

ZASLAV: DAVID, HOW ARE YOU?

FABER: I'M DOING FINE ON THIS FRIDAY MORNING. $1.7 BILLION GOES OUT THE DOOR TO BUY SBS, NORDIC. ANOTHER $221 MILLION TO BUY 20% OF EURO SPORT GROUP. WHY ARE YOU SPENDING ALL THIS MONEY OVERSEAS?

ZASLAV: WELL, FIRST, WE'RE THE LEADER OUTSIDE THE U.S. IN PAY TV TODAY. WHEN I JOINED THE COMPANY SIX YEARS AGO, IT WAS 10% OF OUR BUSINESS. TODAY IT'S OVER 35% OF OUR BUSINESS. THE GROWTH OUTSIDE THE U.S. IS MUCH MORE SUBSTANTIAL. THERE'S LESS COMPETITION. ON AVERAGE THERE'S BETWEEN 40 TO 50 CHANNELS VERSUS 200 HERE. A LOT OF THE TECHNOLOGY WE'RE SEEING HERE IN THE U.S., WE'RE NOT SEEING THAT IN LATIN AMERICA AND EASTER AND WESTERN EUROPE YET. BUT THESE TRANSACTIONS IN PARTICULAR SBS IS A DUAL REVENUE STREAM BUSINESS. WE'RE BUYING IT FOR TWO TURNS LOWER THAN OUR MULTIPLE. WE'RE ALREADY IN BUSINESS IN THOSE MARKETS. THOSE MARKETS FOR THEM ARE SUBSTANTIAL. THEY HAVE BETWEEN 25% AND 30% MARKET SHARE IN NORWAY, DENMARK AND SWEDEN. THEY'RE SIGNIFICANT IN FINLAND. SO YOU TAKE THOSE MARKETS AND YOU PUT IT TOGETHER WITH US WHERE WE HAVE A TEAM ON THE GROUND ALREADY, SO WE HAVE MEANINGFUL SYNERGY. ON TOP OF THAT, WE BRING EURO SPORT, WHICH I'LL TALK ABOUT IN A MINUTE, INTO PLAY. IT GIVES US A VERY SUBSTANTIAL BUSINESS. NOT JUST IN NONFICTION, BUT ALSO IN FICTION AND SPORTS ACROSS A NUMBER OF VERY STABLE COUNTRIES. AND ASIDE FROM BEING TWO TURNS BELOW OUR CURRENT MULTIPLE AT HAVING SYNERGY, WE ALSO HAVE SOME NICE TAX ADVANTAGES IN THE TRANSACTION. SBS BECAME AN EASY ONE FOR US. I THINK IT WILL HELP US GROW FASTER BY HAVING THEM BE PART OF OUR COMPANY.

FABER: ON THE FINANCIAL SIDE OF THAT, YOU MENTION, OF COURSE, THE MULTIPLE LOWER FOR WHAT YOU'RE BUYING THAN WHAT DISCOVERY CURRENTLY TRADES AT. SO I WOULD ASSUME GIVEN THAT AND YOU MENTIONED SYNERGIES. THIS DEAL IS GOING TO BE ACCRETIVE WIN RIGHT AWAY?

ZASLAV: RIGHT AWAY. THIS DEAL WILL BE ACCRETIVE IMMEDIATELY. I THINK IT MAKES IT ATTRACTIVE FOR US. YOU KNOW, THIS, TOGETHER WITH SBS AND EURO SPORT, WE WILL BE THE LARGEST PROGRAMMER IN EUROPE, AND WE'LL BE THE LARGEST PAY TV PROGRAMMER – GLOBAL PROGRAMMER OUTSIDE THE U.S. IT REALLY ENHANCES OUR OVERALL STRATEGY OF TAKING OUR GREAT CONTENT, DISCOVERY, TLC, ANIMAL PLANET, SCIENCE, I.D., WE HAVE 14 CHANNELS HERE IN THE U.S. WE'VE TAKEN A LOT OF THAT CONTENT ALL OF WHICH WE OWN AND TAKEN IT AROUND THE WORLD. THIS HELPS TO SUPERCHARGE THAT INTERNATIONAL STORY, AND REINFORCES THE FACT THAT AS A GLOBAL COMPANY, WE'RE MUCH STRONGER. AND GEOGRAPHICALLY, WE'RE MUCH MORE STABLE AND POSITIONED FOR GROWTH.

