Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: JoelS on March 26, 2014, 09:39:59 PM

Title: CHTR - Charter Communications
Post by: JoelS on March 26, 2014, 09:39:59 PM
There is a good thread on Liberty Media but I thought it would be worth starting a new thread on Charter Communications (if there isn't one already), as a stand alone company or to help analyse the new Liberty tracking stock LBRDA/B which will hold among other things Liberty Media's 27% interest in Charter. So here's my summary, sourced mostly from the company, VIC, interviews, and Brooklyn Investor.. (i'll post up all the sources i've come across at some point)

Charter Communications is a provider of cable television, broadband internet and telephone services to 6.8 million Americans in 29 US states. The Company is minority owned and controlled by Liberty Media, the flagship company of John Malone. Liberty Media acquired a 27% stake in Charter in March 2013 at a price of $95.50 per share, and has the right to increase its stake to 35% ownership between now and June 2016 and 40% ownership after June 2016.  John Malone, by all accounts, is recognised as one of the best CEO and capital allocators of the 20th century. Over 25 years at the helm of TCI, Malone compounded capital at a rate of over 30% before selling to AT&T, whose cable assets were later bought by Charter and Comcast. Malone has achieved a similar rate of return with Liberty Media, originally a spin off from TCI. From May of 2006 through the financial crisis to March 2013, Liberty returned 33% per year. The upshot is a compounding rate of return near 30% for nearly 40 years.

Cable background

Cable is an attractive industry in general. Cable operators have de facto monopolies in that they control the only data connection into the home with enough capacity to serve video, internet and voice simultaneously. Cable provides the highest speeds and will continue to have the highest speed for the least incremental capital. Because data usage is rising exponentially, having the lowest cost basis will become increasingly important. Cable companies are also attractive in that they hold no inventory, have no labour problems and no long term benefit liabilities. The industry norm is two year contracts with annual price increases.

JM quote on cable industry:

“I used to say in the cable industry that if your interest rate was lower than your growth rate, your present value is infinite. That’s why the cable industry created so many rich guys. It was the combination of tax-sheltered cash-flow growth that was, in effect, growing faster than the interest rate under which you could borrow money. If you do any arithmetic at all, the present value calculation tends toward infinity under that thesis.”

Charter

In 2009, Charter Communications went bankrupt. The company suffered from over leverage and poor management virtually from the time of its IPO in 1999. Charter was bought out of bankruptcy by distressed debt and private equity interests including Apollo and Oaktree. They sold their stakes in the company to Malone's Liberty at a significant profit. Charter emerged from bankruptcy with reduced debt and an enormous net operating loss position (at 31st dec 2013, loss carry forwards were $8.3 billion) meaning Charter won't pay tax until at least 2018. Protected by these NOL's, Charter's earnings will flow through to free cash flow, allowing share repurchases or acquisitions.

Today, Charter is levered 4.8x Ebitda. Historically, cable has been able to support up to 5x ebitda due to the utility-like nature of the business. 95% of Charter's debt is due after 2016, with an average duration of 7.4 years and a weighted average cost of debt of 5.6%.

The stock is priced at an EV/Ebitda multiple of about 9.5x. This is higher than peers but arguably justified because the outlook for charter is much better than peers. Tom Rutledge, Charter's CEO since December 2011, is reputedly one of the best operators in the cable business. Rutledge was formerly COO of Cablevision, The US's eighth largest cable operator. Under his leadership, Cablevision achieved some of the best operating metrics in the cable industry, while overseeing a turnaround comparable to Charter. In 2010 Cablevision acquired Bresnan communications, a company which, although much smaller, has similarities to Charter in that both serve mostly rural markets. Rutledge sought to improve Bresnan's EBITDA per serviceable passing (the standard industry metric for measuring the financial performance of a cable company) through a strategy of driving sales and customer service, boosting internet penetration and offering better video products.
In six quarters, EBITDA per serviceable passing at Bresnan rose from $207 to $270.

Rutledge's strategy for Charter is very similar to Bresnan's and to help turn around Charter, he recruited almost his entire team from Cablevision. Rutledge's employment agreement also includes 1.3 million share awards vesting over four years. Today, Charter's EBITDA per serviceable passing sits around $220. The best cable companies in the US show a figure of about $450 EBITDA per passing. If Charter can increase EBITDA to approximately $280 - $300 per home passed per year, free cash flow should grow at a decent clip. Combined with repurchasing shares and incremental borrowing, Charter should be able to shrink the equity of the company substantially over the next 2-3 years.

John Malone on Charter:

"This is a unique opportunity to take this vehicle and grow it; through both superior marketing and promotion, in other words organic growth… which can be exceptionally strong for a number of years… and particularly the rate of growth of free cash flow can be very, very strong, which allows it to then access the leverage market in order to do roll-up transactions, particularly where there are horizontal synergies. So the old TCI formula, horizontal acquisitions, synergies, grow scale and then look to form consortia with other cable companies".

Title: Re: CHTR - Charter Communications
Post by: prevalou on March 27, 2014, 01:43:41 AM
EBITDA per passing is an interesting statistic.  When comparing to GNCMA (more than $ 600 EBITDA per  passing), there seems to be a lot more of potential improvement at Charter. So price/EBITDA is lower at GNCMA but potential is a lot higher at CHTR.
Title: Re: CHTR - Charter Communications
Post by: yadayada on March 27, 2014, 06:09:35 AM
where is the upside? If they increase to 300, then it still trades at like 12-14x FCF with current revenue? If it increases to 375 then it trades at 6.75x FCF. How can you assess the chance they will succeed at this? Seems like alot of the improvement is already priced in?

Also is attaining GCI's level not a bit unrealistic, and isn't their cost structure different with higher cap exp?
Title: Re: CHTR - Charter Communications
Post by: Olmsted on March 27, 2014, 06:24:19 AM
Oh, the pain!  I bought CHTR warrants post-reorganization for ~6, then sold a couple months later for no explicable reason.  Every time I see a CHTR thread or message, it opens up the wound again.  Quick - bury this thread!  ;)
Title: Re: CHTR - Charter Communications
Post by: prevalou on March 27, 2014, 06:42:53 AM
if EBITDA per passing is $300, price to ebitda becomes 9.5*220/300=7. If it increases to $375, price to ebitda is 5.57. If it increases to $690 (GNCMA level), it becomes 3 times ebitda.
Title: Re: CHTR - Charter Communications
Post by: JoelS on March 27, 2014, 03:31:26 PM
where is the upside? If they increase to 300, then it still trades at like 12-14x FCF with current revenue? If it increases to 375 then it trades at 6.75x FCF. How can you assess the chance they will succeed at this? Seems like alot of the improvement is already priced in?

Also is attaining GCI's level not a bit unrealistic, and isn't their cost structure different with higher cap exp?

Attaining GCI's passing figure seems out of reach, at least for the next few years. Getting to $300, on the other hand, doesn't seem so unrealistic. Most of the upside in EBITDA would come from increasing internet penetration in its footprint.. In 2013, Charter provided internet to just over 32% of customers v competitors Time Warner, Comcast and Cablevision all over 36%. (50%+ for Cablevision).

If they can get to $300 per passing at year end 2015, it depends on your assumptions of course, but from 1. 2014 free cash flow, 2. 2015 free cash flow and 3. incremental borrowing to keep leverage at 4.5x ebitda, you end up with c $5bn of cash for Mr Malone and Mr Maffei to use for whatever purpose they deem appropriate.

The current market cap is c $13.1bn. So the free cash looks good in comparison.


Title: Re: CHTR - Charter Communications
Post by: yadayada on March 27, 2014, 05:11:18 PM
What would cap exp be compared to depreciation?

Because here is what I get. 300$ per passing is 36% higher right? So 36% more ebitda. they had 2.8b$ ebitda in 2013. So x  = 3.8bn$ in ebitda now. - 1.8bn$ in depreciation (how much cap exp is that in reality?, and will this be  higher or lower?) - 850 in interest is 1.15 bn$ in FCF, not counting in taxes. with a market cap of 13 bn$ that doesnt look v cheap?

Also if you think they can get more debt, then you are saying i should buy liberty media? Is that FCF for liberty media? I dont get that part.

Did I do the FCF calculation right?
Title: Re: CHTR - Charter Communications
Post by: JoelS on March 27, 2014, 05:41:55 PM
What would cap exp be compared to depreciation?

Because here is what I get. 300$ per passing is 36% higher right? So 36% more ebitda. they had 2.8b$ ebitda in 2013. So x  = 3.8bn$ in ebitda now. - 1.8bn$ in depreciation (how much cap exp is that in reality?, and will this be  higher or lower?) - 850 in interest is 1.15 bn$ in FCF, not counting in taxes. with a market cap of 13 bn$ that doesnt look v cheap?

Also if you think they can get more debt, then you are saying i should buy liberty media? Is that FCF for liberty media? I dont get that part.

Did I do the FCF calculation right?

We're in about the same ballpark. So using your figure of 3.8bn, and keeping leverage at 4.5 v 4.8 today (for charter, not liberty) you add about 3.1bn to debt. Maintenance capex should come down as a percentage of revenues in 2015, when the c400m attributed to the digital rollout ends. So you get capital coming down per customer. I think the cash flow yield might be closer to 10% in 2015 - more like 1.3 - 1.4bn.. But that's subjective.
Title: Re: CHTR - Charter Communications
Post by: Liberty on March 28, 2014, 10:38:16 AM
Quote
Charter Communications has filed legal documents contesting the proposed $42.5bn merger between Time Warner Cable and Comcast, claiming that the deal has been subject to a “flawed process”.

In a filing with the Securities and Exchange Commission on Thursday night, Charter, a cable operator, outlined a series of complaints against the structuring of the deal, with a particular focus on proposed divestitures and the lack of a break-up fee.

“TWC’s process for negotiating and approving the merger was flawed because of the failure of the TWC board of directors to consider and investigate alternatives to the proposed Comcast merger,” the document reads.

“In particular, the TWC board simply refused to meaningfully engage with Charter regarding a potential business combination even after deciding to pursue a transaction with Comcast

http://www.ft.com/intl/cms/s/0/4279ccc4-b671-11e3-b230-00144feabdc0.html#axzz2xHQ55UlE
Title: Re: CHTR - Charter Communications
Post by: tombgrt on April 12, 2014, 11:19:55 AM
Haven't look at this yet but just thinking out loud here:

If you assume that "internal/organic growth can be exceptionally strong for a number of years" is possible in combination with increased EBITDA per passing to $300 by the end of 2015/2016 you would get much much higher EBITDA in only a few years. If internal growth is 10%/year* you'd get near $5B EBITDA in 2016! Sure, that would be a very bullish outcome but also one where you could see a double from the current market cap, if not more.

(*likely way too aggressive ;))
Title: Re: CHTR - Charter Communications
Post by: wellmont on April 12, 2014, 11:40:48 AM
very bad blood now between malone and roberts. I don't suspect charter now has the inside track on divestitures. so I guess the strategy is to go "all in".
Title: Re: CHTR - Charter Communications
Post by: tombgrt on April 12, 2014, 02:12:27 PM
What do you mean with 'going all in' wellmont? TIA
Title: Re: CHTR - Charter Communications
Post by: fareastwarriors on April 22, 2014, 04:06:09 PM
Charter Said to Near Deal for Divested Comcast Subscribers


http://www.bloomberg.com/news/2014-04-22/charter-said-to-near-deal-with-comcast-for-1-5-million-customers.html
Title: Re: CHTR - Charter Communications
Post by: fareastwarriors on April 28, 2014, 09:41:56 AM
Charter Reaches Deal With Comcast for Subscribers



http://dealbook.nytimes.com/2014/04/27/charter-said-to-finalize-deal-with-comcast-for-subscribers/?ref=business (http://dealbook.nytimes.com/2014/04/27/charter-said-to-finalize-deal-with-comcast-for-subscribers/?ref=business)
Title: Re: CHTR - Charter Communications
Post by: wellmont on April 28, 2014, 10:04:04 AM
What do you mean with 'going all in' wellmont? TIA

Apparently the "bad blood" was just for show. It appears that Malone was using the threat of making himself into a real nuisance and object to the Comcast/TWC deal, in the hopes that he could get something for charter. So he was "all in" in acting like a total jerk. He also knew that comcast wanted to swap subscribers with charter in LA. So being a jerk got comcast to the table.

And it looks like it worked. Malone knew he had lost TWC. But he got almost as good a deal with this 3 stage agreement. The original plan was for chtr to buy twc and split some of it with comcast. The only change is that comcast is buying twc and will split some with charter. The end result is comcast gets more subs and charter less than the original proposal. But this deal will work for both companies. If charter also bags COX and or CVC down the road, there will essentially be a duopoly in cable. And that could bode well for DTV/DISH.
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 28, 2014, 07:39:21 PM
http://www.sec.gov/Archives/edgar/data/1091667/000109166714000090/exhibit992publicpresenta.htm

Charter and Comcast's presentation on the deal.
Title: Re: CHTR - Charter Communications
Post by: JoelS on August 14, 2014, 03:12:20 PM
http://www.cnbc.com/id/101920898?utm_source=twitterfeed&utm_medium=twitter

Warren Buffett's Berkshire Hathaway added Charter Communications to its stock holdings during the second quarter.

The stake is worth about $361 million, indicating the decision to buy was almost certainly made by one of Berkshire's portfolio managers, not by Buffett himself.
Title: Re: CHTR - Charter Communications
Post by: Gopinath on August 14, 2014, 04:27:40 PM
Such a complicated valuation on the deal! Anyone care to venture a guess what will be the market cap of the new charter? There could be opportunities in all these spinoffs and new company formation! I would like to see what's the valuation on single customer?

Ex:  New Charter will have 5.7M in legacy & 1/3(2.5M) in the spinco?? On a ownership basis, new charter will have 6.5M customers??

Proforma debt - $21.8 B
Current market cap - $16B??
EV - $38B

Each customer is valued @ $38B/6.5M(both legacy and spinco ownership) --> $5846???

Can someone verify the math above?? Something is wrong i guess!

Title: Re: CHTR - Charter Communications
Post by: dwy000 on August 14, 2014, 04:46:13 PM
The value for Charter should be even more than that (whatever number you use per subscriber) because they are getting a revenue share fee for managing the new entity.  That's huge - it's a fee on the entire business so they are in effect paying themselves for their 1/3'd share but getting fees on the other 2/3's.  That revenue/fee should drop pretty squarely to the bottom line.
Title: Re: CHTR - Charter Communications
Post by: pks99 on August 19, 2014, 01:23:25 PM
This is my first post on CoB.  Charter is intriguing, and I've just started trying to understand it to get a better handle on what LMCA pre-spin is worth.  Here is my stab at valuing Charter pro-forma for the Comcast transaction.  Welcome your thoughts / improvements:

2014 Charter Enterprise Value
+ 5.4m video subscribers = $5.7b revenue (+1.4m acquired)
+ 5.1m internet subscribers = $2.5b revenue
+ 2.5m voice subscribers = $0.7b revenue
+ 0.6m commercial subscribers = $0.9b revenue
+ 2.5m SpinCo video managed subscribers = $0.1b revenue (4.25% on revenue of SpinCo subscribers)
+ Other revenue = $0.5b
= $10.5b total revenue

x 36.0% Adj. EBITDA margin (historical 35%-37%)
= $3.8b Adj. EBITDA

x 9.5 EBITDA multiple (accounts for growth)
= $36.1b enterprise value

+ 33% stake in SpinCo = $2.1b equity value
- $21.8b debt (5.7x leverage)
= $16.4b equity value

/ 0.1b diluted shares
= $153 per share

Charter is currently trading around this value, suggesting upside of improved ARPU, margins and future capital allocation actions by Malone or Rutledge is not fully priced into the current price.  Charter could potentially be worth 25% more is one assumes improved ARPU and margins as a result of economies of scale. 

What do you think?
Title: Re: CHTR - Charter Communications
Post by: dwy000 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.
Title: Re: CHTR - Charter Communications
Post by: pks99 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!
Title: Re: CHTR - Charter Communications
Post by: Liberty on September 18, 2014, 06:21:17 AM
http://www.sec.gov/Archives/edgar/data/1091667/000109166714000176/chtr91114425filing.htm

Transcript from the goldman sachs conference.
Title: Re: CHTR - Charter Communications
Post by: merkhet 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.
Title: Re: CHTR - Charter Communications
Post by: Wilson-TPC 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.
Title: Re: CHTR - Charter Communications
Post by: merkhet 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.
Title: Re: CHTR - Charter Communications
Post by: Wilson-TPC 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.
Title: Re: CHTR - Charter Communications
Post by: merkhet on October 15, 2014, 03:04:18 PM
HBO Sets Stand-Alone Streaming Service http://online.wsj.com/articles/hbo-to-launch-standalone-streaming-service-1413385733
Title: Re: CHTR - Charter Communications
Post by: dwy000 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.
Title: Re: CHTR - Charter Communications
Post by: morningstar 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.
Title: Re: CHTR - Charter Communications
Post by: dwy000 on October 15, 2014, 04:26:37 PM
Can't argue with that.  I think the cable companies have 2 advantages.  a) they provide the broadband which is a massive margin business (much higher than cable because the costs are almost zero) and frankly a duopoly with the telcos;  b) they can aggregate content. 

I'd love to pick and choose my channels and only pay for the ones I watch but I don't want to pay 25 different providers a monthly fee like I pay Netflix today.  If someone packaged up the channels I wanted and it cost an extra $10/month for that service, I'm paying that all day long.  The cable/telcos are best positioned to do that since they already do it for cable and they are providing the broadband that allows the OTT services to reach me (so I'm paying them anyways).

At the end of the day the cablecos (and telcos) hold all the cards because they are the provider of the pipe through which all the content is delivered.  If they doubled the price tomorrow everyone would still pay it because they have no choice (forget that regulators would get involved). 

For HBO, right now they are unique in that they are one of the few a la carte channels out there.  And it's great for both HBO and cableco (with revenue share).  The move to offer OTT is great for HBO because it expands distribution but it can only be negative for cableco.  And given HBO is delivered by cableco (either through cable or broadband), why antagonize that relationship?  I get the short term drive for revenues but the long term impact is questionable.
Title: Re: CHTR - Charter Communications
Post by: ItsAValueTrap on October 15, 2014, 04:40:55 PM
Can't argue with that.  I think the cable companies have 2 advantages.  a) they provide the broadband which is a massive margin business (much higher than cable because the costs are almost zero) and frankly a duopoly with the telcos;  b) they can aggregate content. 

I'd love to pick and choose my channels and only pay for the ones I watch but I don't want to pay 25 different providers a monthly fee like I pay Netflix today.  If someone packaged up the channels I wanted and it cost an extra $10/month for that service, I'm paying that all day long.  The cable/telcos are best positioned to do that since they already do it for cable and they are providing the broadband that allows the OTT services to reach me (so I'm paying them anyways).

At the end of the day the cablecos (and telcos) hold all the cards because they are the provider of the pipe through which all the content is delivered.  If they doubled the price tomorrow everyone would still pay it because they have no choice (forget that regulators would get involved). 

For HBO, right now they are unique in that they are one of the few a la carte channels out there.  And it's great for both HBO and cableco (with revenue share).  The move to offer OTT is great for HBO because it expands distribution but it can only be negative for cableco.  And given HBO is delivered by cableco (either through cable or broadband), why antagonize that relationship?  I get the short term drive for revenues but the long term impact is questionable.

The Internet service provider / cable company might get some of that money back via interconnect fees.
Title: Re: CHTR - Charter Communications
Post by: Wilson-TPC on October 27, 2014, 08:03:46 PM
Just modeled out Charter for the next 5 years. I would love to hear some feedbacks. I'm not certain of the EBITDA margins will expand or not, anyone have any insights into this?

