CHTR - Charter Communications

[FiveSigma]

I was wondering if someone would be kind enough to PM me (or post here) the AllianceBernstein report.

 

I have access to institutional research from a number of brokers, but not AB, unfortunately and I can't find it online.

[scorpioncapital]

Reminds me of mall reits...except there are no alternatives right now , there is no mass 5G yet and yet the stocks are trading even cheaper it would seem than mall REITs which really are in some cases in decline right now from e-commerce. I hope since there is no dividend that they are buying back alot more stock this year than last year.

 

 

[cameronfen]

Here is another way to think about it.

 

Internet at home:

There are ~125M homes in the US. Charter passes ~50M of them and Comcast ~55M with little overlap. Pretty much all of them will be Gigabit ready by year end, which is WAY more bandwidth than 95% of people need anyway. There is virtually no extra cost: the cables are laid down already.

Given this starting situation, why would any rational competitor decide to embark in a several-years-long roll-out to invest billions in building 5G towers + the whole new fiber-to-the-tower network needed to power them, just to then see cable lower their broadband price to match or undercut them in those specific areas - which they can do very easily since their own broadband offering is mostly pure margin?

 

Now, maybe for those undeserved ~20M homes it can make sense but then it's not a threat to cable, just telcos picking up the crumbs where there was no good IRR for their technology, most likely rural and/or poorer areas.

Again, we're talking about billions of dollars and many years of aggravated capex for telcos to carry through that path.

 

Internet on your phone:

Thanks to the forced MVNO agreement, Comcast and Charter can use Verizon's 4G network if it pleases them to offer mobile. Mobile can be a nice side addition to them since it tends to reduce churn but not an absolute need at all, it's like they're just replacing the phone landline option that's declining in their bundle. So basically all upside/optionality, little additional expenditures needed, no fundamental threat.

 

Internet of Things:

low-latency 5G in the streets for autonomous connected cars and other futuristic connected-city applications. A whole other type of "5G" waves if I understand correctly. Everything is yet to be built and the business is pretty much unknown. Will telcos take it, cable cos, Elon Musk's satellites, Google or Facebook's weather balloons, you name it - and what will the IRR be? Hard to tell, much too far away. At least 10+ years until 5G IOT is a meaningful market since we don't even have a need/use for it today, change is slow.

 

Conclusions:

This explains why telcos have been trying to buy cables cos and not the other way around. It is not surprising that Verizon's CEO has been so promotional lately, spreading the "5G is a threat to cable" narrative. If this fear successfully drives Charter and Comcast's share price lower (it has) he will have a stronger seat at the table when another round of M&A negotiations happens in some months. Remember the very same people posting videos about 5G going wonderfully through foliage, buildings, rain, birds, airplanes, tanks and mother-in-laws were trying to buy Charter at $5xx less than a year ago.

 

Two things in response: 1. Why build 5g wireless broadband?  Because you are building 5g mobile due to the natural progression of capex improvements of your mobile service and you get wireless broadband for free. 

 

2.  Why are telecos are doing all the acquiring?  They arent.  Look at liberty global and liberty latin america.  They are intentionally buying cable assets in markets where they have mobile assets as well.  In the US the only cable company that can has enough assets to buy any of the telecoms is comcast and maybe charter.  All four telecos have the resources to buy any cable company with duetche telecom and softbank backing tmobile and sprint any telecom has the resources to acquire any cable company. 

[WayWardCloud]

 

Two things in response: 1. Why build 5g wireless broadband?  Because you are building 5g mobile due to the natural progression of capex improvements of your mobile service and you get wireless broadband for free. 

 

2.  Why are telecos are doing all the acquiring?  They arent.  Look at liberty global and liberty latin america.  They are intentionally buying cable assets in markets where they have mobile assets as well.  In the US the only cable company that can has enough assets to buy any of the telecoms is comcast and maybe charter.  All four telecos have the resources to buy any cable company with duetche telecom and softbank backing tmobile and sprint any telecom has the resources to acquire any cable company.

