Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: jm25 on February 04, 2014, 01:07:36 PM

Title: CTL - CenturyLink
Post by: jm25 on February 04, 2014, 01:07:36 PM
Telecom provider in the US offering Internet, TV and Voice to both consumer and residential. 13.7 million access lines in 37 states; 6.8 million broadband subscribers; 54 data centers.

$16.6 billion market cap; EV of $36.9 billion
Leverage of 2.8x
Trades at 5.0x 2013E EBITDA, 10.5x P/E
Company has flat to slight decline in growth.
P/BV of 1.0x (a lot of goodwill - negative TBV), Current ratio of 1.0x
Down 30% over the last year, 17% in the last 3 months.
Company cut its dividend in February 2013 and is now trading back down to the pre-cut dividend yield.

I'd love to hear your thoughts.

Title: Re: CTL - CenturyLink
Post by: jm25 on February 05, 2014, 11:35:53 AM
As a Canadian I don't know the product offering well like I would Telus / Rogers /Bell, it would be interesting to get someone else's views.

Is the potential for a goodwill write down scaring people away?
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 01, 2017, 09:58:47 AM
CTL Century Link plans to acquire LVLT Level 3 Communication. The acquisition shall be finished in Q3 2017. LVLT shareholders gets a one time payment of 26,50 $ per share and 1,4286 shares of CTL. While LVLT never paid a dividend, CTL is a strong dividend payer; 2,16 $ per share, shareprice today app 25,55 = 8,5 % dividendrate

Presentation:
http://ir.centurylink.com/Cache/1001215938.PDF?Y=&O=PDF&D=&fid=1001215938&T=&iid=4057179

I am now invested in both companies and i endorse it as a strong income-investment (app 9 % payout by dividends) with huge upside potential: app 35 % till end of 2017.

I am invested in LVLT long time, but was not in CTL in the past. When the detailed news about the acquisition came out, LVLT surged and CTL tanked, till CTL had a pricelevel with a dividendrate of nearly 10%. 22 US$ to 2,16 annual dividend in first days of November 2016. This was the moment when i also started to add CTL. Over the time - till now - i added app the same amount of money in CTL, that i have invested in LVLT. I think the whole position is hedged in that way (? ::)) , for the case the acquisition will fail.

I hope that everything will work out and i plan for this case to stay invested in the new formed company. CTL and LVLT announced they will maintain the annual dividend. I think they are able to do so this year and in the future as well, maybe even they will pay out more...

Why: In the future the whole dividend amount to pay out is app. 2,4 B $ per year. (CTL payed out 1,2 B in 2015, so concerning the future company 51:49:CTL:LVLT its app 2,4B$). The combined company is strong enough to do so. LVLT (which never paid out any $ dividend in the past) will bring in 1,1 B $ FCF. The synergies are estimated app 0,9 B $ and further CTL did share buybacks per year of app. 0,8 B $ in 2013/14/15. So to my mind .... no problem to stem the 2,4 B$.

If it will become more and more clear that the acquisition will work out and that the dividend could be paid, i expect that the price of CTL will surge till we have a dividendrate of maybe 6 or 7 %. (compare dividendrates of T and VZ) So CTL price for Q3 / end of 2017 could be around 31 to 36 $. 38 % upside potential to a price of 26 $ now. Concerning my own buying prices of LVLT and CTL i have now an avg dividendrate of 9,5 % on my whole package..a great income-investment ;D

Here are two statements supporting my view that the CTL dividendrate of 8,5 % (today) will be sustainable:

Philip Cusick: JP Morgan Analyst
http://www.cnbc.com/2017/01/03/jpmorgan-upgrades-telecom-stock-centurylink.html

Mason Hawkins: Longleaf Partners / Southeastern Asset Management
http://www.insidermonkey.com/blog/billionaire-mason-hawkins-and-his-teams-thoughts-on-alphabet-centurylink-more-495765/

Note: During Q3 2015 and in Q1,2,3 2016 Longleaf and Southeastern reduced their holdings in LVLT.. we will see Q4 actions soon

Now some negative aspect: soft shrinking revenue at CTL and stagnating or slow growing revenue at LVLT. Concerning LVLT there were several announcements that they expect the revenue increasing over time.. so we will see.. If that happens LVLT and CTL will surge even more :) to my opinion. Higher interest rates could effect the company cause of the debt.

Further - in summary - the whole company seems cheap to me, with a marketcap of 35B $ combined. I have in my mind that just LVLT invested 90 B $ for their fiber net. Marketcap of 35B$ compared to 4B$ from FCF and synergies, partly used for dividends/buybacks seems very attractiv to me.

Maybe he whole company seems to be attractive to a much more bigger player, who likes to buy a worldwide top fiber-network for a discountprice.....
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 03, 2017, 04:00:16 PM
"The dividend is safe"

http://seekingalpha.com/article/4042011-unwise-hold-centurylink-earnings
Title: Re: CTL - CenturyLink
Post by: Spekulatius on February 03, 2017, 04:31:18 PM
"The dividend is safe"

http://seekingalpha.com/article/4042011-unwise-hold-centurylink-earnings

Everytime, I hear this message, I tend to run for the exit.
Title: Re: CTL - CenturyLink
Post by: Ballinvarosig Investors on February 03, 2017, 06:55:06 PM
Valuehalla - are you ValueCarl from the original Level 3 posts?

Honestly, I have no position either way. I looked at Level 3 back in the day, I saw the value of the infrastructure, but (stupidly) I never bit.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 04, 2017, 05:42:49 AM
Hi Ballinvarosig, no..I am not ValueCarl, just entered the forum a few days ago.

LVLT is still extrem cheap to my mind and additionally there is an upside gap of 6,43 % (Friday after close) to the acquisition-offer from CTL. (The upside gap was app 11% in the first days, after the acquisition offer came out.)

But I suggest to invest 50 % in LVLT and 50 % in LVLT. If the acquisition will fail, i think CTL price will rise and LVLT will tank. I have no doubt, that even CTL alone is able to pay the dividend.

On 8th Feb both companies will publish Q4 figures. I plan to swap a positions of LVLT into CTL before 28th Feb. Likely 28th Feb is the ex-div-day for CTL.  The lower the CTL price the better the swap.
Title: Re: CTL - CenturyLink
Post by: benhacker on February 04, 2017, 05:44:22 AM
Quote
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

Definitely not ValueCarl... his signature would have been LVLT^10. :)
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 04, 2017, 09:31:55 AM
Hi Spekulatius - Any serious theory why you prefer to run to the exit in case of CTL/LVLT or it was just a funny country saying, without any connection to my investmentproposal?
Title: Re: CTL - CenturyLink
Post by: benhacker on February 05, 2017, 07:43:59 AM
No Valuehalla, my zero-value post above was mostly just a joke for those of us who remember ValueCarl, a different poster who loved LVLT with all of his heart / soul.

I think Spek's comment above is very clear, so not sure what you were asking him....  He expressed no opinion on CTL/LVLT, but when people start making comments (which he quoted for clarity) that the "dividend is safe" that is generally when it no longer is safe.

I owned LVLT briefly years back for a nice gain, but haven't followed for years, I will step out of your discussion now.

Nothing more to say on LVLT / CTL, good luck!
Title: Re: CTL - CenturyLink
Post by: Spekulatius on February 07, 2017, 05:13:15 PM
No Valuehalla, my zero-value post above was mostly just a joke for those of us who remember ValueCarl, a different poster who loved LVLT with all of his heart / soul.

I think Spek's comment above is very clear, so not sure what you were asking him....  He expressed no opinion on CTL/LVLT, but when people start making comments (which he quoted for clarity) that the "dividend is safe" that is generally when it no longer is safe.

I owned LVLT briefly years back for a nice gain, but haven't followed for years, I will step out of your discussion now.


Nothing more to say on LVLT / CTL, good luck!

Ben is correct, my statement was not specific to CTL/LVLT. In general, I believe that if management overemphasizes a point, especially something sensitive to many investors like the holy sacred dividend, often the opposite of what they state is about to happen.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 08, 2017, 05:10:48 AM
Hi Sepk, from the side of the management - to my mind - their remark concerning the dividend was just a marginal note, not something overemphazised. In the presentation it is one sentence.

But after the news of the acquisition came out, most third-party comments were done concerning the sustainability of the dividend; maybe because at this time the dividend-rate of 10% was extremly high. Today it is 8,7 %.

A negative comment that the dividend is not sustainable - as i remaind it -  just from Jim Cramer (CNBC), but in the newstext that i have read, not any details was mentioned why he thinks so. All other comments were positiv, that the combined company can pay the dividend now and in the long run.

Today after marketbell quartalfigures will come out and maybe we will know more.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 08, 2017, 03:26:51 PM
Figures are out:

LVLT
constant revenue, improvement realized concerning FCF and adj EBITA as expected for 2016 ..... As a longterm shareholder I am very happy with these results.

http://s1.q4cdn.com/840339377/files/doc_downloads/4Q16-Earnings/4Q16_External-Presentation_2017-02-08_FINAL_LVLT.pdf

CTL

shrinking revenue 4,29B in Q4 = -4,2 %, 17,47B FY in 2016 = -2,2%
But guidance for 2017 seems very positiv to me, they expect to stop the decrease of revenue. In the Q&A part of conferencecall they confirmed this positiv "U-turn" view, that they can stop the decrease. We will see...

http://ir.centurylink.com/Cache/1001219848.PDF?Y=&O=PDF&D=&fid=1001219848&T=&iid=4057179

The dividend was no subject in the conference call, not any sign that they will reduce it and step back from their note, that they plan to maintain it.
Title: Re: CTL - CenturyLink
Post by: longinvestor on February 08, 2017, 04:09:24 PM
>$1B in FCF for the year, doubling for the past few years. They have $1.8 B cash on hand and the $9 B in NOL's. Given that this company was pretty much written off, that is something indeed. If someone stopped watching this around 2008 and looked at it now, they would be rubbing their eyes in disbelief. The stock price performance since then reflects the turnaround.

The sale to "someone" makes sense given that they cannot double the FCF again and revenue growth is non-existent. Wishing that someone was not CTL! They stink, look at their history and projections. Makes you wonder how and why capital is returned to shareholders! CTL desperately needs LVLT to maintain the divvy, even if it is for a few years. Imagine that!   
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 08, 2017, 04:53:32 PM
Longinvestor, you are totally right with LVLT, CEO Jeff Storey has delivered !

LVLT: 1B FCF, 3B EBITA and just 34 B marketcap .... compare this to BRK. Very very cheap !
And the businessmodel seems very stabel or likely softly increasing. (For 1017 they expect up to 13 % increase in FCF.)

I wish and expect Jeff Storey (born 1960) to be the next CEO of CTL, when Glen Post (born 1952) will retire.
I am not sure if CTL is in a bad shape in the longrun with LVLT in combination...I am positiv on it.
LVLT will be the Sparta-phalanx inside CTL.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 09, 2017, 07:11:39 AM
Just loaded the next bulk of CTL in my portfolio for 24,26 US$  ;D = 8,9 % dividendrate

From my LVLT/CTL position I have now 40 % in LVLT and 60% in CTL. A few LVLTs i swapped yesterday in CTLs.
Title: Re: CTL - CenturyLink
Post by: constructive on February 09, 2017, 11:44:06 AM
The combined company will have $26B market cap and $41B debt, supported by FCFF of $4.9B. The growth profile of the combined company looks mediocre at best. I think the equity is quite risky and probably not a good value.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 10, 2017, 02:56:36 AM
I found the following figures:

Netdebt  LVLT  9,2 B + CTL  19,7 B = 28,9 B

FCF (combined) 3,1 to 4 B

I cannot see any connection of marketcap and debt. Based on the CTL price of yesterday the markercap of the combined company would be app 26,7 B. The lower the marketcap, the better the deal. This is why i added again CTL yesterday.
Title: Re: CTL - CenturyLink
Post by: longinvestor on February 10, 2017, 05:27:21 AM
I found the following figures:

Netdebt  LVLT  9,2 B + CTL  19,7 B = 28,9 B

FCF (combined) 3,1 to 4 B

I cannot see any connection of marketcap and debt. Based on the CTL price of yesterday the markercap of the combined company would be app 26,7 B. The lower the marketcap, the better the deal. This is why i added again CTL yesterday.

They are taking on an additional $10B for deal financing. To pay for the $26 cash part of the deal. They are conserving the cash on hand plus counting on the NOL s and Synergies to protect the dividend for a few years. If there is no cash drain post deal, they will be in a position to lower the debt ratio. Why they picked Sunit for the job. He'll be playing the same role - deleverage. So for LVLT holders nothing changes. This will go on for a while, a defensive cost game  The combined heft could have some benefits, especially in the enterprise side. But that's a long way away. They need to keep returning capital, deleveraging.  Looks like CTL holders' a$$es will be saved. By LVLT!
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 10, 2017, 07:12:16 AM
http://www.cnbc.com/2017/02/09/here-are-25-stocks-that-will-benefit-most-from-trump-cutting-taxes.html

LVLT is also expecting a 38 % taxrate for 2017, so they would have a great benefit from taxreform....

See page 13:

http://s1.q4cdn.com/840339377/files/doc_downloads/4Q16-Earnings/4Q16_External-Presentation_2017-02-08_FINAL_LVLT.pdf

Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 11, 2017, 06:11:48 AM
CTL: Management expects u-turn: better revenues in 2017

Dean Douglas, president of enterprise markets CTL
"We believe will see a nice ramp up of our revenues associated with our enterprise business"

The webcast of the conference-call is available now:

https://engage.vevent.com/index.jsp?eid=7374&seid=11

Listen from 00:40:30 on till 00:44:47
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 20, 2017, 05:37:28 AM
Mason Hawkins  (CEO Southeastern Asset Management) activity in Q4 2016 concerning LVLT:

Shares hold on 31.12.2016

Longleaf Partners Fund                             5.958.138 = + 21,16 %      (end of Q3=  4.917.632)
Southeastern Asset Management Inc        27.955.852=  -    0,81 %     (end of Q3= 28.184.131)
Longleaf Partners Smallcap Funds              5.717.590=     +/- 0 %       (end of Q3=  5.717.590)

The mentioned "vehicles" accumulate app. 11 % of LVLT 

In the comments of Longleaf the acquisition is described as positive and welcome:

http://longleafpartners.com/sites/default/files/categories/Commentary/4Q16-Longleaf-Partners-Commentary.pdf
Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 03, 2017, 04:39:52 PM
https://www.fool.com/investing/2017/03/01/5-things-centurylink-management-wants-you-to-know.aspx
Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 06, 2017, 07:16:16 AM
I just added again a bulk of CTL to my portfolio for 23,18 $ per share = 9,3 % annual dividend rate
Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 07, 2017, 04:00:07 PM
Here is a negative view on CTL and the acquisition:

http://seekingalpha.com/article/4052630-time-sell-centurylink



Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 09, 2017, 09:24:38 AM
CTL will reduce capex by 400 m $ in 2017

http://www.fiercetelecom.com/telecom/centurylink-plans-to-spend-400m-less-2017-capex-expects-level-3-network-synergies

In my opinion very good news: it seems that the achievable synergies with LVLT will be higher than expected. First they published figures of 125 m $ reduced capex as synergy from the acquisition.




 
Title: Re: CTL - CenturyLink
Post by: longinvestor on March 12, 2017, 08:34:33 AM
http://www.omaha.com/money/omaha-born-level-which-laid-fiber-optic-cable-will-cease/article_8259659b-2ba4-5248-90ca-e00eda0a0eec.html

Down the memory lane to Omaha!
Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 17, 2017, 07:09:17 PM
Acquisition approved by shareholders


http://www.reuters.com/article/brief-centurylink-and-level-3-shareholde-idUSASB0B5Y1
Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 23, 2017, 03:22:28 PM
During the last two days i swapped more LVLT into CTL, so that i am now 70 % in CTL and 30 % in LVLT
Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 29, 2017, 02:32:46 PM
Morgan Stanley: CTL Price target 27 US$

https://www.streetinsider.com/Analyst+Comments/Morgan+Stanley+Resumes+CenturyLink,+Inc.+(CTL)+at+Overweight/12717838.html
Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 30, 2017, 06:42:19 PM
FCC decision to deregulate expected on 20th April

"popping champagne corks"
seems that there are good news ahead for CTL & Big T

https://www.bloomberg.com/politics/articles/2017-03-30/in-turnabout-fcc-mulls-broadband-deregulation-sought-by-at-t

http://finance.yahoo.com/news/u-fcc-vote-reform-45-193605060.html?.tsrc=applewf

Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 05, 2017, 04:02:21 AM


https://seekingalpha.com/article/4059948-can-centurylink-keep-paying-high-dividend

"Conclusion

While CenturyLink still has some issues with its current core business, it is taking the right steps to generate future FCF growth. This means that its current dividends are safe, although it might take awhile before management feels comfortable enough to raise their dividends. But who can complain when a company pays out a sustainable 9.2% dividend rate?"


Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 05, 2017, 09:39:57 AM
Meanwhile i swapped all my LVLTs in CTLs, so I am 100 % in CTL since 24th March.

Probably I will add no further CTLs and await the future development.
The investment seems done to me.

I hope that the low of the CTL price is behind us.

My avg buying price for CTL is $22,69 (dividend 2,16 $ per share; dividendrate = 9,52 %)

My low net avg buyingprice (results from) is discounted by the profits i have made on LVLT shares, that i swapped in CTLs
Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 06, 2017, 01:30:09 AM
http://host.madison.com/business/investment/markets-and-stocks/is-centurylink-stock-a-buy-near--week-lows/article_d6e9cd3c-622a-5b90-a34f-aa75673cc02f.html

"But assuming all goes as planned, I think CenturyLink stock at today's levels represents a compelling buying opportunity for patient, long-term investors."



Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 12, 2017, 12:15:26 PM
CTL received more approvals for the acquisition:

http://www.prnewswire.com/news-releases/delaware-hawaii-maryland-and-dc-approve-centurylink---level-3-merger-300438270.html
Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 13, 2017, 08:44:32 AM
https://seekingalpha.com/article/4062105-buying-safe-market-beating-9-percent-dividend-yield
Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 17, 2017, 11:59:50 AM
http://www.fiercetelecom.com/telecom/centurylink-level-3-say-they-don-t-significantly-compete-each-other-for-business-service
Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 20, 2017, 02:02:13 PM
FCC scraps most business data service regulations

http://finance.yahoo.com/news/u-fcc-approves-easing-business-164113139.html;_ylc=X1MDMTE5Nzc4NDE4NQRfZXgDMQRfeXJpZANjdGkxYW41Y2ZpODJjBGcDZFhWcFpEeHVjejR4TmpkaVpUSTNOeTFtTmprMUxUTmxNbVF0T0dVME1TMDJOMlV4TXpZd05ERXpaalU4Wm1sbGJHUStZM1JzBGxhbmcDZW4tVVMEb3JpZ19sYW5nA2RlBG9yaWdfcmVnaW9uA0RFBHBvcwMwBHJlZ2lvbgNVUwRzeW1ib2wDQ1RM?.tsrc=applewf

Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 21, 2017, 05:35:52 AM
..and some more deregulation for CTL

http://www.startribune.com/centurylink-gains-flexibility-to-raise-rates-in-minnesota/420030303/
Title: Re: CTL - CenturyLink
Post by: Valuehalla on May 03, 2017, 01:21:48 PM
Q1 figures are out:

LVLT: good results to my mind; stable total revenue, but growth in enterprise revenue app 3% (enterprise segment is 75 % of total revenue vs 25 % wholesale segment)
Outlook 2017 for EBITA and FCF reconfirmed, no changes

CTL: weak results on low end of published expectations, management still awaits and confirms a revenue u-turn during this year. Confirmation by management dividend payoutratio will go down from app 75 % now to 65 % during next year.

LVLT acquisition on track

My Summary: no surprises, everything on track, i can not understand why prices of CTL and LVLT are tanking in after hours trade. If we will see again a CTL price below US$ 23 i will add further CTL shares to my portfolio.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on May 05, 2017, 06:29:22 PM
CTL management in the conference call on revenue development:

"I mean, we've seen the improved sales closed during each successive month, during 2017. January started off a little bit slow, a little bit slower than we had thought it would be. But it picked up somewhat in February, March. We closed more sales than we did in February. And again, in April, it looks like that's going to be a good month as well. So we think we're building momentum with respect to the network sales. And we're also seeing some of that momentum in the IT and managed services as well, especially with the cloud application manager product that we have. And that's really, I think, reinvigorated a lot of our salespeople in terms of being able to help them have a product that we can serve our customers with that allows them to move their workloads from one cloud provider to another, from home premises to all premises. So I think that we're more confident now that we have products that we can use to develop the revenue stream, and we -- that sales force, the separate sales force that we have, they're doing a good job getting traction.We have just put them in place and it took a little while to get them up to speed, but they are making progress now, as are some of the top salespeople in the network side that all sell IT services and Managed Services products. That's really why we're more confident now. Why we have came down somewhat from a quarter ago when talked is basically more or less just due to kind of the slow January that we had and a little bit slower February than expected. But again, we think we're making progress there."

