CHTR - Charter Communications

[vince]

Did anyone else watch the verizon presentation?  About half way through, and at the end of the CFO's talk, when he refers to company revenues in 2024 and beyond, he states that.....Wireless broadband will have "well over a billion dollars of revenue".  Obviously the statement is vague but I just cannot see how that number jives with their wireless broadband (WB) footprint predictions for those same years.  Maybe someone else can point out something I may be missing?  I want to repeat that I think Verizon can deliver fantastic returns going forward combined with extreme safety.  This is not easy to find in this environment.  But I wouldn't count on them (nor do they need to) disrupting cable's business within 5-7 years.  They can capture some industry profit without hurting cable's investment thesis IMO

 

I do realize that they mentioned 1 billion in revenue for years 22-23 but they also said well over 1 billion by 2024 and beyond.  At least that's what I'm hearing and the article quote seems to agree.  Are you claiming that they didn't say well over 1 B for 24?  My original point stands.... when you look at their growth rates, with the number of homes passed and the different spectrums and the coverage % of mm wave, and their revenue projections across all their fixed wireless, it does not look like they will be taking any meaningful share, at least not until after 2024.  Even then, they claim that they could capture "up to 20% or more" but they clearly believe that is well past 2024 (as per their own numbers). 

 

Hi Vince, I've watched it a few times :-). 

 

The billion dollar of revenue is mentioned when he is talking about 2022-2023, that is before he starts talking about 2024 :-).

 

He starts talking about their home broadband plans @ 51:43 minutes at https://youtu.be/C0JNCwmCmCg.

 

Here are the figures he mentions regarding home broadband

• Next 12 months (2021): 15 million households covered, including 1-2 million through mmWave.
  
• 2022-2023: 30 million households covered with fixed wireless access.  Fixed wireless access becomes a billion dollar revenue business.
  
• 2024 & beyond: 50 million households covered.
  

 

They are charging $50 for Verizon customers and $70 for non-Verizon customers for 5G Home Internet service at https://www.verizon.com/5g/home/. 

 

Assuming $50 per month, $600 per year, needs only 1.67 million subscribers to hit billion dollars.  Are you saying achieving billion dollars is too high or too little for 2022-2023?

 

My apologies earlier for including the link to https://www.verizon.com/5g/home/ earlier at https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/charter-communications/msg454307/#msg454307 in response to thinking that your point was that Verizon 5g service at those prices was available only for mobile devices, and not available for home broadband when you said "[t]hats for their mobile 5G.  [d]ifferent story for broadband".  Perhaps you had meant something else.

 

So it does look like VZ CFO did say "well over a billion dollars in revenue from Fixed wireless in 2024 and beyond.  This is a copy of a summary I just read on lightreading.......

 

2024 and beyond

 

Verizon intends to cover more than 250 million people with C-band 5G. The delay is partly due to the fact that some of Verizon's C-band spectrum licenses won't be available for commercial use until 2023 because incumbent satellite operators are still working to move their operations off the band.

The operator said it will cover 50 million households with fixed wireless Internet services, generating "well over" $1 billion in revenues.

 

Thanks Vince for sharing where you got it from.

 

In case you find it useful, here are the exact time moments I was referring to in the video of the CFO at https://youtu.be/C0JNCwmCmCg:

• 52:45: CFO starts talking about 2022-2023
  
• 53:20: CFO mentions billion dollar business
  
• 53:26: CFO starts talking about 2024 and beyond
  

[KJP]

Very high-level overview of the discussion we've been having here:  https://www.lightreading.com/5g/a-closer-look-at-cable-vs-5g-fixed-wireless/a/d-id/768112?_mc=RSS_LR_EDT

[vince]

Very high-level overview of the discussion we've been having here:  https://www.lightreading.com/5g/a-closer-look-at-cable-vs-5g-fixed-wireless/a/d-id/768112?_mc=RSS_LR_EDT

 

Thanks for the link!

[KJP]

 

As a cable co shareholder, my concern about fixed wireless is that it's not wrong just early, and my fixed wireless skepticism is really just residue from 2018, not clear thinking about 2023. 

 

 

For anyone trying to get their bearings on the history of 5G, including why previous iterations were flops why the about to be rolled out "midband" spectrum might be different, this is a useful, very high-level summary:  https://www.lightreading.com/5g/get-ready-for-phase-3-of-5g-in-us/a/d-id/768152?_mc=RSS_LR_EDT

 

Note the particularly brutal critique of Verizon's 5G claims circa 2018:

 

In the early days of 5G, Verizon officials implied that their mmWave 5G network would eventually cover large numbers of Americans – a tall order considering mmWave signals typically travel just a few thousand feet in ideal conditions.

 

Now, though, Verizon officials no longer hint at grandiose mmWave buildout plans. Instead, the operator now expects to cover just 2 million households with a mmWave-powered 5G Home service, down from previous promises of up to 30 million. The financial analysts at Sanford C. Bernstein & Co called it a "staggering whiff."

 

The lie of millimeter wave is dead," agreed the financial analysts at New Street Research after hearing of Verizon's latest mmWave buildout targets.

[vince]

I just spent the afternoon adjusting and modelling Charters financials out to 2023......55 billion in revenue, 22.5 billion Ebitda, (41% margin but if you net out mobile revs, exp, and small ebitda contribution, margins are 43%) 10 billion fcf, (this includes cash taxes for the first time) 190 million shares left outstanding, 53 dollars in fcf per share.  Playing around with them, I found that most of the time it landed between 50-55 dollars fcf per share so we should be accurate within that band.  Obviously, assuming no big competitive or regulatory changes, the stock is still pretty cheap and downright cheap buying them at an 18% discount thru Lbrda.  Gotta love a 3% steady unit grower with consistently increasing margins (and I didn't model aggressive margin expansion) combined with a levered equity, fcf, aggressive buyback strategy.  It's also important to mention that this simple model does not assume any pricing so in my mind the fcf numbers include a margin of safety.