Thanks a ton.
Title: Re: CHTR - Charter Communications
Post by: dwy000 on October 27, 2014, 08:48:27 PM
Just modeled out Charter for the next 5 years. I would love to hear some feedbacks. I'm not certain of the EBITDA margins will expand or not, anyone have any insights into this?

Thanks a ton.

Nice job Wilson.  What's the basis for the subscriber growth?  Seems very, very aggressive given the flat numbers for the industry as a whole.  Also, did you back solve for the operating expenses to get to a flat 36% EBITDA margin?
Title: Re: CHTR - Charter Communications
Post by: Wilson-TPC on October 27, 2014, 11:38:10 PM
Yes I did.

The sub number is based off what people think Tom can do to get the EBITDA pass through to Cable Vision level.

I'm just making a ballsy call on the sub numbers. It's currently not priced into any sell side reports, which is another reason why I would love to hear feedbacks.
Title: Re: CHTR - Charter Communications
Post by: JoelS on October 28, 2014, 12:36:56 AM
If the deal with Comcast goes through, I believe that will get you to 4500bn ebitda in 2015.
- that doesn't include any improvement in underlying performance - i think that was the number given for 2014 assuming the transaction proceeds.

the analyst reports I have read don't know how to discount the deal into CHTR price. If it goes through I assume they will boost their price targets accordingly. If it doesn't, then TWC opens up for another bite. So I don't know how you model this on any steady state basis.

Title: Re: CHTR - Charter Communications
Post by: dwy000 on October 28, 2014, 06:45:47 AM
Yes I did.

The sub number is based off what people think Tom can do to get the EBITDA pass through to Cable Vision level.

I'm just making a ballsy call on the sub numbers. It's currently not priced into any sell side reports, which is another reason why I would love to hear feedbacks.

Thanks Wilson.  I'd caution against comparing margins (EBITDA or FCF) to Cablevision.  CVc is a unique beast in the industry because they are so heavily concentrated on the NYC market. It is very, very dense which makes operating much more efficient (everything from head ends to customer visits are easier - especially due to having so many Apartment buildings) and there is only limited competition from DirecTV and Dish.  CVC margins have been the holy grail for everyone but nobody has come close.

Also, is there a basis for the 10x EBITDA multiple?  That's probably right for the pass thru EBITDA but the Spinco and Charter and Comcast are valuing transfers at 7.5x EBITDA.
Title: Re: CHTR - Charter Communications
Post by: merkhet on October 28, 2014, 08:21:27 AM
If the deal with Comcast goes through, I believe that will get you to 4500bn ebitda in 2015.
- that doesn't include any improvement in underlying performance - i think that was the number given for 2014 assuming the transaction proceeds.

the analyst reports I have read don't know how to discount the deal into CHTR price. If it goes through I assume they will boost their price targets accordingly. If it doesn't, then TWC opens up for another bite. So I don't know how you model this on any steady state basis.

Just a quick note that I think you meant 4500mn in EBITDA. Though if they did $4.5 trillion in EBITDA, this will be a home run! :P
Title: Re: CHTR - Charter Communications
Post by: ItsAValueTrap on October 28, 2014, 08:50:44 AM
Thanks Wilson.  I'd caution against comparing margins (EBITDA or FCF) to Cablevision.  CVc is a unique beast in the industry because they are so heavily concentrated on the NYC market. It is very, very dense which makes operating much more efficient (everything from head ends to customer visits are easier - especially due to having so many Apartment buildings) and there is only limited competition from DirecTV and Dish.  CVC margins have been the holy grail for everyone but nobody has come close.

I think I'd rather own rural assets with little competition from AT&T U-verse and Verizon and other high-speed DSL providers.  Monopoly economics on high-speed Internet are better than duopoly economics.

Charter should have fewer visits due to digital set-top box upgrades and encryption.  If somebody cancels their cable, the cableco doesn't have to send a tech to the grey box in their neighborhood to disconnect analog cable service by disconnecting the cable.  They can do this remotely.
Title: Re: CHTR - Charter Communications
Post by: merkhet on October 28, 2014, 11:25:24 AM
I actually think that they can get significantly higher than $4.5B EBITDA through the deal.

Let's think about it this way. They're currently at around $3 billion in EBITDA, right? And they're about to purchase about $1 billion of EBITDA for $7 billion or thereabouts, and they're picking up another $2.1 billion of equity value + about $200 million of revenue share in GreatLand for 16 million more shares of New Charter Co.

Now, that already gets you to $4.2 billion of EBITDA before you get to the fact that Charter gets to lay off costs relating to Costs to Service Customers, Marketing and Other, which amounts to almost $3 billion in current costs over a user base that is now about double what it used to be -- including the Customer Swap and the GreatLand servicing agreement.

I think that it won't take much to see Charter squeeze around $5 billion of EBITDA out of the deal with Comcast and GreatLand. If you figure out a free cash flow based on maintenance cap-ex and figure they refinance their debt down to a reasonable interest rate, then you're looking at a pretty steep discount to intrinsic value here. (And don't forget to add back in that they have $2.1 billion of equity value in GreatLand, which, depending on various assumptions, might itself be undervalued significantly.)
Title: Re: CHTR - Charter Communications
Post by: merkhet on October 28, 2014, 11:35:10 AM
Moreover, if you think about the 5x EBITDA target and I'm right that EBITDA is closer to $5 billion than $4.4 billion, then they would have another $3 billion of share repurchase capacity in addition to their yearly FCF.

I could foresee a scenario where, a year from closing the deal, they've bought back the 16 million shares they've issued for this deal and then some. Add in the possible layering of buybacks from Liberty Broadband, and it makes the heart quicken.
Title: Re: CHTR - Charter Communications
Post by: yadayada on October 28, 2014, 01:53:50 PM
What is your best guess on maintenance capex. 1.5 billion$? 700m$ interest? that is 5-2.2 = 2.8bn$. But I assume some taxes? another 800m$ in taxes, so about 2bn$ in FCF. then a 12x multiple on 92m shares is 260$ of value. Possibly 280-290$ with that greatland stake?

what is an appropriate cash flow multiple on these things. Since they do have a nice moat, and possibly some growth? So if you say a 15x multiple, then it gets interesting.
Title: Re: CHTR - Charter Communications
Post by: merkhet on October 28, 2014, 01:57:52 PM
Your interest is too low. They're going to have $22 billion of debt post-Comcast deal.

My guess is that $2 billion in FCF probably isn't out of the realm of possibility.
Title: Re: CHTR - Charter Communications
Post by: Wilson-TPC on October 28, 2014, 07:12:31 PM
I actually think that they can get significantly higher than $4.5B EBITDA through the deal.

Let's think about it this way. They're currently at around $3 billion in EBITDA, right? And they're about to purchase about $1 billion of EBITDA for $7 billion or thereabouts, and they're picking up another $2.1 billion of equity value + about $200 million of revenue share in GreatLand for 16 million more shares of New Charter Co.

Now, that already gets you to $4.2 billion of EBITDA before you get to the fact that Charter gets to lay off costs relating to Costs to Service Customers, Marketing and Other, which amounts to almost $3 billion in current costs over a user base that is now about double what it used to be -- including the Customer Swap and the GreatLand servicing agreement.

I think that it won't take much to see Charter squeeze around $5 billion of EBITDA out of the deal with Comcast and GreatLand. If you figure out a free cash flow based on maintenance cap-ex and figure they refinance their debt down to a reasonable interest rate, then you're looking at a pretty steep discount to intrinsic value here. (And don't forget to add back in that they have $2.1 billion of equity value in GreatLand, which, depending on various assumptions, might itself be undervalued significantly.)

Thanks for chiming in. It's great that we are all back of the napkin gunning this, but if you actually model out the numbers, it's not anywhere near the speed most people think. Even if Charter reaches 4.5 billion in EBITDA, it's EV is 45 billion. It's still trading at 10x EBITDA. No change in valuation.

What's important here is understanding the organic growth rather than the additional add ons. Charter is using a 10x EBITDA stock to acquire a 7x EBITDA entity. It's automatically accretive, so I rather not think too much about future possible acquisitions, rather than focusing on the right metrics that Charter could do to organically grow the current business.

Is penetration rate increasing 300 basis points too much of an assumption? 
Title: Re: CHTR - Charter Communications
Post by: JoelS on October 28, 2014, 09:01:17 PM
I actually think that they can get significantly higher than $4.5B EBITDA through the deal.

Let's think about it this way. They're currently at around $3 billion in EBITDA, right? And they're about to purchase about $1 billion of EBITDA for $7 billion or thereabouts, and they're picking up another $2.1 billion of equity value + about $200 million of revenue share in GreatLand for 16 million more shares of New Charter Co.

Now, that already gets you to $4.2 billion of EBITDA before you get to the fact that Charter gets to lay off costs relating to Costs to Service Customers, Marketing and Other, which amounts to almost $3 billion in current costs over a user base that is now about double what it used to be -- including the Customer Swap and the GreatLand servicing agreement.

I think that it won't take much to see Charter squeeze around $5 billion of EBITDA out of the deal with Comcast and GreatLand. If you figure out a free cash flow based on maintenance cap-ex and figure they refinance their debt down to a reasonable interest rate, then you're looking at a pretty steep discount to intrinsic value here. (And don't forget to add back in that they have $2.1 billion of equity value in GreatLand, which, depending on various assumptions, might itself be undervalued significantly.)

Thanks for chiming in. It's great that we are all back of the napkin gunning this, but if you actually model out the numbers, it's not anywhere near the speed most people think. Even if Charter reaches 4.5 billion in EBITDA, it's EV is 45 billion. It's still trading at 10x EBITDA. No change in valuation.

What's important here is understanding the organic growth rather than the additional add ons. Charter is using a 10x EBITDA stock to acquire a 7x EBITDA entity. It's automatically accretive, so I rather not think too much about future possible acquisitions, rather than focusing on the right metrics that Charter could do to organically grow the current business.

Is penetration rate increasing 300 basis points too much of an assumption?


my understanding is they will raise 8.4bn in debt leaving them with 22.4bn in debt. Market cap today is c 17bn. So EV is 39.4bn. If you think 10x EV/EBITDA on 4.5bn EBITDA is deserved, that means market cap has to rise 5.6bn or 33%.  With this you don't have to make any growth assumptions, that is all gravy (or goes someway to justifying the 10x EV/EBITDA)
Title: Re: CHTR - Charter Communications
Post by: ItsAValueTrap on October 28, 2014, 09:49:54 PM
What is your best guess on maintenance capex. 1.5 billion$? 700m$ interest? that is 5-2.2 = 2.8bn$. But I assume some taxes? another 800m$ in taxes, so about 2bn$ in FCF. then a 12x multiple on 92m shares is 260$ of value. Possibly 280-290$ with that greatland stake?

what is an appropriate cash flow multiple on these things. Since they do have a nice moat, and possibly some growth? So if you say a 15x multiple, then it gets interesting.

Look over the conference call transcripts.  Management provides some information on free cash flow, and how much of that is customer premise equipment (CPE).

Whenever Charter signs up a new customer, it needs to send out a set-top box that it will rent to that customer.  The CPE is growth capex.
Some of Charter's capex may get a little blurry.  If it improves its Internet infrastructure, some of that is maintenance and some of that would be growth.  It's hard to say what the right split is.  But in any case, Charter management doesn't break that out.
Title: Re: CHTR - Charter Communications
Post by: merkhet on October 29, 2014, 05:23:33 AM
I actually think that they can get significantly higher than $4.5B EBITDA through the deal.

Let's think about it this way. They're currently at around $3 billion in EBITDA, right? And they're about to purchase about $1 billion of EBITDA for $7 billion or thereabouts, and they're picking up another $2.1 billion of equity value + about $200 million of revenue share in GreatLand for 16 million more shares of New Charter Co.

Now, that already gets you to $4.2 billion of EBITDA before you get to the fact that Charter gets to lay off costs relating to Costs to Service Customers, Marketing and Other, which amounts to almost $3 billion in current costs over a user base that is now about double what it used to be -- including the Customer Swap and the GreatLand servicing agreement.

I think that it won't take much to see Charter squeeze around $5 billion of EBITDA out of the deal with Comcast and GreatLand. If you figure out a free cash flow based on maintenance cap-ex and figure they refinance their debt down to a reasonable interest rate, then you're looking at a pretty steep discount to intrinsic value here. (And don't forget to add back in that they have $2.1 billion of equity value in GreatLand, which, depending on various assumptions, might itself be undervalued significantly.)

Thanks for chiming in. It's great that we are all back of the napkin gunning this, but if you actually model out the numbers, it's not anywhere near the speed most people think. Even if Charter reaches 4.5 billion in EBITDA, it's EV is 45 billion. It's still trading at 10x EBITDA. No change in valuation.

What's important here is understanding the organic growth rather than the additional add ons. Charter is using a 10x EBITDA stock to acquire a 7x EBITDA entity. It's automatically accretive, so I rather not think too much about future possible acquisitions, rather than focusing on the right metrics that Charter could do to organically grow the current business.

Is penetration rate increasing 300 basis points too much of an assumption?


my understanding is they will raise 8.4bn in debt leaving them with 22.4bn in debt. Market cap today is c 17bn. So EV is 39.4bn. If you think 10x EV/EBITDA on 4.5bn EBITDA is deserved, that means market cap has to rise 5.6bn or 33%.  With this you don't have to make any growth assumptions, that is all gravy (or goes someway to justifying the 10x EV/EBITDA)

Wilson, I don't think you have to think about additional acquisitions outside of the Comcast deal (subscriber swap, customer purchase and GreatLand transaction) in order to get to more than $4.5 billion in EBITDA. I mean, think about it this way -- if they can squeeze $300 million in cost savings by doubling their user base, then they're @ $4.5 billion in EBITDA already.

Joel, don't forget that they're issuing equity for the GreatLand piece of the transaction. $17 billion in market cap does not include the equity issue.
Title: Re: CHTR - Charter Communications
Post by: Liberty on October 29, 2014, 07:10:33 AM
http://phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-newsArticle&ID=1982904

Quote
Key highlights:

Third quarter revenues of $2.3 billion grew 8.0% as compared to the prior-year period, led by residential revenue growth of 6.7%, and commercial revenue growth of 17.7%.

Third quarter Adjusted EBITDA1 grew by 7.0% year-over-year. Net loss totaled $53 million in the third quarter of 2014, an improvement compared to a $70 million net loss in the year-ago period.

Total residential customer relationships grew by 4.9% over the last twelve months, with third quarter residential revenue per customer growing 2.0% compared to the prior-year period.

Residential customer relationships increased 68,000 during the third quarter, versus 46,000 during the third quarter of 2013. Residential primary service units ("PSUs") increased by 114,000 during the period, versus 100,000 in the year-ago quarter, including continued improvement in year-over-year Internet and video customer trends.

As of the end of the third quarter of 2014, Charter had completed over 80% of its all-digital initiative, having deployed over 2 million set top boxes since the start of Charter's all-digital transition in 2013. Charter remains on schedule to complete its all-digital initiative by year-end 2014.
Title: Re: CHTR - Charter Communications
Post by: JoelS on October 29, 2014, 03:13:22 PM
Merkhet, yes you are correct, my mistake - so they will issue $US 2.1bn of Charter equity and get 33% of Greatland in return. But there is still some difference between the current market price and what 10x EV/Ebitda pro forma the transaction implies. Maybe that difference is justified given the length of time until the deal closes, if it does.
Title: Re: CHTR - Charter Communications
Post by: merkhet on November 10, 2014, 03:02:51 PM
To the extent that you think Charter comes out well on the other side, this downdraft in stock price will help Liberty Broadband once it secures some cash in the rights offering.
Title: Re: CHTR - Charter Communications
Post by: Liberty on November 11, 2014, 07:35:31 PM
http://www.washingtonpost.com/blogs/the-switch/wp/2014/11/11/the-fcc-weighs-breaking-with-obama-over-the-future-of-the-internet/
Title: Re: CHTR - Charter Communications
Post by: giofranchi on November 11, 2014, 10:55:45 PM
To the extent that you think Charter comes out well on the other side, this downdraft in stock price will help Liberty Broadband once it secures some cash in the rights offering.

On the other hand, the lower the stock price of Liberty Broadband, the smaller the cash it will receive in the rights offering. Right?

Gio
Title: Re: CHTR - Charter Communications
Post by: merkhet on November 12, 2014, 06:19:49 AM
To the extent that you think Charter comes out well on the other side, this downdraft in stock price will help Liberty Broadband once it secures some cash in the rights offering.

On the other hand, the lower the stock price of Liberty Broadband, the smaller the cash it will receive in the rights offering. Right?

Gio

Yes, also true.
Title: Re: CHTR - Charter Communications
Post by: EliG on June 18, 2015, 06:16:46 PM
Q&A with Thomas Rutledge, 2015 TMT Symposium, June 17

https://guggenheim.metameetings.net/events/tmt2015/sessions/6422-charter-communications-inc/webcast
Title: Re: CHTR - Charter Communications
Post by: ccplz on September 07, 2015, 01:25:06 PM
That guy (Punchcard) seems to have a hard on for Malone.
Title: Re: CHTR - Charter Communications
Post by: marazul on November 13, 2015, 10:07:04 AM
Using the numbers from the proxy, EBITDA should grow to $19.5BN by 2019. Let´s say that during those 4 years the multiple gets compressed to 8.25x and that leverage is mantained at 4.0x. If they use all the FCF and incremental debt (as they have done historically and expect to do) the share count should be reduced by approximately 40%. Using that 8.25x multiple and 4.0x leverage would leave us with an equity value of $82.5BN or $435 per share using the reduced share count for an IRR over the 4 years of 23%. At that price, the FCF multiple would be close to 8.5x. Let´s assume CHTR deserves a 12x FCF multiple, that takes the stock to $617 or a 34% IRR over the 4 years. Yes, there are a lot of risks such as the TWC deal getting blocked, leverage, depending on the capital markets, technological risk, Google Fiber, etc.. but if things go according to plan then the upside is huge.
Title: Re: CHTR - Charter Communications
Post by: folivera13 on November 16, 2015, 05:10:28 AM
California Public Utilities Commission ruling on CHTR-TWC.  Seems like they will rule on the deal in June 2016. Anyone have any thoughts or insight? Can the DOJ and FCC override this? Is this very bearish on the deal?
Title: Re: CHTR - Charter Communications
Post by: Liberty on January 08, 2016, 10:01:29 AM
http://www.prnewswire.com/news-releases/new-york-state-approves-chartertime-warner-cable-transaction-300201578.html
Title: Re: CHTR - Charter Communications
Post by: giofranchi on February 10, 2016, 05:04:33 AM
Charter: An Attractive Idiosyncratic Risk In A Market Full Of Uncertainties

http://seekingalpha.com/article/3877636-charter-attractive-idiosyncratic-risk-market-full-uncertainties

Cheers,

Gio
Title: Re: CHTR - Charter Communications
Post by: EliG on February 11, 2016, 08:07:14 PM
Report: California speeding up Charter-TWC review

http://seekingalpha.com/news/3104536-report-california-speeding-charter-twc-review
Title: Re: CHTR - Charter Communications
Post by: Kiltacular on March 15, 2016, 08:31:10 PM
http://www.reuters.com/article/us-twc-charter-communi-fcc-idUSKCN0WI02Z


.S. Federal Communications Commission Chairman Tom Wheeler is likely to circulate a draft order approving Charter Communications Inc's (CHTR.O) $56 billion deal to buy Time Warner Cable Inc (TWC.N), the Wall Street Journal reported, citing people familiar with the matter.

The order, which could be circulated as soon as this week, would levy some conditions on the deal, such as preventing Charter from including clauses in pay-TV contracts that limit a content company's ability to offer its programming online or to new entrants, the WSJ reported on Tuesday.

