Author Topic: CTL - CenturyLink  (Read 55804 times)

longinvestor

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1517
  • Never interrupt compounding unnecessarily -Munger
Re: CTL - CenturyLink
« Reply #170 on: March 02, 2018, 05:02:46 PM »
In terms of inverting, you are correct there is a large opportunity.  As I said I am waiting for proof to start to trickle out - I think in the IT world people often think that synergy is easier to achieve than it really is in practice.

If this was a story of two inefficently run banks saddled with lots of debt and a huge payout ratio I don't think investors would be as excited for the merger.

Storey did ok as CEO this is not a knock on him - its just his M.O. has been to merge or buy things like Global Crossing rather than really be a roll up the sleeves operational guy in my opinion.
Actually, Storey brought tremendous operational expertise to the erstwhile LVLT. It was so shoddily run before him by Crowe (the visionary >:() and OHara. The only reason the company survived (imo) is because of the operational discipline brought by Storey.  Mergers have gone on for a long time at LVLT (as one can see on the Slide deck of Ira Sohn); Even here, Storey's operational discipline made for good integration of GLBC and TWTC (Crowe screwed them up in the past) and thereby good earning /FCF performance and in turn the stock appreciation since 2013. If there is a shortcoming, it is that Storey has not shown revenue growth. To be fair, he is a straight shooter and never promised revenue growth. Only FCF growth which he delivered. That continues at CTL and looks to be the Stor(e)y going forward.
« Last Edit: March 02, 2018, 07:18:15 PM by longinvestor »


Valuehalla

  • Sr. Member
  • ****
  • Posts: 267
  • Who wants to earn forever
Re: CTL - CenturyLink
« Reply #171 on: March 04, 2018, 01:54:10 AM »
Thanks for all comments.

Jeff Storey also showed revenue growth as CEO of LVLT: the last Q4 2017 LVLT standalone figures were excellent:
Total Revenue increased in Q4 4,3 % YoY.... and Core Network Revenue increased even 2,7 % from Q3 to Q4 !
« Last Edit: March 05, 2018, 05:22:03 AM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

Valuehalla

  • Sr. Member
  • ****
  • Posts: 267
  • Who wants to earn forever
Re: CTL - CenturyLink
« Reply #172 on: March 06, 2018, 06:25:33 AM »
GREAT NEWS: Jeff Storey will take over in May 2018! Glen Post will retire more early than announced.

http://ir.centurylink.com/file/Index?KeyFile=392468829

Thanks to Glen and Jeff for the great deal they have done for us investors.
The results in stock price will be seen soon.
« Last Edit: March 06, 2018, 08:23:17 AM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

Valuehalla

  • Sr. Member
  • ****
  • Posts: 267
  • Who wants to earn forever
Re: CTL - CenturyLink
« Reply #173 on: March 12, 2018, 08:50:24 AM »
Good article about CTL:

https://seekingalpha.com/article/4155554-take-centurylink-free-cash-flow-dividend?auth_param=1emn1k:1dad5jk:39cc0a34f6fb2269d81c3254b4ef9d49&uprof=44&dr=1

"Management would not give revenue guidance - but they did indirectly. In the first outlook they define capex as 16% of revenue then give us capex in their free cash flow outlook. We calculate the revenue range: $23.75 to $24.37 billion. A more important metric given (indirectly) is operating income. We get pretax income by combining net income and tax expense guidance. Add total other expense and integration related expense and we get an operating income range of $3.04 to $3.36 billion."
« Last Edit: March 12, 2018, 08:56:22 AM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

petec

  • Hero Member
  • *****
  • Posts: 1299
Re: CTL - CenturyLink
« Reply #174 on: March 12, 2018, 09:22:26 AM »
I'm not sure you can draw much from that because guidance is for roughly 16% capex and that introduces a huge error term:
3800/16.4%=23,170 for a 4% drop.
3900/15.5%=25,161 for 4.3% growth.

I think anything around $23.9bn would be a great result and would show revenues are turning.

More important to me was the fact that the FCF guidance isn't sustainable. They only disguised this during Q&A on the call but the $3.15-$3.35bn includes c. $550m of tax refunds (not sure if this is repeating), benefit from accelerating bonus payments due to the merger (which is not repeating), and working capital benefits which might be partially repeatable in 2019 but not thereafter.

So sustainable FCF is more like $2.7bn (maybe a bit higher if the tax refunds are sustainable - anyone know?). That assumes synergies and presumably some revenue shrinkage in 2018. In 2019 you get the full synergy run rate which will likely be enough to offset say 1% of revenue slippage. By 2020 you need growing revenues to grow FCF, is my guess.

$2.7bn is a 14% FCF yield and leaves $400m a year to de-lever, and it's highly sensitive to small changes in margins and revenues. I wouldn't be surprised if Storey cuts the dividend. His reputation is not attached to it (as Post's is) and he will get a higher multiple in time if he accelerates de-leverage due to lower risk. But the stock will drop on the day - might be a good opportunity.

Then again, if he's confident he can get revenues growing, there's no need. Will be interesting to see.

Valuehalla

  • Sr. Member
  • ****
  • Posts: 267
  • Who wants to earn forever
Re: CTL - CenturyLink
« Reply #175 on: March 13, 2018, 09:26:54 AM »
Hi Petec,

thx for your comment.

- Revenue is just shrinking very slightly. I made comments on this on 14 Feb here in the board after Q4 figures came out. Please read that.
- I expect a total revenue of more than 24 B in 2018. I add as a pdf-file my updated estimations on the revenue for the next years, based on Q4 figures for download below. As Petec I also calculated app 1 % revenue decrease for 2018, but we will see. Maybe the outcome is better.
- Storey and Patel are totally committed to the dividend.
- The dividend is sustainable and not in question.
- In LVLT Storey and Patel showed, they are able to drive down costs, improve the margins and increase the revenue slightly. See LVLT standalone figures for 2016 and 2017.

