VZ - Verizon Communications

[rosemontseneca]

I struggle with US telecom.  With 5G on the horizon, it’s hard for me as an industry tourist to have conviction on who prevails between the mobile and cable companies as convergence happens. 

 

Probably don’t know what I’m doing here, but I prefer to own foreign telecoms that have both fixed and mobile footprints at similar valuations.  Telefonica Brazil, Telekom Austria, Hellenic Telecom, KT, et al...

[scorpioncapital]

I struggle with US telecom.  With 5G on the horizon, it’s hard for me as an industry tourist to have conviction on who prevails between the mobile and cable companies as convergence happens. 

 

Probably don’t know what I’m doing here, but I prefer to own foreign telecoms that have both fixed and mobile footprints at similar valuations.  Telefonica Brazil, Telekom Austria, Hellenic Telecom, KT, et al...

 

If it's convergence, wouldn't they both prevail?

[Junto]

I purchased a full position today. I like the dividend yield and the prospects with 5G and Verizon’s position.

 

Hey shamelesscloner, looks like we need to keep an extra eye on Junto's picks ;D Nice pick Junto, hope you're still in the stock. 8)

 

Thanks!  Been finding a few gems this past year!

[rosemontseneca]

I struggle with US telecom.  With 5G on the horizon, it’s hard for me as an industry tourist to have conviction on who prevails between the mobile and cable companies as convergence happens. 

 

Probably don’t know what I’m doing here, but I prefer to own foreign telecoms that have both fixed and mobile footprints at similar valuations.  Telefonica Brazil, Telekom Austria, Hellenic Telecom, KT, et al...

 

If it's convergence, wouldn't they both prevail?

 

I think that's probable, but you have more competition (i.e. comcast mobile) for what will become a single offering and it feels like there is a risk the fixed players are permanently advantaged vs. mobile or vice versa.  No strong view but I think you're not getting paid enough to wear the uncertainty that comes with the industry changes on the horizon. 

[LearningMachine]

I struggle with US telecom.  With 5G on the horizon, it’s hard for me as an industry tourist to have conviction on who prevails between the mobile and cable companies as convergence happens. 

 

Probably don’t know what I’m doing here, but I prefer to own foreign telecoms that have both fixed and mobile footprints at similar valuations.  Telefonica Brazil, Telekom Austria, Hellenic Telecom, KT, et al...

 

If it's convergence, wouldn't they both prevail?

 

I think that's probable, but you have more competition (i.e. comcast mobile) for what will become a single offering and it feels like there is a risk the fixed players are permanently advantaged vs. mobile or vice versa.  No strong view but I think you're not getting paid enough to wear the uncertainty that comes with the industry changes on the horizon.

 

The video here has some good content that answers that question from Verizon's perspective: https://www.verizon.com/about/investors/sellside-analyst-meeting-nov-11.

 

Some interesting quotes:

* "selling the same capacity at different times of the day for mobility and for home": This highlights the point that Verizon doesn't have to pay anyone extra cost for selling both home and mobile internet.

* "We have long-term cable MVNO agreements, which are very important for us, and we have them as really great enterprise customers, both with Xfinity and Spectrum Mobile. And those, of course, are also helping us with the growth going forward... we feel good about our relationship with the cable companies that are doing MVNO and us. And we treat them as an enterprise customer": This highlights that cable companies have to pay mobile oligopolies for access to licensed spectrum, not the other way around.

[scorpioncapital]

so mobile is saying they have mvno cable agreement and cable is saying they have mvno mobile agreement. funny.

 

Practically speaking, what are the anti-trust issues of mobile-cable mergers in the USA? In Europe it is rather standard and in fact there is no problem except as a price of that 'no problem', regulators have more say on pricing power. Do we foresee the same giant oligopoly but now combined mobile-cable? And what about satellite? That seems to be a scruffy new entrant and with Musk and free money anything can be disintermediated. Actually this is the problem I see with years or decades of free money, EVERYTHING gets disintermediated to the point that moats become diluted and everyone is making less money. It almost makes no sense to invest or pick a horse, as they'd all be equal. If this continues, I am not sure a universal income to supplement a flat investment field isn't the result. The point of no return.

[dwy000]

so mobile is saying they have mvno cable agreement and cable is saying they have mvno mobile agreement. funny.

 

Practically speaking, what are the anti-trust issues of mobile-cable mergers in the USA? In Europe it is rather standard and in fact there is no problem except as a price of that 'no problem', regulators have more say on pricing power. Do we foresee the same giant oligopoly but now combined mobile-cable? And what about satellite? That seems to be a scruffy new entrant and with Musk and free money anything can be disintermediated. Actually this is the problem I see with years or decades of free money, EVERYTHING gets disintermediated to the point that moats become diluted and everyone is making less money. It almost makes no sense to invest or pick a horse, as they'd all be equal. If this continues, I am not sure a universal income to supplement a flat investment field isn't the result. The point of no return.

