CHTR - Charter Communications

[Munger_Disciple]

 

Isn't this because the device you were using with the wifi wasn't specced to also be higher power?

 

It is possible. My understanding of the RF propagation is that wavelength has a much bigger effect in terms of penetrating walls and obstructions than transmit power.

[Spekulatius]

 

Isn't this because the device you were using with the wifi wasn't specced to also be higher power?

 

It is possible. My understanding of the RF propagation is that wavelength has a much bigger effect in terms of penetrating walls and obstructions than transmit power.

 

That is correct. At some point, you have to have enough power to burn holes through wall to get wave propagation  8)

[Liberty]

 

Isn't this because the device you were using with the wifi wasn't specced to also be higher power?

 

It is possible. My understanding of the RF propagation is that wavelength has a much bigger effect in terms of penetrating walls and obstructions than transmit power.

 

Sure, but what I mean is if you have a router and a smartphone that are specced to work together, they'll both transmit at about the same power and propagate over about the same distances, right? So if you boost one of the two (the router) without boosting the power of the smartphone, you won't get all the gains because while the smartphone might be able to receive the router better, the router won't be able to receive the smartphone better and for the connection to be stable and fast, you need both sides to be clear, not just one.

 

That's how I picture it, anyway. Am not a RF guy, so am happy to be shown why I'm wrong.

[Munger_Disciple]

Sure, but what I mean is if you have a router and a smartphone that are specced to work together, they'll both transmit at about the same power and propagate over about the same distances, right? So if you boost one of the two (the router) without boosting the power of the smartphone, you won't get all the gains because while the smartphone might be able to receive the router better, the router won't be able to receive the smartphone better and for the connection to be stable and fast, you need both sides to be clear, not just one.

 

That's how I picture it, anyway. Am not a RF guy, so am happy to be shown why I'm wrong.

 

I believe you are correct in that ideally you need to increase power on both sides of the link. 5G CPE for fixed wireless will be plugged into the wall but not 5G mobile devices.

[walkie518]

 

Isn't this because the device you were using with the wifi wasn't specced to also be higher power?

 

It is possible. My understanding of the RF propagation is that wavelength has a much bigger effect in terms of penetrating walls and obstructions than transmit power.

 

Sure, but what I mean is if you have a router and a smartphone that are specced to work together, they'll both transmit at about the same power and propagate over about the same distances, right? So if you boost one of the two (the router) without boosting the power of the smartphone, you won't get all the gains because while the smartphone might be able to receive the router better, the router won't be able to receive the smartphone better and for the connection to be stable and fast, you need both sides to be clear, not just one.

 

That's how I picture it, anyway. Am not a RF guy, so am happy to be shown why I'm wrong.

 

Full Duplex Docsis will address this issue...

[Liberty]

 

Isn't this because the device you were using with the wifi wasn't specced to also be higher power?

 

It is possible. My understanding of the RF propagation is that wavelength has a much bigger effect in terms of penetrating walls and obstructions than transmit power.

 

Sure, but what I mean is if you have a router and a smartphone that are specced to work together, they'll both transmit at about the same power and propagate over about the same distances, right? So if you boost one of the two (the router) without boosting the power of the smartphone, you won't get all the gains because while the smartphone might be able to receive the router better, the router won't be able to receive the smartphone better and for the connection to be stable and fast, you need both sides to be clear, not just one.

 

That's how I picture it, anyway. Am not a RF guy, so am happy to be shown why I'm wrong.

 

Full Duplex Docsis will address this issue...

 

I believe it's a completely different thing than what I was talking about, unless I'm missing something.

 

Full duplex docsis is a spec for better using cable bandwidth (reaching 10gbs and symmetrical ul/dl), I'm talking about how wireless transmission power needs to be specced together to get the most benefit (can't just increase power on one side and not on the other).

[walkie518]

 

Isn't this because the device you were using with the wifi wasn't specced to also be higher power?

 

It is possible. My understanding of the RF propagation is that wavelength has a much bigger effect in terms of penetrating walls and obstructions than transmit power.

 

Sure, but what I mean is if you have a router and a smartphone that are specced to work together, they'll both transmit at about the same power and propagate over about the same distances, right? So if you boost one of the two (the router) without boosting the power of the smartphone, you won't get all the gains because while the smartphone might be able to receive the router better, the router won't be able to receive the smartphone better and for the connection to be stable and fast, you need both sides to be clear, not just one.

 

That's how I picture it, anyway. Am not a RF guy, so am happy to be shown why I'm wrong.

