Valuehalla Posted June 6, 2017 Share Posted June 6, 2017 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? Link to comment Share on other sites More sharing options...
txvalue Posted June 8, 2017 Share Posted June 8, 2017 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. Link to comment Share on other sites More sharing options...
Valuehalla Posted June 9, 2017 Share Posted June 9, 2017 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 Link to comment Share on other sites More sharing options...
Valuehalla Posted June 12, 2017 Share Posted June 12, 2017 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. Link to comment Share on other sites More sharing options...
Valuehalla Posted June 16, 2017 Share Posted June 16, 2017 Mess & Sress approaching? A lawsuit...: https://www.bloomberg.com/news/articles/2017-06-16/centurylink-is-accused-of-running-wells-fargo-like-scheme Link to comment Share on other sites More sharing options...
Valuehalla Posted June 19, 2017 Share Posted June 19, 2017 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 Link to comment Share on other sites More sharing options...
JayGatsby Posted June 19, 2017 Share Posted June 19, 2017 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. Link to comment Share on other sites More sharing options...
Valuehalla Posted June 20, 2017 Share Posted June 20, 2017 Further a class-action: https://www.bloomberg.com/news/articles/2017-06-19/centurylink-faces-class-action-lawsuit-seeking-up-to-12-billion Link to comment Share on other sites More sharing options...
Valuehalla Posted June 20, 2017 Share Posted June 20, 2017 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. Link to comment Share on other sites More sharing options...
Valuehalla Posted June 20, 2017 Share Posted June 20, 2017 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. Link to comment Share on other sites More sharing options...
Valuehalla Posted June 22, 2017 Share Posted June 22, 2017 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/ Link to comment Share on other sites More sharing options...
Valuehalla Posted June 26, 2017 Share Posted June 26, 2017 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 Link to comment Share on other sites More sharing options...
Valuehalla Posted June 28, 2017 Share Posted June 28, 2017 Overview about the lawsuit situation: http://www.channelpartnersonline.com/2017/06/27/centurylink-lawsuit-pile-on-is-opportunistic-not-unexpected/ Link to comment Share on other sites More sharing options...
Valuehalla Posted June 30, 2017 Share Posted June 30, 2017 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 Link to comment Share on other sites More sharing options...
Packer16 Posted July 5, 2017 Share Posted July 5, 2017 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 Link to comment Share on other sites More sharing options...
SI Posted July 5, 2017 Share Posted July 5, 2017 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). Link to comment Share on other sites More sharing options...
Packer16 Posted July 5, 2017 Share Posted July 5, 2017 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 Link to comment Share on other sites More sharing options...
SI Posted July 5, 2017 Share Posted July 5, 2017 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. Link to comment Share on other sites More sharing options...
Guest longinvestor Posted July 5, 2017 Share Posted July 5, 2017 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. Link to comment Share on other sites More sharing options...
Valuehalla Posted July 5, 2017 Share Posted July 5, 2017 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. Link to comment Share on other sites More sharing options...
Packer16 Posted July 6, 2017 Share Posted July 6, 2017 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 $33 per share assuming no default risk. IMO the upside/downside is not favorable unless these guys can do what no other telco has done for the past 20 years. Packer Link to comment Share on other sites More sharing options...
Valuehalla Posted July 6, 2017 Share Posted July 6, 2017 Packer, I can not confirm your cashflow figures. LVLT will provide 1,1 to 1,16 B and CTL will provide 1,55 to 1, 75 B per year, than you have to add effects from NOL and synergies. Often it is not recognized that CTL did share buybacks additionally to the dividend in the past. Further there is a bulk of cash inside LVLT of app estimated 2,2 B at the moment. I dont take a default into consideration at all. Beside economical reasons, I think LVLT is to much connected to the US government & military & intelligence services.... dont worry ;D US$ 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$) Link to comment Share on other sites More sharing options...
Packer16 Posted July 6, 2017 Share Posted July 6, 2017 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 Link to comment Share on other sites More sharing options...
Valuehalla Posted July 6, 2017 Share Posted July 6, 2017 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.CTL_Rev_OCF_FCF.pdf Link to comment Share on other sites More sharing options...
Guest longinvestor Posted July 6, 2017 Share Posted July 6, 2017 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. Link to comment Share on other sites More sharing options...
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