FABER: TO WHAT EXTENT IS IT AT ALL A VOTE AS WELL ON THE U.S.? THERE'S CONTINUED CONCERNS. THEY MAY NOT BE REALIZED FOR MANY YEARS, THAT THE BUNDLE DOESN'T HOLD TOGETHER, PARTICULARLY WHEN IT COMES TO SPORTS PROGRAMMING. AS YOU DIVERSIFY YOUR REVENUE BASE FURTHER AND FURTHER AWAY FROM THE U.S., ARE YOU SAYING HEY I JUST DON'T SEE THE GROWTH HERE AND YOU WORRY ABOUT THAT DAY COMING WHEN THE BUNDLE FALLS APART?

ZASLAV: WELL NO ACTUALLY, WE'RE FINDING VERY SUBSTANTIAL GROWTH HERE IN THE U.S. IN NOVEMBER, WE HAD -- WE GREW OUR MARKET SHARE HERE OF OUR 14 CHANNELS ALMOST 20%. FOR THE YEAR, WE'RE GROWING HIGH SINGLE DIGITS. IN THE U.S., WE'RE STILL FINDING GROWTH. BUT THE FACT THAT WE CAN HAVE THIS GEOGRAPHIC DIVERSITY IS IMPORTANT TO US, BECAUSE THERE'S A NUMBER OF MARKETS. IN LATIN AMERICA WE HAVE FIVE OF THE TOP 20 CHANNELS. AND LATIN AMERICA IS STILL ONLY -- MEXICO'S 40% PENETRATED, BRAZIL 26% PENETRATED. WE'VE SEEN MORE GROWTH IN MEXICO AND BRAZIL IN TERMS OF SUB GROWTH THIS YEAR THAN THE U.S. HAS SEEN OVER THE LAST FIVE YEARS. SO WHAT IT DOES PROVIDE FOR US IS IT PROVIDES KIND OF MORE SUPERCHARGED GROWTH. OUR INTERNATIONAL BUSINESS, AS GOOD AS OUR DOMESTIC BUSINESS IS, OUR INTERNATIONAL BUSINESS HAS BEEN GROWING MUCH MORE SUBSTANTIALLY OVER THE LAST COUPLE OF YEARS. JUST TO GIVE YOU A SENSE, WHEN I STARTED AT DISCOVERY, OUR WHOLE COMPANY WAS MAKING $700 MILLION. AND INTERNATIONAL WAS ABOUT $100 MILLION. THIS YEAR WE'LL MAKE MORE IN OUR INTERNATIONAL BUSINESS THAN OUR WHOLE COMPANY FIVE AND A HALF YEARS AGO. SO WE DO SEE INTERNATIONAL. AND THAT INCLUDES ASIA, AND IT INCLUDES FAST GROWING MARKETS LIKE RUSSIA AND TURKEY AS WELL AS WESTERN EUROPE AND LATIN AMERICA. BUT WE THINK THAT THAT IS A KEY DIFFERENTIATOR FOR US AS A COMPANY, THAT WE HAVE SO MANY GREAT PLATFORMS AROUND THE WORLD IN SUCH GEOGRAPHIC DIVERSITY. AND THAT FACT THAT OUR CONTENT OUR INTERNATIONAL MARGINS ARE CLOSE TO 50%, BECAUSE WE USE THE CONTENT FROM DISCOVERY, ANIMAL PLANET, SCIENCE, I.D., AROUND THE WORLD.

FABER: DAVID, SIMON HOBBS HAS A QUESTION HE WANTS TO GET IN HERE.

SIMON HOBBS: WOULD YOU LIKE TO BUY BSKYB IN THE UNITED KINGDOM, DAVID?