The transaction will also likely include a requirement for Charter to build or upgrade service to more homes, the Journal said.
Title: Re: CHTR - Charter Communications
Post by: Liberty on March 28, 2016, 05:36:02 AM
http://www.nytimes.com/2016/03/28/business/media/charters-67-billion-cable-merger-hinges-on-the-cord-cutters.html
Title: Re: CHTR - Charter Communications
Post by: muscleman on April 03, 2016, 11:03:28 AM
Does anyone know the source of the diluted share count increase? It's been going up by about 1 million shares a quarter, but the 10-k shows the equity grants are only 164k shares for the whole 2015.
https://www.sec.gov/Archives/edgar/data/1091667/000109166716000396/chtr123115-10k.htm#s93EBB37E823E0AF10248B53A3DE2184F

Please see page F-29, F- 37 and F- 38.

The acquisition of 35% ownership of AVN in 2015 is all case, so that won't increase the count.
Title: Re: CHTR - Charter Communications
Post by: muscleman on April 03, 2016, 01:12:42 PM
Another question, what's the proper way to calculate CHTR's ROIC?
Their PPE plus accumulated D&A is 15 bn, but they also have 6 bn francise asset. I wonder if I should use adjusted EBITDA/(ppe+accumulated D&A+franchise value) to calculate it?

I know the traditional way to do this is to use EBIT/(total assets), but in the case of cable or real estate firms, the assets appreciate in value, so that may not be the best way.
Title: Re: CHTR - Charter Communications
Post by: muscleman on April 05, 2016, 09:45:36 AM
Does anyone know the source of the diluted share count increase? It's been going up by about 1 million shares a quarter, but the 10-k shows the equity grants are only 164k shares for the whole 2015.
https://www.sec.gov/Archives/edgar/data/1091667/000109166716000396/chtr123115-10k.htm#s93EBB37E823E0AF10248B53A3DE2184F

Please see page F-29, F- 37 and F- 38.

The acquisition of 35% ownership of AVN in 2015 is all case, so that won't increase the count.

I finally found out this is related to the exercise of warrants "pursuant to the Joint Plan of Reorganization upon the Company's emergence from bankruptcy in 2009."
So this should be a non-recurring event.
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 25, 2016, 11:55:58 AM
http://www.bloomberg.com/news/articles/2016-04-25/charter-takeover-of-time-warner-cable-gets-antitrust-approval

Quote
Charter Communications Inc. won U.S. antitrust approval for its $55 billion takeover of Time Warner Cable Inc., which would create the No. 2 U.S. cable provider, after agreeing to measures intended to protect distribution of online video.
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 26, 2016, 04:26:44 AM
People been waiting so long for this, when it comes they're all...

(http://www.relatably.com/m/img/waiting-skeleton-meme-maker/553a98434aa21808310057d3.jpg)
Title: Re: CHTR - Charter Communications
Post by: merkhet on April 26, 2016, 05:51:49 AM
People been waiting so long for this, when it comes they're all...

(http://www.relatably.com/m/img/waiting-skeleton-meme-maker/553a98434aa21808310057d3.jpg)

Tiiiiiime... was not on his side.

Title: Re: CHTR - Charter Communications
Post by: muscleman on April 26, 2016, 07:42:58 AM
http://www.bloomberg.com/news/articles/2016-04-25/charter-takeover-of-time-warner-cable-gets-antitrust-approval

Quote
Charter Communications Inc. won U.S. antitrust approval for its $55 billion takeover of Time Warner Cable Inc., which would create the No. 2 U.S. cable provider, after agreeing to measures intended to protect distribution of online video.

They are required to build 1 million homes in which a competitor with at least 25 M speed internet is already available. Not sure if the economics will be good on these projects.
Does anyone know if AT&T's U-verse is DSL based? I see on their website that U-Verse can go up to 1 G as well.
I don't think CHTR will build out to homes that already have Comcast or other cable internet. They will most likely build to homes with AT&T's DSL access.
Title: Re: CHTR - Charter Communications
Post by: Munger_Disciple on April 26, 2016, 10:13:47 AM
Quote
They are required to build 1 million homes in which a competitor with at least 25 M speed internet is already available. Not sure if the economics will be good on these projects.

Small price to pay to get the deal done. They can stretch the build out over many years. As a % of homes already passed for New Charter, 1M is a small number.
Title: Re: CHTR - Charter Communications
Post by: Liberty on May 12, 2016, 11:41:35 AM
There we go:

http://www.bloomberg.com/news/articles/2016-05-12/charter-twc-merger-clears-final-hurdle-with-california-approval
Title: Re: CHTR - Charter Communications
Post by: Liberty on August 09, 2016, 11:06:11 AM
Q2:

Quote
Key highlights:
• Charter is now a company with greater scale, an enhanced footprint, and new revenue, product innovation and cost savings opportunities. Charter's network reaches 48.8 million homes and businesses, and serves 25.6 million residential and small and medium business ("SMB") customers.
• Pro forma1 for the Transactions, second quarter revenues of $10.0 billion grew 6.6% as compared to the prior-year period, driven by residential revenue growth of 5.6% and commercial revenue growth of 13.4%. On an actual1 basis, second quarter revenue of $6.2 billion grew 153.5% year-over-year, driven primarily by the Transactions.
• On a pro forma basis, total customer relationships increased 173,000 during the second quarter, compared to 54,000 during the second quarter of 2015, and for the twelve months ended June 30, 2016, grew by 1,251,000 or 5.1%. Pro forma residential and SMB primary service units ("PSUs") increased by 249,000 during the period, versus 270,000 in the year-ago quarter. The year-over-year decline in PSU net additions was driven by fewer voice net additions in the second quarter of 2016 versus the second quarter of 2015.
• On a pro forma basis, second quarter Adjusted EBITDA2 of $3.5 billion grew 9.0% year-over-year. Excluding transition costs in the second quarters of 2016 and 2015, Adjusted EBITDA grew by 9.2% year-over-year. On an actual basis, second quarter Adjusted EBITDA grew by 161.6%, driven primarily by the Transactions.
• Pro forma net income totaled $280 million in the second quarter, compared to $107 million during the same period last year, driven by higher income from operations year-over-year. On an actual basis, net income totaled $3.1 billion, compared to a net loss of $122 million during the second quarter of 2015, driven by higher income from operations following the close of the Transactions and the reduction of substantially all of Charter’s historical valuation allowance on its deferred tax assets.
• On a pro forma basis, second quarter capital expenditures totaled $2.1 billion, as compared to $1.9 billion in the year-ago period. Excluding transition capital, second quarter 2016 pro forma capital expenditures totaled $2.0 billion as compared to $1.8 billion during the second quarter of 2015. Second quarter actual capital expenditures totaled $1.3 billion.
Title: Re: CHTR - Charter Communications
Post by: muscleman on August 09, 2016, 01:48:39 PM
Q2:

Quote
Key highlights:
• Charter is now a company with greater scale, an enhanced footprint, and new revenue, product innovation and cost savings opportunities. Charter's network reaches 48.8 million homes and businesses, and serves 25.6 million residential and small and medium business ("SMB") customers.
• Pro forma1 for the Transactions, second quarter revenues of $10.0 billion grew 6.6% as compared to the prior-year period, driven by residential revenue growth of 5.6% and commercial revenue growth of 13.4%. On an actual1 basis, second quarter revenue of $6.2 billion grew 153.5% year-over-year, driven primarily by the Transactions.
• On a pro forma basis, total customer relationships increased 173,000 during the second quarter, compared to 54,000 during the second quarter of 2015, and for the twelve months ended June 30, 2016, grew by 1,251,000 or 5.1%. Pro forma residential and SMB primary service units ("PSUs") increased by 249,000 during the period, versus 270,000 in the year-ago quarter. The year-over-year decline in PSU net additions was driven by fewer voice net additions in the second quarter of 2016 versus the second quarter of 2015.
• On a pro forma basis, second quarter Adjusted EBITDA2 of $3.5 billion grew 9.0% year-over-year. Excluding transition costs in the second quarters of 2016 and 2015, Adjusted EBITDA grew by 9.2% year-over-year. On an actual basis, second quarter Adjusted EBITDA grew by 161.6%, driven primarily by the Transactions.
• Pro forma net income totaled $280 million in the second quarter, compared to $107 million during the same period last year, driven by higher income from operations year-over-year. On an actual basis, net income totaled $3.1 billion, compared to a net loss of $122 million during the second quarter of 2015, driven by higher income from operations following the close of the Transactions and the reduction of substantially all of Charter’s historical valuation allowance on its deferred tax assets.
• On a pro forma basis, second quarter capital expenditures totaled $2.1 billion, as compared to $1.9 billion in the year-ago period. Excluding transition capital, second quarter 2016 pro forma capital expenditures totaled $2.0 billion as compared to $1.8 billion during the second quarter of 2015. Second quarter actual capital expenditures totaled $1.3 billion.

I saw the results earlier today, and scratching my head as to why CHTR is doing much better than Liberty Global. Any thoughts on that?
Title: Re: CHTR - Charter Communications
Post by: TheAiGuy on August 09, 2016, 07:22:16 PM

I saw the results earlier today, and scratching my head as to why CHTR is doing much better than Liberty Global. Any thoughts on that?

Lot of reasons -- but the biggest is probably that there is a lot more English content for an American audience in TV than there are local-language (and cultural) context for European markets. This means that the average American has higher quality content than the average European (the average quality of the content does't matter -- just the raw volume of it). Hence TV, has always been a bigger US phenomenon than in Europe, so its a much more important product here.

~15 years ago, the TV market was very competitive in the US with the advent of Satellite but now, broadband internet is far more important and this has shifted the balance back towards cable. Broadband internet is also largely (though not entirely) about video and the shift from a subscription package to one plus an OTT package has allowed for a secular growth in cable subscriptions at a cost to traditional internet providers and satellite. In Europe, which is also far more Balkanized and far more competitive, doesn't face this same pressures to the same degree. In contrast, Charter inherited a substantial pool of assets (in terms of wires in the ground) that were under-managed that now have a substantial, and importantly, new, competitive advantage. There aren't any clever bits of strategy here -- Charter really just has to execute to grow revenue and the extra scale and low interest rates (and NOLs) provide a lot of operating and financial leverage for that growth. B/c of the leverage involved, any data that reinforces this story will send the stock through the roof.


Just full disclosure, I made all of this up, and I know very little about LBTYA/K but I think it's pretty compelling.
Title: Re: CHTR - Charter Communications
Post by: Shooter MacGavin on August 09, 2016, 07:40:25 PM


I saw the results earlier today, and scratching my head as to why CHTR is doing much better than Liberty Global. Any thoughts on that?
[/quote]

define "doing much better".
Title: Re: CHTR - Charter Communications
Post by: muscleman on August 10, 2016, 06:40:17 AM


I saw the results earlier today, and scratching my head as to why CHTR is doing much better than Liberty Global. Any thoughts on that?

define "doing much better".
[/quote]

Pro forma EBITDA growth is around 9%. The growth of EBITDA is what I meant doing much better.
Liberty Global said they were targeting 7-9% growth YoY into 2018, but this year so far it has only been 2%. They said in Q1 that they think the second half will accelerate and this year's growth will be 7-9%, but in Q2 they lowered to 5-7% but still stuck to the 7-9% for the next two years. Not sure how much I can trust from the promotional Mike Fries's mouth.  :(
Title: Re: CHTR - Charter Communications
Post by: muscleman on August 10, 2016, 07:00:12 AM

I saw the results earlier today, and scratching my head as to why CHTR is doing much better than Liberty Global. Any thoughts on that?

Lot of reasons -- but the biggest is probably that there is a lot more English content for an American audience in TV than there are local-language (and cultural) context for European markets. This means that the average American has higher quality content than the average European (the average quality of the content does't matter -- just the raw volume of it). Hence TV, has always been a bigger US phenomenon than in Europe, so its a much more important product here.

~15 years ago, the TV market was very competitive in the US with the advent of Satellite but now, broadband internet is far more important and this has shifted the balance back towards cable. Broadband internet is also largely (though not entirely) about video and the shift from a subscription package to one plus an OTT package has allowed for a secular growth in cable subscriptions at a cost to traditional internet providers and satellite. In Europe, which is also far more Balkanized and far more competitive, doesn't face this same pressures to the same degree. In contrast, Charter inherited a substantial pool of assets (in terms of wires in the ground) that were under-managed that now have a substantial, and importantly, new, competitive advantage. There aren't any clever bits of strategy here -- Charter really just has to execute to grow revenue and the extra scale and low interest rates (and NOLs) provide a lot of operating and financial leverage for that growth. B/c of the leverage involved, any data that reinforces this story will send the stock through the roof.


Just full disclosure, I made all of this up, and I know very little about LBTYA/K but I think it's pretty compelling.
Well, I think that's the reason why content companies are making a ton in the US. EU cable operators have higher EBITDA margins than US. (65% vs 48% roughly)
Do you think there is more competition in the EU? I read through the risk factors of LGI and the primary competition comes from DSL internet providers, which is similar to US.
Title: Re: CHTR - Charter Communications
Post by: TheAiGuy on August 10, 2016, 07:10:10 AM

I saw the results earlier today, and scratching my head as to why CHTR is doing much better than Liberty Global. Any thoughts on that?

Lot of reasons -- but the biggest is probably that there is a lot more English content for an American audience in TV than there are local-language (and cultural) context for European markets. This means that the average American has higher quality content than the average European (the average quality of the content does't matter -- just the raw volume of it). Hence TV, has always been a bigger US phenomenon than in Europe, so its a much more important product here.

~15 years ago, the TV market was very competitive in the US with the advent of Satellite but now, broadband internet is far more important and this has shifted the balance back towards cable. Broadband internet is also largely (though not entirely) about video and the shift from a subscription package to one plus an OTT package has allowed for a secular growth in cable subscriptions at a cost to traditional internet providers and satellite. In Europe, which is also far more Balkanized and far more competitive, doesn't face this same pressures to the same degree. In contrast, Charter inherited a substantial pool of assets (in terms of wires in the ground) that were under-managed that now have a substantial, and importantly, new, competitive advantage. There aren't any clever bits of strategy here -- Charter really just has to execute to grow revenue and the extra scale and low interest rates (and NOLs) provide a lot of operating and financial leverage for that growth. B/c of the leverage involved, any data that reinforces this story will send the stock through the roof.


Just full disclosure, I made all of this up, and I know very little about LBTYA/K but I think it's pretty compelling.
Well, I think that's the reason why content companies are making a ton in the US. EU cable operators have higher EBITDA margins than US. (65% vs 48% roughly)
Do you think there is more competition in the EU? I read through the risk factors of LGI and the primary competition comes from DSL internet providers, which is similar to US.

I think broadband internet is more important in the US b/c video is more important. I don't know enough about LGI to really comment on their competitive position. The Charter story is about growing into this massive internet monopoly -- is that true for LGI?
Title: Re: CHTR - Charter Communications
Post by: muscleman on August 10, 2016, 07:33:11 AM

I saw the results earlier today, and scratching my head as to why CHTR is doing much better than Liberty Global. Any thoughts on that?

Lot of reasons -- but the biggest is probably that there is a lot more English content for an American audience in TV than there are local-language (and cultural) context for European markets. This means that the average American has higher quality content than the average European (the average quality of the content does't matter -- just the raw volume of it). Hence TV, has always been a bigger US phenomenon than in Europe, so its a much more important product here.

~15 years ago, the TV market was very competitive in the US with the advent of Satellite but now, broadband internet is far more important and this has shifted the balance back towards cable. Broadband internet is also largely (though not entirely) about video and the shift from a subscription package to one plus an OTT package has allowed for a secular growth in cable subscriptions at a cost to traditional internet providers and satellite. In Europe, which is also far more Balkanized and far more competitive, doesn't face this same pressures to the same degree. In contrast, Charter inherited a substantial pool of assets (in terms of wires in the ground) that were under-managed that now have a substantial, and importantly, new, competitive advantage. There aren't any clever bits of strategy here -- Charter really just has to execute to grow revenue and the extra scale and low interest rates (and NOLs) provide a lot of operating and financial leverage for that growth. B/c of the leverage involved, any data that reinforces this story will send the stock through the roof.


Just full disclosure, I made all of this up, and I know very little about LBTYA/K but I think it's pretty compelling.
Well, I think that's the reason why content companies are making a ton in the US. EU cable operators have higher EBITDA margins than US. (65% vs 48% roughly)
Do you think there is more competition in the EU? I read through the risk factors of LGI and the primary competition comes from DSL internet providers, which is similar to US.

I think broadband internet is more important in the US b/c video is more important. I don't know enough about LGI to really comment on their competitive position. The Charter story is about growing into this massive internet monopoly -- is that true for LGI?

Yeah. Same for LGI, and on top of that, EU content providers are more fragmented as you said, and they charge a fraction of the US content providers, so LGI is supposed to make money from both Video and internet.
But the growth so far has not been good. Hope the second half did pick up as they predicted.
Title: Re: CHTR - Charter Communications
Post by: scorpioncapital on August 10, 2016, 09:16:40 AM
My thesis for Charter vs Global was a simple one: America will outperform Europe. Also the regulatory framework is more pro-business and less distributional. I also thought the Europeans would cap pricing power and require more capex spending and this would cut into profits over time...Not saying American regulators don't do this but on a smaller scale. I remember Buffett's speech where he said if Coke was based in Amsterdam he'd still like it but just a little bit less. Cable is no Coke and probably far more regulated so it becomes more important to know the operating environment, consumer culture, etc...For some reason, US businesses seem to do well for shareholders in a safer fashion.

Title: Re: CHTR - Charter Communications
Post by: muscleman on August 10, 2016, 09:52:56 AM
My thesis for Charter vs Global was a simple one: America will outperform Europe. Also the regulatory framework is more pro-business and less distributional. I also thought the Europeans would cap pricing power and require more capex spending and this would cut into profits over time...Not saying American regulators don't do this but on a smaller scale. I remember Buffett's speech where he said if Coke was based in Amsterdam he'd still like it but just a little bit less. Cable is no Coke and probably far more regulated so it becomes more important to know the operating environment, consumer culture, etc...For some reason, US businesses seem to do well for shareholders in a safer fashion.


In the Liberty Global thread I asked why merger approvals tend to go in a few months instead of over a year like the CHTR/TWC merger, and people said regulatory environment in EU is much better than in the US. How come you think the opposite? From which metrics do you base your view on? Do you mean EU regulators push cable cos to spend more capex? I do see that EU broadband is in the 200-300 Mbps range but the US ones are typically touting the 60 Mbps speed.

Yeah EU's economic is not as good as the US, but the interest rates are so much lower in the EU, so that mitigates a bit. ::)


Title: Re: CHTR - Charter Communications
Post by: scorpioncapital on August 10, 2016, 10:31:10 AM
Perhaps the faster approvals are so that they can torture one company instead of two, a sort of ode to convenience :)

Of course you have to study each company. I just used a simple mental model, namely that regulators in Europe could be tougher on a utility-like business than in the US, perhaps even the starting profitability would be lower. They might even be swayed by the fact Liberty is a US founded company.
All of this is conjecture but when you pull the trigger you have to decide: I know the US environment and maybe the return will be lower but the outcome more certain.
A case of home-bias advantage with the bonus that the US home advantage is alright.
Also swirling in my head was the thought that over long periods of time virtually no stock market has done as well as the US one so there are probably structural benefits to the US economic system.
In short, I thought the Americans would shoot themselves in the foot, but less so than the Europeans.
It's an amazing ability of people to shoot themselves in the foot. It's fascinating to rank the foot-shooting.