Source:
https://finance.yahoo.com/news/edited-transcript-ctl-earnings-conference-043049558.html?.tsrc=applewf
Title: Re: CTL - CenturyLink
Post by: globalfinancepartners on May 08, 2017, 09:50:24 AM
a post from someone other than value-halla for once - your CTL stock was recommended by Keith Meister at "Corvex" at today's Ira Sohn conference.  So there you go.  Good luck and godspeed
Title: Re: CTL - CenturyLink
Post by: Valuehalla on May 08, 2017, 10:15:28 AM

Corvex Managmentís Keith Meister, a protege of Carl Icahn:


His pitch is CentruyLink, which is acquiring Level 3. ďWe would not be pitching CenturyLink in a million yearsĒ if it werenít for the acquisition, he says. Corvex will file a 13D showing it has a 5.5% stake.

Meister sees 40% return in  a base case including dividends, with 50 to 70% upside potential including the benefits of corporate tax reform.

http://blogs.marketwatch.com/thetell/2017/05/08/sohn-hedge-fund-conference-live-blog-ackman-einhorn-gundlach-offer-top-picks/

Video with Meister:

http://video.cnbc.com/gallery/?video=3000616695

The press about it:

http://www.cnbc.com/2017/05/08/corvexs-keith-meister-recommends-centurylink-at-sohn.html

https://www.bloomberg.com/news/articles/2017-05-08/corvex-s-meister-pitches-centurylink-as-it-merges-with-level-3

Title: Re: CTL - CenturyLink
Post by: eclecticvalue on May 09, 2017, 01:04:30 PM
 Over a 5 year period, it is down 34%, what's the reason? Although, the dividend is tempting.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on May 21, 2017, 07:25:17 AM
Mason Hawkins  (CEO Southeastern Asset Management) activity in Q1 2017 concerning LVLT:

Shares hold on 31.03.2017

Longleaf Partners Fund                             5.958.138 = +/- 0 %         (end of Q4=  5.958.138)
Southeastern Asset Management Inc        27.779.930 =  - 0,9 %         (end of Q4= 27.955.852)
Longleaf Partners Smallcap Funds             5.717.590 =  +/- 0 %         (end of Q4=  5.717.590)

The mentioned "vehicles" accumulate app. 11 % of LVLT at the end of Q1 2017

So Longleaf Partner Fund is still in LVLT, no swap to CTL until 31.3.2017, no CTL shares mentioned
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 01, 2017, 10:15:18 AM
Great News:

"Glen F. Post III will remain CEO until Jan. 1, 2019; then expected to become executive chairman Jeff Storey, Level 3 president and CEO, will become CenturyLink president and chief operating officer upon closing of merger; expected to become CenturyLink CEO upon Post's retirement."

http://ir.centurylink.com/file.aspx?IID=4057179&FID=2000840620

Maybe our CoBF-Forum was the place, where this succession plan "was born", though probably was the place where it was public outspoken first time  8).  See the posts from longinvestor and me on 8th February 2017!

Thanks to the great news, today we saw a good 6% jump in CTL price, trading now around $26, app. highest level since the acquisition was announced in Oct. 2016.

WE ARE ON TRACK!
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 02, 2017, 06:09:38 AM
After reaching $ 26,06 for CTL yesterday - an all time high after the annoucment of the acquisition in Oct. 2016 - I would like to give an update on my estimated figures of the new formed company, when the merger is completed:

Based on $ 26 per CTL share:
- Marketcap will be app. 27,98 B
- EBITA: 10 B
- FCF: 2,65 to 2,91 B, according to synergies 0,95 B p.a. and NOLs the expected FCF will be probably higher
- NOLs will reduce tax-payments 0,650 to 0,675 B p.a. for the next 4 years
- Cash needed for paying the annual dividend of 2,16 $ per share = 2,288 B
- Management expects dividend payout ratio to go down from mid 70% now to mid 60% of FCF
- Revenue 25,642 B, managements expects an increasing revenue from 3Q 2017 on
- NetDebt: 29,14 B + 10 B new debt special for the acquisition, to do the one time payout to LVLT shareholders (9,539B)

Level 3 will be the sparta-phalanx inside the new combined company, under the leadership of LVLT stuff: Storey (COO/CEO) and Patel (CFO).

Their mission is the same, like they have already done successfully during the last years inside LVLT: integration, reduce debt, stabilize and increase revenue, reduce costs and popp up FCF... well done in case of LVLT. Thanks..go ahead like this!

On the side of ownership we have two confident anker-investors: Keith Meister (2,8 % of combined company)  and Mason Hawkins (5,4 % of combined company) with their different vehicles. Both experienced in telecoms. Also Singapur state fond is massiv in LVLT now.

I expect a successfull development for the future.
Title: Re: CTL - CenturyLink
Post by: txvalue on June 02, 2017, 08:04:10 AM
I have about 15 years of telecom mgmt experience and have also invested a good amount in the space. From dealing with both of these companies neither are very well run.  This isn't meant to be overly negative, I just feel this is a case where people look at things via a spreasheet rather than from experience in the marketplace.

Level 3 generally has a good quality product, but they are notoriously difficult to deal with and that is going to pressure them quite a bit. Companies like Cogent are much more efficent.  Cogent products are comparable, pricing is typically lower and they deliver solutions in a shorter time frame. As a customer are you going to take the 100Mb fiber connection that takes 10 days (sign up is all digital) to deliver or 90 days of slogging through paperwork and third party contractors when they are priced the same?  In my view Level 3's Internet offerings are going to be pinched over time. They are not as high quality as AT&T and they are getting outcompeted by more nimble players on the other end of the market. Bandwidth pricing is also dropping constantly.

Their legacy businesses like Voice are also losing market share to companies that deliver more efficent mechanisms to add/remove/change services.  As an example, I know a major company that has had this experience. Provisioning a new number on L3 takes 2-3 days in many cases. Whereas with a new company they are doing business with the process is literally instant. To top it off many of L3 systems do not work on browsers other than IE, things like the old WilTel portal for example. Assuming pricing and quality are close for what has become a commodity which company do you think will win share over time.

Again, their quality is very good, but their business processes/contracts get in the way of monetizing these assets.

CTL is in my opinion even worse than L3. In general lower quality products than L3 and so many legacy rolled-up assets and systems. Dealing with them for anything is a tremendous struggle and I think this acquisition is really going to further muddy those waters.

With out solid systems it is really hard to sell enterprise and wholesale well at the same time. AT&T is currently the best at this in the market and they are really trying to innovate to improve their process. They have a significant jump on an entity like L3/CTL in this regard.

So to keep this from rambling on, L3 has some respect but their business processes leave much to be desired. It would be interesting if someone had a list of the number of logos rolled up in this deal. Just off the top of my head

Broawing
WilTel
ICG
Adelphia
Focal
Qwest
Embarq
Global Crossing
TW telecom

None of these assets have been intergrated well in my opinion.  Roll-ups are tricky beasts and if business is not great they are a perfect way to distract investors. I would have preferred to see Level 3 focus on what it had than join with CenturyLink.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 02, 2017, 12:18:55 PM
Thx txvalue for your post. Your view from the operative side of the business is a great add here:

For me the mentioned subjects are good news. It sounds to me, that there is potential to be lifted up from the management in the future.

If competitors can provide a 100Mb fiber connection within 10 days by digital signing in, why CTL/LVLT shall not be able to do it in the future as well. As I remember, during the conference calls, the management has mentioned plans to change the sales process to more automatic in the future. Competition is the best motor for improvements.

If you would have described the situation that T or others can offer products and services that CTL and LVLT technically can not, this would be a serious bad aspect for me.

In summary I understand your post like LVLT products are excellent, but sales-administration has to be improved.

Title: Re: CTL - CenturyLink
Post by: txvalue on June 02, 2017, 01:29:44 PM
Correct, I think the product(s) L3 offers are fine, they need to refine the process essentially making it easier to do business with them. If they can do this the deal starts to make a lot of sense quickly as you noted.

If they can't then L3 has combined with a worse entity and a bundle of debt and a questionable growth story since they have no mobile cash cow like T or VZ. If L3 had sharpely improved operations with their past aquisitions I would be more eager to believe the story or should I say storey :)
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 06, 2017, 06:57:23 AM
http://ir.centurylink.com/file.aspx?IID=4057179&FID=2000903483

Txvalue, can you give us some information, if this award has some kind of relevance?
Title: Re: CTL - CenturyLink
Post by: txvalue on June 07, 2017, 07:54:09 PM
These awards are typically given to companies that have sold a product well for another company. In this case it sounds like CTL is being acknowledged for good performance in its partnership with HP. I don't think any major conclusions can be drawn from it, but it is a sign they are trying to work well with cloud providers.

Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 09, 2017, 05:38:16 AM
The gap of the LVLT share price to the price offered from CTL to do the acquisition has meanwhile narrowed to 2 %. When the offer (for 1 LVLT share you will receive US$ 26.50  + 1,4286 x CTL-shares) came out, the gap was 11 %.

Friday 9th June 2017:
CTL: US$ 26.11      LVLT: US$ 62.36
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 12, 2017, 03:46:52 PM
On 12th June 2017 CTL reached a new all time high of US$ 26,72 after the planed acquisition of LVLT was announced end of Oct 2016. The acquisition shall be completed end of Q3 2017.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 16, 2017, 11:45:47 AM
Mess & Sress approaching? A lawsuit...:

https://www.bloomberg.com/news/articles/2017-06-16/centurylink-is-accused-of-running-wells-fargo-like-scheme

Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 19, 2017, 03:12:37 AM
Corvex (Keith Meister) increased its holdings of CTL by 1 Mio shares, on the day the news about the lawsuit came out:

On 8thMay 2017: 29.998.645 shares = 5,5 %
http://ir.centurylink.com/Cache/2000479974.pdf?IID=4057179&FID=2000479974&O=3&OSID=9

On 16th June 2017 30.998.645 shares = 5,6 %
http://ir.centurylink.com/Cache/389128285.pdf?IID=4057179&FID=389128285&O=3&OSID=9
Title: Re: CTL - CenturyLink
Post by: JayGatsby on June 19, 2017, 07:23:16 AM
Mess & Sress approaching? A lawsuit...:

https://www.bloomberg.com/news/articles/2017-06-16/centurylink-is-accused-of-running-wells-fargo-like-scheme
While I'd typically dismiss something like this, as a former Centurylink customer these claims are 100% accurate and I'd expect some level of payouts. The salespeople basically just tell you the pricing you want to hear and then the bill comes with what it's supposed to be. It's all electronically documented through their chat logs but they don't stand by the original quote or follow-up with the sales agent. Clear culture of fraud throughout the organization... these claims aren't new by any means.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 20, 2017, 04:18:01 AM
Further a class-action:

https://www.bloomberg.com/news/articles/2017-06-19/centurylink-faces-class-action-lawsuit-seeking-up-to-12-billion

Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 20, 2017, 06:58:07 AM
JayGatsby thx for your post.

Some weeks ago I visited the CTL webpage for retail customers to get information about their offers, f.e. if there is something new, cause they plan to place a new OTT product in near future. There were plenty of bundle offers (internet/phone/TV), which made it difficult for me to get an overview. I started a chat with an operator: I asked if there is something new and/or if she could recommend any kind of bundle. The operator made clear that beside the bundle prices per month there could be additional costs, related to my address. Because i dont have an address in USA I couldnt provide an address, which made the talk difficult for the operator to answer questions. I asked what is most popular bundle and if she can recommend it to me. She recommanded a middelpriced product, not even the bundle with all features and highest price. She said that this was/is most popular, most people choose it. No new offers, they offer the same bundles already long time. To give me the exact price, she would need an address. I didnt had the feeling any fraud was planed by selling me the bundle. It was clear there could be additional costs, additionally to the quoted prices on the webpage.

For me the most negative aspect was, that the wide range of bundles, offers and prices are not a good sales strategy, it shall be much more simple for retail customers. Maybe 3 offers with clear fix prices. Easy to choose and fast to get.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 20, 2017, 02:37:01 PM
According the Bloomberg articles and the lawsuit:

I checked "Pissed Customer"concerning complaints about CTL, from now back to Feb 2017. There is app nearly every day one complain about overcharging / wrong bill.

5,9 million subscribers who get a monthly bill, means app 193.400 bills per day.

I think its a normal circumstance that there is a rate of wrong bills all the time. So even 100 per day would not be much even in promille.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 22, 2017, 01:55:23 PM
New details concerning the leadership structure:

http://ir.centurylink.com/Cache/389199660.pdf?IID=4057179&FID=389199660&O=3&OSID=9


http://ir.centurylink.com/Cache/389200592.pdf?IID=4057179&FID=389200592&O=3&OSID=9


http://bizwest.com/2017/06/22/zayo-executive-resigns-return-level-3-one-month-role/
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 26, 2017, 12:31:56 PM
Positive report about the situation concerning the lawsuits:

https://seekingalpha.com/article/4083852-centurylink-wells-fargo


Comment from Moodys concerning the lawsuits:

https://www.moodys.com/research/Moodys-says-CenturyLinks-class-action-lawsuit-is-probably-limited-but--PR_368771?WT.mc_id=AM%7EWWFob29fRmluYW5jZV9TQl9SYXRpbmcgTmV3c19BbGxfRW5n%7E20170626_PR_368771&yptr=yahoo
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 28, 2017, 07:37:29 AM
Overview about the lawsuit situation:

http://www.channelpartnersonline.com/2017/06/27/centurylink-lawsuit-pile-on-is-opportunistic-not-unexpected/
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 30, 2017, 04:51:47 PM
Yesterday CTL started a new offer for retail customers, an OTT offer called

"Centurylink Stream"

details available here:

www.centurylinkstream.com

According to the conferencecalls, this is the new product & the source for revenue growth from 3th quarter on.

https://www.youtube.com/watch?v=EwhYDlO36xc
Title: Re: CTL - CenturyLink
Post by: Packer16 on July 05, 2017, 06:00:12 AM
I have a question on CTL.  The problem with incumbent telcos is revenue decline.  How does the Level 3 acquisition help this given the price CTL paid of 11x EBITDA?  From the 2017 forecasts I have seen CTL/LVLT's revenue will decline by $800 million or 3%.  Even if CTL's revenue decline moderates in 2018, they still will most likely have a revenue decline unless they come up with some revenue synergies.  (These revenue estimates are based upon Value Line estimates)  Where is the plan and funds to overperform the VL estimates?

The other question is the dividend.  At the current dividend level, it consumes all the combined companies FCF.  How will they grow revenue if they do not invest in more the network to retain customers or get additional customers?  I see a dividend cut to try to increase revenue.  They should have done this out of the box versus keeping a dividend they cannot maintain which will just disappoint down the line.  I think they have slowed the rate of melting here but at a high price.  Maybe I am missing something.

Packer 
Title: Re: CTL - CenturyLink
Post by: SI on July 05, 2017, 08:37:31 AM
Not sure any revenue synergies should be modeled. I think in the first 3 years this is all about achieving outperformance on the $1bn synergies that I find to be likely(remember they co-trenched with Qwest and heritage companies including Broadwing and GLBC I believe) - so I think the enterprise synergies should be crystal clear but I foresee a cost cutting at CTL to be an evergreen oppty the way MSFT has done with Ballmer's boated costs via Mrs. Hood and Satya. 

During the period of the CEO transition, I think what investors are going to be focused on landing the integration and trying to get them to cut the dividend and pay down the debt. I see it happening in a rural consumer spin/sale which you can see was contemplated for many months of the proxy.

I also think there is a massive opportunity to improve CTL itself outside of costs. On this point, I have heard it said 49% of shareholders wanted L3 mgmt, 51% were disgruntled including Corvex.

I think Corvex working towards the same ends as the L3 shareholders will lift the capex but I think the big oppty is to reallocate what's already being spent. I know of fewer mismanaged large cap assets over time than CTL and I think Jeff, Sunit, Longleaf, the GLBC folks, STT plus now Corvex grows the depth in global enterprise player(BT, Colt, etc) with those cash flows rather than return them in divds.

I think you can see the seeds of change after CTL paid a 40% premium and offered L3 4 board seats and CFO, Enterprise and IT and then had to give up the CEO job as well. The board needs to be entirely remade( I think if CTL results are poor enough this accelerates board and mgmt changes), the location moved, the capital allocation/fate of rural consumer decided but I think the mgmt team here and the scarcity of the asset is what is intriguing here which on a proforma basis trades at a half turn premium top frontier(CTL is 3rd most shorted stock in S&P).
Title: Re: CTL - CenturyLink
Post by: Packer16 on July 05, 2017, 08:45:38 AM
Do you see signs of CTL giving up control or will there be an internal conflict?  Changing a bad culture is heavy lift unless you have a hammer & can let the folks go unless they get with the program.  Do you see this happening here?  TIA.

Packer
Title: Re: CTL - CenturyLink
Post by: SI on July 05, 2017, 09:48:47 AM
I think the risk of internal conflict were much higher without the CEO move. I think you got two very powerful signals last month, the move to elevate Jeff which we have spoken about but also the "resigning" of Ed Morche who spent all of 1 month at Zayo before returning to the farm with Jeff back in charge and I have heard whispers of similar things happening deeper in the organization.

I think the enterprise division will be entirely run by L3 folks not only b/c the results suggest it but by the aforementioned personnel moves. As for the consumer business, I think there could be some conflict but more between the CEO(and eventually the board) taking that division into a different direction or I think it is jettisoning.

If Corvex or Longleaf are reading this, I feel very strongly that the board needs to be remade and the rural portion of consumer be jettisoned asap and then the capital allocation policy altered.  Not sure who the buyer is but feels like WIN, FTR, SHEN, CNSL are all racing down the cost curve.
Title: Re: CTL - CenturyLink
Post by: longinvestor on July 05, 2017, 10:03:53 AM
There's no question about the integration being a big, hairy deal. (3) has been the beneficiary of a key man, Storey for the past several years now. (3) needed an operator post-Crowe, the builder who built a very shiny thing. Storey successfully tucked in GLBC and TWTC. This is pretty much the investment case going forward. Storey never promised revenue synergies with the previous deals and would be a fool to do so with CTL. This is a knockout drag out game for a bit longer, nothing new if you've held (3) for a long time! But the combined (3) and QWEST fiber assets leave the doors open. Telecom with declining revenues has room for more consolidation. Lower cost providers have a place.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on July 05, 2017, 03:42:29 PM
Hi Packer 16,

1) Revenue
In my opinion the problem with the revenue decline will be solved soon. I could say there is no problem.
In the future I expect the combined company will have a revenue of app 25,652 B per year.

LVLT providing app 8,172B and
CTL providing app 17,47 B.

Both companies now have each a segment of sustainable growing revenue and also a legacy segment of declining revenue. So lets dive into it:

LVLT 8,172 B
Growing revenue: called "CNS revenue" 75 % of the total revenue = 6,129 B growing app 3 % YoY
Declining revenue: called "wholesale revenue" 25 % of the total revenue = 2,043 B declining app 7 % YoY
Result for the moment: very tiny increase revenue of 0,5 % YoY, but the more time pass by, the increase-rate will be improving, cause in my opinion - as you can see from past - the development is sustainable.

For reference:
see pages 6 and 8:
http://s1.q4cdn.com/840339377/files/doc_downloads/1Q17Earnings/1Q17-External-Presentation_LVLT_2017-05-03_FINAL.pdf
and see pages 6 and 9:
http://s1.q4cdn.com/840339377/files/doc_downloads/4Q16-Earnings/4Q16_External-Presentation_2017-02-08_FINAL_LVLT.pdf

CTL 17,47 B
Growing revenue: called "Strategic Enterprise/Business" 28 % of total revenue = 4,9 B, growing app 3% YoY
Flat revenue: called "Strategic Consumer" 18 % of total revenue= 3,147 B flat or tiny increase, app 0%YoY
Declining revenue: all the rest, 54 % of total revenue= 9,44 B, declining app 9 % YoY
Result: declining revenue app - 5,5 % YoY

For reference see page 11
http://ir.centurylink.com/Cache/1001219847.PDF?Y=&O=PDF&D=&fid=1001219847&T=&iid=4057179

Combined Entity   25,625 B
Growing revenue   11,029 B  + 3 % YoY
Flat revenue           3,147 B  +/- 0 % YoY, or maybe +1 % YoY or more: new OTT product since 3Q17
Declining revenue  11,438 B  - 9 % YoY, probably less than 9 %

So 55 % of total revenue will be "healthy" / free of problems.

That doenst look bad to me; mathematically thats a total decline of max 2,5 % YoY. It shall not be that difficult to turn it around. Also if the development stays how it is, the decline will narrow from year to year. Further management is referring to bad margins of the declining revenues and better margins on the growing revenue. Concerning new management and potential synergies in the operating business, especially sales, it seems to me an easy job to overcome the 2,5 % decline.