 

It's the same MVNO agreement just from different sides.  Charter and Comcast both have their mobile offerings carried on the Verizon network.  So for Verizon, the cable companies are wholesale/enterprise customers and for the cable companies, Verizon is a supplier.  Altice (Cablevision) is carried on TMobile.

 

Both Xfinity and Spectrum have been beefing up their public wifi capacity and the public spectrum capabilities since the vast majority of mobile usage is over wifi and not the phone network.  They want to use as little of Verizon's network as possible since it requires fees to Verizon (whereas usage on their own network is essentially free).

 

The anti-trust issues of a cable/mobile merger would not be on the mobile side, it would be on the broadband side.  With mobile you have 3 nationwide networks and merging with a cable company wouldn't reduce that.  But on the broadband side, there are many, many places where the only alternative to cable internet is the phone company DSL.  So it could create a monopoly.

 

I'd love to see Musk's satellite entrant gain traction.  It's somewhat uncompetitive (except in rural areas with little fiber) but it would allow for the argument that there remains an alternative. 

[LearningMachine]

so mobile is saying they have mvno cable agreement and cable is saying they have mvno mobile agreement. funny.

 

Practically speaking, what are the anti-trust issues of mobile-cable mergers in the USA? In Europe it is rather standard and in fact there is no problem except as a price of that 'no problem', regulators have more say on pricing power. Do we foresee the same giant oligopoly but now combined mobile-cable? And what about satellite? That seems to be a scruffy new entrant and with Musk and free money anything can be disintermediated. Actually this is the problem I see with years or decades of free money, EVERYTHING gets disintermediated to the point that moats become diluted and everyone is making less money. It almost makes no sense to invest or pick a horse, as they'd all be equal. If this continues, I am not sure a universal income to supplement a flat investment field isn't the result. The point of no return.

 

It's the same MVNO agreement just from different sides.  Charter and Comcast both have their mobile offerings carried on the Verizon network.  So for Verizon, the cable companies are wholesale/enterprise customers and for the cable companies, Verizon is a supplier.  Altice (Cablevision) is carried on TMobile.

 

Both Xfinity and Spectrum have been beefing up their public wifi capacity and the public spectrum capabilities since the vast majority of mobile usage is over wifi and not the phone network.  They want to use as little of Verizon's network as possible since it requires fees to Verizon (whereas usage on their own network is essentially free).

 

The anti-trust issues of a cable/mobile merger would not be on the mobile side, it would be on the broadband side.  With mobile you have 3 nationwide networks and merging with a cable company wouldn't reduce that.  But on the broadband side, there are many, many places where the only alternative to cable internet is the phone company DSL.  So it could create a monopoly.

 

I'd love to see Musk's satellite entrant gain traction.  It's somewhat uncompetitive (except in rural areas with little fiber) but it would allow for the argument that there remains an alternative.

 

Good discussion.  About 15 years ago, I thought wifi-based mobile phone service would take over.  As I was involved in the industry at the time, I wrote a paper on it.  About 10 years ago, my views on this became stronger after being involved in call handovers between wifi and licensed-spectrum, seeing Free happen in France, and seeing Comcast open up Wifi hot spots, and experiencing free or low-cost Skype-based regular phone calls on top of wifi connections and later on free T-Mobile 3G connections when traveling myself.  I called it "The Rise of the unlicensed spectrum."

 

Today, my views have evolved on this.  Needs for mobility have to be met across a spectrum of customer-types:

• On one end of the spectrum, we have folks who want the cheapest connection available.  These folks are ok with a dropped call or low data speed once in a while.  These folks are also ok with jumping carriers to find that great deal.
  
• On the other end of the spectrum, we have folks who want the best network and are willing to pay premium.
  

 

Verizon has been selective about who they want as customers and have picked folks who are willing to pay a premium, just like Apple and American Express.  These folks bring you low churn rate, and also are usually affluent, who can be sold more services.

 

You might remember Warren Buffett's comment about iphone once, comparing it to Fifth Avenue.  Now, the question is will Apple be able to monetize it, or is Verizon already better positioned to monetize it because it already has a billing relationship with those folks and already getting more per month from them than they are giving Apple. Two-thirds of Verizon's customers have iphone and Verizon sees Apple as their experience vendor for those folks. Yes, Verizon probably cannot easily tap into desire for conspicuous consumption in some segment of the population like Apple can, unless it raised the prices significantly and then was ok with the result of having far fewer users.  Maybe there is a sweet spot there by raising prices, and a way to tap into that as part of their customer-differentiation growth vector, e.g. an add-on expensive conspicuous service.  Imagine conspicuous consumption of folks showing off stadium apps over Verizon ultra wideband in games: "Dad, why don't we have that?".  Anyway, we don't need to go there as Verizon has hit upon something else.

 

That something else is the value proposition that John Malone's cable empire had hit early on.  I'll share couple of quotes from Verizon calls:

• "And so I was going out as a 6 million homes [Fios] business, acquiring content, ignoring the fact that I have 100 million consumers in the business overall. Now I'm able to go out and bring the consumer business in its entirety to bear for partners like Disney, like Discovery and others."
  