 

Full Duplex Docsis will address this issue...

 

I believe it's a completely different thing than what I was talking about, unless I'm missing something.

 

Full duplex docsis is a spec for better using cable bandwidth (reaching 10gbs and symmetrical ul/dl), I'm talking about how wireless transmission power needs to be specced together to get the most benefit (can't just increase power on one side and not on the other).

 

My understanding is that telcos have to build-out 5G, but cable companies can leverage full duplex docsis and other technologies to implement the same short-wave communication technologies. 

 

Full duplex docsis should allow for coax cable to reach fiber speeds, and the coax lines should also have the added benefit of providing more power than what one finds w/fiber. 

 

I think it's likely Comcast and Charter use the same wireless routers currently in the home as the device to which one has a 5G connection. 

 

Where Comcast and Charter do not offer 5G service is where there is no such nearby small cell, from there via the MVNOs, Verizon is tasked with picking up the slack? 

[zippy1]

Oh, No!

https://www.reuters.com/article/us-fox-m-a-comcast-exclusive/exclusive-comcast-prepares-all-cash-bid-to-gate-crash-disney-fox-deal-sources-idUSKBN1I82I7

U.S. cable operator Comcast Corp is asking investment banks to increase a bridge financing facility by as much as $60 billion so it can make an all-cash offer for the media assets that Twenty-First Century Fox Inc has agreed to sell to Walt Disney Co for $52 billion, three people familiar with the matter said on Monday.

Comcast Chief Executive Brian Roberts only plans to proceed with the bid if a federal judge allows AT&T Inc’s planned $85 billion acquisition of Time Warner Inc to proceed, the sources said. The U.S. Department of Justice has opposed the AT&T-Time Warner deal over antitrust concerns, and a decision from U.S. District Court Judge Richard Leon is expected in June.

Last November, Comcast offered to acquire most of Fox’s assets in an all-stock deal valued at $34.41 per share, or $64 billion, a regulatory filing showed last month. Like Disney, Comcast sought to buy Fox’s entertainment networks, movie studios, television production and international assets, the filing shows.

 

Fox ended up announcing an all-stock deal with Disney for $29.54 per share. In the regulatory filing, Disney and Fox cited regulatory hurdles as reasons to reject Comcast’s bid, even though they did not reference it by name.

[Liberty]

https://www.prnewswire.com/news-releases/spectrum-enterprise-to-invest-1-billion-to-increase-the-density-of-its-national-fiber-network-and-transform-its-approach-to-the-client-experience-300647801.html

 

Spectrum Enterprise, a part of Charter Communications (NASDAQ: CHTR), today announced that in 2018, it will invest more than one billion dollars (U.S.) in new fiber infrastructure to increase the density of its national fiber network and to deploy new tools, training and resources required to provide a differentiated client experience. This year will be the second consecutive year in which Charter has invested in excess of $1 billion exclusively in Spectrum Enterprise.

 

The one billion dollar investment will primarily fund increased client access to the existing Spectrum Enterprise national fiber network, adding to the network's nearly 200,000 fiber-lit buildings.  The majority of the new fiber will be constructed within the existing Spectrum Enterprise national footprint.  With a key focus on removing barriers for businesses, Spectrum Enterprise will absorb the upfront costs of fiber construction for the majority of new enterprise clients within its footprint in order to provide more businesses with access to fiber-based solutions such as Fiber Internet Access, Ethernet and voice trunks (SIP/PRI). 

[scorpioncapital]

Growth capex or maintenance capex or both? :)

 

 

[chesko182]

This thread has been extremely informative in understanding the investment thesis of Charter.

 

I am working on a basic financial model and wanted to see how you guys treated the amortization of intangibles, specifically customer relationships that I understand where created as a balance sheet item post TWC/BH acquisitions. This was a large expense in 2017, approx $2.7bn.

 

Do you treat this as an actual economic expense or exclude it given it's "merger-debris"? If you exclude it then I would suppose customer relationships do not go into the invested capital calculation either, similar to goodwill?

 

I am trying to come up with CHTR's ROIC and this is throwing me off a little.

 

Any comments would be appreciated.

 

Thanks

[vince]

This thread has been extremely informative in understanding the investment thesis of Charter.

 

I am working on a basic financial model and wanted to see how you guys treated the amortization of intangibles, specifically customer relationships that I understand where created as a balance sheet item post TWC/BH acquisitions. This was a large expense in 2017, approx $2.7bn.