I like to apply a mental model before getting scientific. Broad strokes, no need for too much numerical crunching at the start, just enough to choose A over B, then you can dig in to see if you want C or D under B, or E, F , G under C, etc...
Title: Re: CHTR - Charter Communications
Post by: Liberty on August 15, 2016, 04:44:55 PM
Soros's fund took a decent-sizd position in LBRDK. Almost 9m shares.

http://whalewisdom.com/filer/soros-fund-management-llc#/tabholdings_tab_link

Update: Thanks to @FrancoOlivera on Twitter for reminding me that they got these shares from the deal with Liberty to finance part of the TWC acquisition.
Title: Re: CHTR - Charter Communications
Post by: Liberty on August 31, 2016, 05:58:30 PM
CHTR is being added to the SP500 to replace EMC (and KHC is going in the SP100):

http://www.prnewswire.com/news-releases/kraft-heinz-set-to-join-sp-100-charter-communications-to-join-sp-500-300321081.html
Title: Re: CHTR - Charter Communications
Post by: Liberty on September 21, 2016, 05:31:43 PM
CHTR has asked Verizon to active its MVNO agreement, going for quad play:

http://www.fiercecable.com/cable/rutledge-charter-has-asked-verizon-to-activate-mvno-agreement

Quote
Verizon in 2011 purchased AWS-1 spectrum from Bright House Networks, Comcast, Cox and TWC (a group dubbed SpectrumCo) and in return gave those companies access to its wireless network for use in a potential MVNO offering. […]

“We’d like to put Netflix and other [SVOD] services into our UI, so our customers can operate them seamlessly with our products,” he said. “Our primary objective is to follow the customer wherever they go.”

Rutledge said 57 percent of Charter’s pay-TV users also subscribe to Netflix. 
Title: Re: CHTR - Charter Communications
Post by: Liberty on November 01, 2016, 07:50:49 AM
http://www.multichannel.com/news/distribution/charter-talks-wireless-network-play-fcc/408794
Title: Re: CHTR - Charter Communications
Post by: muscleman on November 01, 2016, 08:04:48 AM
http://www.multichannel.com/news/distribution/charter-talks-wireless-network-play-fcc/408794


How will this impact the existing wireless carriers? Softbank has long complained that US has more than 2 wireless competitors and that makes it brutal. Does CHTR want to join the competition here?
Title: Re: CHTR - Charter Communications
Post by: Liberty on November 01, 2016, 08:55:21 AM
http://www.multichannel.com/news/distribution/charter-talks-wireless-network-play-fcc/408794


How will this impact the existing wireless carriers? Softbank has long complained that US has more than 2 wireless competitors and that makes it brutal. Does CHTR want to join the competition here?

They want quad play to reduce their churn. They'll probably go the MVNO + wifi route, through the deal they have with Verizon.
Title: Re: CHTR - Charter Communications
Post by: dwy000 on November 01, 2016, 01:25:10 PM
Would love to know the details of that MVNO agmt with Verizon.  Both parties are pretty savvy.  I would guess that they are (at least initially) using a pretty broad service offering from Verizon and then narrow it down if they get the uptake of customers.

It's a really tough business.  You need big volume to make it work but the only way to get that volume is through price - which kills the economics of it and the ability to invest big dollars in marketing and infrastructure (plus relationships and retail, etc. etc. etc.).
Title: Re: CHTR - Charter Communications
Post by: Liberty on November 03, 2016, 05:50:30 AM
Q3: Revenues: +7.4%, EBITDA +14.5%, subs +279k.

http://ir.charter.com/phoenix.zhtml?c=112298&p=irol-newsArticle&ID=2219119

Title: Re: CHTR - Charter Communications
Post by: maybe4less on November 03, 2016, 06:36:43 PM
Was there something not to like here?
Title: Re: CHTR - Charter Communications
Post by: muscleman on November 04, 2016, 11:54:29 AM
The results are far better than LBTYA and LILA. I don't understand why those two are struggling with growth, though to be fair, LBTYA's growth is not too bad, just not good compared with CHTR, and they trade at similar EV/EBITDA multiples.  ::)
Title: Re: CHTR - Charter Communications
Post by: Shooter MacGavin on January 03, 2017, 12:50:34 PM
just keep in mind there is probably some meaningful political spend this year hitting their advertising bucket.  ~100% margin.  That's not going to be in the print starting January.  Still a good story.
Title: Re: CHTR - Charter Communications
Post by: Liberty on January 26, 2017, 06:34:20 AM
Verizon apparently looking at a merger with CHTR:

http://www.wsj.com/articles/verizon-is-exploring-combination-with-cable-firm-charter-communications-1485439901
Title: Re: CHTR - Charter Communications
Post by: Liberty on January 26, 2017, 08:56:56 AM
More details:

https://www.bloomberg.com/news/articles/2017-01-26/verizon-exploring-combination-with-charter-wsj-reports

Looks like Maffei was approached, but not CHTR directly, and they're looking at multiple deals, but this might be the one that makes the most sense..
Title: Re: CHTR - Charter Communications
Post by: Liberty on February 24, 2017, 11:49:20 AM
Quote
FCC chairman Ajit Pai has circulated an item adjusting a Charter-Time Warner Cable deal buildout condition so that it would no longer require Charter to overbuild where a million homes were already getting broadband service.

http://www.broadcastingcable.com/news/washington/pai-proposes-removing-charter-twc-overbuild-condition/163581
Title: Re: CHTR - Charter Communications
Post by: Liberty on May 01, 2017, 08:30:23 AM
Greg Maffei talked a bit about CHTR this morning:

http://video.cnbc.com/gallery/?video=3000614682&play=1
Title: Re: CHTR - Charter Communications
Post by: muscleman on May 01, 2017, 10:25:56 AM
Does anyone know how this may impact CHTR?

https://www.law360.com/publicpolicy/articles/918984/breaking-dc-circ-refuses-to-rehear-net-neutrality-challenge?nl_pk=dcb4823a-d63f-4a78-8335-a8570deed8f6&utm_source=newsletter&utm_medium=email&utm_campaign=publicpolicy
Title: Re: CHTR - Charter Communications
Post by: maybe4less on May 01, 2017, 11:43:48 AM
Does anyone know how this may impact CHTR?

https://www.law360.com/publicpolicy/articles/918984/breaking-dc-circ-refuses-to-rehear-net-neutrality-challenge?nl_pk=dcb4823a-d63f-4a78-8335-a8570deed8f6&utm_source=newsletter&utm_medium=email&utm_campaign=publicpolicy

Likely no impact. The court challenge is moot now that Pai is planning on repealing the rule.
Title: Re: CHTR - Charter Communications
Post by: Liberty on May 02, 2017, 04:37:53 AM
CHTR Q1:

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzc2MjU5fENoaWxkSUQ9LTF8VHlwZT0z&t=1&cb=636293131780142848
Title: Re: CHTR - Charter Communications
Post by: muscleman on May 02, 2017, 07:50:06 AM
CHTR Q1:

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzc2MjU5fENoaWxkSUQ9LTF8VHlwZT0z&t=1&cb=636293131780142848

What do you guys think? The video addition last year turned into losses this year. Internet additions also decreased a bit.
The revenue increase is just 4%.

Title: Re: CHTR - Charter Communications
Post by: Liberty on May 07, 2017, 04:55:31 PM
Wireless partnership for Comcast and Charter:

https://www.wsj.com/articles/comcast-charter-to-strike-wireless-partnership-1494200087
Title: Re: CHTR - Charter Communications
Post by: Liberty on May 31, 2017, 07:11:23 PM
Apparently Verizon tried to buy CHTR:

http://nypost.com/2017/05/31/cable-giant-charter-snubbed-a-buyout-bid-from-verizon/

Quote
Verizon boss Lowell McAdam, his company facing slowing sales of mobile phones, made a proposal to acquire cable-TV giant Charter Communications in recent months, three sources told The Post.

The offer — valued at between $350 and $400 a share, and well over $100 billion, according to two of the sources familiar with the move — was rejected by Liberty Media-controlled Charter because it was too low — and because Charter was not ready to sell.
Title: Re: CHTR - Charter Communications
Post by: Liberty on June 29, 2017, 07:38:42 AM
Interesting writeup about Charter and an indirect way to see how much buybacks they're doing on a monthly basis:

http://www.yetanothervalueblog.com/2017/06/charter-levered-return-of-capital-story.html
Title: Re: CHTR - Charter Communications
Post by: Liberty on July 27, 2017, 06:38:02 AM
CHTR Q2: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzg0MzA1fENoaWxkSUQ9LTF8VHlwZT0z&t=1&cb=636367527732848674

Revenue 3.9% Y/Y, Adjusted EBITDA 8.6% Y/Y, net adds of 211K, repurchase of 11.2M CHTR shares, or equivalent, for $3.7B.

Those $CHTR repurchases are at annual run rate of $14.8bn/year. On a $94bn market cap… 🤔
Title: Re: CHTR - Charter Communications
Post by: muscleman on July 28, 2017, 08:36:20 PM
https://www.thestreet.com/story/14248097/1/sprint-s-owner-proposes-merger-with-charter-communications.html?puc=CNBC&cm_ven=CNBC
https://www.bloomberg.com/news/articles/2017-07-29/charter-is-said-to-rebuff-sprint-corp-s-merger-proposal
Title: Re: CHTR - Charter Communications
Post by: Liberty on July 31, 2017, 05:31:51 AM
Looks like there might be a direct offer from Softbank:

https://www.bloomberg.com/news/articles/2017-07-31/softbank-s-son-is-said-to-plan-direct-offer-for-charter

https://www.bloomberg.com/news/articles/2017-07-31/charter-has-no-interest-in-softbank-s-proposal-to-buy-sprint
Title: Re: CHTR - Charter Communications
Post by: Liberty on July 31, 2017, 12:05:50 PM
Not given up yet:

https://www.cnbc.com/2017/07/31/softbank-hasnt-given-up-on-charter-yet-sources-say.html
Title: Re: CHTR - Charter Communications
Post by: Liberty on August 09, 2017, 06:48:23 AM
 ;D

https://www.cnbc.com/2017/08/09/altice-weighing-bid-for-charter-communications.html
Title: Re: CHTR - Charter Communications
Post by: Gamecock-YT on August 09, 2017, 08:07:15 AM
Are they serious in play or is this all nonsense? Seems to be too much smoke to just be conincidence.
Title: Re: CHTR - Charter Communications
Post by: thefatbaboon on August 09, 2017, 08:54:57 AM
If Charter owners wanted their equity to contain Altice they would make an offer and Drahi could become a shareholder alongside Malone, Newhouses, Buffett etc. If Charter owners wanted a massively levered equity they could do it without Drahi and still stay in control.

So, if Altice wants to be in control and cash out the Charter owners they need to make a cash offer attractive and enough to pay all off everyones taxes - probably +$500.  Don't see how Altice could open their mouth wide enough for a mainly cash offer at $150bn.
Title: Re: CHTR - Charter Communications
Post by: Liberty on August 09, 2017, 09:50:05 AM
Are they serious in play or is this all nonsense? Seems to be too much smoke to just be conincidence.

I don't think Malone's really interested, but if someone is willing to grossly overpay, he'll look at it and might do it.
Title: Re: CHTR - Charter Communications
Post by: Packer16 on August 09, 2017, 09:57:22 AM
Remember he sold TCI to AT&T at nice multiple of EBITDA (12x I think).  If someone is willing to offer a high enough multiple, the business is for sale.

Packer
Title: Re: CHTR - Charter Communications
Post by: dwy000 on August 09, 2017, 10:30:59 AM
That's true.  But he also very much regretted taking AT&T stock and watching it dissipate while he stood on the sidelines and couldn't do anything because of lockup.  I would guess his price differs depending upon cash vs. Altice/Softbank stock.
Title: Re: CHTR - Charter Communications
Post by: namo on August 09, 2017, 10:44:57 AM
Except that if it's cash, he has to pay taxes, which he hates...
So yes, it would have to be a *great* offer.
Title: Re: CHTR - Charter Communications
Post by: TheAiGuy on August 09, 2017, 06:12:34 PM
Are they serious in play or is this all nonsense? Seems to be too much smoke to just be conincidence.

Seriously fucking hope not
Title: Re: CHTR - Charter Communications
Post by: skanjete on August 10, 2017, 01:13:14 AM
Remember he sold TCI to AT&T at nice multiple of EBITDA (12x I think).  If someone is willing to offer a high enough multiple, the business is for sale.

Packer

There were other reasons for the sale of TCI as well, mainly the upcoming satellite competition (and lesser so the internet threat). This is well explained in "Cable Cowboy".
But on top of that, Malone succeeded in extracting a very attractive price as well. It was perfectly executed, but afterwards he was stuck with a unsalable minority interest in ATT which stung him big time.

So Malone was not only motivated by the price of the deal. I don't have the feeling he's in the same situation right now (as of yet).
Title: Re: CHTR - Charter Communications
Post by: Liberty on September 06, 2017, 10:43:29 AM
New rumors of an Altice bid  ::)

http://www.reuters.com/article/altice-loans/lpc-bankers-work-on-us70bn-debt-for-altice-charter-tie-up-idUSL8N1LN4NK
Title: Re: CHTR - Charter Communications
Post by: Liberty on September 11, 2017, 07:21:16 AM
CHTR raising new debt and increasing its buyback authorization to $6.4bn:

http://ir.charter.com/phoenix.zhtml?c=112298&p=irol-newsArticle&ID=2299699
Title: Re: CHTR - Charter Communications
Post by: Liberty on September 13, 2017, 11:24:17 AM
https://seekingalpha.com/article/4106337-charter-communications-chtr-ceo-tom-rutledge-goldman-sachs-communacopia-brokers-conference?part=single
Title: Re: CHTR - Charter Communications
Post by: Liberty on September 14, 2017, 02:01:56 PM
https://www.bloomberg.com/news/articles/2017-09-14/it-s-official-verizon-has-moved-on-from-possible-cable-tie-up

Translation is probably that they approached CHTR and Malone said "no".
Title: Re: CHTR - Charter Communications
Post by: Liberty on October 02, 2017, 06:54:42 AM
http://www.yetanothervalueblog.com/2017/10/still-bullish-on-charter-chtr.html
Title: Re: CHTR - Charter Communications
Post by: Liberty on October 05, 2017, 06:39:40 PM
http://www.yetanothervalueblog.com/2017/10/cord-cutting-and-other-cable-risks-chtr.html
Title: Re: CHTR - Charter Communications
Post by: Liberty on October 26, 2017, 05:40:48 AM
CHTR Q3:

http://ir.charter.com/phoenix.zhtml?c=112298&p=irol-newsArticle&ID=2311569

Quote
Key highlights:

Third quarter total customer relationships increased 212,000, compared to 275,000 during the third quarter of 2016, when excluding the impact of customer activity related to Legacy Bright House's seasonal customer plan in 2016.2 Third quarter total residential and SMB primary service units ("PSUs") increased by 257,000, while third quarter 2016 PSUs grew by 395,000, when adjusted for the seasonal customer program changes at Legacy Bright House.
Third quarter revenues of $10.5 billion grew 4.2%, as compared to the prior year period, driven by residential revenue growth of 4.4% and commercial revenue growth of 8.0%, partly offset by a decline in advertising revenue of 11.1%, due to lower political revenue.
Third quarter Adjusted EBITDA3 of $3.8 billion grew 5.0% year-over-year, and 4.7% when excluding transition costs.
Net income attributable to Charter shareholders in the third quarter declined to $48 million from $189 million during the same period last year. The decline was driven by an increase in depreciation and amortization in the third quarter of 2017, partly offset by a year-over-year increase in Adjusted EBITDA.
Third quarter capital expenditures totaled $2.4 billion, and $2.3 billion when excluding transition capital expenditures.
During the third quarter, Charter purchased approximately 10.9 million shares of Charter Class A common stock and Charter Holdings common units for approximately $4.0 billion.
Title: Re: CHTR - Charter Communications
Post by: Gamecock-YT on November 01, 2017, 08:37:39 PM
Here we go again

http://nypost.com/2017/11/01/softbank-definitely-in-talks-with-charter-about-merger/

SoftBank ‘definitely’ in talks with Charter about merger
Title: Re: CHTR - Charter Communications
Post by: Liberty on November 02, 2017, 04:24:24 AM
 I don't think they're getting the message...

http://nypost.com/2017/11/01/softbank-definitely-in-talks-with-charter-about-merger/
Title: Re: CHTR - Charter Communications
Post by: Liberty on November 06, 2017, 06:45:03 AM
More deal speculation. It's déjà vu all over again..

https://www.cnbc.com/2017/11/06/softbank-willing-to-reengage-charter-communications-on-deal-sources-say.html

Quote
During the summer the Japanese conglomerate had worked on a deal to acquire Charter for $540 a share in cash and stock, the sources said.
Title: Re: CHTR - Charter Communications
Post by: Liberty on November 13, 2017, 07:00:37 AM
Some speculation in the NY Post about Rutledge and Malone not seeing eye to eye about whether to sell or do more M&A:

http://nypost.com/2017/11/12/charters-ceo-butts-heads-with-biggest-shareholder/
Title: Re: CHTR - Charter Communications
Post by: Gamecock-YT on November 13, 2017, 07:32:18 AM
Softbank just needs to raise price to whatever Rutledge's big options exercise price is....$564, I think?
Title: Re: CHTR - Charter Communications
Post by: Liberty on November 13, 2017, 08:16:59 AM
I don't think the journalist quite understands the balance of power. I think in the hand, it'll be Malone who decides. He has lots of board seats, he picked Rutledge, and he has more influence than anyone else in the industry. It might be true that they're debating the best way to go forward and aren't sure yet if they'd take a really high offer or just keep executing on the plan, knowing that there'll be other offers later anyway if they ever change their minds. It'll probably depend on the terms of any deal offered (Malone probably doesn't want a repeat of what happened when he sold TCI and got stuck with billions in stock that he couldn't sell in a company he didn't control...). In other words, if Masa is the kind of guy to overpay for CHTR, Malone won't want to be stuck with a bunch of Softbank stock...
Title: Re: CHTR - Charter Communications
Post by: Jurgis on November 13, 2017, 08:29:34 AM
I doubt SoftBank can pay in cash for Charter. It's not even clear if Malone would want cash - taxes?? So, yeah, majority of purchase would likely have to be Softbank shares, which Malone might not want either.

IMO Masa should just buy DISCA, TRIP, EXPE, LGF... all my "crappy" Liberty universe companies.  8)  ;D
Title: Re: CHTR - Charter Communications
Post by: Happy on November 22, 2017, 02:42:00 AM
https://www.bloomberg.com/news/articles/2017-11-21/fcc-head-proposes-abandoning-obama-era-net-neutrality-rules (https://www.bloomberg.com/news/articles/2017-11-21/fcc-head-proposes-abandoning-obama-era-net-neutrality-rules)

Should be very good for Charter if they really abandon net neutrality.
Title: Re: CHTR - Charter Communications
Post by: Jurgis on November 22, 2017, 07:55:16 AM
Defend net neutrality, defend Internet!

https://www.eff.org/deeplinks/2017/11/today-and-every-day-we-fight-defend-open-internet
Title: Re: CHTR - Charter Communications
Post by: no_free_lunch on November 29, 2017, 06:31:13 AM
http://www.yetanothervalueblog.com/2017/10/still-bullish-on-charter-chtr.html

These 2 articles were excellent reads.  Sounds like the author is a telecom analyst.  They bring you up to speed on the situation very quickly.

It sounds like the biggest risk to the thesis is 5G.  This author is not too concerned and it does sound like a longer term issue but with CHTR being so leveraged it could really turn on you if there's any doubts.  Not that CHTR is completely doomed in that scenario but if they have to pivot that leverage and existing infrastructure might weigh on them.  I am hardly an expert or even really an amateur :) here but that is my 2 cents reading up last night. 