2) Dividend / FCF
The FCF will not be totally consumed by the dividend:
2,288 B is needed for paying the dividend per year.
FCF will be app 2,65 to 2,91 B per year + additionally improvements from NOL, synergies app up to 10 %
Managements expect a future payoutratio just of 65 to 69 % per year (this figure - as I remember from the conference call - is expected for 2018) and they gave a clear statement to maintain the dividend! For LVLT standing alone, there was the discussion during conference calls with the management about providing the FCF to shareholders, cause debt was already reduced to planed levels and Jeff Storeys statement was, to find a solution, which came out to my opinion in the CTL deal . So i can not understand the all time lasting stupid & unnecessary discussion, if they can or want to pay or reduce the dividend.

   
Title: Re: CTL - CenturyLink
Post by: Packer16 on July 05, 2017, 06:27:39 PM
Thanks for the reply.  I see two risks here.  First turning a telco with a 2.5% revenue decline rate to growth is a difficult task.  Alot of firms have tried to do this (CTL, FTR and WIN) amongst others & have failed.  IMO the key is to have an grow a customer base & this requires cap-ex and marketing.  LVLT's customer base is fine.  It is CTL's that I am concerned about.  As you say 55% of the customers are good while 45% are at risk.  If the at risk base continues to shrink at current levels, then the whole thing could default with the debt level they have.  If we look at the debt, it will be rated B after the transaction (the debt is trading 6.7% which also implies a B rating with B trading at 5.7%) implying a 35% default in 10 years based upon historical defaults.  What makes matters worse is the declining cash flows lead to a collapsing margin of safety like we have seen at FTR and WIN. 

As to the dividend coverage, CTL will provide $1.9 to $2.0bn of FCF today based upon 1Q2017 annualized FCF but in 12 months it will be $400m less.  Level 3 will provide $700m that has stalled in Q1 2017 in terms of growth.  So you have $2.6 to $2.7 billion pre-synergy today and $2.3 to $2.4b in 12 months pre-synergy.  The dividend will require $2.3b to maintain the current level.  Therefore, you are reliant on synergies and the NOL for the dividend coverage. 

How do you see the different cultures of growth at Level 3 and mature at CTL will play out?  They definately have 2 different shareholder bases & IMO they have stated which way they are planning on going with the dividend.  They are in defense/mature mode.

Then what is the upside?  Let's say revenues increase by 2 to 3% so you can get a FCF multiple of 15x from the Graham formula so you get $35 billion in equity value or about $35 per share.  This is generous because it assumes that you will not have to pay additional cap-ex to get the growth which I think you will.  But this has to be adjusted for the 35% chance of a $0 if the company defaults so you get an expected value of $23 about where it trades today.  If we look at EBITDA mulitples we get about the same with an EBITDA multiple of the combined entity of 6.9x and an upside of lets say 8x EBITDA (similar to cable cos).  This implies an upside of $33 per share assuming no default risk.  IMO the upside/downside is not favorable unless these guys can do what no other telco has done for the past 20 years.

Packer     
Title: Re: CTL - CenturyLink
Post by: Valuehalla on July 05, 2017, 07:24:33 PM
Packer, I can not confirm your cashflow figures.

LVLT will provide 1,1 to 1,16 B and CTL will provide 1,55 to 1, 75 B per year, than you have to add effects from NOL and synergies. Often it is not recognized that CTL did share buybacks additionally to the dividend in the past. Further there is a bulk of cash inside LVLT of app estimated 2,2 B at the moment.

I dont take a default into consideration at all. Beside economical reasons, I think LVLT is to much connected to the US government & military & intelligence services.... dont worry ;D

US$ 35 for CTL is a good price target for now, already mentioned in my first post concerning this aquisition on 1st Feb 2017. If revenue is increasing, should be much more than 35 US$.

According to the management, the increase in CTL revenue is expected from 3Q 2017 on. So this mean already now!

(If you anticipate 35B marketcap for the new formed entity, the price per CTL share would be 32,52 US$, not 35 US$)
Title: Re: CTL - CenturyLink
Post by: Packer16 on July 05, 2017, 07:45:34 PM
My cash flow figures are from annualizing the Q1 2017 FCF results from each firm's 1Q 2017 presentation.  Are your figures from another presentation?

Packer
Title: Re: CTL - CenturyLink
Post by: Valuehalla on July 05, 2017, 07:51:46 PM
LVLT FCF is expected to be 1,1 to 1,16 B in 2017, not 700 m:

See page 12
http://s1.q4cdn.com/840339377/files/doc_downloads/1Q17Earnings/1Q17-External-Presentation_LVLT_2017-05-03_FINAL.pdf

All my posts are further based on the management statements during conference calls. Pls check the minutes or the audios.

Find enclosed a pdf for CTL revenue, operative CF and FCF. Yello fields are estimated from me, based on statements of management.
Title: Re: CTL - CenturyLink
Post by: longinvestor on July 05, 2017, 08:10:28 PM
My cash flow figures are from annualizing the Q1 2017 FCF results from each firm's 1Q 2017 presentation.  Are your figures from another presentation?

Packer

Can't speak to CTL's numbers, but LVLT cash flow is hockey sticked to the second half of the year. Historically so. That said, Q1 2017 stalled a bit but Storey tends to be conservative and has come good on full year projections for >5 years. They have reiterated  the FY 2017 numbers Valuehalla posted here. Storey's words carry weight with me. Those who gave up on LVLT pre-Storey may not be familiar with the more recent LVLT. Deliver promises. Case in point, Storey never promises growth numbers because that's not their A- game. Not yet anyway. Cost is.

I tend to agree with you that CTL is a wild card to the downside here. Storey has his hands full.
Title: Re: CTL - CenturyLink
Post by: SI on July 05, 2017, 08:28:38 PM
Packer, Cowen published his proforma model today. He is not buy rated on CTL/L3 and is using $2.16 in 2018 FCF/share and $3.40 in 2019 as tax and synergies start helping in 2019 and $3.73 in '20 and '21 $3.83 on 90bps, 130 and 150bps of rev growth and 37%, 38%, 39% and 41%(where he has margins leveling out) so as you can see this is all about the margins.

I have the under actually on those revenues but the over on margins.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on July 08, 2017, 05:51:13 AM
http://www.fiercetelecom.com/telecom/sprint-ordered-to-pay-12-5m-to-centurylink-for-underpaying-voip-call-termination
Title: Re: CTL - CenturyLink
Post by: Valuehalla on July 11, 2017, 01:58:54 AM
http://www.cnbc.com/2017/07/11/singapores-temasek-portfolio-rose-to-198-point-6-billion--up-13-percent-for-fiscal-year.html

Temasek is holding 65 Mio shares of LVLT (= 18% of LVLT), = app. 3,8 B US$, so 2 % of the Temasek portfolio.

Anticipated no changes, they will hold 8,8 % of the combined entity (CTL+LVLT) in the future.
Title: Re: CTL - CenturyLink
Post by: JayGatsby on July 12, 2017, 12:25:30 PM
https://www.bloomberg.com/news/articles/2017-07-12/centurylink-sued-by-minnesota-over-billing-practices

Every company has billing issues, the difference is how they're addressed. I think any analysis of Centurylink without ascribing some level of increased legal/compliance costs or decreased pricing power is risky. That was the lesson learned from Ocwen for me.. their underlying business continued as expected (actually better in some ways), but they couldn't escape a historically loose culture and state AGs destroyed the valuation with compliance/legal costs. Politics gets involved as well. I suppose the opposite argument could be made for Altria... those that invested at the peak of their legal issues have done quite well.

Title: Re: CTL - CenturyLink
Post by: Valuehalla on July 18, 2017, 08:19:40 AM
https://seekingalpha.com/article/4088386-centurylink-king-yield
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 02, 2017, 02:30:05 PM
Q2  figures are out:

LVLT: good results; slightly increased revenue, margin increased, EBITDA increased, deleverage was going forward: target leverage ratio of 3 is reached ! Outlook 2017 for EBITDA and FCF reconfirmed

CTL: results concerning the revenue 4,09 B are slightly over the low end of published expectations of 4,07B,
Due to the fact that in 2Q17 100M revenue was lost because of the Data-Center Sale realized from 1th May on, the revenue decline is nearly stopped, if we compare revenue in 2Q17 (4,09B+0,1= 4,19B) with revenue in 1Q17 (4,21B)

No updated outlook for full year any more, cause of acquisition of LVLT; although management gave the statement, that figures will come in on low end of expectations.

They renamed some figures: FCF is renamed in adjusted FCF, Operative Cashflow renamed Adjusted EBITDA

Adjusted EBITDA with 1,442B slightly better than expected, but lower than 2Q16 1,637B
Adjusted EBITDA margin 35,3% also slightly better than expected, but lower than 2Q16 37,22%

Adjusted FCF was negative (52M) in 2Q17 mainly related to income tax (255M more than 2Q16) and capital expenditures (181M more than 1Q16) and others (15M more cause Data Center Sale).
In 2Q16 FCF was 617 M. My expectation was 392 M FCF. If i adjust the deltas of tax and capex its app inline.

Management expects improvement:
"The company also expects a significant increase in third quarter 2017 adjusted free
cash flow compared to second quarter 2017 results due to the timing of cash interest and cash tax payments, along with an anticipated decline in the level of capital expenditures in the third quarter of 2017 compared to second quarter 2017."

LVLT acquisition on track, expected to be finished till end of September

In afterhours trading CTL and LVLT were most time slightly higher priced than closing price of 23,74 US$

The lawsuites were not a big subject during the conference calls. They started to simplify the complex price system already in Feb 2017 and they said there is/was no fraud. They try to make offers / bills more understandable and simpler for customers and employees.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 03, 2017, 05:57:52 AM
CTL / LVLT 2Q17 figures: 2 important goals are achieved:

1) The management of CTL nearly stopped the shrinking of the revenue: Compared to 1Q17 in 2Q17 the revenue did nearly not decline anymore. From 1th May on, 100 M revenue was lost due to the accounting, cause of the sale of the Data Centers to a new formed entity, in which CTL has shares as well, but did not account this revenue in its own balance anymore. The revenue in 2Q17 was 4,09B + 0,1B adjusted = 4,19B. The revenue in 1Q17 was 4,209B. New products are already offered from 1th June on, so to my expectations there is a high probability, that from 3Q17 on, revenue will slightly increase, in comparison to 2Q17. Number of subscribers declined just very slightly, app 1 %, from 1Q17 to 2Q17.

2) The management of LVLT reached the longtime promised leverage-ratio of x 3.0 to EBITDA. Further LVLT had on 30th June 1.05B Cash and 1,127B Marketable securities on hand. 

Summary:
I as an investor, have no doubt, that the dividend of 2,16 US$ ( 9 % !) per share can be paid in the near and midterm future. The new management team will do exactly the same, what they have successfully done in the last years with LVLT: Increase revenue & cashflow and deleverage the company.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 03, 2017, 06:48:46 AM
Just increased my CTL position by 11 %
I paid 22,55 US$ per share = 9,57 % dividend rate.

GREAT DEAL, thx Mr Market
Title: Re: CTL - CenturyLink
Post by: saltybit on August 03, 2017, 08:27:41 AM
http://www.barrons.com/articles/centurylink-shares-gets-hit-again-as-q2-results-fail-to-impress-1501772992?mod=hp_RTA&
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 03, 2017, 10:03:31 AM
First time there is a CTL  presentation available. The style is like the LVLT style.

Level 3 habits already entering CTL.... ;D

https://www.snl.com/Cache/1500102077.PDF?O=PDF&T=&Y=&D=&FID=1500102077&iid=4057179
Title: Re: CTL - CenturyLink
Post by: LightWhale on August 09, 2017, 07:50:26 AM
Mason Hawkins  (CEO Southeastern Asset Management) activity in Q1 2017 concerning LVLT:

Longleaf Partners Fund                             5.958.138 = +/- 0 %         (end of Q4=  5.958.138)
Southeastern Asset Management Inc        27.779.930 =  - 0,9 %         (end of Q4= 27.955.852)
Longleaf Partners Smallcap Funds             5.717.590 =  +/- 0 %         (end of Q4=  5.717.590)

The mentioned "vehicles" accumulate app. 11 % of LVLT at the end of Q1 2017

So Longleaf Partner Fund is still in LVLT, no swap to CTL until 31.3.2017, no CTL shares mentioned

Lonfleaf would have had to pay capital gains in order to swap, so that's obviously a no-go for them.

http://www.cnbc.com/2017/07/11/singapores-temasek-portfolio-rose-to-198-point-6-billion--up-13-percent-for-fiscal-year.html

Temasek is holding 65 Mio shares of LVLT (= 18% of LVLT), = app. 3,8 B US$, so 2 % of the Temasek portfolio.


45% of the deal is in cash, so post-merger the combined entity will comprise only 1% of Temasek's portfolio. Same logic goes for Longleaf, where the combined will be ~6% of the Partners Fund.


it will be rated B after the transaction (the debt is trading 6.7% which also implies a B rating with B trading at 5.7%) implying a 35% default in 10 years based upon historical defaults.   


The market evidently agrees with the default stats you mention.
Perhaps the move from the general stats to company specific is qualitative -
the only reason to invest in the merger would be a belief in LVLT's management. It's basically a jockey stock. Since Crowe stepped down, Storey and Sunit have been impressively focused on cost cutting, improved margins and debt reduction (aided by the lowest interest rates ever). If leverage is the main threat to the combined entity, no one fits the job better. It would be fair to assume that default chances are closer to 0% than 35%. So IV should be closer to 32-35, rather than 22.  If LVLT's global network can improve Centurylink's offer to existing domestic clients and stem the churn, IV goes up to the high-end 30's. So only if no credit whatsoever should be given to management, current price is fairly valued. 

Title: Re: CTL - CenturyLink
Post by: longinvestor on August 09, 2017, 08:42:08 AM
Mason Hawkins  (CEO Southeastern Asset Management) activity in Q1 2017 concerning LVLT:

Longleaf Partners Fund                             5.958.138 = +/- 0 %         (end of Q4=  5.958.138)
Southeastern Asset Management Inc        27.779.930 =  - 0,9 %         (end of Q4= 27.955.852)
Longleaf Partners Smallcap Funds             5.717.590 =  +/- 0 %         (end of Q4=  5.717.590)

The mentioned "vehicles" accumulate app. 11 % of LVLT at the end of Q1 2017

So Longleaf Partner Fund is still in LVLT, no swap to CTL until 31.3.2017, no CTL shares mentioned

Lonfleaf would have had to pay capital gains in order to swap, so that's obviously a no-go for them.

http://www.cnbc.com/2017/07/11/singapores-temasek-portfolio-rose-to-198-point-6-billion--up-13-percent-for-fiscal-year.html

Temasek is holding 65 Mio shares of LVLT (= 18% of LVLT), = app. 3,8 B US$, so 2 % of the Temasek portfolio.


45% of the deal is in cash, so post-merger the combined entity will comprise only 1% of Temasek's portfolio. Same logic goes for Longleaf, where the combined will be ~6% of the Partners Fund.


it will be rated B after the transaction (the debt is trading 6.7% which also implies a B rating with B trading at 5.7%) implying a 35% default in 10 years based upon historical defaults.   


The market evidently agrees with the default stats you mention.
Perhaps the move from the general stats to company specific is qualitative -
the only reason to invest in the merger would be a belief in LVLT's management. It's basically a jockey stock. Since Crowe stepped down, Storey and Sunit have been impressively focused on cost cutting, improved margins and debt reduction (aided by the lowest interest rates ever). If leverage is the main threat to the combined entity, no one fits the job better. It would be fair to assume that default chances are closer to 0% than 35%. So IV should be closer to 32-35, rather than 22.  If LVLT's global network can improve Centurylink's offer to existing domestic clients and stem the churn, IV goes up to the high-end 30's. So only if no credit whatsoever should be given to management, current price is fairly valued.

Nice summary. Yes, it's a jockey stock alright! That's not new. Hope Jeff/Sunit are up to the task. It's big and hairy. As if LVLT wasn't enough.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 09, 2017, 11:40:51 AM
Thanks for the comments, we have great Jockeys at CTL now and in future...
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 10, 2017, 06:10:00 PM
http://www.nasdaq.com/article/centurylink-ctl-to-offer-consumers-flexible-ott-tv-service-cm830641
Title: Re: CTL - CenturyLink
Post by: txvalue on August 15, 2017, 12:39:34 PM
Hitting 52 week lows today VH must be happy  8)
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 17, 2017, 08:04:52 AM
Just added again a smaller position CTL for 20,26 US$; my avg buying price is 22,58 US$ per CTL for now.

Be fearful when others are greedy and be greedy when others are fearful!

Next milestones to wait for are:
- dividend confirmation for Q3 around 23. August, payable on app. 15th Sept. for holders on app. 2.Sept
- receiving permission and finalizing the LVLT acquisition till 30th September 17
- figures of Q3 beginning of November 17
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 17, 2017, 04:00:32 PM
There are rumours the aquisition of LVLT could be delayed by California PUC:

http://www.tellusventure.com/blog/no-express-lane-offered-for-centurylink-level-3-review-at-cpuc/

http://www.tellusventure.com/blog/no-halloween-treat-for-centurylink-level-3-deal-in-california/?utm_campaign=twitter&utm_medium=twitter&utm_source=twitter

https://ctfn.news/aug-16-2017-ctl-lvlt-12364/

http://www.barrons.com/articles/the-biggest-loser-centurylink-sinks-7-2-1503004764?mod=yahoobarrons&ru=yahoo&yptr=yahoo


Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 17, 2017, 04:34:30 PM
Today Corvex (Keith Meister) increased its holdings of CTL by 5,5 Mio shares:

On 8thMay 2017: 29.998.645 shares = 5,5 %
http://ir.centurylink.com/Cache/2000479974.pdf?IID=4057179&FID=2000479974&O=3&OSID=9

On 16th June 2017 30.998.645 shares = 5,6 %
http://ir.centurylink.com/Cache/389128285.pdf?IID=4057179&FID=389128285&O=3&OSID=9

On 17th August 2017 36.548.645 shares =6,6 %
http://ir.centurylink.com/Cache/389963767.pdf

Further Corvex holds call options for 17 M shares:
https://seekingalpha.com/news/3290416-centurylink-plus-1_9-percent-corvex-boosts-stake-6_6-percent-reports-call-options
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 19, 2017, 06:32:30 AM
California PUC:

http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M193/K982/193982683.PDF

There is a schedule on page 5, CTL applied for a decision on 14th September PUC meeting (page4).

According to the schedule a proposed decision shall be made latest till 15th October, the finial decision shall be made latest till 15th November. Both steps could be done more early. So there is no evidence for a delay until now. However there is some kind of possibility the process could be extended by C PUK, it seems to me more likely, that they will finish in time.

Take also notice of this comment:
http://www.tellusventure.com/blog/no-halloween-treat-for-centurylink-level-3-deal-in-california/?utm_campaign=twitter&utm_medium=twitter&utm_source=twitter

CTL and LVLT set a timeline till 30th Sept. (planed) to 30th October (latest) to finish the acquisition.

A1703016 is the number of the case in the the California PUK: the process and all documents could be seen here:

http://www.cpuc.ca.gov/

There is another master-schedule (for all lasting PUK cases) available, that shows the PUK will negotiate the A1703016 case on 24th August as a PHC (Prehearing). That seems to me an indication for an earlier approach. It could mean there will be a proposed decision on 24th August and the final decision till latest 24th September, probably on 14th September
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 19, 2017, 07:55:18 AM
https://www.fcc.gov/transaction/centurylink-level3
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 21, 2017, 06:18:49 AM
CTL is using AI

http://www.lightreading.com/automation/centurylink-using-ai-to-boost-sales-efficiency/d/d-id/735575
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 22, 2017, 12:18:11 PM
2016:
https://www.verticalsystems.com/vsglb/mid-year-2016-u-s-carrier-ethernet-leaderboard/

2017 (published today):
https://www.verticalsystems.com/vsglb/mid-year-2017-u-s-carrier-ethernet-leaderboard/

Comment:
https://finance.yahoo.com/news/verizon-apos-ethernet-growth-backed-120112028.html?.tsrc=applewf

IMO: Further indication CTL + LVLT will have growing revenues soon.

Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 22, 2017, 02:08:20 PM
Dividend is declared, as expected: for the quarter 0,54 US$ per share = 2,16 US$ a year
= 10,85 % of todays closing price 19,90 US$

https://finance.yahoo.com/news/centurylink-declares-quarterly-cash-dividend-202100578.html?.tsrc=applewf

"CenturyLink's management and board of directors see our quarterly cash dividend as an important part of our value proposition for shareholders," said Glen F. Post III, CenturyLink chief executive officer and president. "Upon completion of the Level 3 acquisition, we anticipate generating nearly a billion dollars in cash synergies, as well as significant cash tax savings from the accelerated recognition of Level 3's net operating losses. These cash savings, along with our focus on profitable growth, are expected to drive increasing free cash flow per share, enhance our financial flexibility and improve our dividend payout ratio."

Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 23, 2017, 08:44:20 PM
http://ir.centurylink.com/file/Index?KeyFile=390027984
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 28, 2017, 04:30:08 PM
Mason Hawkins  (CEO Southeastern Asset Management) activity in Q2 2017 concerning LVLT:

Shares hold on 30.06.2017

Longleaf Partners Fund                             5.958.138 = +/- 0 %         (end of Q1=  5.958.138)
Southeastern Asset Management Inc       27.194.043 = - 2,1 %           (end of Q1= 27.779.930)
Longleaf Partners Smallcap Funds             5.717.590 =  +/- 0 %         (end of Q1=  5.717.590)

The mentioned "vehicles" accumulate app. ? % of LVLT at the end of Q2 2017

They announced for the Partner Funds & Smallcap Funds, where LVLT is each the largest position, LVLT will become a normal weight position in the future, cause app 45 % of the deal will be paid in cash. Sounds as if they will not reinvest this money in the new formed company.

http://longleafpartners.com/sites/default/files/categories/Documents/2Q17-Longleaf-Partners-Small-Cap-Commentary.pdf
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 31, 2017, 05:25:22 AM
California PUC did not publish a draft deccission till 29th August, which will probably cause a delay of the acquisition beyond the 29th Sept:

http://www.tellusventure.com/blog/centurylink-level-3-deal-blows-past-key-california-deadline/
Title: Re: CTL - CenturyLink
Post by: Valuehalla on September 08, 2017, 12:53:26 PM
California PUC made a draft deccission today:

Final deccission probably on 12th October

http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M195/K129/195129137.PDF

http://www.tellusventure.com/blog/centurylink-level-3-deal-moving-ahead-in-california-but-not-until-october/
Title: Re: CTL - CenturyLink
Post by: Valuehalla on September 12, 2017, 06:52:16 AM
CTL revised the timeframe to complete the acquisition:
There is a delay of 2 to 4 weeks.
So instead of closing it till end of Sept, they expect to close it till mid or end Oct.:

http://ir.centurylink.com/file/Index?KeyFile=390251009

Glen Post, CEO of CTL: "We view the slight delay in our projected closing date as manageable, and it does not affect our integration planning process. Both teams are ready to begin the integration process as soon as closing occurs."
Title: Re: CTL - CenturyLink
Post by: Valuehalla on September 30, 2017, 01:39:23 PM
THE FOOL: CTL shareholders have nothing to worry

https://www.fool.com/investing/2017/09/29/why-centurylink-shareholders-have-nothing-to-worry.aspx
Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 01, 2017, 02:36:57 PM
Steve Blum: till now CPUC is on track to make the final decision on 12th October

https://www.tellusventure.com/blog/october-dawns-with-centurylink-level-3-deal-still-undecided/
Title: Re: CTL - CenturyLink
Post by: LightWhale on October 01, 2017, 09:50:47 PM
Thanks for all the updates
Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 02, 2017, 03:05:18 PM
Next step forward: DoJ : Antitrust approval is done !

http://ir.centurylink.com/file/Index?KeyFile=390493095

Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 06, 2017, 10:04:19 AM
George Schneider: CTL...Time to board the train ?

https://seekingalpha.com/article/4111510-centurylinks-yield-sinking-fast-level-3-merger-progress
Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 09, 2017, 05:17:48 AM
Steve Blum: "No indication at this point that there will be any delays"

Decision from California PUC awaited for 12th october

http://www.tellusventure.com/blog/
Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 13, 2017, 05:58:14 AM
California PUC:

All judges voted with YES, the proposed decision is signed, see Agenda ID 15977 :

https://ia.cpuc.ca.gov/agendadocs/3406_results.pdf

Final FCC decision expected till Monday; FCC approval clock restarted >> 3 days left:

http://www.lightreading.com/mergers-and-acquisitions/fcc-restarts-approval-clock-for-centurylink-and-level-3/d/d-id/737167

https://www.fcc.gov/transaction/centurylink-level3

According to the management, none of the circumstances are relevant for expected profit or FCF in the future.



Title: Re: CTL - CenturyLink
Post by: SI on October 13, 2017, 07:21:53 AM
Carlk, please stop spamming us.

Dealreporter has FCC approval today.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 21, 2017, 05:59:12 PM
On Friday 20th October I placed a Start-Buy-Order for 19,24 US$ to increase my CTL position.
In the later day the order was fullfilled.

There were strong activities concerning Call-options on Friday:
https://www.cnbc.com/video/2017/10/20/bulls-buy-into-centurylink-us-steel.html

I will place another Start-Buy-Order on monday with a limit of around 19,70 US$. (Closing Price Friday 19,04 US$)

Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 23, 2017, 03:59:41 AM
Next 9 trading days will be essential for CTL & LVLT.

- Till 31th Oct decision from FFC is needed, to give a green light to the acquisition of LVLT, otherwise contracts are overdue.

- Beginning of Nov CTL will present Q3 figures. Management has to prove, that their announcements from the past come true: in Q3 we await to see stable or slightly increasing revenue.

I will soon publish my expectations for the Q3 figures and further some updated basics (MarketCap & FCF) on the investment / aquisition.

I expect 1) a positiv decision from FCC and 2) very positive Q3 figures.


I am totally positive on the investment in CTL, described here in the corner since beginning of 2017.


My nearterm priceexpectations for CTL: 32 US$, now 19 $ = 70% upside potential + 11 % dividend
Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 23, 2017, 08:34:19 PM
Corvex (Keith Meister) increased its holdings of CTL shares on 20th October:

On 8thMay 2017: 29.998.645 shares = 5,5 %
http://ir.centurylink.com/Cache/2000479974.pdf?IID=4057179&FID=2000479974&O=3&OSID=9

On 16th June 2017 30.998.645 shares = 5,6 %
http://ir.centurylink.com/Cache/389128285.pdf?IID=4057179&FID=389128285&O=3&OSID=9

On 17th August 2017 36.548.645 shares =6,6 %
http://ir.centurylink.com/Cache/389963767.pdf

On 20th October 2017 36.849.476 shares = 6,7 %
http://ir.centurylink.com/Cache/390731590.pdf
Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 26, 2017, 12:10:07 AM
Streetinsiderr reports that CTL won FCC vote

https://www.streetinsider.com/Mergers+and+Acquisitions/UPDATE%3A+CenturyLink+%28CTL%29%2C+Level+3+Communications+%28LVLT%29+Won+Votes+From+Majority+of+FCC+Commissioners+-+Bloomberg/13423760.html
Title: Re: CTL - CenturyLink
Post by: brker_guy on October 30, 2017, 01:18:06 PM
It's officially given by the FCC now:

http://www.morningstar.com/news/pr-news-wire/PRNews_20171030DA29118/centurylink-acquisition-of-level-3-receives-approval-from-federal-communications-commission.html
Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 30, 2017, 06:14:43 PM
YES, GREAT NEWS .... final approval for the acquisition is done now

On 4th Oct. there was another court ruling, but connected with the DOJ approval.

http://ir.centurylink.com/file/Index?KeyFile=390840982

Q3 figures will be given on 8th November. I expect them to be good.

Title: Re: CTL - CenturyLink
Post by: Valuehalla on October 31, 2017, 09:13:47 PM
Steve Blum:

The FCC gave the final green light to the deal on Sunday, without imposing any significant conditions


https://www.tellusventure.com/blog/fcc-limits-scope-of-merger-reviews-as-it-okays-centurylink-level-3-deal/
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 06, 2017, 08:18:56 PM
My expectations concerning the Q3 figures of CTL:

Operative revenue (just CTL)
Q2 2017: 4,05 B
Q3 2017: 4,40 B                        (Q3 2016: 4,382 B)
If the Operative revenue is above 4,1 B IMO they will have managed the U-turn / revenue is increasing.

Operative CF (just CTL)
Q2 2017: 1,442 B
Q3 2017: 1,610 B                       (Q3 2016: 1,590 B)

FCF just CTL (after tax, after CAPEX) but before dividend payout
Q2:  - 0,052 B
Q3:    0,770 B                          (Q3 2016: 0,186 B)

For full year 2017 the management expected a FCF of 1,55 to 1,75 B (for CTL without LVLT)
The (theoretical) marketcap is 9,078 B (just for CTL; without LVLT) at a closing price of 16,67 US$ on 6th Nov 2017

For the new formed combined entity CTL&LVLT my full year expectations for 2017:
The marketcap is 17,8 B at a closing price of 16,67 US$ on 6th Nov 2017
FCF  CLT 1,55 to 1,75 B
FCF  LVLT 1,10 to 1,16 B
FCF TOTAL 2,65 to 2,91 B

Because of NOLs and Synergies we can add a minimum of app 10 % in 2018 which results in a range of:
FCF TOTAL 2,915 to 3,201 B for 2018
(There was a statement from the management, that the NOLs will reduce taxes 0,650 B  per year, lasting for 4 years!)

To pay the dividend of 2,16 US$per share they need 2,288 B per year. = Payoutratio is app 75 %







Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 09, 2017, 05:46:40 AM
LVLT good Q3 figures:
Revenue slightly increased +1,2 % YoY,   2,059 B in Q3
EBITDA improved + 5 % YoY                     752 M in Q3
FCF strong improvment + 21 % YoY           369 B in Q3
FCF range confirmed for 2017                  1,1 to 1,16 B in 2017

LVLT seems to have the right approach to the market, good that Jeff Story will be the CEO in the future.
End of Q3 LVLT alone had 2,252 B cash or cash equivalent on hands!

CTL Q3 figures are disapointing:
Revenue down - 8 % YoY,                       4,034 B in Q3  subscribers down - 3/ -5 % YoY
                                                                                   No U-turn, but revenue just slightly down from 2Q
EBITDA down -8 % YoY                           1,397 B in Q3  margin down as well
FCF down - 41 % YoY                              109 M in Q3
Expected FCF range for 2017 will be missed
End of Q3 CTL alone had 160 M cash or cash equivalent on hands

- From Q2 to Q3 2017 the total revenue (CTL&LVLT) is just slightly down. (app just -0,2%)
- So it shall not be that hard to see an improvement in revenue.
- The low CTL FCF is a big disappointment for me. So its now up to synergies & CAPEX and the NOLs.
- While LVLT is just providing 33 % of the revenue, it generated 77 % of the FCF in Q3.
- The management clearly confirmed that they are able and willing to pay the dividend.

Title: Re: CTL - CenturyLink
Post by: saltybit on November 14, 2017, 10:51:05 AM
https://25iq.com/2017/11/11/the-1990s-telecom-bubble-what-can-we-learn/

Level 3 figures prominently in the article
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 14, 2017, 02:48:18 PM
CTL declared dividend like expected: 0,54 US$ per share for this Q = 2,16 US$ p.a.
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 14, 2017, 05:05:02 PM
https://25iq.com/2017/11/11/the-1990s-telecom-bubble-what-can-we-learn/

Level 3 figures prominently in the article
Thanks for posting! I've read other articles going back to the formative days of Kiewit, but most of those were historical and "how people lost money" type. This one includes fantastic lessons learned. I will have to read a few times to fully digest this.

Thanks again.
Title: Re: CTL - CenturyLink
Post by: saltybit on November 15, 2017, 12:13:09 PM
http://www.peridotcapitalist.com/2017/11/centurylinklevel-3-merger-1-1-12/
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 15, 2017, 01:10:09 PM
http://www.peridotcapitalist.com/2017/11/centurylinklevel-3-merger-1-1-12/
Thanks for posting. Agree with the author of this, this is a bet that is entirely based on Storey repeating his success at LVLT. Only that CTL is a big mess to fix. I do like Storey myself. The situation is tailor made for him. The expectations are so low right now and the noise is around the ability to pay the dividend or not. Storey will be allowed to low ball projections thanks to how beat up CTL is right now. He is really good at sandbagging. The enterprise business opportunity is huge (&profitable) and as the article mentions it, the market is focused on the consumer business woes at CTL. Like Frontier. Legacy LVLT has continually grown enterprise biz while Verizon has continually shrunk. 
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 16, 2017, 03:51:50 AM
THX for postings & comments
I fully agree with the content of the article in the peridotcapitalist as well
Title: Re: CTL - CenturyLink
Post by: BeerBBQ on November 16, 2017, 06:26:22 AM
How relevant is the FCC vote on net nuetrality going to be to CTL?
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 16, 2017, 07:03:49 AM
Concerning the FCC I published some remarks and news here in the past.

IMO the more liberal, the more deregulated, the better for CTL, cause they own the net.
With LVLT one of the biggest nets in the world.

Under Ajit Pai I think it looks good.

Final vote is expected for 14th December. Details next week.

http://www.reuters.com/article/us-usa-internet/fcc-plans-to-vote-to-overturn-u-s-net-neutrality-rules-in-december-sources-idUSKBN1DG00H
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 20, 2017, 03:06:20 AM
Revenue Projektion for CTL & LVLT

Based on the 2017 Q3 figures and the developments of the past, I have done a projection of the revenue, splitted into the segments as reported.

Find the file enclosed.

The revenue of LVLT is totally healthy!
All segments are stable since long time.
One segment "IP&Data" is increasing app 4 % YoY, which results in a slightly increasing total revenue.

CTL has also one segment which is increasing app 3 to 5 % YoY. Most CTL segments are stable as well. Legacy revenues are shringking app. 10 % per year.

In the long run the increasing segments, will offset the shrinking revenue segments, as shown in the projection enclosed. From the total revenue 30 % is increasing app 3 to 5 % YoY, 40 % is totally stable and 30 % is shrinking app 10% YoY

Right now, the total revenue is just shrinking softly: 1,8 % YoY
So its all about margins >> synergies and in my opinion it is not so hard, to create a turn around.

 
Title: Re: CTL - CenturyLink
Post by: BeerBBQ on November 22, 2017, 12:05:08 PM
In the LVLT thread, LVLT was said to be the lowest cost provider.  What gives them that advantage?
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 22, 2017, 02:23:21 PM
FCC Ajit Pai concerning net neutrality:

https://www.tellusventure.com/downloads/fcc/2017/fcc_press_release_title_ii_21nov2017.pdf

https://www.tellusventure.com/downloads/fcc/2017/fcc_draft_order_title_ii_22nov2017.pdf


Steve Blum:

"The Federal Communications Commissionís draft common carrier order is an unconditional surrender to the demands and desires of big cable and telephone companies."

https://www.tellusventure.com/blog/the-dingo-is-in-the-details-as-fcc-reverses-common-carrier-decision-preempts-state-broadband-laws/
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 23, 2017, 04:28:41 AM
In the LVLT thread, LVLT was said to be the lowest cost provider.  What gives them that advantage?

I have no further information about it.

From the side of the balance sheet, the EBITDA margin of LVLT was increasing during the last years, now 36,5 % of total revenue. The EBITDA margin of CTL was shrinking in 2016 and 2017, now 34,6 % (in 2014 and 2015 always around 38 %)
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 05, 2017, 07:54:19 AM
Story and Patel were on a UBS conference yesterday:

- confirmed the dividend
- taxreform is positiv for CTL
- positive outlook concerning profitability of revenue & synergies
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 07, 2017, 08:43:54 AM
CTLs Conclusion of spcial commitee investigation:
http://ir.centurylink.com/Cache/391376197.pdf


The Lawsuit of Minnesotaís attorney general, Lori Swanson:
https://www.dslreports.com/r0/download/2324271~dc03044c279e65ddf233a11e334209f5/Lawsuit.pdf
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 08, 2017, 05:36:17 PM
Mason Hawkins  (CEO Southeastern Asset Management) activity in Q3 2017 concerning LVLT:

Shares hold on 29.09.2017

Longleaf Partners Fund                             increased   = + ? %          (end of Q2=  5.958.138)
Southeastern Asset Management Inc       27.783.714  = +2,16 %         (end of Q2= 27.194.043)
Longleaf Partners Smallcap Funds             5.717.590  =  +/- 0 %         (end of Q2=  5.717.590)

The mentioned "vehicles" accumulate app. ? % of LVLT at the end of Q3 2017

"Level 3 Communications (-10%,-1.08), the global fiber and
integrated communications network company, was the only
notable detractor from the Fundís return in the quarter. The
size of the position magnified the impact of the stockís decline.
We maintained a 10% weight and added in the quarter in
anticipation of the close of CenturyLinkís (CTL) purchase
of the company. Because we will receive approximately
half of the transaction in cash, the combined company will
become a more normal 5% position. In the quarter, Level
3ís price reflected concerns about final deal approvals and a
potential CTL dividend cut post-deal (as inferior competitors
have cut dividends this year). On the first day of the fourth
quarter, the Department of Justice gave a key approval to
the merger. The prospective cash flow from the combination
with Level 3 should easily cover CTLís current dividend which
was otherwise in question given its declining legacy land
line business. The dividend is irrelevant to the companyís
underlying value and has taken on undue importance in
this environment of intense yield chasing. We anticipate
that the deal will close and believe the new CTL will be the
preeminent global fiber network solutions company with an
extraordinarily capable management team, including Level 3
CEO Jeff Storey"

See page 2
http://longleafpartners.com/sites/default/files/categories/Documents/3Q17-Longleaf-Partners-Quarterly-Summary-Report-All-Funds.pdf
Title: Re: CTL - CenturyLink
Post by: globalfinancepartners on December 09, 2017, 06:30:52 AM
Well there you go, looks like CTL folks talked this over and decided to coordinate a big cluster of insider purchases on December 8th to show they believe their stock is attractive ->

https://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=0000018926
Title: Re: CTL - CenturyLink
Post by: longinvestor on December 09, 2017, 07:57:33 PM
Well there you go, looks like CTL folks talked this over and decided to coordinate a big cluster of insider purchases on December 8th to show they believe their stock is attractive ->

https://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=0000018926

That's the news of two decades. One of the biggest abuses at erstwhile LVLT was egregious handing out of stock and in my recollection, management never bought a single share with their own money. I've lived with that. Great to see a different behavior now.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 10, 2017, 03:46:33 AM
8 insiders acquired in total 202.500 shares on 8th Dec 2017 (app. 3 M $)

The anker investors Mason Hawkins (Longleaf Partners) and Keith Meister (Corvex) also increased their positions during the last few month, as noted here in the blog above.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 11, 2017, 05:48:00 AM
Net Neutrality, important aspect for CTLs legacy consumer business:

https://www.tellusventure.com/blog/end-of-net-neutrality-means-more-corporate-control-of-central-coast-media-and-speech/

"The market, at best, is a duopoly collapsing into a monopoly Ė Comcast and Charter Communications account for 48% of U.S. wireline (and fixed wireless) broadband subscribers, and their share is growing. The next three biggest ISPs Ė AT&T, Verizon and CenturyLink Ė muster only a 28% market share, but thatís enough to put more than three-quarters of U.S. broadband subscribers in the hands of just five companies."
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 12, 2017, 06:04:53 AM
GREAT NEWS:
CTL just published SEC 13G filing about Mason Hawkins  (CEO Southeastern Asset Management):


http://ofchq.snl.com/cache/391424670.PDF

He is holding since last Friday 8th Dec 2017 

71.604.936 shares, which is 6,7 % of all outstanding CTL shares. Thats app. 1 B$ today

This means he increased his holdings massiv in comparison to the number of CTL shares he received for his LVLT shares because of the acquisition.

Holdings by his Funds:
Longleaf Partners Fund - 15,961,137                 
Longleaf Partners Small-Cap Fund - 14,779,941
Longleaf Partners Global Fund - 1,123,152
Title: Re: CTL - CenturyLink
Post by: Jurgis on December 12, 2017, 07:11:38 AM
I bought some CTL bonds. Tough to analyze the probabilities with LVLT merger, but assuming the company does not implode and muddles through or even grows, it should be OKish fixed income return. Nothing spectacular.
Title: Re: CTL - CenturyLink
Post by: LightWhale on December 12, 2017, 07:12:12 AM
what is the quote on the bonds?
Title: Re: CTL - CenturyLink
Post by: Jurgis on December 12, 2017, 07:18:14 AM
There's a bunch of them.
Search Fido or Finra http://finra-markets.morningstar.com/BondCenter/Default.jsp?part=3 (enter "Centurylink" for search)

I tried to paste results, but formatting sucks.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 12, 2017, 07:27:30 AM
Jurgis, why did you choose bonds, not the shares ?

The bonds yields are app 4 to 9,5 %.
The dividendyield of the share is app. 13,7 % and its safe and the dividend of 2,16$ p.a. will not be lowered.
Title: Re: CTL - CenturyLink
Post by: LightWhale on December 12, 2017, 07:30:44 AM
There's a bunch of them.
Search Fido or Finra http://finra-markets.morningstar.com/BondCenter/Default.jsp?part=3 (enter "Centurylink" for search)

I tried to paste results, but formatting sucks.