[fareastwarriors]

Shotwell again emphasized previous comments by SpaceX leadership that Starlink is not looking to replace the service of “giant providers AT&T, Comcast, etc.,” as she noted its satellite internet is “very complimentary to the services that they provide.”

“The Starlink system is best suited to highly distributed rural or semi-rural populations,” Shotwell said.

 

https://www.cnbc.com/2021/04/06/spacexs-shotwell-no-plan-for-tiered-starlink-internet-pricing.html

 

 

Pretty much what everyone believes... cable broadband is here to stay. 

Edited April 6, 2021 by fareastwarriors

[vince]

Nothing really new in the clip I'm about to paste but I like the way Dexter (Atus Ceo) eloquently highlighted the quality and cost advantage that cable has over 5g wireless broadband in a recent interview....

5G wireless is a real threat to your broadband dominance?

No. I mean, you’d expect me to say that, but I really don’t. I believe it is complementary. People want better and better broadband connectivity inside and outside of the home.

At the end of the day, a wireless connection, no matter what technology, 5G, 10G, whatever you want to call it, it ultimately terminates on a fixed line. And it has to go through a fiber connection because the fiber connection ultimately takes it out to the World Wide Web and allows you to have connectivity.

If wireless has to connect through airwaves to ultimately a fixed line connection, that connectivity always is going to be less productive and robust than a full end-to-end fiber-to-the-home connectivity, not only from a performance standpoint and a bandwidth standpoint but purely from a price standpoint. The price per gig over wireless is more expensive than the price per gig over fixed because the marginal costs are de minimis over fixed where there are marginal costs on wireless.

If everyone was on an unlimited plan that was never throttled on wireless, and they were consuming 400 to 500 gigs of data like we see from our fixed line customers, the entire wireless infrastructure would explode.

So, you need both, and you do want good connectivity when you’re outside the house, but when you’re driving, you don’t need necessarily to have the most amazing connectivity. 5G is going to allow smart cars. Your Apple carplay is going to work well. But you’re not interacting when you’re driving. You have shorter periods of time when you’re going on the subway or a train to commute. And then when you’re in the office, you’re back on a fixed line network. So people will subscribe to 5G. Absolutely. Because they want better and better service from a wireless standpoint. But I don’t believe it will replace in any shape or form nor be able to compete, broadly speaking, with fixed-line cable.

[vince]

Call me crazy but it looks like today's deal with T and DISC was an excellent way for Malone to set T up for a merger with Chtr.  I think it's pretty obvious that at the very least the subject was discussed during negotiations.  T's operations are now focused on wireless and broadband.  They will use 43 billion to clean up the balance sheet.  And they used creative wording to inform the street that their dividend will be going from a 15 billion dollar payout to roughly 8 billion.  The dividend payout has always been a big issue for Malone when contemplating a merger with telecom and this latest move goes a long way in removing that obstacle.  

[vince]

In addition, Charter will soon have to send 2-2.5 billion to the IRS.  I think there is good chance that if the tax specialists around here do some work on T they will find some juicy tax attributes that Charter can use to push these payments back for a few years.  DTV debacle?  Warner Media adventures? Any takers?

[Munger_Disciple]

Quote

Call me crazy but it looks like today's deal with T and DISC was an excellent way for Malone to set T up for a merger with Chtr. 

I hope not. Luckily I think there is very little chance of this happening. Cable is a regional business, not a nationwide business like cellular. Plus, cable broadband is much more profitable and has less competition compared to wireless carriers. 

Edited May 17, 2021 by Munger_Disciple

[vince]

This is a good point and has been brought up before but Malone has clearly stated that the synergies are large, measurable and guaranteed.  He also said (to Dave Faber on CNBC) that it is inevitable eventually.  I also agree with you about cable's superior economics however a merger can still be done fairly by adjusting multiples.

[bizaro86]

16 hours ago, Munger_Disciple said:

I hope not. Luckily I think there is very little chance of this happening. Cable is a regional business, not a nationwide business like cellular. Plus, cable broadband is much more profitable and has less competition compared to wireless carriers. 

I think the history of Malone doing deals with AT&T suggests that his shareholders end up the winners in that negotiation.

[Munger_Disciple]

Quote

I think the history of Malone doing deals with AT&T suggests that his shareholders end up the winners in that negotiation.

I wouldn't necessarily assume that. IIRC Malone sold TCI to old AT&T in the late 90s and AT&T promptly ran it to ground while Malone watched helplessly. Eventually old AT&T ended up selling TCI to Comcast. 

Plus Malone's record in cable outside the US has not been that great (Liberty Global & Liberty LatAm). With Charter we are lucky to have Tom Rutledge running things. Rutledge is far more interested in buying more cable assets than wireless. 

Edited May 18, 2021 by Munger_Disciple

[rogermunibond]

Rutledge is far more interested in buying his own shares than more cable assets, no?  I don't think Comcast or Charter can buy any more cable assets in the US due to anti-trust concerns.

[Munger_Disciple]

There are not many cable assets of size left in the US. Mediacom and Cox are private and their owners decide if and when they want to sell. Altice might eventually be for sale. I am sure Rutledge would be interested in all three properties if they come up for sale. But for now, he is quite happy buyback own shares. 

With respect to anti-trust concerns, Charter is still slightly smaller than Comcast, so there might be room for one more acquisition. 

Edited May 18, 2021 by Munger_Disciple