I wonder if CHTR coupled with DISH might not be a bad option.  In the event that 5G starts to take off it seems there is a good chance DISH will benefit.
Title: Re: CHTR - Charter Communications
Post by: Liberty on November 29, 2017, 06:34:03 AM
Defend net neutrality, defend Internet!

https://www.eff.org/deeplinks/2017/11/today-and-every-day-we-fight-defend-open-internet

An argument that Title II might not have been the right way to go to protect net neutrality:

https://stratechery.com/2017/pro-neutrality-anti-title-ii/

https://stratechery.com/2017/light-touch-cable-and-dsl-the-broadband-tradeoff-the-importance-of-antitrust/
Title: Re: CHTR - Charter Communications
Post by: DooDiligence on December 08, 2017, 08:13:33 AM
Defend net neutrality, defend Internet!

https://www.eff.org/deeplinks/2017/11/today-and-every-day-we-fight-defend-open-internet

An argument that Title II might not have been the right way to go to protect net neutrality:

https://stratechery.com/2017/pro-neutrality-anti-title-ii/

https://stratechery.com/2017/light-touch-cable-and-dsl-the-broadband-tradeoff-the-importance-of-antitrust/

Great thoughts.

Is there a corollary between bundling & un-bundling / regulating & de-regulating?

Where there's a will, there's a way (and John Malone is still kicking...)
Title: Re: CHTR - Charter Communications
Post by: Liberty on December 11, 2017, 07:13:24 AM
http://www.leveragedloan.com/amid-investor-appetite-loans-charter-communications-eyes-12-3b-refinancing-package/

Looks like they're lowering further their cost of debt..
Title: Re: CHTR - Charter Communications
Post by: muscleman on December 11, 2017, 09:27:22 PM
http://www.leveragedloan.com/amid-investor-appetite-loans-charter-communications-eyes-12-3b-refinancing-package/

Looks like they're lowering further their cost of debt..


Thank you for the note. L+200 for a 8 year loan is really cheap, and it is rated as BBB+? What a joke.  :D
Title: Re: CHTR - Charter Communications
Post by: DooDiligence on December 13, 2017, 07:14:38 AM
I'm having trouble keeping up & some stuff is dropping below the fold so nother bump...
Title: Re: CHTR - Charter Communications
Post by: Liberty on December 20, 2017, 09:31:04 AM
https://www.bloomberg.com/news/articles/2017-12-20/cable-tv-s-password-sharing-crackdown-is-coming
Title: Re: CHTR - Charter Communications
Post by: DooDiligence on December 20, 2017, 09:47:21 AM
https://www.bloomberg.com/news/articles/2017-12-20/cable-tv-s-password-sharing-crackdown-is-coming

Good!

NetFlix is like $0.40 a day.

I'm willing to bet these same service thieves regularly make vapid gestures to Sally Strothers whiny entreaties.
Title: Re: CHTR - Charter Communications
Post by: fareastwarriors on December 20, 2017, 10:19:52 AM
https://www.bloomberg.com/news/articles/2017-12-20/cable-tv-s-password-sharing-crackdown-is-coming

Good!

NetFlix is like $0.40 a day.

I'm willing to bet these same service thieves regularly make vapid gestures to Sally Strothers whiny entreaties.

10 streams? Crazy. Maybe limit it to 2 streams max for the "basic" account.
Title: Re: CHTR - Charter Communications
Post by: Liberty on December 20, 2017, 10:26:28 AM
https://www.bloomberg.com/news/articles/2017-12-20/cable-tv-s-password-sharing-crackdown-is-coming

Good!

NetFlix is like $0.40 a day.

I'm willing to bet these same service thieves regularly make vapid gestures to Sally Strothers whiny entreaties.

10 streams? Crazy. Maybe limit it to 2 streams max for the "basic" account.

"The CEO has said that one unidentified channel owner had 30,000 simultaneous streams from a single account."
Title: Re: CHTR - Charter Communications
Post by: Liberty on December 20, 2017, 10:31:45 AM
Also, bringing DOSCIS 3.1 to NYC and six markets:

https://www.fiercecable.com/cable/charter-officially-announces-expansion-docsis-3-1-into-new-york-6-other-markets

Quote
The 1 Gbps services will come with a 35 Mbps upload speed and be priced at $105 a month. The minimum speed in the deployed regions will increase to 200 Mbps.
Title: Re: CHTR - Charter Communications
Post by: rogermunibond on December 20, 2017, 10:41:56 AM
https://www.bloomberg.com/news/articles/2017-12-20/cable-tv-s-password-sharing-crackdown-is-coming

Very interesting - let's see if subs start to go up on all services both linear and OTT.
Title: Re: CHTR - Charter Communications
Post by: CLM5 on December 21, 2017, 10:51:58 AM
Question for anyone who understands Charter better than I do....

Recently started digging into Charter, and I've been trying to understand where the differences come in between Charter and Comcast. Most of the thesis resolves around the consolidation of the cable industry, and Charter closing the margin gaps between them and comcast, who are at least close in scale. After digging into the numbers, there was something that stood out to me as not making sense.... as far as customer relationships go, comcast and charter are in the same ballpark. 28k for comcast at end of 2016 versus 26k for charter at end of 2016. Now, video makes much higher revenue per customer than HSD does, so it makes sense that Comcast has much higher revenue than Charter, because they have a much higher proportionality of video customers. But the impression I get from most people who have done deep dive analysis into Charter is that Video is currently only around a breakeven segment, while HSD is supposed to be much higher margins, driving even higher in the future due to the switch to all-digital.

So if Charter is the company made up of much more HSD customers proportionally, and HSD is a much better business when compared with video, then why is it that Comcast's margins are so superior to Charter? Is it simply because Comcast has so much more scale in video, so their video segment is actually profitable because their massive revenues can offset the ever increasing programming costs? Still, to me this would seem to counteract the argument that HSD is so much better of a business than video (obviously ignoring the fact that video is dying a slow death) in terms of margin at least. However, if we take into account the fact that video is dying (i.e. Comcast slowly losing their scale, programming costs becoming unwieldy) and the fact that Charter is proportionally more weighted towards HSD, would that not point towards the conclusion that someday in the future, it would be reasonable to assume Charter would surpass Comcast in ebitda margin? Whether or not that margin is higher or lower than it is today is debatable, but it seems charter is better positioned in terms of segment concentration.

Edit: Thoughts are getting a bit jumbled here, but I guess what I'm trying to say is that I see what people are saying about how video is a bad industry if you have no scale. Pretty much every player outside of comcast is screwed in terms of cable video. But comcast has so much scale, they they are able to offset those programming costs, and to me, this is where I see most of the margin advantage comcast has over charter coming from. Not necessarily because they are better operators, but because their video has more scale. And most of the charter theses seem to revolve around charters margins closing the gap on comcast (and most analysis revolves around HSD obviously), but absent the scale in video, is this reasonable/possible? I don't see much difference in Charter/Comcast numbers in terms of HSD and that's what the thesis relies upon.
Title: Re: CHTR - Charter Communications
Post by: Liberty on December 21, 2017, 11:18:38 AM
Comcast is a better operator than legacy TWC, and than legacy CHTR before Rutledge came around. Part of the story is a turnaround/optimization, with going all-digital, simplifying the products/pricing, going triple play and quad play to reduce churn/costly transactions/maintenance, etc.
Title: Re: CHTR - Charter Communications
Post by: CLM5 on December 21, 2017, 11:35:43 AM
My point is - I get that people are saying that, but I'm not seeing it in the numbers. All I'm seeing is a scale advantage in video for comcast over charter.
Title: Re: CHTR - Charter Communications
Post by: Liberty on December 21, 2017, 12:02:52 PM
My point is - I get that people are saying that, but I'm not seeing it in the numbers. All I'm seeing is a scale advantage in video for comcast over charter.

"Right now Comcast earns about $375 of EBITDA per home passed and spends about $133 in cap ex per home passed. Comcast’s operating margin and EBITDA margin for the past quarter were 25.11% and 40.4% respectively. Comcast also generated $151.19 per month in revenue per customer.

By contrast Charter is generating only about $285 in EBITDA per home passed and spending about $148 in cap ex. EBITDA margins for Charter are around 35% for the past six months and operating margins were just 9.7% (due to high legacy depreciation charges). Charter also only generates $109.77 of monthly revenue per customer."

https://seekingalpha.com/article/4112178-charter-great-potential-fully-valued
Title: Re: CHTR - Charter Communications
Post by: CLM5 on December 21, 2017, 01:51:32 PM
The capex from charter is absolutely elevated, on that I agree. Although from what I understand, that seems to be transitory in nature. But it terms of EBITDA per passing, that directly relates to what I was trying to say above. Because of comcast's scale in video, they're at a 48% gross margin for video. Charter is at a 41% gross margin for video. I believe this makes up a majority of the discrepancy between the EBITDA per passing, not the fact that comcast is a better operator. That's pure scale. The capex is a fair point, but I don't think EBITDA per passing is. It seems to me that's purely a function of scale and the proportionality of the segments. Although Charter's service charges seem to be extremely disproportionately high to me as well, which doesn't make sense.... I would think video would create more service charges than HSD, so maybe that could be a result of comcast being a better operator on that front. Still though, the numbers to me don't seem to be pointing to comcast being radically better operators like I've been told.
Title: Re: CHTR - Charter Communications
Post by: marazul on December 21, 2017, 03:11:31 PM
The delta between Charter and Comcast EBITDA margins has more to with non-video opex per customer than anything else. Rutledge has invested in personnel (insourcing call centers, service, etc), pushing sales, moving analog subscribers to digital, etc. This will accelerate growth but depress margins at the same time. Eventually, growth will slow down and opex will come down as well, resulting in higher margins...I think eventually Charter will ahve higher than 40% EBITDA margins (that is where Comcast is currently at. Reasons: B2B is a higher margin business and keeps growing at an accelerated pace, video keeps losing relevance and broadband is a higher margin line, once Charter achieves a higher level of penetration they will reduce costs (now they are focused on value creating growth, which is rational but affects margins, etc)...Conclusion, there is no structural reason for Comcast to have higher margins than Charter in perpetuity
Title: Re: CHTR - Charter Communications
Post by: Liberty on January 03, 2018, 12:25:45 PM
https://www.fiercecable.com/cable/charter-outlines-inside-out-wireless-strategy-urges-fcc-to-adopt-county-sized-geographic
Title: Re: CHTR - Charter Communications
Post by: DooDiligence on January 04, 2018, 08:52:57 AM
https://www.fiercecable.com/cable/charter-outlines-inside-out-wireless-strategy-urges-fcc-to-adopt-county-sized-geographic

Nice (I never would have been interested except that I just read Cable Cowboy a month ago.)

This is an oldie from the same source:

https://www.fiercewireless.com/tech/fcc-votes-to-adopt-new-3-5-ghz-spectrum-sharing-plan-for-innovation-band

---

What do you think Masa is doing with $S?

Here's an old TMF writeup that goes against what I was thinking re: spectrum for $S.

https://www.fool.com/investing/general/2015/10/04/sprint-doesnt-need-more-spectrum-it-needs-this-ins.aspx

Are they cooking something up with DIS or is the Hulu thing a fluke?
Title: Re: CHTR - Charter Communications
Post by: BG2008 on January 04, 2018, 10:09:26 AM
Nice (I never would have been interested except that I just read Cable Cowboy a month ago.)

Same here, that book was so eye opening
Title: Re: CHTR - Charter Communications
Post by: BG2008 on January 23, 2018, 09:34:42 AM
Has there been any updates on Charter's share buyback?
Title: Re: CHTR - Charter Communications
Post by: Liberty on January 23, 2018, 09:57:36 AM
Has there been any updates on Charter's share buyback?

I haven't done the calc based on the BHN disclosure. I'm just waiting for Q4 to come out, that'll be in there. Wouldn't be surprised if they did a substantial amount during Q4 with the lower stock price.
Title: Re: CHTR - Charter Communications
Post by: BG2008 on March 01, 2018, 10:42:06 PM
During the three months ended December 31, 2017, Charter purchased approximately 13.5 million shares of Charter Class A common stock and Charter Holdings common units for approximately $4.7 billion. - Bought back shares at $348

For the year ended December 31, 2017, Charter purchased approximately 38.2 million shares of Charter Class A common stock and Charter Holdings common units for approximately $13.2 billion. - Bought back shares at $345

As of Dec 31, 2017 - 238.5mm shares outstanding implies a $81bn MC plus $70.2 bn of debt for a TEV of $151bn.  2017 Actual EBITDA is $15.3 bn, Q4 run rate EBITDA is $16.0 bn.  So the TEV/EBITDA is 9.87x and 9.44x respectively.  Debt/EBITDA is 4.6x and 4.4x respectively.   

This company is cannibalizing itself in real time.  Shares trade at less than buyback prices. 

Title: Re: CHTR - Charter Communications
Post by: BG2008 on March 02, 2018, 10:42:17 AM
During the three months ended December 31, 2017, Charter purchased approximately 13.5 million shares of Charter Class A common stock and Charter Holdings common units for approximately $4.7 billion. - Bought back shares at $348

For the year ended December 31, 2017, Charter purchased approximately 38.2 million shares of Charter Class A common stock and Charter Holdings common units for approximately $13.2 billion. - Bought back shares at $345

As of Dec 31, 2017 - 238.5mm shares outstanding implies a $81bn MC plus $70.2 bn of debt for a TEV of $151bn.  2017 Actual EBITDA is $15.3 bn, Q4 run rate EBITDA is $16.0 bn.  So the TEV/EBITDA is 9.87x and 9.44x respectively.  Debt/EBITDA is 4.6x and 4.4x respectively.   

This company is cannibalizing itself in real time.  Shares trade at less than buyback prices.

Apologies, the share counts are much higher than 238.5mm as there are an additional 31.7mm partner units and convertible preferred stocks.  So the fully diluted S/O is closer to 274mm.  This implies a MC of $91.2 bn Plus $70.2bn of debt equates to $161.2 which prices CHTR at roughly 10.1x EV/EBITDA run rate and 10.5x TTM EBITDA.  The thesis of Rutledge and Malone buying back an ungodly amount of shares is still relevant.   
Title: Re: CHTR - Charter Communications
Post by: marazul on March 02, 2018, 10:59:14 AM
Just wanted to add that Charter will likely buyback less stock in 2018 compared to 2017...Leverage is currently close to 4.5x which is near the high end of the range they feel comfortable. FCF generation won´t be significant in 2018 due to high levels of capex...management has already mentioned that the pace of repurchases will slow down
Title: Re: CHTR - Charter Communications
Post by: BG2008 on March 02, 2018, 01:19:50 PM
I read somewhere that in the M&A projections, they had projected $19.5 bn of EBITDA in 2019. I need to find the source.  On that forward metric the current debt/EBITDA is about 3.5x.  I wonder if Malone has an opinion on skating to where the puck is when it comes to debt/EBITDA ratio.  Using a 4.0x DEBT/EBIDA ratio, this would imply another $9-10 bn of buyback via debt increases in the next 2 years and perhaps another $8-10 bn of buyback via FCF.  Still put us in the range of $17-20bn of buyback on a $93bn EV. 

If we think $19.5 bn is the right 2019 EBITDA, then in two years, this could look like $93bn less $17-20bn + $78bn of debt = $154-157bn of EV vs $19.5bn of EBITDA or 7.9x EV/EBITDA in 2 years.  More importantly, the MC becomes about 3.9x EBITDA which would imply higher upside upon further deleveraging etc.  Certainly, these figures are much less than the $13.2 bn they spent this year.  It seems going forward the max run rate of buyback is $8-10bn a year. 

I love cannibalism when it comes to companies.     
Title: Re: CHTR - Charter Communications
Post by: marazul on March 02, 2018, 03:07:20 PM
The problem is that they are running behind the proxy numbers for various reasons, so most likely they won't be able to hit those numbers in 2019...besides, the move into mobile will add costs, which will rsult in even lower cash flow figures...I agree with you on the direction of the company though
Title: Re: CHTR - Charter Communications
Post by: walkie518 on March 20, 2018, 04:09:28 PM
Unless someone can correct me, it seems as though Charter is very attractive here?

Increasing capex for mobile initiative plus reduction of debt might be the impetus for downward pressure on the stock?  Mgmt is simply buying less shares back than last year too?

This doesn't seem to be a reason to sell, but to build a bigger position? 

Of course, the floor is not defined, but does anyone have a feel for how sustainable the $11B cash from operations may be?
Title: Re: CHTR - Charter Communications
Post by: marazul on March 20, 2018, 04:30:27 PM
Think cash flows are very sustainable, market is probably looking at some of the following:

-Rising rates are significant negatives for infrastructure assets given the amount of debt employed and the recurring nature of cash flows

-As you mentioned, push into mobile and continued elevated capex will delay the growth in fcf

-HSD growth is slowing down as penetration increases, this will put pressure on growth

-Other threats include video going to OTT and fixed wireless/5g
Title: Re: CHTR - Charter Communications
Post by: walkie518 on March 23, 2018, 01:26:46 PM
Charter is building the scale needed to do it the right way. 

Charter's pricing is good and the company is developing a mobile business to improve customer retention as well as aid in the transition to 5G. 

I can't help but accumulate shares here...

Title: Re: CHTR - Charter Communications
Post by: bonkers on March 23, 2018, 03:39:08 PM
I'm in fact little surprised that they seem to be so much behind proxy numbers. The business should be predictable, management capable, and the proxy was published not too long time ago. I would also guess they did not have an incentive to overstate the projections. But now both cash flow is weaker and capex higher!  :o

I still bet they can increase their FCF, but for me there's a large spread between min and max case. Does anyone have some practical way to go about forecasting the next few years out?
Title: Re: CHTR - Charter Communications
Post by: marazul on March 23, 2018, 03:43:10 PM
The transaction closed more than 6 months later than they originally thought. This delayed the integration, investment, etc...so it will take longer than expected...also market is a bit worse than in 2015-2016...video has declined at a faster pace than expected and ATT has been a bit aggresive with the buildouts
Title: Re: CHTR - Charter Communications
Post by: Spekulatius on March 23, 2018, 05:22:20 PM
Unless someone can correct me, it seems as though Charter is very attractive here?

Increasing capex for mobile initiative plus reduction of debt might be the impetus for downward pressure on the stock?  Mgmt is simply buying less shares back than last year too?

This doesn't seem to be a reason to sell, but to build a bigger position? 

Of course, the floor is not defined, but does anyone have a feel for how sustainable the $11B cash from operations may be?

Higher interest rates are  the likely reason for downwards pressure. Relatively speaking, VHTR actually had held up very well, way better than CMCSA, despite CMCSA having less leverage.
Title: Re: CHTR - Charter Communications
Post by: Liberty on March 24, 2018, 06:10:52 AM
Malone ran his levered cable model at much higher interest rates for decades, I don't think the currently historically still very low rates will be a problem. Charter had some M&A premium and every time those expectations deflate a bit, a bunch of M&A focused HFs probably move on...
Title: Re: CHTR - Charter Communications
Post by: scorpioncapital on March 24, 2018, 06:37:01 AM
Maybe we should ask what makes for a prudent vs an inprudent asset financed with leverage?

1. The rates should be fixed as long as possible at a low rate.
2. The asset side - the business - must have ability to grow prices above the rate of inflation (studies show cable companies can raise prices inflation + some positive amount)
3. The leverage ratio overall should not be totally imprudent.
4. Refinancing risk should be eyed in relation to possible cash-flows a few years out.
5. Business should not be in decline or have a risk of being in decline.

However volatility is higher no matter what because perception of debt differs from reality of debt. So these assets could very well dip much lower than other stocks along the way. I think if you will invest in stocks that use internal leverage, your own personal leverage - if any - should be very strictly controlled. If you invest in stocks that use no leverage - or float, you can afford perhaps a little more leverage yourself. However I am forewarned by what Buffett said that even Berkshire can go down 50% and they have float, permanent, zero cost leverage...so borrower beware!
Title: Re: CHTR - Charter Communications
Post by: Spekulatius on March 24, 2018, 04:42:50 PM
Malone ran his levered cable model at much higher interest rates for decades, I don't think the currently historically still very low rates will be a problem. Charter had some M&A premium and every time those expectations deflate a bit, a bunch of M&A focused HFs probably move on...