10x
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 12, 2017, 11:33:24 AM
Report about CTL & Corvex as active anker investor:

https://seekingalpha.com/article/4131367-centurylink-becoming-industry-leader-need
Title: Re: CTL - CenturyLink
Post by: globalfinancepartners on December 12, 2017, 02:33:26 PM
A few more director purchases at CTL filed today.  Two of the same people from last week and poor Virginia who waited until the price went up a dollar to make her purchase ->

https://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=0000018926
Title: Re: CTL - CenturyLink
Post by: notorious546 on December 14, 2017, 05:23:02 PM
What do you guys think about the operational or integration risks with the acquisition? How are you able to get comfort on this front?

It seems clear that the market is discounting managements ability to pay/sustain the dividend (2nd highest yielding stock in S&P500) and a rather poor environment on the enterprise market for the next several years
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 15, 2017, 07:05:36 AM
Notorious546, for me there is no doubt that they are able and willing to pay the dividend. The revenue doesnt look so bad (analysed & projected here in the corner more early). There are many reports from "experts" out there, who just recognise CTL standalone figures for the whole company, without being aware that already LVLT is inside, providing additional 1,1 B FCF pa. CTL stock was this month a good opportunity for tax-selling after the day of record (24th Nov.). The LVLT management has shown all abilities in the past to make a success out of an aquisition and i am convinced they will do fine with the current situation. Further its great news from 8th December that Mason Hawkins (Southeastern Asset Management)  is now in CTL with 6,7 %;  beside Kieth Meister (Corvex) as active investor, holding 3,4 % of CTL.... so there are two great anker investors. Both of them accompanied LVLT on their way to success during the last decade. I am sure they know what they do.

CTL is strong strong buy, a real bargain !
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 15, 2017, 07:09:24 AM
Good bye Net Neutrality:

 http://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db1214/DOC-348261A1.pdf

MAGA MAGA MAGA

https://seekingalpha.com/article/4132083-aboard-internet-highway?auth_param=1emn1k:1d37n9d:4f9d8118b4045e223aab8c78f01800b8&uprof=44&dr=1

"And this is where the Internet Toll-Road analogy is the best one. CTL, as the 2nd largest owner of fiber optic cable in the country, (those are the said toll roads), now has the ability to charge varied fees to send traffic on its fiber."
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 15, 2017, 09:57:30 AM
Steve Blum, telco expert:

"Big cable, Telcos take control"

https://www.tellusventure.com/blog/the-internet-goes-from-ping-to-pong-as-big-cable-telcos-take-control/
Title: Re: CTL - CenturyLink
Post by: Valuehalla on December 23, 2017, 06:18:58 PM
A standard is born for 5G:

https://www.tellusventure.com/blog/5g-mobile-tech-finally-moves-from-marketing-hype-to-a-hard-standard/

Centurylink and 5G:

http://host.madison.com/business/investment/markets-and-stocks/is-g-the-key-to-centurylink-s-turnaround/article_5c669409-4e21-5f88-9546-d4c7056c8134.html
Title: Re: CTL - CenturyLink
Post by: Valuehalla on January 09, 2018, 04:07:00 AM
https://seekingalpha.com/article/4122947-whole-storey-centurylink
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 07, 2018, 03:19:00 PM
Temasek Holdings (Fund of Signapur Gov) holds 8,7 % of CTL on 5th Feb 2018

http://ir.centurylink.com/Cache/392090289.pdf

Temasek was an anker investor of LVLT for many years. So they are still on board.
Their former share of LVLT was 18 %.
LVLT shareholders own 49% of the new entity.
>> So that looks like no big change after the aquisition is done by Temasek.

ANKER INVESTORS ARE NOW:
Temasek                                      8,7 %
Corvex (Keith Meister)                   6,7 %
Longleaf (Mason Hawkins)             6,7 %
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 08, 2018, 07:40:28 AM
BlackRock Inc.

Today a 13G/A filling came out:

http://ofccolo.snl.com/cache/392108638.PDF

BlackRock holds on 31th December 2017 6,7 % of CTL, which is a strong increase:

From old CTL (standalone without LVLT) they were holding 4,25 % on 29th September 2017 according to yahoo

Title: Re: CTL - CenturyLink
Post by: globalfinancepartners on February 08, 2018, 07:41:53 AM
I imagine they held some LVLT as well and this just reflects the combined stake.  It's like getting excited that Vanguard has taken a big position in your company - it doesn't mean anything

BlackRock Inc.

Today a 13G/A filling came out:

http://ofccolo.snl.com/cache/392108638.PDF

BlackRock holds on 31th December 2017 6,7 % of CTL, which is a strong increase:

From old CTL (standalone without LVLT) they were holding 4,25 % on 29th September 2017 according to yahoo
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 08, 2018, 09:17:58 AM
Time to be excited about the share of BlackRock in new CTL:

Sure, the mentioned 6,7 % holding from BlackRock are for the combined new CTL entity.

BlackRock holdings in old standalone companies were:
Shares of CTL were 4,25 %     
Sahres of LVLT were 5,04 %
AVG = 4,637 % ( LVLT 49 % and CTL 51 % in new entity)

So its a clear increase! They increased the stake by 44 % !
Title: Re: CTL - CenturyLink
Post by: kab60 on February 08, 2018, 09:44:36 AM
And so somebody else must have sold... Really, it is a huge nonevent.
Title: Re: CTL - CenturyLink
Post by: brker_guy on February 08, 2018, 11:02:06 AM
I am surprised that no one has posted this yet:

https://seekingalpha.com/article/4141549-miller-value-partners-opportunity-equity-q4-2017-letter-value-nothing
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 14, 2018, 02:00:57 PM
Q4 Figures are out:

http://ir.centurylink.com/file/Index?KeyFile=392193775

They expect for 2018 a FCF after dividends of 805 M to 1,05 B, which mean a FCF in total of 3,15B to 3,35 B, compared to a marketcap of 18,79 B = ratio of just 5,6 to 5,7 = 16,8 % to 17,8 %

Dividend payout ratio lower than 73 %, so dividend is safe for 2018.

CTL was up app 10 % in aftertrading

LVLT
LVLT standalone figures were excellent:
- Total Revenue Q4=2,11B increased in Q4 3,8 % YoY.... and Core Network Revenue (Q4=2,017B) increased 4,3 % YoY and even 2,7 % from Q3 to Q4 !
- FCF very strong for Q4 353 M + 33 % YoY  (Q3 was already very strong with 369M), so it looks like that just LVLT standalone can provide 1,4 to 1,5 B to the FCF of the whole entity.
- LVLT Total revenue Q4 = 2,11 B

CTL

CTL standalone figures were good:
I compare the CTL revenue quarter to quarter, because there was the sale of the colocation & data centers in 2017: that makes it more transparent to elaborate, if and which part of the revenue is shrinking or not:
- Strategic revenue 1,905 B is stable (even slightly increasing by 0,7% from Q3 to Q4) as projected here in CoBF in the past >> see my post on 20th Nov.; so no lost in this revenue segment
- Legacy revenue 1,633 B is shrinking ( - 2,4 % from Q3 to Q4 >> = - 9,2 % shrinking YoY) as projected here in the CoBF in the past >> see my post on 20th Nov; so no surprise
- Other Revenue and Dataintegration revenue both app. stable Q to Q and YoY (313 M and 113 M)   
- CTL Total revenue Q4 = 3,964B

LVLT + CTL Total Revenue in Q4 2017 = 6,074 B

Conference Call:
- Taxreform will lower payments for taxes massively in the next 5 years
- Management is willing and able to pay the dividend
- Pointing out that LVLT had strong results in Q4
- No big surprises in the integration, which is on track, synergy targets will be reached
- They expect increasing EBITDA over the next few years and plan to drive down leverage-ratio in the coming years to 3 to 4 times ratio
- weighted average cost of debt is currently about 5.7% with 65% being fix rate and 35% being variable-rate debt
- 9B of NOLs
- Shrinking legacy consumer business is now 25 % of total revenue, they try to improve it: simplifying and cutting costs. No remarks to maybe sell this segment. The "Price for Life" product is successfull with more than 1 M subscribers. They want push that.

Transcript:
https://seekingalpha.com/article/4146897-centurylink-ctl-q4-2017-results-earnings-call-transcript?page=1

Everything looks good to me, I am happy to sit on a big position of CTL, waiting for the next dividend payment and an increase in stockprice.

 
Title: Re: CTL - CenturyLink
Post by: Valuehalla on February 15, 2018, 06:03:59 AM
Outlook / Fundamentals

Based on yesterdays closing price of 17,58 US$ the marketcap of CTL is 18,79B.
The dividendrate is 12,28 %, based on an annual dividend of 2,16 US$.

Here is the outlook given beside the Q4 figures:

FCF Free Cash Flow    3,15 to 3,35 B before dividend payments (=2,3 B pa, so payout ratio less than 73 %)
EBITDA                     8,75 to 8,95 B

Management expects growing EBITDA and FCF over the next years. Revenue is stable. They are willing to keep the dividend over the next years. The management (Storey and Patel) proved their ability to integrate, grow EBITDA and grow FCF during the last years in LVLT.

I am totally positive about the future of CTL and recommand it again as a great valueinvestment.




Title: Re: CTL - CenturyLink
Post by: longinvestor on February 15, 2018, 10:23:10 AM
Guess who's back into CTL? Prem / Fairfax!. Bought $25 Million at $17. Looks like oldtimers coming back. Bill Miller did as well.
Title: Re: CTL - CenturyLink
Post by: walkie518 on February 15, 2018, 10:35:03 AM
Both companies had warts, but it looks like Storey is pulling it together!
Title: Re: CTL - CenturyLink
Post by: petec on March 01, 2018, 01:31:19 AM
I have about 15 years of telecom mgmt experience and have also invested a good amount in the space. From dealing with both of these companies neither are very well run.  This isn't meant to be overly negative, I just feel this is a case where people look at things via a spreasheet rather than from experience in the marketplace.

Level 3 generally has a good quality product, but they are notoriously difficult to deal with and that is going to pressure them quite a bit. Companies like Cogent are much more efficent.  Cogent products are comparable, pricing is typically lower and they deliver solutions in a shorter time frame. As a customer are you going to take the 100Mb fiber connection that takes 10 days (sign up is all digital) to deliver or 90 days of slogging through paperwork and third party contractors when they are priced the same?  In my view Level 3's Internet offerings are going to be pinched over time. They are not as high quality as AT&T and they are getting outcompeted by more nimble players on the other end of the market. Bandwidth pricing is also dropping constantly.

Their legacy businesses like Voice are also losing market share to companies that deliver more efficent mechanisms to add/remove/change services.  As an example, I know a major company that has had this experience. Provisioning a new number on L3 takes 2-3 days in many cases. Whereas with a new company they are doing business with the process is literally instant. To top it off many of L3 systems do not work on browsers other than IE, things like the old WilTel portal for example. Assuming pricing and quality are close for what has become a commodity which company do you think will win share over time.

Again, their quality is very good, but their business processes/contracts get in the way of monetizing these assets.

CTL is in my opinion even worse than L3. In general lower quality products than L3 and so many legacy rolled-up assets and systems. Dealing with them for anything is a tremendous struggle and I think this acquisition is really going to further muddy those waters.

With out solid systems it is really hard to sell enterprise and wholesale well at the same time. AT&T is currently the best at this in the market and they are really trying to innovate to improve their process. They have a significant jump on an entity like L3/CTL in this regard.

So to keep this from rambling on, L3 has some respect but their business processes leave much to be desired. It would be interesting if someone had a list of the number of logos rolled up in this deal. Just off the top of my head

Broawing
WilTel
ICG
Adelphia
Focal
Qwest
Embarq
Global Crossing
TW telecom

None of these assets have been intergrated well in my opinion.  Roll-ups are tricky beasts and if business is not great they are a perfect way to distract investors. I would have preferred to see Level 3 focus on what it had than join with CenturyLink.

Just getting started on this one. Txvalue, did you read the 4q call? If so does it change your opinion on any of the above? I am struck by a) how Storey dominated the call and b) how focussed they seem to be on reorganising the company to deal with at least some of the issues you mention. Interested in your thoughts.
Title: Re: CTL - CenturyLink
Post by: txvalue on March 01, 2018, 07:52:36 AM
Storey said they are improving or have already improved much of what I mentioned. It is still early, but I have only seen the combining of sales teams (with some new cross-selling) and some backbone integration. The more difficult parts of the integration are still "on the road map."

I don't mind investing in messy situations, but I'm still on the sidelines. I'd view the call as a small incremental positive. I think it is a good that he is aware of the company's short comings but I would like to see more tangible integration and improvement.
Title: Re: CTL - CenturyLink
Post by: petec on March 01, 2018, 10:17:07 AM
Does anyone have a nice simple graphic or set of stats to help me understand how much this industry has consolidated over time?
Title: Re: CTL - CenturyLink
Post by: kab60 on March 01, 2018, 10:31:57 AM
I have about 15 years of telecom mgmt experience and have also invested a good amount in the space. From dealing with both of these companies neither are very well run.  This isn't meant to be overly negative, I just feel this is a case where people look at things via a spreasheet rather than from experience in the marketplace.

Level 3 generally has a good quality product, but they are notoriously difficult to deal with and that is going to pressure them quite a bit. Companies like Cogent are much more efficent.  Cogent products are comparable, pricing is typically lower and they deliver solutions in a shorter time frame. As a customer are you going to take the 100Mb fiber connection that takes 10 days (sign up is all digital) to deliver or 90 days of slogging through paperwork and third party contractors when they are priced the same?  In my view Level 3's Internet offerings are going to be pinched over time. They are not as high quality as AT&T and they are getting outcompeted by more nimble players on the other end of the market. Bandwidth pricing is also dropping constantly.

Their legacy businesses like Voice are also losing market share to companies that deliver more efficent mechanisms to add/remove/change services.  As an example, I know a major company that has had this experience. Provisioning a new number on L3 takes 2-3 days in many cases. Whereas with a new company they are doing business with the process is literally instant. To top it off many of L3 systems do not work on browsers other than IE, things like the old WilTel portal for example. Assuming pricing and quality are close for what has become a commodity which company do you think will win share over time.

Again, their quality is very good, but their business processes/contracts get in the way of monetizing these assets.

CTL is in my opinion even worse than L3. In general lower quality products than L3 and so many legacy rolled-up assets and systems. Dealing with them for anything is a tremendous struggle and I think this acquisition is really going to further muddy those waters.

With out solid systems it is really hard to sell enterprise and wholesale well at the same time. AT&T is currently the best at this in the market and they are really trying to innovate to improve their process. They have a significant jump on an entity like L3/CTL in this regard.

So to keep this from rambling on, L3 has some respect but their business processes leave much to be desired. It would be interesting if someone had a list of the number of logos rolled up in this deal. Just off the top of my head

Broawing
WilTel
ICG
Adelphia
Focal
Qwest
Embarq
Global Crossing
TW telecom

None of these assets have been intergrated well in my opinion.  Roll-ups are tricky beasts and if business is not great they are a perfect way to distract investors. I would have preferred to see Level 3 focus on what it had than join with CenturyLink.

Just getting started on this one. Txvalue, did you read the 4q call? If so does it change your opinion on any of the above? I am struck by a) how Storey dominated the call and b) how focussed they seem to be on reorganising the company to deal with at least some of the issues you mention. Interested in your thoughts.
Thanks a lot for the insight. I'm on the sideline but following. Inverting what you said, can't that be a positive? I mean, the numbers don't look too bad, and it seems there's still lots of stuff they can still fix (one obviously needs to think they'll be able).
Title: Re: CTL - CenturyLink
Post by: A_Hamilton on March 01, 2018, 11:11:09 AM
Does anyone have a nice simple graphic or set of stats to help me understand how much this industry has consolidated over time?

Slides 5 and 6

https://www.sec.gov/Archives/edgar/data/18926/000101143817000194/exhibit_3.htm
Title: Re: CTL - CenturyLink
Post by: petec on March 02, 2018, 12:10:29 AM
Many thanks.
Title: Re: CTL - CenturyLink
Post by: txvalue on March 02, 2018, 09:12:35 AM
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.
Title: Re: CTL - CenturyLink
Post by: longinvestor 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.
Title: Re: CTL - CenturyLink
Post by: Valuehalla 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 !
Title: Re: CTL - CenturyLink
Post by: Valuehalla 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.
Title: Re: CTL - CenturyLink
Post by: Valuehalla 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."
Title: Re: CTL - CenturyLink
Post by: petec 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.
Title: Re: CTL - CenturyLink
Post by: Valuehalla 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.
Title: Re: CTL - CenturyLink
Post by: longinvestor 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.
Title: Re: CTL - CenturyLink
Post by: petec 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.
Title: Re: CTL - CenturyLink
Post by: petec 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 ;)
Title: Re: CTL - CenturyLink
Post by: Valuehalla 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.
     
Title: Re: CTL - CenturyLink
Post by: longinvestor on March 14, 2018, 12:26:14 PM
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 ;)

David Klein has a decent analysis and he's been at it with LVLT and now CTL for many years, https://www.iiex.club/interactive-model

The key number I watch is the connected (enterprise) building count. I believe it stands at just over 100K. It doubled with the CTL merger. Around 2010, I remember that being less than 10K. (need to verify). They have gone 10 fold. The path to riches is as fast as the building count. At some building count number, they become a behemoth. Is it 500K or 1000K, I have no idea. Exact same thing as the last mile in residential, this was the boot the incumbents had on LVLT's throat as they were floating around with no strategy other than "build it and they will come".  Storey came in and went after enterprise building count. It makes sense, they have the biggest pipes and need large data to flow through them. Server farms, NYSE, Library of Congress, the Universities, the Military etc. They are all customers of CTL.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 22, 2018, 05:10:05 PM
https://seekingalpha.com/article/4158298-centurylink-storey-trust?auth_param=1emn1k:1db7oa2:e011ab6b89fcdd6d926ff704404ffe06&uprof=44&dr=1
Title: Re: CTL - CenturyLink
Post by: petec on March 26, 2018, 01:15:23 AM
The more I read about this the more I think the capital structure is wholly inappropriate. A dividend cut here would add a lot of value.
Title: Re: CTL - CenturyLink
Post by: petec on March 26, 2018, 01:28:38 PM
Can someone who understands more than me (which will be most of you) explain why SD WAN might be a threat to CenturyLink? I came across a reference to that in my reading but can't find an explanation.
Title: Re: CTL - CenturyLink
Post by: LightWhale on March 27, 2018, 04:40:17 AM
I'm no expert, but here's my understanding. I'd be happy to know whether I got this all wrong...

The focus of the combined company is enterprises. It gets a portion of enterprises revenue from legacy MPLS (they won't disclose how much). Over time, MPLS should be displaced by SD-WAN (cheaper, better, more secure).  Because of its physical networks, CTL had an advantage over some comps regarding MPLS.

The threat comes from the fact that SD-WAN can be provided over public IP broadband. So whatever advantage CTL had in the enterprises sector over off-net providers is supposedly vanishing. Furthermore, the off-net providers (such as Windstream) do not need to maintain the actual infrastructure, so their costs will be lower, and CTL might find it hard to compete in such marketplace.

That's the theory. For now, CTL claims MPLS to still be growing, and it offers hybrid solutions of MPLS and SD-WAN, particularly to companies that use the cloud. And since the transition has so far been gradual, meaning that companies move to SD-WAN without immediately dumping MPLS, it helps to maintain customers who prefer not to split those services among various providers.
Title: Re: CTL - CenturyLink
Post by: petec on March 27, 2018, 06:28:45 AM
Great, thanks.

I am torn between thinking "this is too cheap on FCF" and "this is operationally and financially levered, FCF can evaporate fast, and you don't know enough about it to handicap the odds".

Caution might have to be the better part of valour for now.
Title: Re: CTL - CenturyLink
Post by: LightWhale on March 27, 2018, 09:41:47 AM
Great, thanks.

I am torn between thinking "this is too cheap on FCF" and "this is operationally and financially levered, FCF can evaporate fast, and you don't know enough about it to handicap the odds".


What are the main threats you see to FCF?
Title: Re: CTL - CenturyLink
Post by: SI on March 27, 2018, 11:24:22 AM
consumer ebitda erodes faster than they can grow over with synergies and enterprise.
Title: Re: CTL - CenturyLink
Post by: longinvestor on March 27, 2018, 11:42:25 AM
consumer ebitda erodes faster than they can grow over with synergies and enterprise.

Yes, that is not out of the realm of possibilities. Comforting fact is that consumer business is 25% of the combined business and shrinking. Well, LVLT was best described as a melting ice cube, so this is nothing new. Paradoxically, the networking assets are durable as evidenced by them withering the melting ice cubes. Just wishing that we will see durable and competitive advantage. Some day! Hopefully before the next ice age. Weíll all be dead by then.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on March 29, 2018, 10:57:23 PM

Temasek Holdings
(Fund of Signapur Gov)
increased its holdings in CTL and holds now 9,7 % reported on 27th March 2018
(before they hold 8,7 %)

http://ir.centurylink.com/Cache/392810342.pdf

Temasek was an anker investor of LVLT for many years. Their former share of LVLT was 18 %.
LVLT shareholders would own 49% of the new entity. So they increased their holdings since the acquisition was finalized till now.