- The posted seekingalpha article miss a view on the class action, which is pending since mid of 2017. So this is an unknown aspect and for sure the outcome is a risk on the investment. After the classaction was filed, the stock tanked form a high of 27 US$ per share massivly. I think the lawsuite is still weighing on the price heavily.
« Last Edit: March 13, 2018, 10:47:54 AM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

longinvestor

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1517
  • Never interrupt compounding unnecessarily -Munger
Re: CTL - CenturyLink
« Reply #176 on: March 13, 2018, 09:44:05 AM »
Trust in management, indeed.

Being a long termer with LVLT, Iíve had to head scratch since this deal was announced. What I do like about this trust thing is that Iím getting paid to wait for all the goodness to pour forth from the new CTL. Shortly after the deal was approved late last year, the stock dipped down to $13 and the divvy of $2.16 was a sweet 15%. Some of the cash payout went back into CTL, opportunistically, based on trust in Jeff and Sunit. This time around, the divvy is an explicit statement, in 2010-13, I trusted the same two gentlemen but with nothing else. Jeff/Sunit have earned my trust. I have some more time to verify thanks to the divvy. Iím tickled that the zombies at the erstwhile CTL had this divvy in place. Keeping everyone honest here.
« Last Edit: March 13, 2018, 11:49:01 AM by longinvestor »

petec

  • Hero Member
  • *****
  • Posts: 1299
Re: CTL - CenturyLink
« Reply #177 on: March 13, 2018, 11:06:15 AM »
Hi Petec,

thx for your comment.

- Revenue is just shrinking very slightly. I made comments on this on 14 Feb here in the board after Q4 figures came out. Please read that.
- I expect a total revenue of more than 24 B in 2018. I add as a pdf-file my updated estimations on the revenue for the next years, based on Q4 figures for download below. As Petec I also calculated app 1 % revenue decrease for 2018, but we will see. Maybe the outcome is better.
- Storey and Patel are totally committed to the dividend.
- The dividend is sustainable and not in question.
- In LVLT Storey and Patel showed, they are able to drive down costs, improve the margins and increase the revenue slightly. See LVLT standalone figures for 2016 and 2017.

- The posted seekingalpha article miss a view on the class action, which is pending since mid of 2017. So this is an unknown aspect and for sure the outcome is a risk on the investment. After the classaction was filed, the stock tanked form a high of 27 US$ per share massivly. I think the lawsuite is still weighing on the price heavily.

Hi

I've read the entire thread and the L3 one and your comments have been very useful. Thanks also for the pdf. I think it's practically impossible to predict revenues to within 1% accuracy but I find it encouraging that the q4 revenue decline had slowed to 1.5%. I'm using their proforma numbers which also incidentally explains the difference between our absolute revenue projections because I'm starting from a lower number for 2017 (they excluded various things in their 2017 proforma number).

I have no idea what they will do with the divi and I certainly have no idea whether Storey and Sunit are committed to it or are just singing the party line for as long as Post is in his post. My point is more that a cut would drive the intrinsic value up and the share price down and would be a nice opportunity.

petec

  • Hero Member
  • *****
  • Posts: 1299
Re: CTL - CenturyLink
« Reply #178 on: March 14, 2018, 01:25:31 AM »
Apologies for if this is a dumb question but I am pretty new to this industry.

My understanding is that back in the depths of internet history people thought these companies would have pricing power as an ever growing amount of data was forced down a relatively fixed number of fibres. The data growth came through, but the technology kept improving to force more bits down the same fibre so pricing power never arrived.

I was struck by the stat in the Corvex presentation that data volumes will double 2016-2020. In other words, what took 40 years to devellop will take 4 years to double. With that kind of exponential growth, is there a tipping point (especially in a newly deregulated market) somewhere where technology and fibre additions can't keep up?

This possibility doesn't seem to have been discussed much here or on the L3 thread. That means it's either pie-in-the-sky, or people are so used to being disappointed that when pricing power comes, even if it is temporary, it will be a huge surprise. Which is it?

I'd really appreciate:
- Any data on this
- Explanations of technological limits in laymans terms
- Any estimates of capacity utilisation if they are relevant
- Information on how hard it really is to add capacity and what the bottlenecks are
- Any data on the impact of deregulation that goes past the headlines we've all read about how "the champagne corks will be popping at CTL".

I won't be quite so appreciative of aggressive opinions given without supporting data ;)

Valuehalla

  • Sr. Member
  • ****
  • Posts: 267
  • Who wants to earn forever
Re: CTL - CenturyLink
« Reply #179 on: March 14, 2018, 08:31:03 AM »
Very interesting question from Petec.

I have no idea about that. I am invested in LVLT/CTL because its cheap. MarketCap of 19B and a FCF of 3B is great.
Further i am convinced the revenue is more or less stable. Synergies and margins will improve the FCF like in LVLT standalone.

But its true, that many investors of LVLT hoped years ago, what you described: Volume will go up and will create pricing power. As i know LVLT has / had many unused dark fiber lines, which could easily and cheap be activated and this was often mentioned as a moat to competitors, who could not do that in the same easy cheap way. (But I dont know if this is true)

Maybe Longinvestor knows more about it.

Under Storey and Patel they could bring down the costs and increase the margins, so that the company gets huge and impressive profitable. This is what i also expect from them, for the entire CTL in the future.

Net Neutrality & Pricingpower for sure would be the best tailwind.
     
« Last Edit: March 14, 2018, 08:59:18 AM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM