CHTR - Charter Communications

[scorpioncapital]

In this respect I might give the advantage to liberty global since poorer countries subsidize less while richer ones risk throwing a ton of taxpayers incentives to develop 5g faster.

[vince]

https://www.livewiremarkets.com/wires/charter-communications-digging-a-moat-to-lay-cable

 

Interesting article, but it completely ignores the 5G issue.  The more I research the more I think 5G will be a strength rather than a threat to Charter.  Even Verizon says that only 25% of the current broadband customer base will be cost effective to convert to fixed wireless.  I'm guessing that number is slightly optimistic, probably more like 20%.  It will be less costly for Charter to build out fixed wireless, if it wants to, than Verizon, AT&T, or any other wireless carrier.

Hi JRM, could you please show me where Verizon says that or where you saw it?

[JRM]

https://www.livewiremarkets.com/wires/charter-communications-digging-a-moat-to-lay-cable

 

Interesting article, but it completely ignores the 5G issue.  The more I research the more I think 5G will be a strength rather than a threat to Charter.  Even Verizon says that only 25% of the current broadband customer base will be cost effective to convert to fixed wireless.  I'm guessing that number is slightly optimistic, probably more like 20%.  It will be less costly for Charter to build out fixed wireless, if it wants to, than Verizon, AT&T, or any other wireless carrier.

Hi JRM, could you please show me where Verizon says that or where you saw it?

 

What tipped me off to that number was a post on a VIC article.  The post was almost more informative than the actual article.  What was actually said was "30 million customers" which supposedly correlates to ~25% of the market.  I don't have a good way to double check the denominator in this estimate.  Here's another source: https://www.fiercewireless.com/wireless/editor-s-corner-1-gbps-speeds-verizon-s-5g-residential-fixed-wireless-broadband-service

[cameronfen]

https://www.livewiremarkets.com/wires/charter-communications-digging-a-moat-to-lay-cable

 

Interesting article, but it completely ignores the 5G issue.  The more I research the more I think 5G will be a strength rather than a threat to Charter.  Even Verizon says that only 25% of the current broadband customer base will be cost effective to convert to fixed wireless.  I'm guessing that number is slightly optimistic, probably more like 20%.  It will be less costly for Charter to build out fixed wireless, if it wants to, than Verizon, AT&T, or any other wireless carrier.

Hi JRM, could you please show me where Verizon says that or where you saw it?

 

What tipped me off to that number was a post on a VIC article.  The post was almost more informative than the actual article.  What was actually said was "30 million customers" which supposedly correlates to ~25% of the market.  I don't have a good way to double check the denominator in this estimate.  Here's another source: https://www.fiercewireless.com/wireless/editor-s-corner-1-gbps-speeds-verizon-s-5g-residential-fixed-wireless-broadband-service

 

I've said this before on this thread but Carlos Slim has expressed the same sentiment (5G wireless broadband is not economic for most people) on his most recent America Movil conference call. 

[LongTermView]

Here's another source: https://www.fiercewireless.com/wireless/editor-s-corner-1-gbps-speeds-verizon-s-5g-residential-fixed-wireless-broadband-service

 

The pie charts here are interesting:

 

Total Millimeter Wave Spectrum

WITHOUT

FiberTower's Terminated Licenses:

41% Verizon

45% FCC

10% Others

  4% AT&T

 

Total Millimeter Wave Spectrum

WITH

FiberTower's Terminated Licenses:

41% Verizon

33% FCC

  9% Others

17% AT&T

 

[HalfMeasure]

Anyone have a good resource for broadband market share on a regional level?

[vince]

https://www.livewiremarkets.com/wires/charter-communications-digging-a-moat-to-lay-cable

 

Interesting article, but it completely ignores the 5G issue.  The more I research the more I think 5G will be a strength rather than a threat to Charter.  Even Verizon says that only 25% of the current broadband customer base will be cost effective to convert to fixed wireless.  I'm guessing that number is slightly optimistic, probably more like 20%.  It will be less costly for Charter to build out fixed wireless, if it wants to, than Verizon, AT&T, or any other wireless carrier.

Hi JRM, could you please show me where Verizon says that or where you saw it?

 

What tipped me off to that number was a post on a VIC article.  The post was almost more informative than the actual article.  What was actually said was "30 million customers" which supposedly correlates to ~25% of the market.  I don't have a good way to double check the denominator in this estimate.  Here's another source: https://www.fiercewireless.com/wireless/editor-s-corner-1-gbps-speeds-verizon-s-5g-residential-fixed-wireless-broadband-service

Thanks JRM, was the VIC article a response to a Chtr writeup?

[JRM]

It was this post: https://www.valueinvestorsclub.com/idea/CHARTER_COMMUNICATIONS_INC/141186, and message #20.

[vince]

thx again

[vince]

Craig Eder Moffett - MoffettNathanson LLC - Founding Partner

Well, let's -- since we're more focused on broadband now, I'm going to change the subject away from broadband and go to video for a second. I

guess -- so obviously, OTT and cord cutting are the big stories that people are focused on, and that's going to continue to pressure subscribers. I

guess, the thing that would be most helpful for your investors is if you can just take us through the economics of what it's like to lose a subscriber.

How -- in essence, how important is it that you have high video numbers? Or are video subscribers less important than a lot of people crack them

up to be?

David N. Watson - Comcast Corporation - Senior EVP & President, CEO, Comcast Cable

Let me start, to make it very clear, we still think video is a very important category. We're still going to compete. We have a great product in X1. I

think one of the things we've learned through this OTT period is that a great product like X1 with good value between excellent DVR service, every

one of our X1 customers has Stream connected to it, so you can do TV everywhere elegantly. Applications can come together, like Netflix and

YouTube and others. So by -- we're going to compete with video. But to the extent that you lose a video customer, we've also taken the time to

look at the marginal economics, to your point, of what happens when you lose that video relationship. And there are a couple of things that jump

out in the way we're managing the business. One is that we -- that customers always get the best deal through packaging. To the extent that video

that they either downgrade, they don't have video, that multi-product discount, regardless of video, goes away. So broadband pricing will go up.

Second thing is there's less programming cost. And the third thing is that it's -- there's generally more noise attached to servicing the video customer,

more CPE, more activity. And it's just the more efficient relationship to manage in regards to broadband, so your cost to serve is improved. So you

take all of those things, this is a very manageable transition in terms of net cash flow. And you look at...

Craig Eder Moffett - MoffettNathanson LLC - Founding Partner

Do you want to go out on a limb and put a number on what a customer -- what a video customer -- what you really lose when a video customer

unbundles the video?

David N. Watson - Comcast Corporation - Senior EVP & President, CEO, Comcast Cable

Well, I won't go way out there, but I will say this that we segment the marketplace. And a good part -- we've been doing this for a while, but we

look at the -- all the video relationships, and some are fantastic and a lot of them are, most. We feel great about, full video, package -- skinnier

packaging with broadband. There's a lot of opportunities still. But we've seen some low-end customers that have dropped video, maintained

broadband, and those low-end customers, you actually -- it's accretive when that happens. And so the trick now is to make sure you're very focused

and you're doing a really good job segmenting the marketplace, so you understand that in the first place. So I think it's a manageable transition,

very focused on this. Again, we think the connectivity business has a long runway, and so that's why we shifted our focus.

 

[scorpioncapital]

I have a friend who went to internet TV. He even gets a lag, he's on a slow connection and doesn't care too much. I think pay TV is definitely going to drop faster than people

think.

 

What do people think on charter debt load? It's high and some have said tangible equity is negative. In fact charter even went bankrupt in 2009. Are debt risks being underestimated or is this a different situation, likely higher cash flows, better rates , and possible inflationary future ?

 

[Spekulatius]

I have a friend who went to internet TV. He even gets a lag, he's on a slow connection and doesn't care too much. I think pay TV is definitely going to drop faster than people

think.

 

What do people think on charter debt load? It's high and some have said tangible equity is negative. In fact charter even went bankrupt in 2009. Are debt risks being underestimated or is this a different situation, likely higher cash flows, better rates , and possible inflationary future ?

 

When CHTR went bankrupt (I think it was a Paul Allen vehicle then), it was badly run from an operational POV, subscale and the debt load was much higher in terms of EBITDA/EV. CHTR debt right now is 4-4.5x. EV/EBITDA which is in the same ballpark than most utility companies and since the business is comparable (if not better), I feel it is manageable. CHTR tangible equity is in fact negative, yahoo shows it as such and should be about correct.

[Deepdive]

I hope others here can help me understand the risk in CHTR

 

1) Cord cutting - many have pointed out that video doesn't have much margin and broadband has very high margin.  If cord cutting accelerates, how does CHTR content cost scales down?  How does CHTR support staff scales down?  It is terrible to work at a company that is constantly scaling down.  How does CHTR retain the employees in a scale down?  How are CHTR's contracts structured for content cost?  Is it 100% variable?  Is there a fixed component? 

 

2) 5G risk - Many have mentioned that the Telco would be wiser to buy CHTR.  Can someone explain the overall physics?  I have heard leaves, rain etc hurting milimeter waves performance.  Is there a certain density like NYC where it makes sense to deploy?  Can the Telcos selectively deploy in NYC, Chicago, LA etc?  There is also talk that only sub 3GHZ will be used.  Any thoughts? 