I am guessing that Malone purchased and valued cable assets at lower EBITDA multiples back then when interest rates were higher.I also think that the price increases taper out and are lower than they used to be. just my guess, I have not looked at historical numbers closely.  Cable systems do have competition in most areas. Where I live, FIOS for example eats their lunch.
Title: Re: CHTR - Charter Communications
Post by: Liberty on March 25, 2018, 11:11:05 AM
Malone ran his levered cable model at much higher interest rates for decades, I don't think the currently historically still very low rates will be a problem. Charter had some M&A premium and every time those expectations deflate a bit, a bunch of M&A focused HFs probably move on...

I am guessing that Malone purchased and valued cable assets at lower EBITDA multiples back then when interest rates were higher.I also think that the price increases taper out and are lower than they used to be. just my guess, I have not looked at historical numbers closely.  Cable systems do have competition in most areas. Where I live, FIOS for example eats their lunch.

There are many variables. He bought the assets at lower multiples, but they were also much smaller and less developed (scale is the most valuable thing in cable), as he was doing a roll up of the industry...

Rutledge said that his whole footprint can pretty inexpensively get to a gig, and has a path to 10 gigs of bandwidth. Fiber is competitive but much much more expensive, and so the ROI for overbuilds doesn't make much sense.
Title: Re: CHTR - Charter Communications
Post by: Spekulatius on March 25, 2018, 04:58:03 PM
Quote
utledge said that his whole footprint can pretty inexpensively get to a gig, and has a path to 10 gigs of bandwidth. Fiber is competitive but much much more expensive, and so the ROI for overbuilds doesn't make much sense.

I have got. FIOS Gigbit and cable can’t touch it. I actually tried it and switched it toi cable for a while l because they gave me a good offer with 250Mbit, but the issue is not speed, it is ping and packet losses. I ditched cable fairly quickly.

Fiber, where it is available  has high market shares and houses when sold listing the availability as a plus. I think it is also getting cheaper to get fiber to the house.
Title: Re: CHTR - Charter Communications
Post by: Munger_Disciple on March 25, 2018, 05:16:22 PM
I have Charter's 100 Mbps Spectrum internet service in Southern California, and so far never had any problems with ping or packet losses. I have been very happy with the service.

Regarding the cost of connecting homes with fiber, I would point out that both Verizon and Google had abandoned their over-build FFTH plans as they realized that ROI was quite poor. Verizon unloaded their FIOS business in CTF regions (California, Texas and Florida) to Frontier, and Frontier is having a hell of a time getting decent return from these properties.
Title: Re: CHTR - Charter Communications
Post by: jgyetzer on March 25, 2018, 06:41:48 PM
Has anyone listened to any of the recent Tucows conference calls?  They claim they make back their investment in FTTH in two years with a subscribing customer and expect 20-50% uptake over time.  That translates to a pretty good ROI.  They make it sound like they manage to complete the install at a lower cost than other fiber builds.  Maybe they are able to take advantage of smaller markets where they have an advantage that the national providers find too small, but I wonder why large scale fiber build couldn’t replicate their process.
Title: Re: CHTR - Charter Communications
Post by: WayWardCloud on March 25, 2018, 07:08:43 PM
Sure they could but why would they?
It seems to me that there's already a very expensive infrastructure laid down in the ground (cable) that will easily be upgraded to 1G speeds within a few years, then for a very reasonable additional cost per home can go up to 10G if need be. The average broadband speed today in the US is only ~70Mbps and most people barely ever use the full extend of their bandwidth (or are even aware of what that means). I don't see the incentive for any company to start over from scratch laying down fiber optics to the home everywhere just so they might have an edge in 50 years, when most households will actually feel a need for speeds >10G... We're barely starting to see people migrating from copper DSL to cable for bandwidth reasons.
Title: Re: CHTR - Charter Communications
Post by: Spekulatius on March 25, 2018, 07:38:17 PM
Fiber to the home used to cost $3000 when Verizon did their buildout, but this has dropped to below $1000/ home (LBTYA mentioned £650 for example). Some of cost is cost/ home fixed, some of it is discretionary when customer actually orders it.

I would imagine that getting $80/month of high margin business with a $1000 upfront investment is reasonable  ROI, because based on what I have seen, the uptake of reasonably priced FTTH is quite high.

I had FTTH first (50MPS first) then switched to cable (200MBPS) and then switched back to FIOS(1GPS). At that point, Played an online game and when I switched  from the slow 50MPS to cable, I noticed increased lag. I investigated with a ping tracer they hater were ping spikes and packet losses, which I had not seen before even with slower nominal  data speed. I was extremely happen when gigabit FIOS was offered and didn’t look back since. The nominal data speeds mean very little when you game or even stream and have ping spikes and packet losses, which depend on you local network, what your neighbors are doing etc because bandwidth is always shared to some extend with cable.

FTTH get rid of these issues and that it why I is superior.  This will become very obvious when people start to stream video music on circus devices at the same time.
Title: Re: CHTR - Charter Communications
Post by: Liberty on March 26, 2018, 06:45:40 AM
Quote
utledge said that his whole footprint can pretty inexpensively get to a gig, and has a path to 10 gigs of bandwidth. Fiber is competitive but much much more expensive, and so the ROI for overbuilds doesn't make much sense.

I have got. FIOS Gigbit and cable can’t touch it. I actually tried it and switched it toi cable for a while l because they gave me a good offer with 250Mbit, but the issue is not speed, it is ping and packet losses. I ditched cable fairly quickly.

Fiber, where it is available  has high market shares and houses when sold listing the availability as a plus. I think it is also getting cheaper to get fiber to the house.

Fiber is great. Cable has tons of fiber up to local nodes too. The point is, building new fiber where it doesn't already exist, especially in areas that aren't super densely populated, is VERY expensive. Anything where you have to dig trenches and deal with permits and such, and get new wires to houses will be expensive. If you had to re-build a cable network from the ground up today it would be astronomically expensive too. Over most of Charter footprint, overbuilding fiber doesn't make much sense, especially since most people don't even know what latency or packet losses are (guessing you're a gamer). Even Google has found Google Fiber harder than they expected...
Title: Re: CHTR - Charter Communications
Post by: Liberty on March 26, 2018, 06:47:38 AM
Fiber to the home used to cost $3000 when Verizon did their buildout, but this has dropped to below $1000/ home (LBTYA mentioned £650 for example). Some of cost is cost/ home fixed, some of it is discretionary when customer actually orders

These costs cited don't mean much because they'll vary a lot depending on where you are (population density, regulations, labor costs, etc). Fiber in rural alabama won't cost the same per passing as in Hong Kong.

Extending fiber to somewhere that already has it is one thing, bringing it to somewhere that doesn't is another, etc.
Title: Re: CHTR - Charter Communications
Post by: Shooter MacGavin on March 26, 2018, 07:38:45 AM
Fiber to the home used to cost $3000 when Verizon did their buildout, but this has dropped to below $1000/ home (LBTYA mentioned £650 for example). Some of cost is cost/ home fixed, some of it is discretionary when customer actually orders

These costs cited don't mean much because they'll vary a lot depending on where you are (population density, regulations, labor costs, etc). Fiber in rural alabama won't cost the same per passing as in Hong Kong.

And also GBP 650 is the incremental cost to connect to Virgin Media's already existing Fiber backbone in the UK across more dense areas.

Here's a nice breakdown of DSL vs. Fiber vs. Cable..

https://broadbandnow.com/report/dsl-vs-cable-vs-fiber/
Title: Re: CHTR - Charter Communications
Post by: Jurgis on March 26, 2018, 08:52:39 AM
I had FTTH first (50MPS first) then switched to cable (200MBPS) and then switched back to FIOS(1GPS). At that point, Played an online game and when I switched  from the slow 50MPS to cable, I noticed increased lag. I investigated with a ping tracer they hater were ping spikes and packet losses, which I had not seen before even with slower nominal  data speed. I was extremely happen when gigabit FIOS was offered and didn’t look back since. The nominal data speeds mean very little when you game or even stream and have ping spikes and packet losses, which depend on you local network, what your neighbors are doing etc because bandwidth is always shared to some extend with cable.

FTTH get rid of these issues and that it why I is superior.  This will become very obvious when people start to stream video music on circus devices at the same time.

I doubt that your packet losses and ping spikes are due to neighbors sharing the network and/or inherent cable (vs FIOS) issues. I'm pretty sure it's due to either the infrastructure the company has locally or losses on physical cable or possibly even connection to backbone (I've even had one game where the issue was backbone to another backbone connection that was being crapped by whatever the backbone interconnect politics was playing at the time). IMO and from what I've heard all of these can occur with FIOS too, so it's somewhat a crapshoot what you gonna get in specific location/specific companies/etc. Best bet is to have a house that has multiple providers and test all. And even then the quality may change in couple months (for who-knows-what reasons).

However, I can't prove any of the above, so FWIW. 8)
Title: Re: CHTR - Charter Communications
Post by: Liberty on March 26, 2018, 08:54:24 AM
I had FTTH first (50MPS first) then switched to cable (200MBPS) and then switched back to FIOS(1GPS). At that point, Played an online game and when I switched  from the slow 50MPS to cable, I noticed increased lag. I investigated with a ping tracer they hater were ping spikes and packet losses, which I had not seen before even with slower nominal  data speed. I was extremely happen when gigabit FIOS was offered and didn’t look back since. The nominal data speeds mean very little when you game or even stream and have ping spikes and packet losses, which depend on you local network, what your neighbors are doing etc because bandwidth is always shared to some extend with cable.

FTTH get rid of these issues and that it why I is superior.  This will become very obvious when people start to stream video music on circus devices at the same time.

I doubt that your packet losses and ping spikes are due to neighbors sharing the network and/or inherent cable (vs FIOS) issues. I'm pretty sure it's due to either the infrastructure the company has locally or losses on physical cable or possibly even connection to backbone (I've even had one game where the issue was backbone to another backbone connection that was being crapped by whatever the backbone interconnect politics was playing at the time). IMO and from what I've heard all of these can occur with FIOS too, so it's somewhat a crapshoot what you gonna get in specific location/specific companies/etc. Best bet is to have a house that has multiple providers and test all. And even then the quality may change in couple months (for who-knows-what reasons).

However, I can't prove any of the above, so FWIW. 8)

First question I'd ask if he was on wifi or on a wired connection...
Title: Re: CHTR - Charter Communications
Post by: Munger_Disciple on March 26, 2018, 10:04:31 AM
Quote
First question I'd ask if he was on wifi or on a wired connection...

Good question.

Also, why on earth would anyone need 1 Gbps connection to home?

Title: Re: CHTR - Charter Communications
Post by: Spekulatius on March 26, 2018, 12:10:07 PM
Because I can get 1 Gig and it’s not that pricey

Jurgis is correct that some of the issues appeared to be backbone related ( some local nodes in Long Island) but again, it’s the providers job to get this right.

It was also played on wireless on a mobile device. But then again, I had the Verizon router and the cable companies router, but then again, it is the providers job to get the hardware right. My pingtracet indicated that wireless wasn’t the issue though.

When on cable internet, I even had issues with Netflix or Amauon video streams jamming up. Again YMMV but in my comparison test, Fios performed better. Small dataset, I know.
Title: Re: CHTR - Charter Communications
Post by: Liberty on March 26, 2018, 12:28:25 PM
Because I can get 1 Gig and it’s not that pricy.

Jurgis is correct that some of the issues appeared to be backbone related ( some local nodes in Long Island) but again, it’s the providers job to get this right.

It was also played on wireless on a mobile device. But then again, I had the Verizon router and the cable companies router, but then again, it is the providers job to get the hardware right. My pingtracet indicated that wireless wasn’t the issue though.

When on cable internet, I even had issues with Netflix or Amauon video streams jamming up. Again YMMV but in my comparison test, Fios performed better. Small dataset, I know.

Ok. Glad it fixed your problem. Whatever fixes it for you was the right thing to do, I suppose, but with this context, it pretty much has nothing to do about cable vs fiber as technologies.
Title: Re: CHTR - Charter Communications
Post by: vince on March 27, 2018, 07:27:34 AM
anyone hear anything lately that may have caused the price to drop this much? not complaining, i'm buying more.  i do wish tho that they would be able to buy more stock back at these levels
Title: Re: CHTR - Charter Communications
Post by: atbed on March 27, 2018, 01:28:06 PM
BAML came out with a note on VZ this week. They were very bullish on 5G wireless broadband which may be the cause of weakness on CHTR stock this week. Their general opinion is that wireless broadband will be a viable #2, but they don't expect an impact on cable/fiber until 2020.

anyone hear anything lately that may have caused the price to drop this much? not complaining, i'm buying more.  i do wish tho that they would be able to buy more stock back at these levels
Title: Re: CHTR - Charter Communications
Post by: vince on March 27, 2018, 03:49:17 PM
Thanks atbed
Title: Re: CHTR - Charter Communications
Post by: vince on March 28, 2018, 04:09:34 PM
so charter trading for 84 billion.  buy it thru lbrda and its 78 billion.  buy it thru gliba for 70 billion.  ebitda for 2018 should be 16 billion.  normal capex at 15% on 42 billion revenue equals 6.5 billion.  interest about 3.5 billion.  no cash taxes, fcf 6 billion.  pretty good multiple whichever vehicle u choose.  now lets see 4 years out.  with 4 years of 5% ebitda growth (mgmt thinks high single or low double digit growth but trying to see value if operating environment is tougher) we get 20 billion ebitda, 13 billion ebit, 8.5 billion ebt (we borrowed another 25 billion to keep leverage ratio constant).  for sure they will have found a way to push cash taxes back further.  so fcf for next 4 years (4.5, 5.5, 7.5, 8.5) equals 26 billion (i still used elevated capex).  so we have 50 billion with debt and fcf to allocate.  lets assume all on buybacks (which is conservative cause an acquisition will probably add more value).  at an average of 450 dollars a share we can buy back 110 million shares.  not good at figuring out options but lets assume we lose 20 million shares back to mgmt, we will have 185 million left outstanding and about 45 dollars of fcf per share.  a 15 multiple on fcf seems rational, brings us to almost 700 a share.  even a multiple of 10, using pretty conservative numbers thru-out gives us 450, very good in this low interest rate , high priced environment.  full disclosure, i have 50 percent of my net worth in this idea.
Title: Re: CHTR - Charter Communications
Post by: BG2008 on March 28, 2018, 04:52:44 PM
so charter trading for 84 billion.  buy it thru lbrda and its 78 billion.  buy it thru gliba for 70 billion.  ebitda for 2018 should be 16 billion.  normal capex at 15% on 42 billion revenue equals 6.5 billion.  interest about 3.5 billion.  no cash taxes, fcf 6 billion.  pretty good multiple whichever vehicle u choose.  now lets see 4 years out.  with 4 years of 5% ebitda growth (mgmt thinks high single or low double digit growth but trying to see value if operating environment is tougher) we get 20 billion ebitda, 13 billion ebit, 8.5 billion ebt (we borrowed another 25 billion to keep leverage ratio constant).  for sure they will have found a way to push cash taxes back further.  so fcf for next 4 years (4.5, 5.5, 7.5, 8.5) equals 26 billion (i still used elevated capex).  so we have 50 billion with debt and fcf to allocate.  lets assume all on buybacks (which is conservative cause an acquisition will probably add more value).  at an average of 450 dollars a share we can buy back 110 million shares.  not good at figuring out options but lets assume we lose 20 million shares back to mgmt, we will have 185 million left outstanding and about 45 dollars of fcf per share.  a 15 multiple on fcf seems rational, brings us to almost 700 a share.  even a multiple of 10, using pretty conservative numbers thru-out gives us 450, very good in this low interest rate , high priced environment.  full disclosure, i have 50 percent of my net worth in this idea.

What vehicles is in that 50%? CHTR, GLIBA, etc
Title: Re: CHTR - Charter Communications
Post by: vince on March 28, 2018, 05:20:31 PM
all 3
Title: Re: CHTR - Charter Communications
Post by: BG2008 on March 28, 2018, 07:35:48 PM
Care to disclose further allocations and the logic behind it? Thanks.
Title: Re: CHTR - Charter Communications
Post by: vince on March 29, 2018, 07:37:48 AM
when you ask about further allocations, you mean to other companies? and logic behind the heavy concentration?
Title: Re: CHTR - Charter Communications
Post by: vince on March 29, 2018, 08:19:15 AM
allison transmission, trading at 5.5 billion.  average fcf over last 4-5 years is 500 million, should be between 550-600 million this year.  so we are starting with a 10 percent yield and that 10 percent is free to distribute, not needed to grow along with nominal gdp.  my experience shows that when you start with a 10 percent yield (or will reach it within a couple years with a high probability, like chtr), in a reasonably good business with sustainable earning power you are going to do well.  obviously if u start with a 10% yield and the business earnings grow with gdp u have a 15% return (10% yield plus 5-6% nominal growth) with no multiple expansion. (this assumes mgmt doesnt like burning our retained earnings on dumb allocations and is potentially conservative cause at these multiples, if mgmt buys back lots of stock we will actually be getting more than a dollar of market value for every dollar retained and therefore a bump to that initial 10% yield).  and u are starting at the low end of price to earnings multiples so much better chance you will get multiple expansion, which means an excellent return.  for this to work, the business must have low-negative working capital needs (payables and accrued expenses greater than sum of inventory and receivables) and maintenance capex (call the company) equal to or less than depreciation. (or else the 5-6 percent growth will consume some of the 10 percent starting yield).  back to allison... they have a 60% worldwide share of teir endmarkets in fully automatic transmissions for med-large sized trucks (think fire trucks, refuse, school buses, motorhomes). penetration in north america is 80%, in China and other large emerging economies its 5%. they check the box on the 10% fcf yield.  doesnt look like an outlier cause its been 5 years of that same level of fcf.  will continue this in another post cause we have to still  assess their likelihood of 5-6 percent nominal growth and im out of space
Title: Re: CHTR - Charter Communications
Post by: vince on March 29, 2018, 09:15:41 AM
my apologies, forgot i was on chtr board.  i will copy and paste the alsn writeup and finish it under allisons board for those who want to see it
Title: Re: CHTR - Charter Communications
Post by: Jurgis on March 29, 2018, 10:15:52 AM
when you ask about further allocations, you mean to other companies? and logic behind the heavy concentration?

BG2008 might be asking in what percentages do you split your position between CHTR/LBRDA/GLIBA.
Title: Re: CHTR - Charter Communications
Post by: vince on March 29, 2018, 10:27:39 AM
Hi Jurgis,

Its a little complicated because of timing.  at first it was mostly lbrda because of the shares i was given in spinoff from liberty and the rights to buy more at 20 percent discount.  acquired about a third of chtr exposure thru lbrda at 45 bucks.  then bought about a third directly in chtr at 190, i wanted to own some directly just in case.  more recently, the last third, been buying lvnta (gliba) cause i want more chtr but i want it at cheapest price possible.  in addition i have bought and sold some lbrda profitably and also some long dated conservatively striked chtr calls.

Vince
Title: Re: CHTR - Charter Communications
Post by: vince on March 29, 2018, 05:12:28 PM
Jurgis and BG2008,

what do u guys think about chtr, the cable industry and my valuation?
Title: Re: CHTR - Charter Communications
Post by: Jurgis on March 30, 2018, 07:02:15 AM
I hold LBRDA and GLIBA shares. I don't really have much to say about valuation.
Title: Re: CHTR - Charter Communications
Post by: walkie518 on March 30, 2018, 07:31:05 AM
Jurgis and BG2008,

what do u guys think about chtr, the cable industry and my valuation?

Charter is evolving.  Adding mobile is no small feat.

Charter's MVNO w/Verizon should prove fruitful, but we also find that on the 20% of Charter's new customers' mobile usage (according to the company 80% is over wifi/Charter's own pipes today), is beholden to Verizon's network. 