 

Thanks for your response :)

Not that I think I'm necessarily right but just to keep the group thinking process going:

 

1. What I was trying to say was that laying down a dense enough fiber-to-the-5Gtower backhaul to handle the amount of data used at home by entire neighborhoods at high speeds including during peak hours is a completely different ballpark in terms of overall bandwidth than what's required to provide a similar neighborhood with "outside of the home data" only via their phone. Just to give an example, my own monthly home broadband consumption is about 300 times higher than my phone data consumption.

 

2. True in can go either way since the two clearly help each other but the multiples at which these deals are made consistently value cable companies higher than telecoms (eg Vodafone raising debt to buy UnityMedia in Germany for 12X instead of buying back their own shares at 7X).

 

[scorpioncapital]

"eg Vodafone raising debt to buy UnityMedia in Germany for 12X instead of buying back their own shares at 7X"

 

If I was a cynic, which I probably am, I'd say the seller knows more than the buyer. The buyer probably thinks growth is in the cards, the seller probably thinks something like this country's government/market is handicapping returns.

 

 

[WayWardCloud]

An even more cynical person might notice that the deal was struck a month before the announcement of CEO Vittorio Colao's retirement and that some leaders have a strong desire to leave an impression of grandeur behind them while others only care about maximizing shareholder value. Heck, the leader of the second type might even be aware of the upcoming retirement and decide to start negotiating again right around that time!

...But we're getting off topic ;)

[cameronfen]

"eg Vodafone raising debt to buy UnityMedia in Germany for 12X instead of buying back their own shares at 7X"

 

If I was a cynic, which I probably am, I'd say the seller knows more than the buyer. The buyer probably thinks growth is in the cards, the seller probably thinks something like this country's government/market is handicapping returns.

 

I agree I dont understand why VOD values cable assets higher than itself, maybe its acquistive management and maybe its because cable is worth more in a 5g world.  But vodaphone has mobile assets in Germany so likely liberty's cable assets in Germany are worth more to VOD than to liberty.  So one way of looking at it is saying cable worth more than telecos.  The other more negative view is that both cable and wireless assets are dominanted by companies that have both. 

[scorpioncapital]

http://www.dailymail.co.uk/health/article-5784487/The-roll-5G-wireless-service-massive-health-experiment-public-health-expert-warns-a.html

 

Everything I read , 5g is moving fast globally. If it hits critical mass faster than people expect then pay TV and even broadband wired will drop off faster than people expect. I want to see charter CEO be more aggressive to address this. Or at least buy back a ton of shares.

 

Another good article -

 

"John Malone led Liberty Communications (majority stakeholder in Charter Cable) has been busy in Europe as of late. Liberty has struck a deal with Deutsche Telekom (DTE) to sell Liberty's Austrian cable TV entity to Deutsche Telekom. Vodafone and Liberty merged into a joint venture in the Netherlands in 2016 to provide mobile, broadband and cable TV as a single entity. And Vodafone and Liberty Communications have also developed a plan where Vodafone will purchase various cable TV entities off of Liberty Communications throughout other parts of Europe. Last Liberty reversed direction on rolling out the new technical upgrades to the infrastructure, saying they will implement it when they see the need and willingness from customers to pay for faster speeds. Why this change in position for Liberty Communications, which earlier was purchasing MNO's and talking expansion? The eSIM technology along with the onslaught of IoT could be the primary motivators shaping Liberty's recent decisions to strategically sell to or joint venture with MNO's throughout the world, and why I believe, they will be looking towards the US next.

 

Just as a reminder, there is an agreement in place between Comcast and Charter until May 8, 2018 where any negotiations by either Charter or Comcast with any mobile carrier will require the consent of the other entity"

 

https://seekingalpha.com/article/4152202-cable-mobile-telecom-mergers-technology-force-now

 

 

[Astrea]

Topical commentary...

 

AT&T comments on Fixed Wireless 5G – Cowen conference 30 May 2018

Colby Synesael

 

And as it relates to fixed wireless, I feel like that’s something about a year ago you guys were talking about.  But I have not heard as much of late. What is your view there?

