CHTR - Charter Communications

[dutchman]

This is probably a stupid question, but wouldn't it almost be less expensive for cable companies to band together and put up cellular towers to provide 5g themselves.

 

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

[vince]

This is probably a stupid question, but wouldn't it almost be less expensive for cable companies to band together and put up cellular towers to provide 5g themselves.

 

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

 

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

[DeepSouth]

This is probably a stupid question, but wouldn't it almost be less expensive for cable companies to band together and put up cellular towers to provide 5g themselves.

 

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

 

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

 

And it's nonsensical to try to build a portfolio of towers instead of leasing space from the tower cos.

[Spekulatius]

This is probably a stupid question, but wouldn't it almost be less expensive for cable companies to band together and put up cellular towers to provide 5g themselves.

 

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

 

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

 

So,  hat means that 5G would only work within CHTR  or any other service providers service areas?

[vince]

I dont completely understand your question.  It can work in Verizons service area if they have access to the fiber infrastructure that is necessary.  And it is my understanding that even with that access, it is just as, or more expensive to do wireless drops then to run the wireline. 

[Liberty]

Anyone can get there, the question is more, how long is it going to take, how much is it going to cost, what kind of return are you going to get on your capital, and is it cheaper to buy someone who has what you want than to build.

[Voodooking]

So, I've been looking at Charter for a week or two now, thanks to VIC, MOI, and CoB&F (mostly Liberty's repeated mentions...  ;D), for bringing it to my attention.

 

I feel that I understand the strengths and weaknesses and I've read the annual reports and done lots of background research on the company and the management / board.

 

My question now is - How should I buy it?! I know I'm too late for Liberty Ventures, which seems to leave me with either investing in Charter Communications (CHTR) directly, or buying Liberty Broadband (LBRDA) in order to achieve a discount by buying the tracking company.

 

Is there still a discount to be had? What would people (mainly Liberty...  ;)) recommend at the moment? How can I work out the Charter-specific NAV of LBRDA in order to compare it with the LBRDA stock price?

[Liberty]

CHTR Q1:

 

Key highlights:

• First quarter total residential and SMB customer relationships increased 261,000, compared to 355,000 during the first quarter of 2017, when excluding the impact of customer activity related to Legacy Bright House's seasonal customer plan in 2017.1

• As of March 31, 2018, Charter had 27.5 million total customer relationships and 52.5 million total PSUs.

• In the first quarter, total residential and SMB video, Internet and voice customers increased by 225,000, with Internet net additions of 362,000, video net losses of 112,000 and voice net losses of 25,000.

• First quarter revenues of $10.7 billion grew 4.9%, as compared to the prior year period, driven by residential revenue growth of 4.8%, commercial revenue growth of 5.3%, and advertising revenue growth of 5.6%.

• First quarter Adjusted EBITDA of $3.9 billion grew 6.5% year-over-year, and 6.8% when excluding 2018 mobile launch costs.

• Net income attributable to Charter shareholders totaled $168 million in the first quarter, compared to $155 million during the same period last year.

• First quarter capital expenditures totaled $2.2 billion compared to $1.6 billion during the first quarter of 2017, primarily driven by in-year timing differences and Charter's all-digital initiative. First quarter capital expenditures included $186 million of all-digital costs and $17 million of 2018 mobile launch costs.

• During the first quarter, Charter purchased approximately 2.0 million shares of Charter Class A common stock and Charter Holdings common units for approximately $683 million.

[dutchman]

Liberty, how do you feel about the numbers? I know this is your wheelhouse.

[Gamecock-YT]

Wow getting pummeled, down 14%

[Liberty]

Liberty, how do you feel about the numbers? I know this is your wheelhouse.

 

Haven't had time to really look into it yet. I've been traveling so I've got like 7 different earnings to get through. At first glance it seems pretty solid. More video losses than usual, but that's going to move around.

[chrispy]

They gained more than expected internet users and lost more than expected video users.  Not the most surprising trend given the 5G thesis.

[muscleman]

I am pretty surprised by the 14% drop this morning. Market seems to really dislike its negative FCF which is what the market based its valuation on, just like SIRI and other Malone stocks.

 

For 5G to work, the mobile providers would have to work with CHTR and Comcast to get the data moving, right? 5G only connects from customer's phone to the tower, but if the tower doesn't have the capacity to move the data around, it won't be useful.

[walkie518]

CHTR looks very cheap here, the sell-off appears unjustified and more the result of mgmt taking away the punchbowl

 

Small and medium business is improving, passings are up, increased residential relationships...net adds are up, revs are up 5%

 

The buybacks were done in the $340/sh range...while this will create value over time, the price is not as attractive as $270/sh

[Voodooking]

As per my post above, I was on the fence and looking to think more about CHTR / LBRDA over the weekend, with a view to initiating a position in either / both on Monday or Tuesday next week.

 

After seeing the earnings release and watching the stock drop minute by minute, I just bought the dip on both CHTR and LBRDA.

 

Hopefully I will not regret this decision and it has set me up with a nice base for compounding in the future!

 

Would still be interested to hear the opinions of others on the most efficient way to purchase this though...