 

Do you treat this as an actual economic expense or exclude it given it's "merger-debris"? If you exclude it then I would suppose customer relationships do not go into the invested capital calculation either, similar to goodwill?

 

I am trying to come up with CHTR's ROIC and this is throwing me off a little.

 

Any comments would be appreciated.

 

Thanks

 

Imo you should count the asset to determine the historic ROIC.  You should ignore the amortization when trying to figure out economic earnings.  And finally, you should exclude the asset when trying to calculate Return On Net Tangible Assets which in my opinion gives you a better indicator of future returns, all else equal.

[walkie518]

This thread has been extremely informative in understanding the investment thesis of Charter.

 

I am working on a basic financial model and wanted to see how you guys treated the amortization of intangibles, specifically customer relationships that I understand where created as a balance sheet item post TWC/BH acquisitions. This was a large expense in 2017, approx $2.7bn.

 

Do you treat this as an actual economic expense or exclude it given it's "merger-debris"? If you exclude it then I would suppose customer relationships do not go into the invested capital calculation either, similar to goodwill?

 

I am trying to come up with CHTR's ROIC and this is throwing me off a little.

 

Any comments would be appreciated.

 

Thanks

 

I apologize for not answering your question, but I can't stop thinking about these and other questions.  I think Charter is incredibly cheap here, but the reasons might carry an equal amount of quantitative and qualitative analysis...maybe it helps to show my thinking? Selfishly, maybe it helps me more?

 

I started my thinking on Charter's balance sheet.  What's there and what's missing from the figures. 

 

What would someone of right, sound mind, independent from the cable business pay for these assets?  Important as an exercise but meaningless in practicum since neither Rutledge nor Malone appear to want to settle for a quick and fast deal to make a few bucks. 

 

Back to the balance sheet: what would the cost be to recreate those assets?  What would the cost be to recreate the employee-base as well as lay all the cable?  What's the value of the NOL? 

 

What would someone pay for Charter if there were material synergies?  Which companies are deemed "players" in the acquisition game and how might the landscape change to accommodate others?

 

How much of Malone's and/or Rutledge's histories do we see repeating?  How much does scale matter in the thesis and what levers can and will be pulled in the coming three to five years?  Where does this factor into the figures?  Do we disregard because it might not show up?  I would argue that there are real patterns in this business and in Malone's past...

 

We can look at historical cash flows from operations and assume that future cash flows will grow at a commensurate rate, but how do you value the emergent businesses like mobile that have more promise than is given credit?  Do we look to Comcast's performance and map over Charter?  What if Comcast flops and Charter succeeds?  (I think it's most likely both succeed in mobile).

 

How much spread does Malone and Rutledge create over cost of capital over the next five or ten years? 

 

How have historical cash flow growth measured against Cablevision's under Rutledge over longer periods of time? 

 

The difference and/or any historical acceleration or deceleration might give insight, but it's arguable that Charter is in fairly early-innings. 

 

Other questions that may not point to a quantitative figure but have subjective value: Why did Rutledge take this job?  Money or more points on the board? 

 

Why is Malone so involved at this age and what value does he bring as a shareholder-centric manager? 

 

At times, Malone's investment approach is somewhat callous and careless when it comes to short-term volatility.  On the flip side, does this take away any value when he trades volatility and perceived risk for long-term appreciation? 

[bathtime]

Given that I've read some criticism of the share performance of Malone's companies during the last recession, I'm also curious what the perceived margin of safety is in CHTR. I distinguish the equity from the business here as factors such as liquidity, controlling shareholder, ownership, etc., can come to the forefront in market pullbacks.

 

I've appreciated and been convinced of the value argument for CHTR here, so I'm stress-testing my dominant perspective, so to speak, given what I perceive as the likelihood of an eventual significant market pullback.

[scorpioncapital]

Considering all of Malone's vehicles, I think 'broadband delivery'/cable is the most recession proof and utility like, the other ones are consumer discretionary, entertainment, some real estate, content, which are likely to underperform the average drop in those 1/3 to 1/4 of years that there is a major contraction.

 

Regarding ROIC, I would want to know in which direction the profits are heading. One has 'targets' but will the market allow them to be achieved. In the case of cable, you do have a few moaty advantages. The first is the duopoly or triopoly structure in a delineated, but large market. You have a semi-utility like structure where you promise to do capex in exchange for a reasonable return. The question is - do cable co's have pricing power to maintain a 15% ROIC or is the government allowing them a determined return if they behave nice (similar to an electric utility)? If the return has an upper limit, what is that number?  Then there is nobody stopping you from developing other forms of 'alternative energy' - in this case, 'alternative connectivity'. Will it happen? Maybe yes, maybe no. I see lots of disruption in many fields. Personally, I chose CHTR over KHC because I feel food brands are being diluted at a fast pace, the moat is eroding quite fast. I think a utility of connectivity has somewhat higher moat value than brands , but I don't know how long that will last either.