 

John Stephens (CFO AT&T)

 

Our network guys can do it, it works. If you think about fixed wireless using millimeter wave in urban settings, we have tested, we tested millimeter wave in Austin back in 2016 […]. We've had one gig speeds on these point-to-point connections, it has worked really well.

 

Challenge for us is not the network or the team can’t build it or they have the knowledge - they can. It's the cost efficiency. Once you get that, if you will as I describe it, the fixed wireless connection from the alley to your house, that's great, you can do that, but you have to get it from the alley into the core network. And so you have to have fiber in that alley or you have a collection of small cells to hand it off and in doing so building all that out can be very expensive when you're likely doing it in a urban market in a residential area that already has a lot of fiber or already has a lot of competition from the incumbent Telco or the incumbent cable company.

 

So, our challenge with regard to fixed wireless from that perspective from the urban setting is really about the business case and what share market you get and how much it would cost to do the so to speak backhaul, if that makes sense.

 

Colby Synesael

 

So, not a technology issue, it’s economics.

 

John Stephens

 

Yes, the guys, the network guys have proven, well, we're getting gig speeds in Austin in 2016 on some point-to-point for business and we will see fixed wireless be used in that sense in manufacturing operations with robotic equipment and machines where business operations just want to connect those machines back to a central point to manage and have information.

 

So, I would expect we will see a lot of those applications but the general residential broadband solution, the economics for us don’t seem to work. And you’ve got to remember we have 30 million of our customer base mainly consumers that we built out for U-verse, so that means there is 30 million of our base that has fiber near the home, and so taking the last mile and adding it into fiber or using the network that is already there can give great speeds and great results without shifting to that other technology.

 

So, if you will, taking the last 500 feet with fiber and having that dedicated capability to the home, may be very inexpensive for us compared to the alternative and give the customer a tremendous level of service. So, our history, our collection of local exchange assets, our collection of U-verse investments, our extensive fiber footprint across the country because of our legacy AT&T as well as the local exchange companies, gives us an advantage in having a choice in how to deliver. We can do this a number of ways, we are not tied to just one technology.

 

[scorpioncapital]

I don't quite get the back haul system. If I sit in my living room and pop out my mobile phone on 4g it just works. Is it not direct from tower to phone or it goes somewhere where there is actual physical fibre ?

[DooDiligence]

I don't quite get the back haul system. If I sit in my living room and pop out my mobile phone on 4g it just works. Is it not direct from tower to phone or it goes somewhere where there is actual physical fibre ?

 

These guys do a good job of explaining the technology & use cases (not sure how promotional either video is.)

 

 

 

---

 

Here's a webinar on small cell backhaul & 5G.

I only watched the 1st 10 minutes as other work demands my attention but I will watch the rest of it this weekend (at the beach, on my phone.)

 

 

---

 

And THANKS to everyone for such a robust & informative discussion (the best anywhere on the GoogleNets.)

 

I'm gonna stick with what another poster said earlier and, "Let Malone figure it out" for me & other shareholders.

[stevevri]

This is a vast over simplification and someone could correct me if I'm wrong. I've built a bunch of wifi networks both corporate and residential.

 

I think thinking of WiFi helps here.

 

If you have a pretty small house or apartment, then it's simple you plug in a WiFi point and it is wired to the wall and all is good. It gets good connection from the wire, and delivers to clients at a good rate as long as they are in range.

 

Now say your house is bigger and you need an access point. That access point has to be placed at a spot that it gets "good wireless signal" to the base station and also extends the signal for the rest of your house. If the access point is connecting wirelessly to the base station you will lose some internet speed even if you have "good signal" from your device (phone) to the access point.

 

This is usually okay and unnoticed but as the house or building gets larger if you kept chaining these things together then the loss of speed from each station connecting to each other starts to have an affect.

 

You could be in some far corner of your house and have great WiFi Signal, but because that access point is talking to another access point which is talking to the base station all wirelessly your connection isn't very great.

 

How do you fix this? You wire all the access points.

 

I believe there is a similar dynamic going on here and that is the back-haul or fiber. Keep in mind that to achieve top speeds they will probably need a lot of fiber to make sure each access point has a great connection.