 

3) Emerging 5G risk - Low orbit satellite? Li Lu is supposedly backing someone for a 5G venture?  What are the rumoured disrupted technology?

 

4) Risk of 100% fiber to the house vs the current Fiber to the node and then co-axial to the house

 

5) Debt covenants - Anyone looked at them? 

 

What are we missing? 

[HalfMeasure]

I hope others here can help me understand the risk in CHTR

 

1) Cord cutting - many have pointed out that video doesn't have much margin and broadband has very high margin.  If cord cutting accelerates, how does CHTR content cost scales down?  How does CHTR support staff scales down?  It is terrible to work at a company that is constantly scaling down.  How does CHTR retain the employees in a scale down?  How are CHTR's contracts structured for content cost?  Is it 100% variable?  Is there a fixed component? 

 

2) 5G risk - Many have mentioned that the Telco would be wiser to buy CHTR.  Can someone explain the overall physics?  I have heard leaves, rain etc hurting milimeter waves performance.  Is there a certain density like NYC where it makes sense to deploy?  Can the Telcos selectively deploy in NYC, Chicago, LA etc?  There is also talk that only sub 3GHZ will be used.  Any thoughts? 

 

3) Emerging 5G risk - Low orbit satellite? Li Lu is supposedly backing someone for a 5G venture?  What are the rumoured disrupted technology?

 

4) Risk of 100% fiber to the house vs the current Fiber to the node and then co-axial to the house

 

5) Debt covenants - Anyone looked at them? 

 

What are we missing?

 

This might be helpful on #2 - Nokia on fixed-mobile convergence https://onestore.nokia.com/asset/201230

[HalfMeasure]

Does anyone here have a sense for how the marginal unit economics of upgrade a household to all digital and doing a DOCSIS 3.1 upgrade, or has anyone come across resources useful in doing that math?

[Liberty]

http://ir.charter.com/phoenix.zhtml?c=112298&p=irol-newsArticle&ID=2359762

 

Dr. Malone said, "I am retiring from the board of Charter to reduce my travel and focus on fewer board positions. I remain heavily invested in Charter, both financially and emotionally, and am excited about its prospects. As the Liberty Broadband nominee to the Charter board, Jim Meyer brings a strong track record and wealth of relevant experience, and I will remain an active advisor in my director emeritus role."

[Shooter MacGavin]

Wow.  Thanks.  Not sure what to make of it.  Seems like he is basically trying not to be conflicted or to give away his vote to pave the way for a sirius/ chtr deal.  Maybe Charter buys sirius or at least its spectrum?  The line about spending less time but being present clearly doesn’t make sense

[Munger_Disciple]

Charter is far more likely to buy Liberty Broadband/GCI Liberty than Sirius.

[Spekulatius]

Wow.  Thanks.  Not sure what to make of it.  Seems like he is basically trying not to be conflicted or to give away his vote to pave the way for a sirius/ chtr deal.  Maybe Charter buys sirius or at least its spectrum?  The line about spending less time but being present clearly doesn’t make sense

 

Conflicts between his different entities rarely were an issue for him. My guess is that Malone wants to slow down, he is not 65 any more  8)

[Foreign Tuffett]

Wow.  Thanks.  Not sure what to make of it.  Seems like he is basically trying not to be conflicted or to give away his vote to pave the way for a sirius/ chtr deal.  Maybe Charter buys sirius or at least its spectrum?  The line about spending less time but being present clearly doesn’t make sense

 

Malone is 77. Maybe he's just ready to slow down? I recall reading something, somewhere recently that stated he spends about 50% of his time in Ireland at his castle estate. Either way, Maffei is clearly the "Sith Apprentice" dealmaking heir to Malone's "Darth Vader."

 

Does anyone know if Malone attended the Sun Valley Conference this year?

[Munger_Disciple]

Does anyone know if Malone attended the Sun Valley Conference this year?

 

He did not.

[gokou3]

Does this increase the odds / bring forward timing of M&A activity at Charter?

[walkie518]

in a recent interview, I remember Malone discussing how conflicts can cloud a CEO's judgment and that part of the board's purpose is to mitigate those problems

 

putting the Sirius CEO in his board seat is likely a way for Malone to place someone without a pay package to have a vote on company matters

 

It seems Malone remains chairman of Liberty Broadband despite leaving the CHTR board so he still has full control by proxy?

 

 

[scorpioncapital]

Buffet retired from khc board recently too. Do these moves mean more flexibility to buy or sell ?

[Shooter MacGavin]

Buffet retired from khc board recently too. Do these moves mean more flexibility to buy or sell ?

 

 

Check out Faux Greg Maffei's Twitter posts in relation to this.