Author Topic: CHTR - Charter Communications  (Read 177007 times)

dwy000

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Re: CHTR - Charter Communications
« Reply #20 on: August 20, 2014, 07:37:26 AM »
Hey there, welcome to the Board!

I think your analysis is pretty correct.  The only things I'd question are: a) the managed subs should have much, much higher margins since that is just a management fee and wouldn't have any of the associated costs of revenue;  b) for the SpinCo ownership, you show $2.1bn of enterprice value and $21bnof debt - not sure that math works but the $16bn remaining value is probably right.

I can't recall but I thought they were also purchasing some 2M subs from Comcast to get them to a total managed base of about 9-9.5M subs.


pks99

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Re: CHTR - Charter Communications
« Reply #21 on: August 20, 2014, 04:56:41 PM »
Yes, thanks for taking a look at these estimates.  I agree that most of the revenue from the managed subs would drop to profit, especially since some costs will be reimbursed by the SpinCo.  Also, the way I presented the SpinCo equity value and CHTR debt is confusing.  They are not related, just grouped together to get to CHTR equity value.

I like the CHTR story.  Must believe that the economics of the business will improve to resemble leaders like CVC and Malone and Rutlege will make shareholder friendly capital allocation decisions.  Resembles the FIATY thesis (but probably with fewer upside options...).

Look forward to the dialogue on the board!

Liberty

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Re: CHTR - Charter Communications
« Reply #22 on: September 18, 2014, 06:21:17 AM »
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merkhet

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Re: CHTR - Charter Communications
« Reply #23 on: September 18, 2014, 07:21:11 AM »
http://www.sec.gov/Archives/edgar/data/1091667/000109166714000176/chtr91114425filing.htm

Transcript from the goldman sachs conference.

Thanks for the transcript.

I must be a little slow, because it took this transcript to help me figure out why the GreatLand deal was such a good deal for Charter. They get to offload some of their costs (R&D, marketing, etc.) onto GreatLand, and this helps Charter by increasing Charter's margins while at the same time they benefit off the revenue share on GreatLand. It's pure margin for them.
« Last Edit: September 18, 2014, 09:55:56 AM by merkhet »

Wilson-TPC

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Re: CHTR - Charter Communications
« Reply #24 on: September 18, 2014, 09:21:33 PM »
http://www.sec.gov/Archives/edgar/data/1091667/000109166714000176/chtr91114425filing.htm

Transcript from the goldman sachs conference.

Thanks for the transcript.

I must be a little slow, because it took this transcript to help me figure out why the GreatLand deal was such a good deal for Charter. They get to offload some of their costs (R&D, marketing, etc.) onto GreatLand, and this helps Charter by increasing Charter's margins while at the same time they benefit off the revenue share on GreatLand. It's pure margin for them.

It's more than just margin expansion. The customer trade with Time Warner is very beneficial. And not to mention the possibility of acquiring GreatLand when the opportunity arises.
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merkhet

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Re: CHTR - Charter Communications
« Reply #25 on: September 18, 2014, 09:28:32 PM »
Yes. I understood the reasoning behind the customer trade, but I didn't quite see why they touted the other part -- the management agreement -- as being that great a deal.

At the end of the day, they have various fixed costs that they were going to incur anyway, and now they get to offload some of that onto GreatLand.

I'm still a little unclear on whether acquiring GreatLand would be more beneficial to them than their current arrangement. I suppose it all depends on price.

Wilson-TPC

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Re: CHTR - Charter Communications
« Reply #26 on: September 18, 2014, 09:38:00 PM »
Yes. I understood the reasoning behind the customer trade, but I didn't quite see why they touted the other part -- the management agreement -- as being that great a deal.

At the end of the day, they have various fixed costs that they were going to incur anyway, and now they get to offload some of that onto GreatLand.

I'm still a little unclear on whether acquiring GreatLand would be more beneficial to them than their current arrangement. I suppose it all depends on price.

The management agreement gives them "pure" profit, which is why they are touting it.

The pro-forma EBITDA is roughly 7 something with synergies and the management fee.
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merkhet

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Re: CHTR - Charter Communications
« Reply #27 on: October 15, 2014, 03:04:18 PM »

dwy000

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Re: CHTR - Charter Communications
« Reply #28 on: October 15, 2014, 03:34:44 PM »
I don't get that move.

At the end of the day HBO is just an aggregator of movie content plus some proprietary shows.  If Charter (or Comcast or Verizon or TW, etc) increased their broadband price by $5/month and offered unlimited movies (a la Netflix) it would kill the Netflix and HBO and Showtime and Starz business model in one fell swoop.  They would turn into channels that only show proprietary content - and while I love the HBO shows I'm not sure how many would pay $10-12/month for just those (or $9/month for the proprietary Netflix shows, etc.

As HBO, why would you antagonize and make an enemy of the very partners that you rely on for survival - whether that's through a cable distribution relationship or as the provider of broadband that's needed to access your new business model.

morningstar

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Re: CHTR - Charter Communications
« Reply #29 on: October 15, 2014, 04:06:42 PM »
I don't get that move.

At the end of the day HBO is just an aggregator of movie content plus some proprietary shows.  If Charter (or Comcast or Verizon or TW, etc) increased their broadband price by $5/month and offered unlimited movies (a la Netflix) it would kill the Netflix and HBO and Showtime and Starz business model in one fell swoop.  They would turn into channels that only show proprietary content - and while I love the HBO shows I'm not sure how many would pay $10-12/month for just those (or $9/month for the proprietary Netflix shows, etc.

As HBO, why would you antagonize and make an enemy of the very partners that you rely on for survival - whether that's through a cable distribution relationship or as the provider of broadband that's needed to access your new business model.

I don't think HBO relies on a Charter for its survival, particularly... the pay-TV services have been very resilient precisely because (1) subs really want their content (even to the point of paying for it ala carte) and (2) they provide revenue to the MVPDs via revenue sharing (they are not cost centers, unlike traditional cable). It's a mutually beneficial relationship. I'd expect that the new streaming service will ultimately be priced such that if you are subscribing to cable, it's still cheaper/higher quality to get HBO via cable than as a stand-alone package; it will also probably force cable to take a smaller cut as revenue share.

Bigger picture, the breakdown of the existing model, and proliferation of over the top/streaming services, seems more dangerous for Charter and other big cable companies than for the companies controlling the content. The main advantage of scaling up in cable may be lower content costs, not lower installation costs, e.g. I think Google's experiences in Fiber largely point to this. Charter definitely does not want to position itself as just a generic provider of bandwidth.

As it stands the cable channels create a lot of value by aggregating content, thereby (1) forcing subs to end up paying more than they really want to or would in an alacarte world - creating new revenue - and (2) generating market power for themselves by being indispensible to the content creators/controllers who can't afford, for instance, not to be distributed on Comcast.