ZASLAV: YOU KNOW BSKYB IS A GREAT BUSINESS RUN BY JEREMY DERRICK. BUT THAT'S NOT WHAT WE DO. IT'S PRIMARILY A DISTRIBUTOR. THEY'RE DIRECTV ON STEROIDS. THEY ALSO OWN A NUMBER OF CHANNELS. BUT THAT'S NOT WHAT WE DO. WE'RE VERY EXCITED ABOUT THIS NEW DEAL THAT WE ANNOUNCED TODAY, THE SOUTHERN DEAL OF THE EURO SPORT. EURO SPORT IS A VERY UNIQUE PLATFORM. IT'S A SPORTS CHANNEL BETWEEN ONE AND THREE CHANNELS IN 59 COUNTRIES.

FABER: DAVID, IF GIVEN THE CHANCE, WILL YOU ACQUIRE A MAJORITY STAKE AS THIS AGREEMENT ALLOWS FOR OVER TIME?

ZASLAV: WE'RE GOING TO SEE OVER THE NEXT TWO YEARS, IT'S A GREAT STRUCTURE FOR US. BUT I WILL SAY THIS, THERE IS --THEY ARE THE LEADER IN SPORTS ALL ACROSS EUROPE. THERE IS NO PLATFORM THAT EVEN COMES CLOSE. IN FACT, THERE IS NO PLATFORM THAT'S REALLY MULTI-COUNTRY. SO EURO SPORT IS A GREAT BRAND IN 59 COUNTRIES. BUT MORE IMPORTANTLY, THEY'RE IN THE SPORTS BUSINESS WITHOUT PAYING A LOT OF MONEY FOR SPORTS. THE BIG-TIME SPORTS, THE KIND OF STUFF THAT YOU SEE HERE IN THE U.S., WHERE CABLE PROGRAMMERS ARE PAYING A LOT FOR THE NFL, FOR BASEBALL, FOR BASKETBALL, AND THEN CHARGING HUGE FEES, THAT'S NOT THE GAME THAT WE'RE IN WITH EURO SPORT. THE EURO SPORT IS -- THE CONCEPT FOR EURO SPORT IS THEY HAVE MUCH MORE NICHE SPORTS. SO THEY'LL HAVE TENNIS, THEY HAVE SKIING, THEY HAVE CURLING.

HOBBS: BUT DAVID ITS FREE TO AIR ISN'T IT, YOU'RE NOT ABLE TO CHARGE CARRIAGE AS ESPN WOULD HERE IN THE UNITED STATES?

ZASLAV: NO, IT'S ACTUALLY DUAL REVENUE STREAM. IN THOSE 59 COUNTRIES WE HAVE BETWEEN ONE AND THREE CHANNELS WITH EURO SPORT WHERE WE GET SUB FEES. AND THE ATTRACTION FOR US IS, WE'RE IN ALL 59 OF THOSE COUNTRIES WITH BETWEEN SIX AND EIGHT CHANNELS OF OUR OWN. IN MOST OF THOSE MARKETS, WE'RE THE NUMBER ONE CHANNEL FOR MEN, AND WE HAVE A TOP CHANNEL FOR WOMEN. WHEN YOU PUT THAT TOGETHER – WE THINK THAT WE HAVE SOME MORE VALUE TO BRING TO ADVERTISERS AND DISTRIBUTORS.

FABER: WE'VE GOT TO WRAP IT UP. BUT REAL QUICK, THE BUYBACK WHY DID YOU GO UP A BILLION ARE YOU GOING TO BUY THE STOCK BACK QUICKLY OR IS THAT JUST SORT OF AN ADDITION HERE THAT WILL TAKE TIME?

ZASLAV: WE HAVE 400 MILLION LEFT. WE DID THE ADDITIONAL BILLION BECAUSE WE BELIEVE IN THE COMPANY. WE'VE BEEN AGGRESSIVE BUYERS IN THIS PAST YEAR. WE INTEND TO BUY AS MUCH NEXT YEAR AS WE DID THIS YEAR. BECAUSE WE THINK THAT OUR STOCK IS A GOOD VALUE RIGHT NOW.

FABER: WE'LL LEAVE IT THERE. DAVID ZASLAV, AS ALWAYS, THANKS FOR JOINING US.



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