 

So while a 5G tower may provide 1gbps to customers a certain distance. The distance at which that tower can provide enough bandwidth to another tower to provide 1gbps... No clue. Either it's going to be a ton closer then the service range or it may not be a good idea at all and each tower may need fiber.

 

And that's where you start needing a lot of fiber and things get expensive. While say Charter or Comcast already have a ton of wire that is capable of this.

[DooDiligence]

I read somewhere, but can't find the source to cite, that it cost around $1,000 per home to run fiber & that Charter cable passes by about 50 million homes (Comcast 55 million) +/- :: Which would mean a replacement cost of at least $50 billion just for what Charter owns.

 

Here's a link covering cost per mile in varying geographies, mostly 2003 to 2010 but there's some more recent figures.

 

https://www.itscosts.its.dot.gov/its/benecost.nsf/DisplayRUCByUnitCostElementUnadjusted?ReadForm&UnitCostElement=Fiber+Optic+Cable+Installation+&Subsystem=Roadside+Telecommunications+

 

---

 

and a brochure discussing some of the vagaries of installations,

 

http://www.bbpmag.com/2011mags/marchapril11/BBP_MarApr_CostOfFiber.pdf

 

---

 

Of course, they aren't monetizing the entire network & that + any pricing power + innovative new bundling/un-bundling = opportunity.

 

---

 

As to 5G, I'll leave it alone & trust in Malone (jockey bet...)

I'm pretty sure he hasn't been spending all that cap on a biz that he doesn't fully understand potential disruptions.

[cameronfen]

I read somewhere, but can't find the source to cite, that it cost around $1,000 per home to run fiber & that Charter cable passes by about 50 million homes (Comcast 55 million) +/- :: Which would mean a replacement cost of at least $50 billion just for what Charter owns.

 

Here's a link covering cost per mile in varying geographies, mostly 2003 to 2010 but there's some more recent figures.

 

https://www.itscosts.its.dot.gov/its/benecost.nsf/DisplayRUCByUnitCostElementUnadjusted?ReadForm&UnitCostElement=Fiber+Optic+Cable+Installation+&Subsystem=Roadside+Telecommunications+

 

---

 

and a brochure discussing some of the vagaries of installations,

 

http://www.bbpmag.com/2011mags/marchapril11/BBP_MarApr_CostOfFiber.pdf

 

---

 

Of course, they aren't monetizing the entire network & that + any pricing power + innovative new bundling/un-bundling = opportunity.

 

---

 

As to 5G, I'll leave it alone & trust in Malone (jockey bet...)

I'm pretty sure he hasn't been spending all that cap on a biz that he doesn't fully understand potential disruptions.

 

Not saying charter will do poorly and not trying to start anything, but if it was any other stock, people here would be rightly critical of you for just trusting management instead of figuring out whether the existential risk to your industry is going to come to fuition.  I can't figure it out, thats why Im not in. 

[Spekulatius]

You don’t have to trust Malone to be in Charter, you just watch the economics either unfold as expected or not. It will be a slow process, so there should be time to react accordingly.

[DooDiligence]

I read somewhere, but can't find the source to cite, that it cost around $1,000 per home to run fiber & that Charter cable passes by about 50 million homes (Comcast 55 million) +/- :: Which would mean a replacement cost of at least $50 billion just for what Charter owns.

 

Here's a link covering cost per mile in varying geographies, mostly 2003 to 2010 but there's some more recent figures.

 

https://www.itscosts.its.dot.gov/its/benecost.nsf/DisplayRUCByUnitCostElementUnadjusted?ReadForm&UnitCostElement=Fiber+Optic+Cable+Installation+&Subsystem=Roadside+Telecommunications+

 

---

 

and a brochure discussing some of the vagaries of installations,

 

http://www.bbpmag.com/2011mags/marchapril11/BBP_MarApr_CostOfFiber.pdf

 

---

 

Of course, they aren't monetizing the entire network & that + any pricing power + innovative new bundling/un-bundling = opportunity.

 

---

 

As to 5G, I'll leave it alone & trust in Malone (jockey bet...)