[no_free_lunch]

CHTR looks very cheap here, the sell-off appears unjustified and more the result of mgmt taking away the punchbowl

 

Small and medium business is improving, passings are up, increased residential relationships...net adds are up, revs are up 5%

 

The buybacks were done in the $340/sh range...while this will create value over time, the price is not as attractive as $270/sh

 

It is probably foolish to question malone but is it really cheap?  $70B market cap, $70B st debt, $70B lt term = $210B EV.  EBITDA at around $16B correct?  So after the drop isn't EV/EBITDA 13-14? 

[muscleman]

CHTR looks very cheap here, the sell-off appears unjustified and more the result of mgmt taking away the punchbowl

 

Small and medium business is improving, passings are up, increased residential relationships...net adds are up, revs are up 5%

 

The buybacks were done in the $340/sh range...while this will create value over time, the price is not as attractive as $270/sh

 

It is probably foolish to question malone but is it really cheap?  $70B market cap, $70B st debt, $70B lt term = $210B EV.  EBITDA at around $16B correct?  So after the drop isn't EV/EBITDA 13-14?

 

Depends on which metric you use. FCF could be 1.1 bn per quarter if not more, so P/FCF seems ok.

[Liberty]

CHTR looks very cheap here, the sell-off appears unjustified and more the result of mgmt taking away the punchbowl

 

Small and medium business is improving, passings are up, increased residential relationships...net adds are up, revs are up 5%

 

The buybacks were done in the $340/sh range...while this will create value over time, the price is not as attractive as $270/sh

 

It is probably foolish to question malone but is it really cheap?  $70B market cap, $70B st debt, $70B lt term = $210B EV.  EBITDA at around $16B correct?  So after the drop isn't EV/EBITDA 13-14?

 

It appears you're double-counting a lot of debt.

[gokou3]

CHTR looks very cheap here, the sell-off appears unjustified and more the result of mgmt taking away the punchbowl

 

Small and medium business is improving, passings are up, increased residential relationships...net adds are up, revs are up 5%

 

The buybacks were done in the $340/sh range...while this will create value over time, the price is not as attractive as $270/sh

 

It is probably foolish to question malone but is it really cheap?  $70B market cap, $70B st debt, $70B lt term = $210B EV.  EBITDA at around $16B correct?  So after the drop isn't EV/EBITDA 13-14?

 

It appears you're double-counting a lot of debt.

 

Total debt is under $71B per today's release:

 

http://ir.charter.com/mobile.view?c=112298&v=203&d=1&id=2345269

 

[no_free_lunch]

You are correct, debt is only $70B.  The website I was using butchered their financials, I should have gone to the source.

[walkie518]

This morning, I sold CHTR to lock in tax losses while buying Liberty Broadband to come back to CHTR in ~30 days and sell the Broadband position. 

 

Though I suppose one could trade LBRDA, LBRDK, and CHTR to manage tax losses and retain exposure...

[Spekulatius]

CMCSA is cheaper though, although they own content and theme parks as well ( which are fine business, imo)?, so not totally comparable.

 

I added some CHTR as well and a bit more CMCSA. CHTR fall shows how little we know about whatever own, imo.

CMCSA has 40% EBITDA margins on cable compared to CHTR ~37%, so they do have some improvement potential.

[Jurgis]

My question now is - How should I buy it?! I know I'm too late for Liberty Ventures, which seems to leave me with either investing in Charter Communications (CHTR) directly, or buying Liberty Broadband (LBRDA) in order to achieve a discount by buying the tracking company.

 

Is there still a discount to be had? What would people (mainly Liberty...  ;)) recommend at the moment? How can I work out the Charter-specific NAV of LBRDA in order to compare it with the LBRDA stock price?

 

Why do you think you are late with Liberty Ventures? GLIBA is still buyable and some people argue that it has the largest discount.

You probably need to dig either this thread or Liberty (companies, not person ;)) threads for analysis of discount.

 

Disclaimer: I have GLIBA and LBRDA.

[atbed]

TTM free cash flow came in at 2.9B. But of course, they are investing to shift the entire base to digital... It doesn't look that cheap if you look at reported FCF, but maybe it is cheap if you are looking at a few years

[Liberty]

TTM free cash flow came in at 2.9B. But of course, they are investing to shift the entire base to digital... It doesn't look that cheap if you look at reported FCF, but maybe it is cheap if you are looking at a few years

 

Yeah. If you're buying something to own for the long-term, what matters is the earning power over that period. TTM is an arbitrary period that might or might not be representative.

 

In this case, looking at the fact that three very large companies are being integrated together (and the biggest one was the one most in need of catching up) at the same time as they're moving to all-digital at the same time as they're launching a mobile product, I'd say that there's a lot of noise covering the real earning potential. As the CFO said, these things are not linear and there's going to be ups and downs (he said something like: If you look at the legacy Charter transition after this team took it over, it looks smooth if you are standing back, after it was done, but at the time, quarter to quarter, it wasn't. I think we're seeing the same thing).

 

Rutledge also mentioned that video has very little margins and that even if they're off by a million subs or whatever in their predictions, it's not material.