ANKER INVESTORS ARE NOW:
Temasek                                      9,7 %
Corvex (Keith Meister)                   6,7 %
Longleaf (Mason Hawkins)             6,7 %

Title: Re: CTL - CenturyLink
Post by: petec on March 29, 2018, 11:11:39 PM
Great, thanks.

I am torn between thinking "this is too cheap on FCF" and "this is operationally and financially levered, FCF can evaporate fast, and you don't know enough about it to handicap the odds".


What are the main threats you see to FCF?

Declining revenue on a fixed cost base - both operationally fixed but also very financially levered.

1% decline in revenue is 10% decline in FCF, all else equal (i.e. if you can't cut costs and capex to offset).

Now, obviously for the next couple of years there will be a lot of cost outs and that will more than offset declining revenue. Great.

But, after that, it's not so clear, so what you need is confidence in revenues. Given the history of this very price competitive industry, and given how hard it is to guide, and given how little I really know about it, I find it very hard to get confidence on that. I can see the positives and negatives but I don't know how to weight them.

Still very tempted though on 6x FCF.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 02, 2018, 05:05:46 AM
Thats exactly the point. For the short and medium term there is enough costsreduction and synergies to power the FCF. And in the long run the increasing segments of the revenue will overcome the shrinking segments. There is no doubt to me.

I published here already on 13th March 2018 the revenues per segment YoY / QoQ, incl. a prognose for the future. And to me it looks good.

Also from Q3 2018 figures on, the sale of the colocation centers which was done in 2017 and reduced the revenue, will not weigh anymore on the "optic" of the YoY comparisons of the total revnenue.
Title: Re: CTL - CenturyLink
Post by: LightWhale on April 02, 2018, 11:02:15 PM


1% decline in revenue is 10% decline in FCF, all else equal (i.e. if you can't cut costs and capex to offset).

But, after that, it's not so clear, so what you need is confidence in revenues. Given the history of this very price competitive industry, and given how hard it is to guide, and given how little I really know about it, I find it very hard to get confidence on that. I can see the positives and negatives but I don't know how to weight them.


Another problem is the possibility that rates rise significantly. It will make it harder to roll the debt. What S&S did in LVLT was achieved against the backdrop of falling rates. There's a big difference between running downhill and uphill. CTL's >5Y bonds are trading at yields equivalent to B/-B credit rating. In Bloomberg, aggregate projection 5Y out remains relatively constant, at ~23.7B rev and ~9B EBITDA (ajd.) This leaves about 1B a year to delever. With 38B of debt, and 0.11 Debt/EBITDA multiple to delever every year, it will take CTL a while to rerate (EDIT: they can also "delever" the ratio by growing the EBITDA).

On the other hand, according to the guidance, Capex is elastic, at 16% of revenue. Also, when listening to S&S on conference calls, the subtext is that they expect undeclared revenue synergies. Plus since enterprise is 75% of revenues, it only requires a modest growth, around 1/4 of the decay in retail, to keep revenues constant. At FCF yield of 17%, and with the industry consolidating, the compensation for the risk seems adequate.

The more I read about this the more I think the capital structure is wholly inappropriate. A dividend cut here would add a lot of value.

Couldn't agree more.  Reducing debt at triple speed (3.3B annually) is much more sensible in the long term.
Title: Re: CTL - CenturyLink
Post by: petec on April 03, 2018, 01:38:40 AM
Valuehalla - I'd really appreciate it if you could lay out your revenue thesis in more detail. I have read your posts and you are right that if we extrapolate current revenue trends then revenues are going to be fine. But why should we extrapolate? Trends don't seem to me to have been too stable in this industry in the long run. So what's driving growth in your view? Is CTL going to take share, and if so why? Is industry growth going to accelerate, and if so why? I just don't know enough to answer these questions so any help is appreciated.

Lightwhale - rising rates is a headwind but the debt is so long term that they can de-lever materially in the relevant timeframe and offset any rate rise. Of course that would be much easier if they cut the dividend, which is the obvious thing to do. If they pay down debt then the market cap will rise at a stable multiple, and you'd probably get a higher multiple so the equity return could be  huge. That's far more attractive than clipping a dividend.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 03, 2018, 03:38:02 PM
Petec- i tracked the revenue segments in all quarters from 2014 on (even in many smaller segments than mentioned in my overview & prognose) and the development is nearly all time constant: 40 % of the revenue is all time stable. 27 % is shrinking 10 % YoY all time and 33 % is increasing, all time app 4 % YoY. During the 4 years this was all time the same. In 2017 they sold collocation centers, which means a one time dropp in revenue, cause of the sales. The sale didnt effect the development of the mentioned segments. It is correct that just a slightly higher rate than the 4 % of the increasing revenue-segments, will lift the total revenue very fast. And that is what it looks like, after the last 2 quarters. Mainly powered by LVLT and one revenue segment of CTL.

Lightwhale - On the last conference call there was an information concerning the debt: weighted average cost of debt is currently about 5.7% with 65% being fix rate and 35% being variable-rate debt. So this sounds good or not to you ?
 
Title: Re: CTL - CenturyLink
Post by: petec on April 04, 2018, 01:00:56 AM
Thanks - that's very helpful.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 05, 2018, 10:00:58 AM
There seems to be some news concerning the class-action lawsuite:

https://arstechnica.com/tech-policy/2018/04/centurylink-fights-billing-fraud-lawsuit-by-claiming-that-it-has-no-customers/

Source:
https://arstechnica.com/wp-content/uploads/2018/04/centurylink-memorandum-on-stay.pdf
Title: Re: CTL - CenturyLink
Post by: Valuehalla on April 05, 2018, 10:08:31 AM
Temasek Holdings (Fund of Signapur Gov)
increased AGAIN its holdings in CTL and holds now 11% reported on 4th April 2018, last reported  9,7 % on 27th March 2018 and before they hold 8,7 %.

http://ir.centurylink.com/Cache/392908984.pdf

Temasek was an anker investor of LVLT for many years. Their former share of LVLT was 18 %.
LVLT shareholders would own 49% of the new entity. So they increased their holdings since the acquisition was finalized till now.

ANKER INVESTORS ARE NOW:
Temasek                                      11,0 %
Corvex (Keith Meister)                   6,7 %
Longleaf (Mason Hawkins)             6,7 %
Title: Re: CTL - CenturyLink
Post by: Valuehalla on May 09, 2018, 07:34:20 AM
Interesting article about CTL:

https://seekingalpha.com/article/4171580-centurylink-buy-solid-dividend-keep-increasing-revenues?auth_param=1emn1k:1df50bo:b9cacdac94abcddea983ea60af152836&uprof=44&dr=1

Today we will get the Q1 figures.

If the revenue is higher than 6B for the first quarter, this would be a very strong sign.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on May 09, 2018, 01:57:57 PM
1Q 2018 Earnings are out:

http://ir.centurylink.com/Cache/1001236852.PDF?O=PDF&T=&Y=&D=&FID=1001236852&iid=4057179

http://ir.centurylink.com/Cache/1001236853.PDF?O=PDF&T=&Y=&D=&FID=1001236853&iid=4057179

- No positive or negative surprise
- all figures in the range of the expectations
- outlook for full year 2018 is reiterated
- Revenue was 5,945 B in Q1
- Free Cash Flow: 852 M in Q1; expected for the full year 3,15 to 3,35 B
- MarketCap was 19,464 B on 18,04 $ closing price today
- Long-Term Debt & Credit Facilities down from 37,238 B end Q4 to 36,94 B end of Q1

Conference call:
- Dividend will be maintained, dividend payoutrate in 70s %
- Sales in second quarter will be better than first quarter, which had just 90 days
- EBITDA will increase every quarter during this year & next year, margins will improve
- They expect "good grows in FCF during the next few years", driven by EBITDA increases
- SD-WAN revenue grew 45%, but represented less than 1% of total revenue
- net debt to adj EBITDA ratio at 4.3x; expect to reach low end of target leverage range of 3x to 4x by end of 2019, driven by growth in adjusted EBITDA
- effective income tax rate in Q1 was 51% due to tax reform and purchase price accounting adjustments. Expect tax rate to be lower in subsequent quarters. Overall expect effective tax rate app 25% in full year 2018


Transcript:
https://finance.yahoo.com/news/edited-transcript-ctl-earnings-conference-054621149.html?.tsrc=applewf&guccounter=2
Title: Re: CTL - CenturyLink
Post by: longinvestor on May 10, 2018, 07:01:18 AM
Congratulations to longs. CTL just appears to have overcome the cloud over the merger. That 15% divvy is looking nicer. CDN revenues went up 27% this Qtr. Appears to be driven by security services, similar to Akamaiís performance. Cyber security could be a nice opportunity here. Timing could not be better.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on May 10, 2018, 08:09:59 AM
Everything looks great to me.

Like during the last years of LVLT Storey and Patel delivered what they have promised. And what they have promised yesterday in the conferencecall sounds excellent for the future. 

I am happy to be invested in CTL with a large part of my portfolio.

My pricetarget remains at more than 31 US$ per share. Waiting to reach the pricetarget, i enjoy 12 % dividend.

I have just also updated a little my remarks from yesterday, on the Q1 figures.
Title: Re: CTL - CenturyLink
Post by: JayGatsby on May 10, 2018, 11:29:21 PM
Which management team will lead the company going forward?

Has anyone long CTL actually done business with them? After a week of trying to get internet service from them for a small business we've decided to just use a Verizon hotspot. (Our unit was never individually wired, which I told them when I first called (otherwise I wouldn't have had to call in the first place). The sales guy spent a week trying to cross/upsell various things (like "long-distance"), before the installer out, took 2 minutes in the unit and said the unit was never wired and it was beyond what he could do). With mobile data becoming cheaper and faster I can't see this not becoming more common. The rates CTL charges for "business" internet are really high, while wireless companies don't make this distinction (businesses usually actually get significantly cheaper rates).
Title: Re: CTL - CenturyLink
Post by: Valuehalla on May 22, 2018, 05:29:54 PM
Prem Watsa / Fairfax Financial increased its holding of CTL in Q1 by 29 %. It is now the 7th largest position in the portfolio of FFH with 2,3% of the portfolio.
Title: Re: CTL - CenturyLink
Post by: petec on June 19, 2018, 04:56:41 AM
Valuehalla would you mind sharing how you get to $31? And do you know the $ value of the FFH position?
Title: Re: CTL - CenturyLink
Post by: Valuehalla on June 19, 2018, 05:56:13 AM
Hello Petec, thx for adding questions

1) FFH was holding on 31th March 2018 1,847100 Mio CTL shares, today a 18 US$ = 33,24 Mio US$; that was an increase of 29,6% to the previous quarter. Source Dataroma.

2) CTL pricetarget of 31 US$ is my individual valuation. In case of 31 US$ the MarketCap would be 33,45 B; now 19,56B. According to the free cash flow (after capex & tax) of 3,2B per year, app. 10 times valuation seems reasonable to me. My individual estimation is based on many aspects. If the price woule be tomorrow higher than 31 US$ i would probably sell my position. As long as it is not, i keep my position and enjoy 12 % dividend paid on my account.

The danger that the LVLT merger or the businessmodel (legacy revenues) will fail is off the table to my opinion. Next Q figures will show, that the new management is able to grow FCF and EBITDA, as they did in LVLT stand alone before.
Title: Re: CTL - CenturyLink
Post by: petec on June 19, 2018, 07:35:22 AM
Thanks. My only issue with that is that the $3.2bn in FCF you use includes some tax payments and other things that look like one-offs to me. Unless we know they are recurring, I prefer a FCF figure of about $2.7bn.

As for the multiple, 10x is very reasonable IF they can get FCF growing sustainably (which means the concerns about the capital structure go away). I agree that is looking more likely.

So, 2.7*10=$27bn, $25...still a good upside.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on July 10, 2018, 01:08:58 PM
CTL closed today above 20 US$ per share.
By that CTL delivered a great winning streck during the last 30 days, as it rised 12,5 % in that time, clearly outpreforming the S&P 500 (+0,37%).

The Q2 figures will be published on 9th August after the bell.

Revenue slightly above 6 B for Q2 would be a great sign, which would enable to top 24B for the full year 2018. This means, the shrinking of the revenue, caused mainly be the legacy customer revenue of CTL, would be overcome.

FCF shall come in around 810 M for Q2.

My target price remains 31 US$.
Title: Re: CTL - CenturyLink
Post by: petec on July 11, 2018, 03:41:15 AM

By that CTL delivered a great winning streck during the last 30 days, as it rised 12,5 % in that time.


I know - bloody annoying - I only bought half of what I wanted ;)
Title: Re: CTL - CenturyLink
Post by: Valuehalla on July 11, 2018, 05:02:16 PM
Mason Hawkins on CTL

from minute 21.10 on
and from minute 33.18 on

https://www.youtube.com/watch?v=kgAsaXGKOJs
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 08, 2018, 01:21:39 PM
2Q 2018 Earnings are out:

http://ir.centurylink.com/file/Index?KeyFile=394566856

- Positive surprise: Great Cash Flow figures!
- Full year 2018 outlook raised EBITDA & FCF !
- MarketCap was 20,02 B on 18,56 $ closing price today,
- After hour the share price is up
- Revenue was 5,902 B in Q2 (5,945 B in Q1) = disapointing aspect
- Expenses down
- Imporved EBITDA margins
- Free Cash Flow: 811 M in Q2 (852 M in Q1); expected outlook for FCF 2018 increased to 3,6 to 3,8B (till now 3,15 to 3,35 B)
- For the dividend (2,3 B per year) that means the payout ratio will be in a range of app 64 % to 60,5% in 2018
- net debt to adj EBITDA ratio down to 4.2 x; (4.3 x in previose quarter)
- Long-Term Debt & Credit Facilities down from 36,94 B at end of Q1 to 36,878 B  (37,238 B end Q4 17)

Conference call:
- Intergration Level 3 is going well
- Expect further increasing EBITDA margins in the future
- Expect further increasing FCF in the future
- no revenue guidance
- no questions or comments on the dividend, according to the outlook dividend will stay at 0.54$ per quarter (2.16$ per year)

Transcript:
https://seekingalpha.com/article/4196789-centurylink-ctl-q2-2018-results-earnings-call-transcript?source=email_rt_article_readmore&dr=1
Title: Re: CTL - CenturyLink
Post by: petec on August 08, 2018, 03:32:46 PM
Did they clarify how much of the fcf is one-offs (tax etc)?
Title: Re: CTL - CenturyLink
Post by: longinvestor on August 08, 2018, 03:40:21 PM
Did they clarify how much of the fcf is one-offs (tax etc)?

Yes, they did. Someone asked a question about this. It's mostly synergy driven and Sunit pointed to the increased guidance on FCF.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 08, 2018, 04:37:01 PM
They said that the taxrefund of Q2 was mentioned already in the outlook given in Q1.
The taxrefund in Q3 is spended in the pensionplan, so neutral.
So I understand that clearly, like Longinvestor does as well, the increased given outlook for FCF is not based in taxrefunds, but in increased EBITDA, syernergies and business. Its a fundamental increase of the guidance, driven by synergies.
Title: Re: CTL - CenturyLink
Post by: petec on August 09, 2018, 03:15:14 AM
I wasn't suggesting the increase was due to tax refunds - I'm just trying to figure out what recurring FCF is.

Here's my take on the results:

All the commentary about how they are transforming the business is very positive and hopefully we start to see the results over the next few quarters.

The EBITDA guidance increase is nice but ultimately meaningless. They are extracting synergies faster, which boosts 2018 ebitda, but they're not guiding to higher final synergies, so recurring earnings power is not higher than previously expected.

I'm more interested in (and confused by) recurring FCF. New guidance for 2018 is $3.6-3.8bn, but on the Q1 call they disclosed $550m worth of one-off boosts to 2018 FCF including the q1 tax refund, early bonuses, and working capital gains. That suggests recurring FCF is $3-3.25bn. That's a very good number vs a $20bn market cap, especially given that they are still talking about 40-42% ebitda margins eventually which in round numbers is another $500-1bn in ebitda and, if you tax that at 20%, another $400-800m in FCF. That's great - anything around the $3.5bn mark in recurring FCF makes this stock insanely cheap IMHO.

What I find confusing is that the FCF guidance increase is $450m, much larger than the EBITDA guidance increase of $200m. Why? The capex guide is down a touch in absolute terms but not enough to explain the difference. It's not clear to me why recurring FCF should be higher if recurring ebitda hasn't increased (see above) and if capex guidance hasn't fallen (still 16% of revenues). I wonder if there is another one off in there, in which case recurring FCF might be in the high $2bn range rather than the low $3bn range.



Title: Re: CTL - CenturyLink
Post by: longinvestor on August 15, 2018, 05:49:20 PM
Early days of cheery consensus? Analysts have moved away from a ďDonít touch itĒ to a lovefest stock in less than a year.
Title: Re: CTL - CenturyLink
Post by: petec on August 15, 2018, 05:57:20 PM
Hope so!
Title: Re: CTL - CenturyLink
Post by: walkie518 on August 21, 2018, 09:06:22 PM
it's likely still fairly cheap here?

should revs stabilize further we might have ourselves a fair amount of room to run?
Title: Re: CTL - CenturyLink
Post by: petec on August 22, 2018, 11:03:11 AM
it's likely still fairly cheap here?

should revs stabilize further we might have ourselves a fair amount of room to run?

Likely, yes, especially today, and especially if you assume >$3bn in recurring FCF (see my post above). But MN (who downgraded today) are right that there is no certainty that revenues will stabilise. My bet is that the transformation and simplification of the company will enable the new management to grow the combined business, but that has not yet been proven.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on August 22, 2018, 12:42:03 PM
I agree that the revenue was the weak point in the Q1 figures. I expected more than 6 B which came not true.
In case of LVLT Storey and Patel stabilized the revenue and than it started to grow slightly in the end.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on September 06, 2018, 10:43:25 AM
Sunit Patel, CFO, CenturyLink, today took part in Bank of America - Merrill Lynch 2018 Media, Communications and Entertainment Conference:

- Strong commitment on the dividend. They are able and willing to maintain it.
- Expecting growing EBIDTA over the next years.
- Exercised restraint on the revenue development, sounded to me like expecting further shrinking revenue, but due to synergies and cost savings better margins, better EBITDA, FCF
- 5G, Dark Fiber, On-Net buildings, SD WAN as positive business drivers for the future
Title: Re: CTL - CenturyLink
Post by: walkie518 on September 06, 2018, 11:29:20 AM
Sunit Patel, CFO, CenturyLink, today took part in Bank of America - Merrill Lynch 2018 Media, Communications and Entertainment Conference:

- Strong commitment on the dividend. They are able and willing to maintain it.
- Expecting growing EBIDTA over the next years.
- Exercised restraint on the revenue development, sounded to me like expecting further shrinking revenue, but due to synergies and cost savings better margins, better EBITDA, FCF
- 5G, Dark Fiber, On-Net buildings, SD WAN as positive business drivers for the future
buying more?
Title: Re: CTL - CenturyLink
Post by: Valuehalla on September 06, 2018, 02:10:46 PM
For sure its still a buy. Compare marketcap and FCF!

For myself, i have enough, app. 10 % of my portfolio is in CTL now. I keep it and enjoy the dividend. If price would be tomorrow above 31, i will sell or reduce the position.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on September 13, 2018, 04:12:36 PM
A report about the new simplified consumer-offer "Price for Life"

https://seekingalpha.com/article/4205519-next-centurylinks-10-percent-yield
Title: Re: CTL - CenturyLink
Post by: Valuehalla on September 24, 2018, 10:02:03 PM
CFO Patel is leaving CTL

http://www.snl.com/Cache/c395119114.html

https://seekingalpha.com/news/3392562-centurylink-minus-3_8-percent-cfo-patel-exit-post-t-mobile

https://finance.yahoo.com/news/centurylink-cfo-departure-worry-investors-165900469.html?.tsrc=applewf
Title: Re: CTL - CenturyLink
Post by: petec on September 25, 2018, 02:03:56 AM
How much does this worry you?
Title: Re: CTL - CenturyLink
Post by: Valuehalla on September 25, 2018, 03:50:45 AM
Doenst worry me at all. If Jeff Storey would leave additionally, it would worry me.
Title: Re: CTL - CenturyLink
Post by: longinvestor on September 25, 2018, 06:06:32 AM
I will worry if they change the tune he sang as recently as last week. So far nothing but greener pastures for him. Wildcard could be if they ink some revenue deal with TMUS. Or something bigger with Masa down the road.
Title: Re: CTL - CenturyLink
Post by: petec on November 02, 2018, 10:18:49 AM
So after spending a lot of time trying to understand the downside Iíve started to think more about the ďwhat if it all goes rightĒ scenario.