I bet Verizon squeezes if Charter is successful?

Does Charter build, buy, or lease towers to overcome reliance on its MVNO?  Does Charter make a bid for Sprint?  Does a bid for Sprint ruin its relationship w/Verizon? 

Studies have shown that quad-plays at scale can reduce costs by 40%.  It's more likely that Comcast sees this 40% before Charter and Charter should be able to learn a lot from Comcast's new offerings.  Charter should be better as a result?

It might be that customers don't sign up for quad-plays without significant financial incentives?  How close does the price for a charter phone need to be to charter's cost to get this done the right way?  Does Charter need to take a loss on mobile and video to gain scale?

Charter is about building value.  Maybe I'm wrong and I should be thinking about how Charter can reinvest to build a better tomorrow for shareholders? 
Title: Re: CHTR - Charter Communications
Post by: vince on March 30, 2018, 09:48:41 AM
Hey Walkie,

lots of good points on wireless but not a material part of my valuation.  Dont really know how verizon squeezes them, they have a mvno agreement.  my understanding is our mvno usage based costs will be minimal because most of bits on wifi anyway.  in addition, it is not going to be a material profit source when viewed as a sole business,  but will lower churn (which would be material).  in my mind, if it is successful, it will drive consolidation on terms favaorable to cable.  but i have to admit i havent spent lots of time on the wireless opportunity.  if it disappeared tomorrow it wouldnt change my valuation
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 04, 2018, 07:31:19 AM
https://www.prnewswire.com/news-releases/charter-comcast-and-cox-to-form-new-group-to-sell-national-advanced-advertising-solutions-300624134.html
Title: Re: CHTR - Charter Communications
Post by: walkie518 on April 04, 2018, 09:09:39 AM
Hey Walkie,

lots of good points on wireless but not a material part of my valuation.  Dont really know how verizon squeezes them, they have a mvno agreement.  my understanding is our mvno usage based costs will be minimal because most of bits on wifi anyway.  in addition, it is not going to be a material profit source when viewed as a sole business,  but will lower churn (which would be material).  in my mind, if it is successful, it will drive consolidation on terms favaorable to cable.  but i have to admit i havent spent lots of time on the wireless opportunity.  if it disappeared tomorrow it wouldnt change my valuation

I don't know how others on this forum feel, but convergence and its synergies at (better) scale are key parts to my Charter thesis. 

Spectrum serves my office, which pays double for nearly the same service I have at home.  Spectrum has been moving business from annual to month/month contracts with teaser rates. 

What happens when Spectrum wants to lock-in pricing?  What happens when Spectrum wants to hike prices by 10%?  They will certainly get it, but is this short-term thinking?

How hard will it be when business customers have broadband and mobile devices with Spectrum (voice and video being less important) to leave?  What happens to those month/month agreements and how much additional revenues will be generated?  How well does Charter reduce churn with these offerings?

The MVNO with Verizon will juice cash flow b/c the pipes are the same, but new revenue is funneled to Charter instead of Verizon.  It's likely Charter undercuts Verizon's pricing, but I speculate that over time they come in line. 

On the other hand, building the infrastructure that Charter already has for 5G seems like a waste for many wireless carriers?  Maybe there will be increasing numbers of these kinds of agreements among the other cable providers. 

In the least, the next few years will be very interesting for cable and wireless companies. 

Title: Re: CHTR - Charter Communications
Post by: walkie518 on April 04, 2018, 05:28:20 PM
Charter prices $2.5B in debt to roll over Time Warner Cable notes https://seekingalpha.com/news/3343745?source=ansh $CHTR

Clear positive...
Title: Re: CHTR - Charter Communications
Post by: BG2008 on April 04, 2018, 07:24:30 PM
$800mm of 20 year debt at slightly higher yield than 5.375% and $1.7bn of 30 year debt at slight higher than 5.75% replacing $2b in 6.75% due 2018.  Wow. 
Title: Re: CHTR - Charter Communications
Post by: gokou3 on April 04, 2018, 08:25:25 PM
I find it interesting that the TWC yields fluctuate so much over a short span around the GFC..
Title: Re: CHTR - Charter Communications
Post by: BG2008 on April 04, 2018, 10:22:53 PM
I find it interesting that the TWC yields fluctuate so much over a short span around the GFC..

I think late 2008 and early 2009 were peak pessimism.  Capital market were essentially closed. 
Title: Re: CHTR - Charter Communications
Post by: Spekulatius on April 05, 2018, 03:59:45 AM
I find it interesting that the TWC yields fluctuate so much over a short span around the GFC..

These times were crazy. You could by lower investment grade bonds for mid teens yields, if you looked around. Also, the financing side is one of the issues with Malone, he runs hothead entities he controls with fairly high leverage and not very “creditor friendly” with this assets shifting around and deals. Few people care now, but when credit gets tight, the remaining bond buyers will, IMO.
Title: Re: CHTR - Charter Communications
Post by: atbed on April 14, 2018, 02:44:53 PM
I had some massive problems with our phone service with one of the cable guys this week. Every time we lose cable internet service, we lose home phone service. I'm not picking on CHTR here specifically (just choosing to post here), because it probably applies to all cable providers.

IMO VOIP phone service through one of the cable providers is a complete rip-off. We are in the process of portering over our phone number from a cable provider to google voice (with a pit stop through T-Mobile). Combining phone/internet just seems like a marketing play to juice pricing.

Not sure how material this is. But curious what other board members think.
Title: Re: CHTR - Charter Communications
Post by: Spekulatius on April 14, 2018, 03:24:02 PM
I had some massive problems with our phone service with one of the cable guys this week. Every time we lose cable internet service, we lose home phone service. I'm not picking on CHTR here specifically (just choosing to post here), because it probably applies to all cable providers.

IMO VOIP phone service through one of the cable providers is a complete rip-off. We are in the process of portering over our phone number from a cable provider to google voice (with a pit stop through T-Mobile). Combining phone/internet just seems like a marketing play to juice pricing.

Not sure how material this is. But curious what other board members think.

You don’t really pay for phone it’s cable providers, in my case the tripple play offering (with phone) was cheaper than the double play after the rebates. We never used the phone since we were happy with Ooma and didn’t feel like changing.
Title: Re: CHTR - Charter Communications
Post by: vince on April 15, 2018, 03:19:31 PM
Chtr being offered at very good prices on CURRENT ebitda where current ebitda is not representative of potential future ebitda.  Said another way, current multiple is basically a good cash on cash return with no growth.  That is a very nice margin of safety IMO.  Wish they had more capacity to take out more equity at these prices
Title: Re: CHTR - Charter Communications
Post by: vince on April 15, 2018, 03:23:12 PM
Not seeing sec filing with Advance Newhouse leads me to believe AN is not selling anymore shares back to Chtr
Title: Re: CHTR - Charter Communications
Post by: Spekulatius on April 15, 2018, 03:49:23 PM
Chtr being offered at very good prices on CURRENT ebitda where current ebitda is not representative of potential future ebitda.  Said another way, current multiple is basically a good cash on cash return with no growth.  That is a very nice margin of safety IMO.  Wish they had more capacity to take out more equity at these prices

What makes you believe that CHTR current EBITDA is not representative of future EBITDA? I expect to see mid single digit EBITDA, Sam than with CMCSA, which trades at lower multiples. I prefer CMCSA because of lower leverage and lower valuation at this point.
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 15, 2018, 06:35:05 PM
Chtr being offered at very good prices on CURRENT ebitda where current ebitda is not representative of potential future ebitda.  Said another way, current multiple is basically a good cash on cash return with no growth.  That is a very nice margin of safety IMO.  Wish they had more capacity to take out more equity at these prices

What makes you believe that CHTR current EBITDA is not representative to future EBITDA? I expect to see mid single digit EBITDA, Sam than with CMCSA, which trades at lower multiples. I prefer CMCSA because of lower leverage and lower valuation at this point.

Because they are going through a huge integration/transition process that is depressing margins and likely growth.
Title: Re: CHTR - Charter Communications
Post by: vince on April 15, 2018, 06:56:11 PM
 Ebitda growth rate with legacy charter footprint was high single to low double digits once the upgrades to the plant were largely complete and the product and pricing strategy was implemented.  I think it's also important to consider the fact that business was performing very much in line with what management was predicting.  Mr Rutledge was confident that once the plant was upgraded consumers would see that the cable product is superior to satellite and chtr would begin to claw back video customers.  Without the drag from video losses and conservative estimates of further broadband penetration you could see very good growth. Mgmt is now predicting, with this latest integration, even better relative performance all factors considered.  And they are backing up that conviction buying back large chuncks of equity at 350 a share.  As the integration recently passed the halfway mark, the biggest risks are behind them and value is increasing as the stock heads south.  Remember, 3 different companies were looking to acquire them and it was publicly stated that there was an offer for 540.  Of course the market overreacts to some lumpiness in their results, which by the way mgmt stated was obviously going to happen due to the sheer scale and complexity of the acquisition.  Lets assume though that you are right and they get mid single digit ebitda growth (which is what I use anyway for valuation), the returns will be fantastic.  And that was my original point.  But I also think one could pencil in 10 percent (or more) growth for the next few years (what I meant when I said not representative of potential future ebitda) which obviously greatly enhances returns.  The cfo was asked at recent conference whether he still felt low double digit growth was in the cards.  He said absolutely and that he is more confident now than ever.
Title: Re: CHTR - Charter Communications
Post by: vince on April 15, 2018, 07:02:26 PM
Thanks Liberty for saying basically what I said with my long post which for some reason I think was a waste of time in terms of getting anywhere with the extra effort.
Title: Re: CHTR - Charter Communications
Post by: dutchman on April 16, 2018, 07:04:24 AM
Can someone direct me to some material which explains why 5g and cord cutting isn't a threat to charter. The market seems to be freaking out of over this, and therein lies the opportunity i guess.  I get that they'll just keep raising the price of broadband if ppl cord cut, and 5g requires many more cells where cable can maybe play a role. Trying to understand the conviction that many of you, whom I respect, have.
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 16, 2018, 07:16:37 AM
Can someone direct me to some material which explains why 5g and cord cutting isn't a threat to charter. The market seems to be freaking out of over this, and therein lies the opportunity i guess.  I get that they'll just keep raising the price of broadband if ppl cord cut, and 5g requires many more cells where cable can maybe play a role. Trying to understand the conviction that many of you, whom I respect, have.

Rutledge touches on this in his March 5 presentation. I suggest you check out his comments.
Title: Re: CHTR - Charter Communications
Post by: Gamecock-YT on April 16, 2018, 03:30:05 PM
Not seeing sec filing with Advance Newhouse leads me to believe AN is not selling anymore shares back to Chtr
a day early

https://www.sec.gov/Archives/edgar/data/914545/000089924318010177/xslF345X03/doc4.xml
Title: Re: CHTR - Charter Communications
Post by: LongTermView on April 18, 2018, 07:38:45 PM
Charter breaks down capex on page 48 of the 2017 10-K:
Quote
in millions:
$3,385 Customer premise equipment [CPE] (a)
$2,007 Scalable infrastructure (b)
$1,176 Line extensions (c)
   $572 Upgrade/rebuild (d)
$1,541 Support capital (e)
--------
$8,681 Total capital expenditures

(a) Customer premise equipment includes costs incurred at the customer residence to secure new customers and revenue generating units. It also includes customer installation costs and customer premise equipment (e.g., set-top boxes and cable modems).
(b) Scalable infrastructure includes costs not related to customer premise equipment, to secure growth of new customers and revenue generating units, or provide service enhancements (e.g., headend equipment).
(c) Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).
(d) Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.
(e) Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles).

We know 2017 and 2018 are heavy in terms of growth capex due to the all-digital initiative. What is the breakdown between maintenance capex and growth capex for the above?

A similar question was answered in October 2014 (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/charter-communications/msg195301/#msg195301) but I'd like to continue exploring the blurry areas:
What is your best guess on maintenance capex. 1.5 billion$? 700m$ interest? that is 5-2.2 = 2.8bn$. But I assume some taxes? another 800m$ in taxes, so about 2bn$ in FCF. then a 12x multiple on 92m shares is 260$ of value. Possibly 280-290$ with that greatland stake?

what is an appropriate cash flow multiple on these things. Since they do have a nice moat, and possibly some growth? So if you say a 15x multiple, then it gets interesting.

Look over the conference call transcripts.  Management provides some information on free cash flow, and how much of that is customer premise equipment (CPE).

Whenever Charter signs up a new customer, it needs to send out a set-top box that it will rent to that customer.  The CPE is growth capex.
Some of Charter's capex may get a little blurry.  If it improves its Internet infrastructure, some of that is maintenance and some of that would be growth.  It's hard to say what the right split is.  But in any case, Charter management doesn't break that out.
Title: Re: CHTR - Charter Communications
Post by: Astrea on April 19, 2018, 02:06:03 AM
Just to get back to Dutchman re cord cutting/5G risks. These are my high level thoughts:

The disruption caused to the cable video distribution model is real but cable operators still own the infrastructure (i.e. the pipe to the home) over which both traditional and over-the-top video services are delivered to customers. In other words, cable owns the toll road and gets to set the toll charge and so there should be other ways it can make up for what it loses in video. Bundle economics should also continue to make sense and offer value to customers and I think that with the proliferation of OTT services in addition to linear TV, cable can continue to be an aggregator of content and offer value to the customer through bundling even if what's in the bundle changes.

No one has all the answers re 5G but as the technology sorts out, cable seems to lend itself to answering the questions better than others. Cable’s existing architecture comprises many of the building-blocks needed to compete in a 5G world, including an existing fibre network for backhaul and high capacity wireless connectivity in homes and businesses (i.e. wifi). By contrast, wireless carriers will almost certainly need to build dense physical networks (fibre and small cell radios) down from the macro-cell towers into the neighbourhoods with all the cost, time and overbuild risk that carries. On that basis, 5G may well be more of an opportunity for cable than a threat. At least that's what Charter is saying. VZ is saying that existing cable assets aren't quite good enough for a 5G world and so they are building their own networks in selected markets. How much of that is tactical ahead of some form of convergence with cable, I don't know.

It's worth following what's happening in Europe with the JV between Vodafone and Liberty Global. If that works out, then it further validates the merits of convergence between wireless and wireline operators. That JV valued Liberty Global's cable assets at around 11x EBITDA if I recall correctly.
Title: Re: CHTR - Charter Communications
Post by: Spekulatius on April 19, 2018, 04:03:05 AM
I agree convergence and consolidation between wireline and wireless is the most likely path going forward. Verizon has already a dense fiber network in the Northeast and ATT in CA, some areas in the Midwest and South, but each operator needs to cover most of the US to give the consumer the best experience.

It seems that in the mid term future, wireless and fiber will start to supplement and compete with each other.
Title: Re: CHTR - Charter Communications
Post by: vince on April 19, 2018, 12:51:00 PM
Imo, wireless and wireline will consolidate on valuations favorable to cable based on Zig-Vod merger and the various wireless companies looking at Chtr assets.  Things could change so not a time for overconfidence but its no secret the wireline currently has the advantage and Malone is the last person that will allow that "advantage value" to be transferred without being compensated.  In fact, one of my worries is that he wont take a fair price when offered which could come back to bite later.  I would have taken 540, (assuming currency was decent, or even if lots of it was cash) because that 540 NOW in my hands is worth a good bit more in 3-4 years.  By turning it down now (not saying that he did) you must be very confident of 700-800 or more in 3-4 years, again assuming currency was solid.
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 19, 2018, 01:03:12 PM
Imo, wireless and wireline will consolidate on valuations favorable to cable based on Zig-Vod merger and the various wireless companies looking at Chtr assets.  Things could change so not a time for overconfidence but its no secret the wireline currently has the advantage and Malone is the last person that will allow that "advantage value" to be transferred without being compensated.  In fact, one of my worries is that he wont take a fair price when offered which could come back to bite later.  I would have taken 540, (assuming currency was decent, or even if lots of it was cash) because that 540 NOW in my hands is worth a good bit more in 3-4 years.  By turning it down now (not saying that he did) you must be very confident of 700-800 or more in 3-4 years, again assuming currency was solid.

Malone mentioned this in interview with Faber about the offer (which I don't think was confirmed as 540, but as "something with a 5 in front" or something like that), and Malone basically said "I didn't see a check for that amount, show me the check". Meaning that he didn't want to swap CHTR stock for Softbank stock or whatever and be stuck with it with no control, repeating his AT&T mistake.
Title: Re: CHTR - Charter Communications
Post by: Happy on April 20, 2018, 03:05:59 AM
In the interview, it sounded to me as if part of the offer was in Sprint shares and Son wanted to value those shares significantly above their market value for the deal (because he considered them undervalued). That's obviously a far more dubious proposition than receiving $540 in cash.
Title: Re: CHTR - Charter Communications
Post by: vince on April 20, 2018, 08:34:53 AM
I agree with both of you, I saw the interview.  But whats your thoughts on first part of my post?
Title: Re: CHTR - Charter Communications
Post by: Shooter MacGavin on April 20, 2018, 08:36:54 AM
Hey here's a dumb question...

I hear this line a lot from Malone and MIke Fries...combining a wireline network and a wireless network has huge synergies.  Why does it have huge synergies? I get the churn reduction argument.  But from a pure cost synergy perspective? 
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 20, 2018, 08:43:40 AM
I agree with both of you, I saw the interview.  But whats your thoughts on first part of my post?

It seems to be the direction of things, but who knows how it'll play out... What matters most is that CHTR doesn't need to merge with anyone to get to quad play, and 80% of the bits going through phones are already going through its wifi, not through cell towers, so it's easier for them to absorb that extra capacity than for the wireless players to try to duplicate the capacity of cable.
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 20, 2018, 08:46:05 AM
Hey here's a dumb question...

I hear this line a lot from Malone and MIke Fries...combining a wireline network and a wireless network has huge synergies.  Why does it have huge synergies? I get the churn reduction argument.  But from a pure cost synergy perspective?

As you mentioned, reducing churn has big benefits, but there are also synergies when it comes to the backhaul capacity, the billing and customer service systems, etc.

Imagine a cable network and a wireless company side by side, operating independently. If you made a venn diagram of everything they need to operate, there'd be a fair bit over overlap. That's where the synergies would come from.

But cable is a better business than wireless, so it all depends at what cost you can make it happen. So far CHTR seems to be going the MVNO route, which reduces risk.
Title: Re: CHTR - Charter Communications
Post by: Astrea on April 20, 2018, 08:58:01 AM
Yes Liberty Global commentary on VOD/Ziggo JV was that the two biggest benefits were higher NPS and lower churn. The cost synergies were 1/4 IT savings, 1/4 redundancies and 1/2 included marketing + sales and termination of rented fibre. I think they discussed this on the Liberty Global Q3 2017 call.
Title: Re: CHTR - Charter Communications
Post by: gokou3 on April 20, 2018, 09:03:44 AM
Perhaps another dumb question, but why would someone like VZ willing to play game with the cable guys by letting them run a MVNO on its network?  Is it due to regulatory requirement that they need to open up their network?  Otherwise, I don't see it beneficial to cultivate a potential competitor for a little incremental revenue.
Title: Re: CHTR - Charter Communications
Post by: walkie518 on April 20, 2018, 09:14:27 AM
Perhaps another dumb question, but why would someone like VZ willing to play game with the cable guys by letting them run a MVNO on its network?  Is it due to regulatory requirement that they need to open up their network?  Otherwise, I don't see it beneficial to cultivate a potential competitor for a little incremental revenue.

VZ's customers use Charter's and Comcast's pipes, Routeledge claims 80% of mobile activity occurs over wifi and therefore cable. 

Master/slave!
Title: Re: CHTR - Charter Communications
Post by: mbreject on April 20, 2018, 09:53:04 AM
Perhaps another dumb question, but why would someone like VZ willing to play game with the cable guys by letting them run a MVNO on its network?  Is it due to regulatory requirement that they need to open up their network?  Otherwise, I don't see it beneficial to cultivate a potential competitor for a little incremental revenue.

I think it's more about them not leaving money on the table. The customers of MVNOs aren't going to be the same as Verizon's, so it's not like they're losing business. Their networks just get more congested though they do limit MVNOs.
Title: Re: CHTR - Charter Communications
Post by: Munger_Disciple on April 20, 2018, 10:00:14 AM
Quote
Perhaps another dumb question, but why would someone like VZ willing to play game with the cable guys by letting them run a MVNO on its network?  Is it due to regulatory requirement that they need to open up their network?  Otherwise, I don't see it beneficial to cultivate a potential competitor for a little incremental revenue.

Comcast & Time Warner Cable owned cellular spectrum in the past and they subsequently sold it to VZ. As a part of the deal, they also received the ability to offer MVNO using VZ network. So VZ is legally required to support Charter's (since Time Warner Cable is now part of Charter) and Comcast's MVNO plans.
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 20, 2018, 10:12:31 AM
Perhaps another dumb question, but why would someone like VZ willing to play game with the cable guys by letting them run a MVNO on its network?  Is it due to regulatory requirement that they need to open up their network?  Otherwise, I don't see it beneficial to cultivate a potential competitor for a little incremental revenue.

I don't remember how that deal came to exist, but TWC came with a perpetual MVNO deal with Verizon that they're now activating.

Fromt he point of view of the wireless company, MVNO deals can make sense because it just increases utilization on their mostly fixed cost assets, so it's probably at very high incremental margins.
Title: Re: CHTR - Charter Communications
Post by: Shooter MacGavin on April 20, 2018, 10:49:02 AM
Yes Liberty Global commentary on VOD/Ziggo JV was that the two biggest benefits were higher NPS and lower churn. The cost synergies were 1/4 IT savings, 1/4 redundancies and 1/2 included marketing + sales and termination of rented fibre. I think they discussed this on the Liberty Global Q3 2017 call.

ok thanks. I listened to the call, but didn't quite catch that part.  Thanks.  the one I didn't think of is the termination of rented fibre. 
Title: Re: CHTR - Charter Communications
Post by: Shooter MacGavin on April 20, 2018, 10:55:03 AM
Hey here's a dumb question...

I hear this line a lot from Malone and MIke Fries...combining a wireline network and a wireless network has huge synergies.  Why does it have huge synergies? I get the churn reduction argument.  But from a pure cost synergy perspective?

As you mentioned, reducing churn has big benefits, but there are also synergies when it comes to the backhaul capacity, the billing and customer service systems, etc.

Imagine a cable network and a wireless company side by side, operating independently. If you made a venn diagram of everything they need to operate, there'd be a fair bit over overlap. That's where the synergies would come from.

But cable is a better business than wireless, so it all depends at what cost you can make it happen. So far CHTR seems to be going the MVNO route, which reduces risk.

Yup.

 I get the billing and customer service, but you could then make the argument that you should merge netflix with a cable company or anything with a billing department and charter. In other words, merging SG&A costs isn't unique to wireless and cable.  But definitely the backhaul piece is.  I guess maybe the telcos stops leasing cell towers in  some instances because the footprint overlaps with a cable operator and they can simply plug cells to the cable backhaul.  I'm not an engineer but in my simple mind, this is maybe how it makes sense?  Not sure, which is why i asked the question.
Title: Re: CHTR - Charter Communications
Post by: walkie518 on April 20, 2018, 10:56:39 AM
this is wild ... maybe a merger would never be approved by the antitrust regulators, but this can happen

https://www.fiercecable.com/cable/comcast-and-charter-to-jointly-develop-common-mobile-operating-platform?mkt_tok=eyJpIjoiTmprMk5EZGlNRE00WW1ZMyIsInQiOiJsNHNLWXY3VHhySGhXTkFzeFloNmpFNWM1VzNXUkxvdVFRazZmSWtTQUlMVk04NjFjamd3em04RmZ5V25GS1FHZmIydHVubHlWQVZVYkY5VG1tYm1GNSt6ZWZwUkhLRzl6UTE1N1RDUWV6UnR4cCt1UW5BT3M1cDVHQXlvTU5xVyJ9&mrkid=60566399
Title: Re: CHTR - Charter Communications
Post by: BG2008 on April 20, 2018, 11:14:34 AM
this is wild ... maybe a merger would never be approved by the antitrust regulators, but this can happen

https://www.fiercecable.com/cable/comcast-and-charter-to-jointly-develop-common-mobile-operating-platform?mkt_tok=eyJpIjoiTmprMk5EZGlNRE00WW1ZMyIsInQiOiJsNHNLWXY3VHhySGhXTkFzeFloNmpFNWM1VzNXUkxvdVFRazZmSWtTQUlMVk04NjFjamd3em04RmZ5V25GS1FHZmIydHVubHlWQVZVYkY5VG1tYm1GNSt6ZWZwUkhLRzl6UTE1N1RDUWV6UnR4cCt1UW5BT3M1cDVHQXlvTU5xVyJ9&mrkid=60566399

Yes, this is wild.  The fact that CHTR and Comcast would work together is not surprising to me at all.  This is largely a function of having read Cable Cowboys.  Malone was a bit of a mentor to the Comcast guys, Robertsons?.  Malone talked about how cable and media companies tend to collaborate together against industries/companies they view as threats.  I think characteristics like this is what makes the cable business better than say the airlines (pre-merger).  It's a lot more clubby than a prisoners dilemma type of decision making. Clubby means higher returns on capital for shareholders.   
Title: Re: CHTR - Charter Communications
Post by: marazul on April 20, 2018, 11:19:33 AM
Yes, they cooperate because they don´t compete but own basically the same assets (just in different geographies). Makes perfect sense to work together to develop better products and reduce costs. On fixed-mobile convergence, it makes less sense in US vs. Holland (Ziggo-Vod), or other parts of Europe for example. In US, cable assets are not nationwide providers while mobile providers are...in Europe, Cable assets cover larger % of a country.
Title: Re: CHTR - Charter Communications
Post by: BG2008 on April 20, 2018, 11:37:13 AM
This is my little rant regarding my short thesis on CHTR on the "what are you buying today" thread

My CHTR thesis is something along the line of:

Some business' replacement value is very real and compounds over time.  This is typical of businesses that require a lot of blue collar construction labor, materials cost, political zoning, scale, and right-of-way.  One way of looking at CHTR is kind using a railroad analogy.  No one in their right mind today will go out and build another railroad.  It simply can't be done.  Railroads has structural advantage over trucks (although self-driving cars may erode or even usurp this advantage) due to lower cost.  You can't go through towns etc because they are not the wilderness anymore.  They are populated and you can't use eminent domain and get all the politics lined up to build a railroad.  My thought is that you can't do that with cable today either.  Imagine going to residents and say "I'm going to dig up your roads and bring in all this loud noise etc" to build a competing network"  Please give me permission to do it.  Also where do you find the labor?  Apparently we don't have tough blue collar guys left who knows how to work with their leathery hands.  We have a bunch of wimpy millenials these days.  They have no efficiency in digging ditches etc.  What this all implies is that as time goes on and populations get denser and more buildings get built and the roads gets traveled more, it becomes ever more difficult for people to go out and dig up roads and climb up poles and connect coaxial cables or lay down fiber optics.  This is a true case of a replacement cost being real, tangible, and compounding over time.  The 5G stuff that could be a threat, if I remember correctly from my "physics of waves" in college.  Basically, lower wavelength can't penetrate buildings unlike long radio waves.  So you need lots of little antennas and you need lots of power.  If you want to build it from scratch, how do you get access to buildings?  How do you get permission to mount stuff on buildings, light posts etc?  Where do the labor come from?  What if YOU ARE the cable company.  You have the access point already.  You are sending a tech out to repair something already.  I think these are overwhelming structural advantages that only compounds over time.  This implies price hikes over time.  If I learned anything about owning real estate in a land constraint location (NYC) is that if you're able to pass through 3% price increases a year and you leverage your assets the right way, everything else takes care of itself.   Rant over.   
Title: Re: CHTR - Charter Communications
Post by: Shooter MacGavin on April 20, 2018, 01:07:41 PM
This is my little rant regarding my short thesis on CHTR on the "what are you buying today" thread

My CHTR thesis is something along the line of:

Some business' replacement value is very real and compounds over time.  This is typical of businesses that require a lot of blue collar construction labor, materials cost, political zoning, scale, and right-of-way.  One way of looking at CHTR is kind using a railroad analogy.  No one in their right mind today will go out and build another railroad.  It simply can't be done.  Railroads has structural advantage over trucks (although self-driving cars may erode or even usurp this advantage) due to lower cost.  You can't go through towns etc because they are not the wilderness anymore.  They are populated and you can't use eminent domain and get all the politics lined up to build a railroad.  My thought is that you can't do that with cable today either.  Imagine going to residents and say "I'm going to dig up your roads and bring in all this loud noise etc" to build a competing network"  Please give me permission to do it.  Also where do you find the labor?  Apparently we don't have tough blue collar guys left who knows how to work with their leathery hands.  We have a bunch of wimpy millenials these days.  They have no efficiency in digging ditches etc.  What this all implies is that as time goes on and populations get denser and more buildings get built and the roads gets traveled more, it becomes ever more difficult for people to go out and dig up roads and climb up poles and connect coaxial cables or lay down fiber optics.  This is a true case of a replacement cost being real, tangible, and compounding over time.  The 5G stuff that could be a threat, if I remember correctly from my "physics of waves" in college.  Basically, lower wavelength can't penetrate buildings unlike long radio waves.  So you need lots of little antennas and you need lots of power.  If you want to build it from scratch, how do you get access to buildings?  How do you get permission to mount stuff on buildings, light posts etc?  Where do the labor come from?  What if YOU ARE the cable company.  You have the access point already.  You are sending a tech out to repair something already.  I think these are overwhelming structural advantages that only compounds over time.  This implies price hikes over time.  If I learned anything about owning real estate in a land constraint location (NYC) is that if you're able to pass through 3% price increases a year and you leverage your assets the right way, everything else takes care of itself.   Rant over.   

1. I 100% agree with you.

2. I thought this was "your short thesis." 
Title: Re: CHTR - Charter Communications
Post by: BG2008 on April 20, 2018, 01:20:00 PM
This is my little rant regarding my short thesis on CHTR on the "what are you buying today" thread

My CHTR thesis is something along the line of:

Some business' replacement value is very real and compounds over time.  This is typical of businesses that require a lot of blue collar construction labor, materials cost, political zoning, scale, and right-of-way.  One way of looking at CHTR is kind using a railroad analogy.  No one in their right mind today will go out and build another railroad.  It simply can't be done.  Railroads has structural advantage over trucks (although self-driving cars may erode or even usurp this advantage) due to lower cost.  You can't go through towns etc because they are not the wilderness anymore.  They are populated and you can't use eminent domain and get all the politics lined up to build a railroad.  My thought is that you can't do that with cable today either.  Imagine going to residents and say "I'm going to dig up your roads and bring in all this loud noise etc" to build a competing network"  Please give me permission to do it.  Also where do you find the labor?  Apparently we don't have tough blue collar guys left who knows how to work with their leathery hands.  We have a bunch of wimpy millenials these days.  They have no efficiency in digging ditches etc.  What this all implies is that as time goes on and populations get denser and more buildings get built and the roads gets traveled more, it becomes ever more difficult for people to go out and dig up roads and climb up poles and connect coaxial cables or lay down fiber optics.  This is a true case of a replacement cost being real, tangible, and compounding over time.  The 5G stuff that could be a threat, if I remember correctly from my "physics of waves" in college.  Basically, lower wavelength can't penetrate buildings unlike long radio waves.  So you need lots of little antennas and you need lots of power.  If you want to build it from scratch, how do you get access to buildings?  How do you get permission to mount stuff on buildings, light posts etc?  Where do the labor come from?  What if YOU ARE the cable company.  You have the access point already.  You are sending a tech out to repair something already.  I think these are overwhelming structural advantages that only compounds over time.  This implies price hikes over time.  If I learned anything about owning real estate in a land constraint location (NYC) is that if you're able to pass through 3% price increases a year and you leverage your assets the right way, everything else takes care of itself.   Rant over.   

1. I 100% agree with you.

2. I thought this was "your short thesis."

Short as in length, haha
Title: Re: CHTR - Charter Communications
Post by: Shooter MacGavin on April 20, 2018, 01:21:08 PM
This is my little rant regarding my short thesis on CHTR on the "what are you buying today" thread

My CHTR thesis is something along the line of:

Some business' replacement value is very real and compounds over time.  This is typical of businesses that require a lot of blue collar construction labor, materials cost, political zoning, scale, and right-of-way.  One way of looking at CHTR is kind using a railroad analogy.  No one in their right mind today will go out and build another railroad.  It simply can't be done.  Railroads has structural advantage over trucks (although self-driving cars may erode or even usurp this advantage) due to lower cost.  You can't go through towns etc because they are not the wilderness anymore.  They are populated and you can't use eminent domain and get all the politics lined up to build a railroad.  My thought is that you can't do that with cable today either.  Imagine going to residents and say "I'm going to dig up your roads and bring in all this loud noise etc" to build a competing network"  Please give me permission to do it.  Also where do you find the labor?  Apparently we don't have tough blue collar guys left who knows how to work with their leathery hands.  We have a bunch of wimpy millenials these days.  They have no efficiency in digging ditches etc.  What this all implies is that as time goes on and populations get denser and more buildings get built and the roads gets traveled more, it becomes ever more difficult for people to go out and dig up roads and climb up poles and connect coaxial cables or lay down fiber optics.  This is a true case of a replacement cost being real, tangible, and compounding over time.  The 5G stuff that could be a threat, if I remember correctly from my "physics of waves" in college.  Basically, lower wavelength can't penetrate buildings unlike long radio waves.  So you need lots of little antennas and you need lots of power.  If you want to build it from scratch, how do you get access to buildings?  How do you get permission to mount stuff on buildings, light posts etc?  Where do the labor come from?  What if YOU ARE the cable company.  You have the access point already.  You are sending a tech out to repair something already.  I think these are overwhelming structural advantages that only compounds over time.  This implies price hikes over time.  If I learned anything about owning real estate in a land constraint location (NYC) is that if you're able to pass through 3% price increases a year and you leverage your assets the right way, everything else takes care of itself.   Rant over.   

1. I 100% agree with you.

2. I thought this was "your short thesis."

Short as in length, haha

ah!
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 20, 2018, 06:23:19 PM
I thought the same thing because of the wording. I was expecting a twist at the end..
Title: Re: CHTR - Charter Communications
Post by: Jurgis on April 20, 2018, 10:10:58 PM
Dis why I never say "short writeup" or "short thesis" anymore.  8)
Title: Re: CHTR - Charter Communications
Post by: vince on April 21, 2018, 12:59:37 PM
I agree with both of you, I saw the interview.  But whats your thoughts on first part of my post?

It seems to be the direction of things, but who knows how it'll play out... What matters most is that CHTR doesn't need to merge with anyone to get to quad play, and 80% of the bits going through phones are already going through its wifi, not through cell towers, so it's easier for them to absorb that extra capacity than for the wireless players to try to duplicate the capacity of cable.

Well you never know exactly how the future unfolds but what you said in the rest of your post (basically supporting what I was referring to) makes it highly likely that it unfolds favorably in cables favor.  That dynamic, combined with Rutledge's operating abilities and Malone helping drive strategic direction in a monopoly like business with pricing power (hopefully they restrain themselves with pricing) just seems to me like a rare combination especially when the price is reasonable.  In fact, it looks to me like the plan could fall well short and still hold its current market value.  Can anyone please highlight any leaks that could sink this ship?
Title: Re: CHTR - Charter Communications
Post by: dutchman on April 21, 2018, 01:55:34 PM
"80% of the bits going through phones are already going through its wifi, not through cell towers, so it's easier for them to absorb that extra capacity than for the wireless players to try to duplicate the capacity of cable."

-- what does this mean?  Is the point that verizon would have to buy a charter in order to get to 5g?
Ive heard Malone say 5g is " impossible " without a terrestrial fiber network.  So isn't it inevitable that charter will be bought?  This has to happen right?   why would verizon et al pay to build charters network all over again? This is what i don't get.


Title: Re: CHTR - Charter Communications
Post by: Liberty on April 21, 2018, 03:18:13 PM
I think it was Rutledge who mentioned it a few times. Basically, when we think of mobile devices we might think of cell towers first, but 80% of the bits transferred to these devices come from WiFi, not cellular.

The other 20% are still very valuable because they allow complete mobility, but when it comes to backhaul infrastructure, there's more going through other pipes.
Title: Re: CHTR - Charter Communications
Post by: vince on April 21, 2018, 03:56:25 PM
But remember, the bits are higher over wifi cause people watch video on their phones when they are home...usually, and video passes more bits.  The fact that they are not able to monetize this traffic yet is significant but if measured in other ways I dont believe its as valuable as it seems.  At least it feels that way when I think it thru.
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 21, 2018, 04:16:30 PM
I think the point is that if wireless companies want to compete with cable with 5G, they're going to have to handle all these bits (mostly video), and that won't be easy on their infrastructure. They'd basically almost have to recreate a cable network, except that instead of terminating into homes with wifi, it would terminate into small 5G cells blanketing neighborhoods. 5G cells are almost closer to wifi than current cellular, based on what I know (higher speeds, but shorter range and a lot more trouble getting through obstacles, even trees and rain).
Title: Re: CHTR - Charter Communications
Post by: dutchman on April 22, 2018, 08:18:49 AM
This is probably a stupid question, but wouldn't it almost be less expensive for cable companies to band together and put up cellular towers to provide 5g themselves.

But i guess they can't because theyd have to buy spectrum from att Verizon!
Title: Re: CHTR - Charter Communications
Post by: vince on April 22, 2018, 09:01:09 AM
This is probably a stupid question, but wouldn't it almost be less expensive for cable companies to band together and put up cellular towers to provide 5g themselves.

But i guess they can't because theyd have to buy spectrum from att Verizon!

5G is basically just a wireless drop for that last bit of distance to the property.  You dont need wireless towers, and they wouldnt have to buy spectrum from VZ.   
Title: Re: CHTR - Charter Communications
Post by: DeepSouth on April 22, 2018, 11:08:02 AM
This is probably a stupid question, but wouldn't it almost be less expensive for cable companies to band together and put up cellular towers to provide 5g themselves.

But i guess they can't because theyd have to buy spectrum from att Verizon!

5G is basically just a wireless drop for that last bit of distance to the property.  You dont need wireless towers, and they wouldnt have to buy spectrum from VZ.

And it's nonsensical to try to build a portfolio of towers instead of leasing space from the tower cos.
Title: Re: CHTR - Charter Communications
Post by: Spekulatius on April 22, 2018, 11:21:07 AM
This is probably a stupid question, but wouldn't it almost be less expensive for cable companies to band together and put up cellular towers to provide 5g themselves.

But i guess they can't because theyd have to buy spectrum from att Verizon!

5G is basically just a wireless drop for that last bit of distance to the property.  You dont need wireless towers, and they wouldnt have to buy spectrum from VZ.

So,  hat means that 5G would only work within CHTR  or any other service providers service areas?
Title: Re: CHTR - Charter Communications
Post by: vince on April 22, 2018, 06:48:17 PM
I dont completely understand your question.  It can work in Verizons service area if they have access to the fiber infrastructure that is necessary.  And it is my understanding that even with that access, it is just as, or more expensive to do wireless drops then to run the wireline. 
Title: Re: CHTR - Charter Communications
Post by: Liberty on April 22, 2018, 07:03:19 PM
Anyone can get there, the question is more, how long is it going to take, how much is it going to cost, what kind of return are you going to get on your capital, and is it cheaper to buy someone who has what you want than to build.