I'm pretty sure he hasn't been spending all that cap on a biz that he doesn't fully understand potential disruptions.

 

Not saying charter will do poorly and not trying to start anything, but if it was any other stock, people here would be rightly critical of you for just trusting management instead of figuring out whether the existential risk to your industry is going to come to fuition.  I can't figure it out, thats why Im not in.

 

I was just hammering my confirmation bias gland.

 

I'd welcome a truly convincing & well cited bear mauling of an analysis, to keep me from buying more if it dipped hard.

[cameronfen]

I read somewhere, but can't find the source to cite, that it cost around $1,000 per home to run fiber & that Charter cable passes by about 50 million homes (Comcast 55 million) +/- :: Which would mean a replacement cost of at least $50 billion just for what Charter owns.

 

Here's a link covering cost per mile in varying geographies, mostly 2003 to 2010 but there's some more recent figures.

 

https://www.itscosts.its.dot.gov/its/benecost.nsf/DisplayRUCByUnitCostElementUnadjusted?ReadForm&UnitCostElement=Fiber+Optic+Cable+Installation+&Subsystem=Roadside+Telecommunications+

 

---

 

and a brochure discussing some of the vagaries of installations,

 

http://www.bbpmag.com/2011mags/marchapril11/BBP_MarApr_CostOfFiber.pdf

 

---

 

Of course, they aren't monetizing the entire network & that + any pricing power + innovative new bundling/un-bundling = opportunity.

 

---

 

As to 5G, I'll leave it alone & trust in Malone (jockey bet...)

I'm pretty sure he hasn't been spending all that cap on a biz that he doesn't fully understand potential disruptions.

 

Not saying charter will do poorly and not trying to start anything, but if it was any other stock, people here would be rightly critical of you for just trusting management instead of figuring out whether the existential risk to your industry is going to come to fuition.  I can't figure it out, thats why Im not in.

 

I was just hammering my confirmation bias gland.

 

I'd welcome a truly convincing & well cited bear mauling of an analysis, to keep me from buying more if it dipped hard.

 

No good bear thesis from me.  But if if I was in Charter, I'd be watching Asian telecoms/cable companies really closely to see the impact of 5G. 

[DooDiligence]

I read somewhere, but can't find the source to cite, that it cost around $1,000 per home to run fiber & that Charter cable passes by about 50 million homes (Comcast 55 million) +/- :: Which would mean a replacement cost of at least $50 billion just for what Charter owns.

 

Here's a link covering cost per mile in varying geographies, mostly 2003 to 2010 but there's some more recent figures.

 

https://www.itscosts.its.dot.gov/its/benecost.nsf/DisplayRUCByUnitCostElementUnadjusted?ReadForm&UnitCostElement=Fiber+Optic+Cable+Installation+&Subsystem=Roadside+Telecommunications+

 

---

 

and a brochure discussing some of the vagaries of installations,

 

http://www.bbpmag.com/2011mags/marchapril11/BBP_MarApr_CostOfFiber.pdf

 

---

 

Of course, they aren't monetizing the entire network & that + any pricing power + innovative new bundling/un-bundling = opportunity.

 

---

 

As to 5G, I'll leave it alone & trust in Malone (jockey bet...)

I'm pretty sure he hasn't been spending all that cap on a biz that he doesn't fully understand potential disruptions.

 

Not saying charter will do poorly and not trying to start anything, but if it was any other stock, people here would be rightly critical of you for just trusting management instead of figuring out whether the existential risk to your industry is going to come to fuition.  I can't figure it out, thats why Im not in.

 

I was just hammering my confirmation bias gland.

 

I'd welcome a truly convincing & well cited bear mauling of an analysis, to keep me from buying more if it dipped hard.

 

No good bear thesis from me.  But if if I was in Charter, I'd be watching Asian telecoms/cable companies really closely to see the impact of 5G.

 

++

[JRM]

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."-Buffett

 

Not that Comcast or Charter currently have bad economics, but the barbarians may be at the gates.

[HalfMeasure]

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."-Buffett

 

Not that Comcast or Charter currently have bad economics, but the barbarians may be at the gates.