1) margins rise 500-700bps off a base of 36%. Round numbers, that gets you to 9-10bn in ebitda. At those levels free cash flow after the dividend is $1-2bn and you need to pay down $1-4.5bn of debt to get to the middle of the 3-4x target leverage range. So best case scenario you can start buying back stock in about a year.

2) clearly there are legacy revenues that will continue to decline. But, data is the fastest growing thing on earth today (I heard an IBM stat that 90% of the data on earth was created in the last 2 years, and weíve barely got started). If you own the pipes the data flows down is it *really* so hard to believe you might be able to grow revenues at a couple of percent a year? And if you can do that, maybe you can grow ebitda at 5%. Not in the next couple of years, when ebitda growth will come from margins not revenues + operating leverage. But long term.

3) if you can grow ebitda at 5% or $500m a year, you can borrow $1.75bn to keep at 3.5x levered. Add FCF after the dividend and you get to a buyback of $3.5bn in round numbers. Thatís 15% of the company, annually, at the current price. In addition to a 10% dividend.

4) Would that company trade at 10x FCF? 15x? That would be a double or a triple.

Iím not saying this is a base case, but one has to frame upside as well as downside. Please shoot holes in this - I want to know why it canít happen.
Title: Re: CTL - CenturyLink
Post by: petec on November 02, 2018, 10:19:33 AM
I will worry if they change the tune he sang as recently as last week. So far nothing but greener pastures for him. Wildcard could be if they ink some revenue deal with TMUS. Or something bigger with Masa down the road.

How would you envisage a revenue deal with TMUS working?
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 02, 2018, 09:46:49 PM
I will worry if they change the tune he sang as recently as last week. So far nothing but greener pastures for him. Wildcard could be if they ink some revenue deal with TMUS. Or something bigger with Masa down the road.

How would you envisage a revenue deal with TMUS working?

CTL simply takes over Sprint's enterprise business / customers. It has been a continuous drag for Sprint. There was a rumored deal like this some 5 or so years ago. Sprint apparently didn't want to, because LVLT was not in a good enough financial shape. Times have changed. Everyone, including VZ/T is losing share in enterprise to CTL (LVLT).
Title: Re: CTL - CenturyLink
Post by: petec on November 03, 2018, 12:55:39 AM
I will worry if they change the tune he sang as recently as last week. So far nothing but greener pastures for him. Wildcard could be if they ink some revenue deal with TMUS. Or something bigger with Masa down the road.

How would you envisage a revenue deal with TMUS working?

CTL simply takes over Sprint's enterprise business / customers. It has been a continuous drag for Sprint. There was a rumored deal like this some 5 or so years ago. Sprint apparently didn't want to, because LVLT was not in a good enough financial shape. Times have changed. Everyone, including VZ/T is losing share in enterprise to CTL (LVLT).

Thanks. Whatís the easiest way to track share changes? Does anyone aggregate data or are you getting that from tracking all companies?
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 05, 2018, 05:59:51 AM
So after spending a lot of time trying to understand the downside Iíve started to think more about the ďwhat if it all goes rightĒ scenario.

1) margins rise 500-700bps off a base of 36%. Round numbers, that gets you to 9-10bn in ebitda. At those levels free cash flow after the dividend is $1-2bn and you need to pay down $1-4.5bn of debt to get to the middle of the 3-4x target leverage range. So best case scenario you can start buying back stock in about a year.

2) clearly there are legacy revenues that will continue to decline. But, data is the fastest growing thing on earth today (I heard an IBM stat that 90% of the data on earth was created in the last 2 years, and weíve barely got started). If you own the pipes the data flows down is it *really* so hard to believe you might be able to grow revenues at a couple of percent a year? And if you can do that, maybe you can grow ebitda at 5%. Not in the next couple of years, when ebitda growth will come from margins not revenues + operating leverage. But long term.

3) if you can grow ebitda at 5% or $500m a year, you can borrow $1.75bn to keep at 3.5x levered. Add FCF after the dividend and you get to a buyback of $3.5bn in round numbers. Thatís 15% of the company, annually, at the current price. In addition to a 10% dividend.

4) Would that company trade at 10x FCF? 15x? That would be a double or a triple.

Iím not saying this is a base case, but one has to frame upside as well as downside. Please shoot holes in this - I want to know why it canít happen.

I will bite. #1 and #3 are possible and thatís all that they are focused on.

#2: Telecom is brutal and total revenues of the industry remains capped. So they have to take share. Thereís just too much capacity and too much clout in the last mile. CTL has been building out their own last mile in enterprise. This was a late realization and brought to LVLT by Storey. Revenues have grown slowly and itís always offset by legacy shrinkage and price compression. Revenue growth? Nada.

In all of this, something that is glossed over is that by buying CTL, we are sitting on the two best fiber backbones in QWest and LVLT. We now wait for the industry to consolidate down to the last man standing. I will be dead before then 😢
Title: Re: CTL - CenturyLink
Post by: petec on November 05, 2018, 08:40:28 AM
The only problem with that is that (3) doesn't work without (2) - in the long run you can't grow ebitda without growing revenues. Storey is quite clear that in the long run they need to be an enterprise revenue growth company (e.g. comments at GS Communacopia conference recently).

Also, I'm very aware of the quality of the backbone but I never know how to think about that in value terms given that backbone capacity doesn't seem to be limited - the barrier to entry is cost of overlay in the last mile, as far as I can tell. Am I wrong, and can you elaborate on how you think about the value of the backbone?
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 07, 2018, 01:13:38 AM
CenturyLink has named Neel Dev executive VP and chief financial officer.

The move's effective immediately; Dev has been interim CFO since Sunit Patel left the company in September.

He's another exec with experience at Level 3, where he spent 13 years prior to the CenturyLink acquisition.

He has previously served as CenturyLink group VP of finance.
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 07, 2018, 06:12:55 AM
The only problem with that is that (3) doesn't work without (2) - in the long run you can't grow ebitda without growing revenues. Storey is quite clear that in the long run they need to be an enterprise revenue growth company (e.g. comments at GS Communacopia conference recently).

Also, I'm very aware of the quality of the backbone but I never know how to think about that in value terms given that backbone capacity doesn't seem to be limited - the barrier to entry is cost of overlay in the last mile, as far as I can tell. Am I wrong, and can you elaborate on how you think about the value of the backbone?
In the long run sure. My money is in this for the sole reason that these valuable assets are a part of the furniture when the industry is fully consolidated.In the meantime, Storey is doing the absolutely right thing in improving the margin profile of revenues. I am tickled to get paid a fat dividend while waiting. At 10+% itís quite satisfactory.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 08, 2018, 01:44:09 PM
3Q 2018 Earnings are out:

http://ir.centurylink.com/file/Index?KeyFile=395695567

- Again positive surprise: Great Cash Flow figures; FCF comes in much higher than expected, primarily driven by lower capex but also by better margins
- Full year 2018 outlook AGAIN raised for FCF to 4,0 to 4,2 B !
- CF from Operations up to 1,787 B from 1,582 B in Q2 ( = 13 % up)
- Full year 2018 outlook confirmed for EBITDA at 9 to 9.15 B
- Capex will be 3,15 to 3,25 B in 2018, not 16 % of the revenue
- MarketCap was 22,08 B on 21.08 $ closing price today,
- Although after hour the share price dropp 6 %
- Revenue was 5,818 B in Q3 (5,902 B in Q2)
- Imporved EBITDA margins 39,3 % from 38,5 % in Q2 and 35,5 % a year ago
- Free Cash Flow: 1,103 M in Q3 (811 M in Q2); expected outlook for FCF 2018 increased to 4,0 to 4,2B (till now 3,6 to 3,8 B)
- For the dividend (2,3 B per year) that means the payout ratio will be app 56 % of FCF. So payout ratio is massively down with that FCF figures in comparison to the past.
- net debt to adj EBITDA ratio down to 4.1 (4.2 x in previous quarter), target 3 to 4 times
- Long-Term Debt & Credit Facilities down to 35,749 B down from 36,878 B at end of Q2
   (36,94 B at end of Q1 18 and 37,238 B end Q4 17)

Conference call:
- focus on profitable revenue, low margin contracts were and will be canceled
- revenue decline comes from unprofitable contracts
- good progress with synergies and integration, ahead of the expectations
- expect lower expenses
- expect further growing EBITDA & margins
- Price for life product now generates 50% of the cunsumer revenue, which simplifies the handling, reduce costs
- Capex 13 % of total revenue, reduced capex in copper plant and incraesed in fiber footprint. Longterm capex will be at 16% of revenue.
- They "remain comfortable with the dividend"!
- The focus of the management will move from integration to business transformation now
- 5G is part of CTLs network expanding strategy
- head count: app 52,500 a year ago and app 46,000 now

Transcript:
https://finance.yahoo.com/news/centurylink-inc-ctl-q3-2018-032900932.html?.tsrc=applewf
Title: Re: CTL - CenturyLink
Post by: marazul on November 08, 2018, 01:45:46 PM
numbers look very good, why is the stock down afterhours?
Title: Re: CTL - CenturyLink
Post by: petec on November 08, 2018, 02:12:11 PM
numbers look very good, why is the stock down afterhours?

Because the revenue and OCF figures arenít good. The FCF beat is on lowered capex only. Call commentary will be key.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 08, 2018, 03:07:15 PM
Operating Cash Flow was up 13 % from last quarter, FCF up 36 %.

What do you guys out there think about the figures and the conferencecall ?

To me everything looks good.
Title: Re: CTL - CenturyLink
Post by: petec on November 08, 2018, 03:15:32 PM
Operating Cash Flow was up 13 % from last quarter, FCF up 36 %.

What do you guys out there think about the figures and the conferencecall ?

Several headlines reporting that OCF was below the lowest est. There may be something non-comparable about that as it looked fine in absolute terms to me.

Havenít listened to the call. What did they say about why capex is down?

Revenues does worry me somewhat.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 08, 2018, 03:25:23 PM
They shall increase the dividend by 1 cent, that would be a positive sign.  :) There is enough room to do so.
Title: Re: CTL - CenturyLink
Post by: petec on November 08, 2018, 03:43:59 PM
Ugh. Iíd far rather they paid down debt. The dividend is already way too high, until they prove they can stabilise revenue.
Title: Re: CTL - CenturyLink
Post by: SI on November 08, 2018, 10:12:37 PM
They did say why the capex is down, they refuse to extend the copper plant.

Debt is also moving down rapidly - debt was $39bn when deal closed, net debt 35.4 now and they put a half billion in to basically fully fund the pension. Assuming Tuesdayís ebitda growth guide is intact for the next twelve months, 9.1bn maybe is 9.3bn. Remember sunit guided ebitda growth each year for the next 5 so that was clearly a plan.

Anyway, If they donít find any more reusable equipment as they did this year, have no more tax efficiencies and are done consolidating real estate, you are looking at 3.7x net debt to ebitda by this time next year. My guess is in the low 3s the mkt will start valuing the company more on fcf to the equity than free cash to the firm - maybe that takes 3-4 years but that is where the value will be created. That time frame to me rhymes with tmus bs cleanup post sprint, that should leave them ready and able to shore up the most critical part of its supply chain and bring a complete sales offering against t and vz by acquiring ctl.
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 09, 2018, 05:03:03 AM
They did say why the capex is down, they refuse to extend the copper plant.

Debt is also moving down rapidly - debt was $39bn when deal closed, net debt 35.4 now and they put a half billion in to basically fully fund the pension. Assuming Tuesdayís ebitda growth guide is intact for the next twelve months, 9.1bn maybe is 9.3bn. Remember sunit guided ebitda growth each year for the next 5 so that was clearly a plan.

Anyway, If they donít find any more reusable equipment as they did this year, have no more tax efficiencies and are done consolidating real estate, you are looking at 3.7x net debt to ebitda by this time next year. My guess is in the low 3s the mkt will start valuing the company more on fcf to the equity than free cash to the firm - maybe that takes 3-4 years but that is where the value will be created. That time frame to me rhymes with tmus bs cleanup post sprint, that should leave them ready and able to shore up the most critical part of its supply chain and bring a complete sales offering against t and vz by acquiring ctl.
Completely aligned with your view. TMUS plus CTL will be super competitive with VZ and T. In Masayoshi Sonís hands this could be a global player like few others. Now I am getting ahead a bit.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 09, 2018, 05:42:54 AM
CTL is extremly cheap now and a strong buy!

After the Q3 figures were published yesterday, I digged again in the old numbers of 2016, when the acquisition was announced and how the figures of CTL and LVLT standalone were at these times.

The progress and the development till today is great.

The fundamentals today are that CTL has just a marketcap of 22 B, but a FCF of 4,0 to 4,2 B, an EBITDA of 9 B, Net longterm debt of 35,749 B and a revenue of app 23 B in 2018

The 4 B FCF in 2018 is after tax, after capex, just before dividend. Dividend needs 2,3 B per year to pay it: So payout ratio app 56 %

With a 2,16 $ dividend p.a./ share, the dividend rate is now more than 10 %

A comfortable pillow to sit and wait. The management is committed to pay the dividend.

In 2016, when the acquisition was announced, it looked like this for the full year 2016:

Revenue:     LVLT  8,17 B         and       CTL 17,47 B          in total 25,642 B
EBITDA:       LVLT  2,865 B       and       CTL 7 B                 in total  9,865 B
FCF:             LVLT  1,1 B          and       CTL 1,817 B          in total 2,9 B
Net Debt:      LVLT 9,19 B         and        CTL 19,7 B           further app 10 B was added for the acquisition, so in total 40 B

From the beginning on, the new CEO Jeff Storey announced to increase FCF, margins and EBITDA. Always making clear, they will loose unprofitable revenue. Storey was CEO at LVLT before and did there the same agenda, which he is executing now in CTL: better FCF and margins on lower revenue.
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 09, 2018, 09:04:44 AM
CTL is extremly cheap now and a strong buy!

After the Q3 figures were published yesterday, I digged again in the old numbers of 2016, when the acquisition was announced and how the figures of CTL and LVLT standalone were at these times.

The progress and the development till today is great.

The fundamentals today are that CTL has just a marketcap of 22 B, but a FCF of 4,0 to 4,2 B, an EBITDA of 9 B, Net longterm debt of 35,749 B and a revenue of app 23 B in 2018

The 4 B FCF in 2018 is after tax, after capex, just before dividend. Dividend needs 2,3 B per year to pay it: So payout ratio app 56 %

With a 2,16 $ dividend p.a./ share, the dividend rate is now more than 10 %

A comfortable pillow to sit and wait. The management is committed to pay the dividend.

In 2016, when the acquisition was announced, it looked like this for the full year 2016:

Revenue:     LVLT  8,17 B         and       CTL 17,47 B          in total 25,642 B
EBITDA:       LVLT  2,865 B       and       CTL 7 B                 in total  9,865 B
FCF:             LVLT  1,1 B          and       CTL 1,817 B          in total 2,9 B
Net Debt:      LVLT 9,19 B         and        CTL 19,7 B           further app 10 B was added for the acquisition, so in total 40 B

From the beginning on, the new CEO Jeff Storey announced to increase FCF, margins and EBITDA. Always making clear, they will loose unprofitable revenue. Storey was CEO at LVLT before and did there the same agenda, which he is executing now in CTL: better FCF and margins on lower revenue.

Munger has often said that there are customers who youíre better off not having. In the case of CTL itís entire biz segments that are worth jettisoning. The cost avoidance is huge which we heard one example of. Copper capital investment. Now the legacy CTL has loads of such shitty revenues. Why I posted earlier that total revenue growth is unrealistic for a while. They have to cut cost while growing profitable revenues. Wishing it different is futile.
Title: Re: CTL - CenturyLink
Post by: petec on November 09, 2018, 09:28:06 AM
CTL is extremly cheap now and a strong buy!

After the Q3 figures were published yesterday, I digged again in the old numbers of 2016, when the acquisition was announced and how the figures of CTL and LVLT standalone were at these times.

The progress and the development till today is great.

The fundamentals today are that CTL has just a marketcap of 22 B, but a FCF of 4,0 to 4,2 B, an EBITDA of 9 B, Net longterm debt of 35,749 B and a revenue of app 23 B in 2018

The 4 B FCF in 2018 is after tax, after capex, just before dividend. Dividend needs 2,3 B per year to pay it: So payout ratio app 56 %

With a 2,16 $ dividend p.a./ share, the dividend rate is now more than 10 %

A comfortable pillow to sit and wait. The management is committed to pay the dividend.

In 2016, when the acquisition was announced, it looked like this for the full year 2016:

Revenue:     LVLT  8,17 B         and       CTL 17,47 B          in total 25,642 B
EBITDA:       LVLT  2,865 B       and       CTL 7 B                 in total  9,865 B
FCF:             LVLT  1,1 B          and       CTL 1,817 B          in total 2,9 B
Net Debt:      LVLT 9,19 B         and        CTL 19,7 B           further app 10 B was added for the acquisition, so in total 40 B

From the beginning on, the new CEO Jeff Storey announced to increase FCF, margins and EBITDA. Always making clear, they will loose unprofitable revenue. Storey was CEO at LVLT before and did there the same agenda, which he is executing now in CTL: better FCF and margins on lower revenue.

Proforma predeal ebitda at $9.9bn suggests weíve lost several hundred million in ebitda despite huge synergies. That doesnít sound right?!

Title: Re: CTL - CenturyLink
Post by: petec on November 09, 2018, 09:33:08 AM

Munger has often said that there are customers who youíre better off not having. In the case of CTL itís entire biz segments that are worth jettisoning. The cost avoidance is huge which we heard one example of. Copper capital investment. Now the legacy CTL has loads of such shitty revenues. Why I posted earlier that total revenue growth is unrealistic for a while. They have to cut cost while growing profitable revenues. Wishing it different is futile.

Yes. I should have been explicit in our earlier debate that I was discussing growing ebitda-profitable revenue, not overall revenue. The problem is itís virtually impossible to know if thatís happening.
Title: Re: CTL - CenturyLink
Post by: petec on November 09, 2018, 10:11:21 AM
Just listening to the call. They are pretty explicit that the capex beat vs guide is not recurring. Guide for future years remains 16% of revenues. Plus thereís $300m of fcf one offs in 2018 (tax refunds etc). They made a comment that excluding one offs and at 16% capex, div/fcf would be in the low 70% range, implying sustainable run rate FCF is about $3.2bn.

On the positive side more of that FCF will go to debt reduction if they donít have to make more pension plan contributions.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 10, 2018, 03:45:03 AM
From the transcript of the conference call:

"As I mentioned earlier, our initiatives around improving our capital planning and deployment processes have resulted in lighter capital expenditures. With that in mind, we now expect full year 2018 capital expenditures of $3.15 billion to $3.25 billion, which is lower than the original outlook of 16% of total revenues. Primarily driven by lower capital spending, we are updating our full year 2018 outlook for free cash flow to $4 billion to $4.2 billion from $3.6 billion to $3.8 billion.

I'd also like to point out that based on our free cash flow outlook, our dividend payout ratio as a percent of free cash flow is expected to be in the mid-50s this year. Keep in mind, in 2018 we had approximately $300 million of aggregate one-time cash flow benefit from the tax refunds, net of higher pension contribution we made this year and the bonuses paid to Level 3 employees in 2017 versus 2018. Excluding the benefit that I mentioned and if our capital expenditures were around 16% of total revenue, our payout ratio would have been in the low 70s.

We are pleased with the improvement in our payout ratio compared to last year and remain comfortable with the dividend. I'll summarize by emphasizing Jeff's earlier comments. Having just passed the one-year mark, we feel good about our synergy achievement, margin expansion and focus on profitable growth."


When they announced the acquisition in 2016 they said, for the first 4 years they will have NOLs that reduce the tax for 650 to 675 M per year.

 
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 10, 2018, 03:57:40 AM
CTL development in 2018:

                                        Q1                               Q2                                  Q3

Revenue                           5,945 B                         5,902 B                          5,818 B
 
EBITDA                            2,074 B                          2,111 B                          2,228 B

adj. EBITDA                      2,181 B                         2,271 B                          2,287 B                         

EBITDA Margin                  34,9 %                           38,5 %                          39,3 %

Lomg Term Dept                36,94 B                          36,78 B                          35,749 B

NetDept to adj EBITDA          x 4.3                             x 4.2                            x 4.1

Operat. CF                        1,667 B                           1,58 B                            1,787 B

FCF                                    852 M                            811 M                             1,103 B

EPS                                     0,11                              0,27                               0,25

Markt Cap
(at day figures came out)      19,464 B                      20,02 B                            22,08 B

Market Cap today: 20,43 B
Title: Re: CTL - CenturyLink
Post by: petec on November 10, 2018, 04:11:41 AM
Thanks Valuehalla. Good summary. (Although if Iím being cheeky Iíd rather net debt than long term debt!).