 

Maffei said capex would be elevated for Charter in Q2 as well (on the GLIBA conference call) and then dissipate in the latter half of the year.

 

Perhaps broadband connectivity is an old world moat in a fast changing world. I've had an eye on bioservices and biologic technology stocks and can see they are really richly priced. I can see the reasoning too...in a fast changing world, where are the new potential moats? On the other hand, when the dust settles, it's not always clear who the winners will be. There are sharks biting at distribution too...Usually involving non-linear, direct to consumer channels, digital vs analog. One should keep an eye open for developments in connectivity costs, systems, and alternatives and regulatory systems.

 

 

 

 

 

 

 

[CorpRaider]

Lowel McAdam says Verizon is planning on building their 5G network with the terminus 2000 meters from the home and foliage and weather are not impactful.

 

[jmp8822]

Lowel McAdam says Verizon is planning on building their 5G network with the terminus 2000 meters from the home and foliage and weather are not impactful.

 

 

Great interview - thanks for posting.  Sounds like there will be a lot of exciting things coming for consumers, coupled with risks/opportunities for businesses.  I wouldn't want to be a 2nd/3rd broadband choice with 5G coming possibly as a home alternative to cable internet.

[dwy000]

Would Charter and Comcast's MVNO agreement with Verizon cover 5G?  Is there a possibility that Charter/Comcast could use Verizon's own buildout to compete with themselves?

[Shooter MacGavin]

Lowel McAdam says Verizon is planning on building their 5G network with the terminus 2000 meters from the home and foliage and weather are not impactful.

 

 

Great interview - thanks for posting.  Sounds like there will be a lot of exciting things coming for consumers, coupled with risks/opportunities for businesses.  I wouldn't want to be a 2nd/3rd broadband choice with 5G coming possibly as a home alternative to cable internet.

 

thanks for posting. Though it's a slow moving train, I'm slightly nervous about my GLIBA position in 3-4 years. Maybe we need to call Masa...  though the future is murky obviously, there is a not insignificant chance that this could be the satellite threat from the 90s all over again.

[chrispy]

The Charter website has posted the webcast from an interview with Charter's CFO at this weeks JPM conference.  Towards the end of the interview they discuss 5G and he states how there are still line of sight issues and that all of the test locations by Verizon are in ideal dense urban environments.  Applying 5G elsewhere will be much more difficult and require cable's infrastructure.  My takeaway is that Charter and Verizon are expressing much different views on how straight forward implementing 5G is going to be.  Only time will tell.

 

Also, at the beginning of the interview Charter's CFO dived further into the loss of no-pay customers.  I listened to it a few days ago but here is what I recall:  During the billing integration Charter failed to have new low credit customers put up a down payment which is normal practice.  Once this was uncovered, these customers were terminated and that is the reason for the large blip in the quarterly results.  It is now corrected. 

[scorpioncapital]

There are two short clips from maffei last year where he is also skeptical, saying 5g will require spectrum or alliance with backhaul providers. I see this very much as a story similar to oil, coal and alternative sources. In the end it's just connectivity. There are the land owners (spectrum), the developers and the tenants. Sometimes owners and developers are one...either way a utility will provide utility like returns plus alpha from smart mergers and operation.

[jgyetzer]

Even if it all works exactly as brilliantly as the wireless companies claim, they will all be competing on price and have an interest in getting their own network built as quickly and cheaply as possible. How much is Charter then worth to any of those players as opposed to a slow, expensive build-out.

[Liberty]

There's been two interesting Charter presentations a couple days ago, one by Tom Rutledge and the other by Chris Winfrey (CFO).

 

One of Rutledge's lines was interesting. He said he didn't think spectrum was worth as much as others thought, partly because some low-cost or no-cost spectrum was becoming available soon (not sure on the details of that, maybe more white space being freed up soon?), but also because at very high frequencies, you need to be a lot closer, and with small cells, you can re-use the same spectrum over and over again more easily than with large cells without the interference.

[dutchman]

liberty where can we access these presentations? wood u have a link?  thank u

[Liberty]

liberty where can we access these presentations? wood u have a link?  thank u

 

They're on Charter's investor relations site, May 14 and 15.