 

I'm not sure what is evoking that quote. Broadband is a better business than cable TV ever was, and cable TV made a lot of billionaires.

[chrispy]

Yea...

 

The billion dollar question is, does 5g increase the value of cable tremendously or remove the need for cable?

 

The more I read, cable benefits. Seems remarkably similar to the late 90s

[Liberty]

Apple just announced at WWDC that they have a deal with Charter to have all of Spectrum content be available through the Apple TV.

[chesko182]

Apple previewed tvOS 12, which it calls "the powerful operating system designed for enjoying entertainment on the big screen, which takes the cinematic experience of Apple TV 4K to the next level with support for Dolby Atmos audio, convenient new features to easily access the shows and movies you love and breathtaking aerials shot from space." Apple also announced that Charter Communications (CHTR) will begin offering Apple TV 4K to their customers. Later this year, Charter's nearly 50 million customers will have access to Apple TV 4K via an all-new Spectrum TV app. In addition, as part of this collaboration, Charter will be offering iPhone and iPad to customers as they grow their mobile presence, Apple stated.

 

from:

https://thefly.com/landingPageNews.php?id=2740380

 

my understanding is Apple TV's OS will be available directly from the Spectrum TV app which means you won't need an appleTV (box) if you already have spectrum, right? This would be a nice differentiator...

[undervalued]

Apple previewed tvOS 12, which it calls "the powerful operating system designed for enjoying entertainment on the big screen, which takes the cinematic experience of Apple TV 4K to the next level with support for Dolby Atmos audio, convenient new features to easily access the shows and movies you love and breathtaking aerials shot from space." Apple also announced that Charter Communications (CHTR) will begin offering Apple TV 4K to their customers. Later this year, Charter's nearly 50 million customers will have access to Apple TV 4K via an all-new Spectrum TV app. In addition, as part of this collaboration, Charter will be offering iPhone and iPad to customers as they grow their mobile presence, Apple stated.

 

from:

https://thefly.com/landingPageNews.php?id=2740380

 

my understanding is Apple TV's OS will be available directly from the Spectrum TV app which means you won't need an appleTV (box) if you already have spectrum, right? This would be a nice differentiator...

 

What you just wrote confused me as an Apple TV and iPhone user. I think you meant, all Spectrum customers will have access to the Spectrum app IN Apple TV or access Spectrum app in iPhone or iPads.

[gokou3]

Apple previewed tvOS 12, which it calls "the powerful operating system designed for enjoying entertainment on the big screen, which takes the cinematic experience of Apple TV 4K to the next level with support for Dolby Atmos audio, convenient new features to easily access the shows and movies you love and breathtaking aerials shot from space." Apple also announced that Charter Communications (CHTR) will begin offering Apple TV 4K to their customers. Later this year, Charter's nearly 50 million customers will have access to Apple TV 4K via an all-new Spectrum TV app. In addition, as part of this collaboration, Charter will be offering iPhone and iPad to customers as they grow their mobile presence, Apple stated.

 

from:

https://thefly.com/landingPageNews.php?id=2740380

 

my understanding is Apple TV's OS will be available directly from the Spectrum TV app which means you won't need an appleTV (box) if you already have spectrum, right? This would be a nice differentiator...

 

What you just wrote confused me as an Apple TV and iPhone user. I think you meant, all Spectrum customers will have access to the Spectrum app IN Apple TV or access Spectrum app in iPhone or iPads.

 

Looks like yes, the Apple TV + spectrum app will be able to replace the Spectrum cable box.  This is good and bad - on the good side, spectrum can save equipment and installation costs --> lower customer acquisition cost.  On the downside, switching seems to have become easier (I imagine competitors can have similar apps and form the same relationship with Apple).  Also, people at homes with multiple TV but not multiple Apple TV boxes cannot take full advantage of being cable box free (or can Apple TV support multiple TVs at once?)

 

Apple TV can replace your Charter Spectrum cable box later this year

https://www.cnet.com/news/apple-tv-can-replace-your-charter-spectrum-cable-box-later-this-year/