What do you draw from these figures? How do you feel about long term (3y+) ebitda growth prospects? And do you agree with my assumption that sustainable free cash flow is currently running at $3.2bn?
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 10, 2018, 04:26:14 AM
I feel positive with the figures in 2018.

But i am disaponted about revenue. In 2017 I made a calculation, based on all small revenue segments and i came to the result that revenue per quarter shall come in above 6B in 2018. That came not true.

Since Storey is CEO they do not announce increasing revenue anymore, just growing EBITDA and FCF, which came true over the 3 quarters in 2018. In case of LVLT they did the same agenda and in the end they increased even slightly the revenue. But nobody knows, if it will happen again in same way.

If the FCF is above 3,1 B in 2019 the company is still cheap. It remains the negative that it can be a value trapp. Revenue can shrink more and more over time. Thats a risk.

The FCF above 4 B for 2018  clearly looks like a one time effect.

But i am not sure about the meaning of the quote in the call, thats why i published it.
It could also mean that there are one time negative effects (pension fund and bonus) beside the positive effect tax refund ? And the one time positive effect is in total net just 300 B ?  (that would be great) On the other hand, that would not go along with mid 70s for payout ratio...

I am not english native speaker, how do you interprete the quote?
Title: Re: CTL - CenturyLink
Post by: petec on November 10, 2018, 04:48:29 AM
I read it very clearly as two effects, $300m for tax/other and another timing effect as copper capex falls before fibre capex ramps. Ex those two effects div/fcf is low 70s, or 3.2bn.

My issue is that I donít know enough about the industry as a whole - who theyíre competing against, why customers choose different providers, and therefore who might win. Iíve always known I didnít know enough about that but as headline revenue trends worsen I worry more.

3.2bn is 16% yield which is cheap but not that cheap if this cant grow.
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 10, 2018, 06:05:51 AM
This is an investment case of trust in management. Make that Storey. But they have great assets but overbuilt (35B today) with the attendant debt load.. This is why Buffett never touches anything like this.
Title: Re: CTL - CenturyLink
Post by: petec on November 10, 2018, 07:15:45 AM
If I was Buffett Iíd be looking at buying this outright, refinancing the debt stack 100bps cheaper, and riding the free cash wave ;)
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 10, 2018, 07:27:26 AM
If I was Buffett Iíd be looking at buying this outright, refinancing the debt stack 100bps cheaper, and riding the free cash wave ;)
That speculation has been alive for 20 years. I wish itíd happen. Todd / Ted?
Title: Re: CTL - CenturyLink
Post by: petec on November 10, 2018, 07:33:35 AM
Wonít happen but nice to dream!
Title: Re: CTL - CenturyLink
Post by: Cigarbutt on November 10, 2018, 08:49:12 AM
Long term vs short term opportunity question here.

Holding Fairfax in the past, the fact that they held LVLT securities for long periods always made me feel uneasy.

Looking at past comments made by longinvestor, it seems that concerns are shared about long term performance of these heavily indebted entities in cyclical capacity businesses. Even if Mr. Buffett had a close connection with Mr. Walter Scott and even if the 2002 environment was compelling for the LVLT distressed bonds, he "only" committed 100M and sold (with something like a 100% profit) after holding the convertible bonds for about only a year.

-A potential question for those holding CTL about the pension plan underfunding:

How does one discount for this and do you take into account different cash flow scenarios given that the thesis seems to rest a lot on the "safety" of the dividend?

In 2011, CTL benefitted from legislative "relief", basically "adjusting" discounting analysis and allowing smoothing of cash flow requirments to deal with underfunding. Then PBO=13,60B, PA=11,81 and underfunding=1,78B. The relief measures helped but in no way changed the amounts that ultimately need to be paid. At year end 2017, PBO=13,12B, PA=11,06B and underfunding=2,06B. In 2017, the funding ratio made it to 86,0% (vs 81,1% the year before). Not often discussed in investing circles but, from an actuarial and statistical perspective, the part of the curve around 80 to 85% sits very close to an area where non-linear events can occur. During 2018, CTL has contributed 100M + 400M to the pension plan but it seems that the second contribution corresponds pretty much to a mirror image of a non-recurrent tax inflow occurring in Q3.

So, even under a very favorabe environment and in the context of non-recurrent events, CTL seems to be pretty much where it was in 2011.

These days I read "Trade like Warren Buffett" by James Altucher and find it refreshing since we don't usually think of Mr. Buffett as a "trader" even though he may be.
Title: Re: CTL - CenturyLink
Post by: petec on November 10, 2018, 09:57:11 AM
Simple answer is I add the pension deficit to the debt.

Do you have the figure for cumulative contributions from 2011 to 2017? And do your figures adjust for the addition of the LVLT deficit (I assume that pension was in deficit).

Why do you consider the conditions to have been so favourable? My understanding was that low rates were unfavourable for deficits due to the impact of lowered discount rates on long term liabilities. Am I wrong?

As an aside, I donít think the investment case rests on the dividend. I think it rests on the FCF yield. I wish theyíd cut the damned dividend and delever because I see the debt as an existential threat in the bear case.

The issue I have with the FCF yield argument is I can get similar yields elsewhere with less risk, in businesses where I donít have to trust management that the revenue declines are down to unprofitable revenues and that I donít actually own a melting iceberg. Then again, if theyíre right and they can achieve any level of sustainable ebitda growth, this is a steal.
Title: Re: CTL - CenturyLink
Post by: Cigarbutt on November 10, 2018, 12:29:32 PM
Simple answer is I add the pension deficit to the debt.

Do you have the figure for cumulative contributions from 2011 to 2017? And do your figures adjust for the addition of the LVLT deficit (I assume that pension was in deficit).

Why do you consider the conditions to have been so favourable? My understanding was that low rates were unfavourable for deficits due to the impact of lowered discount rates on long term liabilities. Am I wrong?

As an aside, I donít think the investment case rests on the dividend. I think it rests on the FCF yield. I wish theyíd cut the damned dividend and delever because I see the debt as an existential threat in the bear case.

The issue I have with the FCF yield argument is I can get similar yields elsewhere with less risk, in businesses where I donít have to trust management that the revenue declines are down to unprofitable revenues and that I donít actually own a melting iceberg. Then again, if theyíre right and they can achieve any level of sustainable ebitda growth, this is a steal.
When I looked (stopped in 2015), CTL contributed 100M in each year, 2015, 2016 and 2017. As far as I recall, the LVLT pension funding was not a material issue (maybe some stuff from Global Crossing?).

For the discount rate, you are correct because lower discount rates render the obligation larger (higher value of PBO and higher current service costs). But, in a period where appraisal on the asset side is said to correlate so tighly (gravity concept) with interest rates, rules that I allude to in the previous post allow to build a gap between the discount rate used for PBO and the risk-free rate (rules allow to take a longer term perspective ie 25 years) with the idea that this gap will close over time. Risk-free interest rates since 2011 have remained low (maybe this is changing?) but the discount rates used have had a tendency to decrease less. So, in a way, there is a "gap" that has been built which will have a tendency to act as a negative margin of safety going forward as the values will tend to converge under any scenarios. There eventually may be a limit to the amend and extend process.

I understand your comment about the dividend and value your fundamental assessment but would like to mention that sometimes (not saying this necessarily applies to CTL though), the best time to buy such an opportunity is when the company announces a dividend cut and the market attributes a lower value whereas the intrinsic value for the interested observer may not change, giving rise to a potential opportunity. Is this happening with GE?

I will follow this idea but have to admit it is too complicated for me. Also, I often wonder about the situations where dividends are maintained when the most sensible thing to do would be to lower leverage to more reasonable levels. I wonder because of the of asymmetric reward that management may collect if things go well.
Title: Re: CTL - CenturyLink
Post by: kab60 on November 10, 2018, 12:53:42 PM
I've been tempted by this story and even though it's completely irrational the yield has probably played a role. I think it's really important to stay intellectually honest here, because the yield means nada to the intrinsic value. I'd also venture that with a new CFO on board it will be easier for them to slash it.
Title: Re: CTL - CenturyLink
Post by: walkie518 on November 12, 2018, 07:04:27 AM
I'd also venture that with a new CFO on board it will be easier for them to slash it.
I disagree here.

I don't think the new CFO is detailing a different Storey

Despite rev decline, cash flow is ok, last 9 months shows $5B of cash flow against $2B of capex... back of the env, this keeps div intact ($1.7B/9 months) and whatever is left can go to debt pay down
Title: Re: CTL - CenturyLink
Post by: matts on November 12, 2018, 10:27:39 AM
I'd also venture that with a new CFO on board it will be easier for them to slash it.
I disagree here.

I don't think the new CFO is detailing a different Storey

Despite rev decline, cash flow is ok, last 9 months shows $5B of cash flow against $2B of capex... back of the env, this keeps div intact ($1.7B/9 months) and whatever is left can go to debt pay down

I see what you did there 8)
Title: Re: CTL - CenturyLink
Post by: kab60 on November 12, 2018, 11:40:33 AM
I'd also venture that with a new CFO on board it will be easier for them to slash it.
I disagree here.

I don't think the new CFO is detailing a different Storey

Despite rev decline, cash flow is ok, last 9 months shows $5B of cash flow against $2B of capex... back of the env, this keeps div intact ($1.7B/9 months) and whatever is left can go to debt pay down
I might be reading too much into it but I wasn't convinced when they talked about the divy. Agree cashflows look strong as well as ebitda margins increasing, but debt is high, operating leverage is high and revenues are shrinking. Do we think all or most of the revenue they lost is simply turning away bad business? I don't know but ain't comfortable.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 13, 2018, 01:46:37 AM
That the FCF is up on a one time effect to 4 to 4,2B in 2019 is a positiv news.

I can not understand what is negative on it. If we deduct 2,3 B for the dividend payout from the FCF, 1,7 to 1,9 B is left to reduce the debt. That is a big part of total debt.

Longterm debt is now already at 35,749 B, down from 37,238 B end Q4 17. Delta = 1,489 B within 9 month!
So within 9 month, thy reduced longterm debt app 4%.

EBITDA margins and EBITDA are growing. The reaction of the market - CTL down 10% on the day after the figures came out - is crazy and a good opportunity to buy.

Here is a good article diving a little deeper into it:

https://seekingalpha.com/article/4221517-centurylink-another-bizarre-reaction?dr=1
Title: Re: CTL - CenturyLink
Post by: petec on November 13, 2018, 02:36:42 AM
That the FCF is up on a one time effect to 4 to 4,2B in 2019 is a positiv news.

I can not understand what is negative on it. If we deduct 2,3 B for the dividend payout from the FCF, 1,7 to 1,9 B is left to reduce the debt. That is a big part of total debt.

Longterm debt is now already at 35,749 B, down from 37,238 B end Q4 17. Delta = 1,489 B within 9 month!
So within 9 month, thy reduced longterm debt app 4%.

EBITDA margins and EBITDA are growing. The reaction of the market - CTL down 10% on the day after the figures came out - is crazy and a good opportunity to buy.

Here is a good article diving a little deeper into it:

https://seekingalpha.com/article/4221517-centurylink-another-bizarre-reaction?dr=1

There's nothing negative about a one time benefit but we can't use it to value the company. Sustainable FCF is therefore key to focus on.

As I mentioned above you need to look at net debt not long term debt. Long term debt can come down while net debt goes up, so it's important. Net debt has fallen $700m this year - good, but not great, especially in a year with a roughly $1bn one off FCF benefit. It's quite possible that sustainable FCF, after the dividend and benefit obligation payments, is just a few hundred million. That's not a lot of debt paydown if ebitda stalls. And ebitda WILL stall if they can't stabilise revenues, because you can't cut costs forever. So right now an awful lot hinges on management's promise that the lost revenues are unprofitable. That implies that profitable revenues are flat to growing, but they don't actually say that, which worries me, because I don't know enough about the underlying drivers and competitive dynamics to get comfortable that revenue declines can be halted.

It seems to me that what Storey refers to as the transformation process is really going to be far more important than the integration process. 
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 13, 2018, 03:24:00 AM
Thx a lot for your comments Petec. I agree on your view.

How did you calculated net debt?
How high is net debt now?
Title: Re: CTL - CenturyLink
Post by: petec on November 13, 2018, 03:39:00 AM
Thx a lot for your comments Petec. I agree on your view.

How did you calculated net debt?
How high is net debt now?

I'm just using LT debt + ST debt - cash. You could do more complex calculations including any leases and unfunded benefit obligations but this calc captures most of what you need. So: $35,749+$778-$390 = $36,137, down from $37,175 at year-end (the q4 number does include some leases that seem to have gone away). So actually closer to $1bn paydown in 9 months, not $700m, but driven by some one offs.

There's another $3.7bn in other ST assets - I ought to delve into the notes and see what those are but presumably they are not near-cash items or they'd be disclosed as such.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 15, 2018, 05:27:22 AM
As expected, CTL declared quarterly dividend: 0,54$ per share will be paid on 7th Dec

Thats 2,16$ per year = 11,3% divi rate p.a. on the share price of 19,07 $ (yesterday)

All as expected and announced from the management.

Since 2 years we saw sensless debates about "how safe is the divi", although payout ratio went massivly down from high 70th to mid 50th now and although all the time management was totally committed to the divi.
Title: Re: CTL - CenturyLink
Post by: petec on November 15, 2018, 08:42:29 AM
As expected, CTL declared quarterly dividend: 0,54$ per share will be paid on 7th Dec

Thats 2,16$ per year = 11,3% divi rate p.a. on the share price of 19,07 $ (yesterday)

All as expected and announced from the management.

Since 2 years we saw sensless debates about "how safe is the divi", although payout ratio went massivly down from high 70th to mid 50th now and although all the time management was totally committed to the divi.

Out of interest why are you so focussed on the dividend? The dividend bears no relation to the intrinsic value of the company and if it is too high relative to long term sustainable cash flow then it represents a material threat to equity holders. The fact that they insist on paying it might indicate confidence, or it might indicate stupidity. The equity value in 5 years' time might well be far higher with a lower dividend and lower debt than it is with a higher dividend and higher debt. And you need to own it for 9 years to make your investment back in dividends, so if equity value is meaningfully impaired in 5 you're done for.

The payout ratio has not gone into the 50's on a sustainable basis: they were very clear on the call that it's in the low 70's excluding one offs, so there hasn't been a lot of progress on that front.
Title: Re: CTL - CenturyLink
Post by: matts on November 15, 2018, 09:51:27 AM
I would guess that there is some overhang on the stock price because some investors (not many anymore) think it will get cut and the stock will take a big hit. But I agree with you, it's not a dividend story as far as value is concerned. I'm long the stock and I find Valuehalla's take on events a bit too rosy. There are real risks to this thesis. And the thing is, if all those revenue losses are not just unprofitable contracts, but you know, real business, it's not something Storey can be pinned on. He can just keep singing the same tune for a few more quarters regardless of what is really going on, while the stock drifts lower. Yes, he takes a financial hit when the stock falls, but my point is this is one of those situations where you will never prove that management misled investors.
Title: Re: CTL - CenturyLink
Post by: Cigarbutt on November 15, 2018, 10:29:18 AM
^Just finished reviewing and updating. Too hard pile (business and room for error).
The last input was the following, which I thought useful in terms of different potential scenarios analysis:
https://deconstructingrisk.com/2018/11/13/ctl-pain-before-gain/
Good luck to all.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 16, 2018, 02:36:05 AM
As expected, CTL declared quarterly dividend: 0,54$ per share will be paid on 7th Dec

Thats 2,16$ per year = 11,3% divi rate p.a. on the share price of 19,07 $ (yesterday)

All as expected and announced from the management.

Since 2 years we saw sensless debates about "how safe is the divi", although payout ratio went massivly down from high 70th to mid 50th now and although all the time management was totally committed to the divi.

Out of interest why are you so focussed on the dividend? The dividend bears no relation to the intrinsic value of the company and if it is too high relative to long term sustainable cash flow then it represents a material threat to equity holders. The fact that they insist on paying it might indicate confidence, or it might indicate stupidity. The equity value in 5 years' time might well be far higher with a lower dividend and lower debt than it is with a higher dividend and higher debt. And you need to own it for 9 years to make your investment back in dividends, so if equity value is meaningfully impaired in 5 you're done for.

The payout ratio has not gone into the 50's on a sustainable basis: they were very clear on the call that it's in the low 70's excluding one offs, so there hasn't been a lot of progress on that front.

THX Petec for comments. The management is not only commited to the dividend. They said clearly during all last conference calls: They will increase EBITDA, EBITDA margins and FCF....(from year to year & over the next few years !!!) and they will eliminate unprofitable revenue and they will reduce debt. All of this happened till now. I have no reason to doubt.

It is more likely that they know what they are doing and predicting and its more unlikly they do a fraud to us investors by telling lies.

We will get next guidance for whole 2019 already in app 3  moth. Than we know more about FCF in 2019 and payout ratio.
For today i am happy we are in the mid 50th.

Even if you bought CTL on the high price levels, two years ago - after the aqcuisition was announced - around 25 $ ... you dont have a big loss today, cause you got already 2 times 2,16$ dividend. Not talking about the scenario, if you invested when the price was down mid 13$ in Nov 2017. Or in other words from 9 years, 2 years are already done.
Title: Re: CTL - CenturyLink
Post by: petec on November 16, 2018, 05:48:23 AM
As expected, CTL declared quarterly dividend: 0,54$ per share will be paid on 7th Dec

Thats 2,16$ per year = 11,3% divi rate p.a. on the share price of 19,07 $ (yesterday)

All as expected and announced from the management.

Since 2 years we saw sensless debates about "how safe is the divi", although payout ratio went massivly down from high 70th to mid 50th now and although all the time management was totally committed to the divi.

Out of interest why are you so focussed on the dividend? The dividend bears no relation to the intrinsic value of the company and if it is too high relative to long term sustainable cash flow then it represents a material threat to equity holders. The fact that they insist on paying it might indicate confidence, or it might indicate stupidity. The equity value in 5 years' time might well be far higher with a lower dividend and lower debt than it is with a higher dividend and higher debt. And you need to own it for 9 years to make your investment back in dividends, so if equity value is meaningfully impaired in 5 you're done for.

The payout ratio has not gone into the 50's on a sustainable basis: they were very clear on the call that it's in the low 70's excluding one offs, so there hasn't been a lot of progress on that front.

THX Petec for comments. The management is not only commited to the dividend. They said clearly during all last conference calls: They will increase EBITDA, EBITDA margins and FCF....(from year to year & over the next few years !!!) and they will eliminate unprofitable revenue and they will reduce debt. All of this happened till now. I have no reason to doubt.

It is more likely that they know what they are doing and predicting and its more unlikly they do a fraud to us investors by telling lies.

We will get next guidance for whole 2019 already in app 3  moth. Than we know more about FCF in 2019 and payout ratio.
For today i am happy we are in the mid 50th.

Even if you bought CTL on the high price levels, two years ago - after the aqcuisition was announced - around 25 $ ... you dont have a big loss today, cause you got already 2 times 2,16$ dividend. Not talking about the scenario, if you invested when the price was down mid 13$ in Nov 2017. Or in other words from 9 years, 2 years are already done.

I'm not worried about fraud. I'm worried they fail to pay down enough debt and then (in several years) find they can't sustain ebitda.

They have been very clear that capex will rise again and that they are not at a 50's payout on a sustainable basis. Don't kid yourself that they are. Yes, if they do something extraordinary with costs and ebitda next year they might get there, but it is a stretch, and I wouldn't count those chickens before they hatch.
Title: Re: CTL - CenturyLink
Post by: Valuehalla on November 16, 2018, 06:13:07 AM
I agree on your view, that there is a risk. But its small in my opinion, thats why i am positiv.

Investment is always connected with risks.

CTLs huge fiber footprint is needed and someone will pay for the use. We will not see it going in chapter 11
Title: Re: CTL - CenturyLink
Post by: petec on November 16, 2018, 06:37:25 AM

CTLs huge fiber footprint is needed and someone will pay for the use. We will not see it going in chapter 11


Someone will certainly need to pay. Whether they need to pay enough to support an EV of $60bn is another thing. But I remain long, for now, and I hope you are right.
Title: Re: CTL - CenturyLink
Post by: longinvestor on November 16, 2018, 11:59:30 AM

CTLs huge fiber footprint is needed and someone will pay for the use. We will not see it going in chapter 11


Someone will certainly need to pay. Whether they need to pay enough to support an EV of $60bn is another thing. But I remain long, for now, and I hope you are right.

CTL is sitting on the best fiber assets. Comcast inked a DF deal with LVLT in 2005 for 20 years (I believe); Too bad for us shareholders that it was a giveaway. But we will see how the marketplace is when that that comes up for reneg. It is only 6 years from now (sigh!). Comcast Business nationwide rides on that DF. Keeping a seat at the table in a fully consolidated telecom world is key. Getting paid a (fat)dividend to wait for that is a big deal for long termers like myself.