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CHTR - Charter Communications

Guest JoelS

By Guest JoelS
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Liberty Newbie

Liberty

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I don't think the journalist quite understands the balance of power. I think in the hand, it'll be Malone who decides. He has lots of board seats, he picked Rutledge, and he has more influence than anyone else in the industry. It might be true that they're debating the best way to go forward and aren't sure yet if they'd take a really high offer or just keep executing on the plan, knowing that there'll be other offers later anyway if they ever change their minds. It'll probably depend on the terms of any deal offered (Malone probably doesn't want a repeat of what happened when he sold TCI and got stuck with billions in stock that he couldn't sell in a company he didn't control...). In other words, if Masa is the kind of guy to overpay for CHTR, Malone won't want to be stuck with a bunch of Softbank stock...

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Jurgis Newbie

Jurgis

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I doubt SoftBank can pay in cash for Charter. It's not even clear if Malone would want cash - taxes?? So, yeah, majority of purchase would likely have to be Softbank shares, which Malone might not want either.

 

IMO Masa should just buy DISCA, TRIP, EXPE, LGF... all my "crappy" Liberty universe companies.  8)  ;D

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no_free_lunch Newbie

no_free_lunch

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These 2 articles were excellent reads.  Sounds like the author is a telecom analyst.  They bring you up to speed on the situation very quickly.

 

It sounds like the biggest risk to the thesis is 5G.  This author is not too concerned and it does sound like a longer term issue but with CHTR being so leveraged it could really turn on you if there's any doubts.  Not that CHTR is completely doomed in that scenario but if they have to pivot that leverage and existing infrastructure might weigh on them.  I am hardly an expert or even really an amateur :) here but that is my 2 cents reading up last night. 

 

I wonder if CHTR coupled with DISH might not be a bad option.  In the event that 5G starts to take off it seems there is a good chance DISH will benefit.

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Liberty Newbie

Liberty

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An argument that Title II might not have been the right way to go to protect net neutrality:

 

https://stratechery.com/2017/pro-neutrality-anti-title-ii/

 

https://stratechery.com/2017/light-touch-cable-and-dsl-the-broadband-tradeoff-the-importance-of-antitrust/

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DooDiligence Newbie

DooDiligence

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Great thoughts.

 

Is there a corollary between bundling & un-bundling / regulating & de-regulating?

 

Where there's a will, there's a way (and John Malone is still kicking...)

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Liberty Newbie

Liberty

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Good!

 

NetFlix is like $0.40 a day.

 

I'm willing to bet these same service thieves regularly make vapid gestures to Sally Strothers whiny entreaties.

 

10 streams? Crazy. Maybe limit it to 2 streams max for the "basic" account.

 

"The CEO has said that one unidentified channel owner had 30,000 simultaneous streams from a single account."

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CLM5 Newbie

CLM5

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Question for anyone who understands Charter better than I do....

 

Recently started digging into Charter, and I've been trying to understand where the differences come in between Charter and Comcast. Most of the thesis resolves around the consolidation of the cable industry, and Charter closing the margin gaps between them and comcast, who are at least close in scale. After digging into the numbers, there was something that stood out to me as not making sense.... as far as customer relationships go, comcast and charter are in the same ballpark. 28k for comcast at end of 2016 versus 26k for charter at end of 2016. Now, video makes much higher revenue per customer than HSD does, so it makes sense that Comcast has much higher revenue than Charter, because they have a much higher proportionality of video customers. But the impression I get from most people who have done deep dive analysis into Charter is that Video is currently only around a breakeven segment, while HSD is supposed to be much higher margins, driving even higher in the future due to the switch to all-digital.

 

So if Charter is the company made up of much more HSD customers proportionally, and HSD is a much better business when compared with video, then why is it that Comcast's margins are so superior to Charter? Is it simply because Comcast has so much more scale in video, so their video segment is actually profitable because their massive revenues can offset the ever increasing programming costs? Still, to me this would seem to counteract the argument that HSD is so much better of a business than video (obviously ignoring the fact that video is dying a slow death) in terms of margin at least. However, if we take into account the fact that video is dying (i.e. Comcast slowly losing their scale, programming costs becoming unwieldy) and the fact that Charter is proportionally more weighted towards HSD, would that not point towards the conclusion that someday in the future, it would be reasonable to assume Charter would surpass Comcast in ebitda margin? Whether or not that margin is higher or lower than it is today is debatable, but it seems charter is better positioned in terms of segment concentration.

 

Edit: Thoughts are getting a bit jumbled here, but I guess what I'm trying to say is that I see what people are saying about how video is a bad industry if you have no scale. Pretty much every player outside of comcast is screwed in terms of cable video. But comcast has so much scale, they they are able to offset those programming costs, and to me, this is where I see most of the margin advantage comcast has over charter coming from. Not necessarily because they are better operators, but because their video has more scale. And most of the charter theses seem to revolve around charters margins closing the gap on comcast (and most analysis revolves around HSD obviously), but absent the scale in video, is this reasonable/possible? I don't see much difference in Charter/Comcast numbers in terms of HSD and that's what the thesis relies upon.

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Liberty Newbie

Liberty

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Comcast is a better operator than legacy TWC, and than legacy CHTR before Rutledge came around. Part of the story is a turnaround/optimization, with going all-digital, simplifying the products/pricing, going triple play and quad play to reduce churn/costly transactions/maintenance, etc.

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Liberty Newbie

Liberty

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My point is - I get that people are saying that, but I'm not seeing it in the numbers. All I'm seeing is a scale advantage in video for comcast over charter.

 

"Right now Comcast earns about $375 of EBITDA per home passed and spends about $133 in cap ex per home passed. Comcast’s operating margin and EBITDA margin for the past quarter were 25.11% and 40.4% respectively. Comcast also generated $151.19 per month in revenue per customer.

 

By contrast Charter is generating only about $285 in EBITDA per home passed and spending about $148 in cap ex. EBITDA margins for Charter are around 35% for the past six months and operating margins were just 9.7% (due to high legacy depreciation charges). Charter also only generates $109.77 of monthly revenue per customer."

 

https://seekingalpha.com/article/4112178-charter-great-potential-fully-valued

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CLM5 Newbie

CLM5

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The capex from charter is absolutely elevated, on that I agree. Although from what I understand, that seems to be transitory in nature. But it terms of EBITDA per passing, that directly relates to what I was trying to say above. Because of comcast's scale in video, they're at a 48% gross margin for video. Charter is at a 41% gross margin for video. I believe this makes up a majority of the discrepancy between the EBITDA per passing, not the fact that comcast is a better operator. That's pure scale. The capex is a fair point, but I don't think EBITDA per passing is. It seems to me that's purely a function of scale and the proportionality of the segments. Although Charter's service charges seem to be extremely disproportionately high to me as well, which doesn't make sense.... I would think video would create more service charges than HSD, so maybe that could be a result of comcast being a better operator on that front. Still though, the numbers to me don't seem to be pointing to comcast being radically better operators like I've been told.

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