• "Disney and Discovery being great examples, where the Disney bundle now, I think next month, whether that goes up to $18.99, if you take the 3 elements. Well, needless to say, we're not paying anything like $18.99 but the customer is getting all of that value."
  
• "And then after the time is expiring on the free, we also know that we can convert them into paying customer for a partner, which means that we can make a bounty on that."
  
• "Now we're bringing that to Discovery that is actually bringing a totally new sort of library of content to streaming, probably one of the biggest after Netflix. We have been talking to them for 1.5 years. So this is a give and get, how the streaming should look like, and we're going to be the exclusive partner."
  
• "We're not going to bring in 100 companies here. We have many people knocking on our doors and want to be part of that transformation. We're going to pick the ones that we see alignment with and have size enough and counterweight to Verizon."
  

 

Effectively, Verizon has become the new bundle creator for streaming services (might even become the biggest streaming bundle creator for the affluent segment), and with it comes the power to select content providers, which gives it the power to make good deals with content providers, e.g. exclusivity with brand names, lower prices than what they offer direct to consumer, and maybe in the future, power to pick new content streaming providers in return for equity stake in them like Malone did. 

 

Meanwhile, the cable companies are losing the traditional old video bundle.

[dwy000]

Do you see Verizon as a bundle creator for streaming or more of a primary sales channel?  I guess if most of the bundling was accessed over the phone it could be seen as a bundler but I would have classified them more as an enabler for attracting customers to a streaming service who might not be signing up right away otherwise.  For Disney and Discovery, they offer the free introductory service but ultimately the customer relationship moves over to Disney and Discovery themselves and Verizon was just an introductory service (hence them referring to getting bounties).

 

I see the cable companies as much more effective bundlers.  Right now, as an Xfinity customer if I want to watch Netflix or Disney or HBOMax I just say it into the remote.  Also their shows come up when I do a general search.  If you have Xfinity wifi but no cable, they offer the Flex box for free - which is essentially a Roku type player that gives you access to all the streaming services.  Ultimately, I have to imagine that Xfinity (or Spectrum) will offer access to a bundle of streaming service for a single price you pay with your internet bill.  Effectively the "new bundle".  The biggest issue there will be that the streamers are very, very reluctant to give up the direct customer relationship.  They want to target you and have you pay them directly instead of just being another offering through Xfinity.  At some point the price and volume will get there, it's just a question of how quickly it will play out and how much merging there will be by streamers in the meantime.

 

Unless Verizon gets a direct to home internet product (a la Fios or the new 5G Home service), they will, in my view, never have the depth of relationship that the home broadband companies do. 

 

But great discussion

[LearningMachine]

Do you see Verizon as a bundle creator for streaming or more of a primary sales channel?  I guess if most of the bundling was accessed over the phone it could be seen as a bundler but I would have classified them more as an enabler for attracting customers to a streaming service who might not be signing up right away otherwise.  For Disney and Discovery, they offer the free introductory service but ultimately the customer relationship moves over to Disney and Discovery themselves and Verizon was just an introductory service (hence them referring to getting bounties).

 

I see the cable companies as much more effective bundlers.  Right now, as an Xfinity customer if I want to watch Netflix or Disney or HBOMax I just say it into the remote.  Also their shows come up when I do a general search.  If you have Xfinity wifi but no cable, they offer the Flex box for free - which is essentially a Roku type player that gives you access to all the streaming services.  Ultimately, I have to imagine that Xfinity (or Spectrum) will offer access to a bundle of streaming service for a single price you pay with your internet bill.  Effectively the "new bundle".  The biggest issue there will be that the streamers are very, very reluctant to give up the direct customer relationship.  They want to target you and have you pay them directly instead of just being another offering through Xfinity.  At some point the price and volume will get there, it's just a question of how quickly it will play out and how much merging there will be by streamers in the meantime.

 

Unless Verizon gets a direct to home internet product (a la Fios or the new 5G Home service), they will, in my view, never have the depth of relationship that the home broadband companies do. 

 

But great discussion

 

The bounty is ongoing as billing stays with Verizon if you're introduced to the streaming service through Verizon.  Customer has incentive to stick with Verizon and also continue paying for streaming services through Verizon because customer experience is that the customer is effectively paying less for the streaming service through Verizon as part of the bundle than the customer would pay if the customer got the streaming service themselves.

 

Take a look at some of the bundles Verizon is selling already: https://www.verizon.com/plans/

[fareastwarriors]

Verizon is the top bidder on 5G spectrum, committing more than $45 billion

 

 

Federal Communications Commission announced the winners of an $81 billion auction for the license to use important airwaves that are ideal for 5G.

 

The big winners were Verizon and AT&T, which need these airwaves in order to build 5G networks that are significantly faster than current wireless service.

 

Verizon, through its Cellco Partnership, spent nearly $45.5 billion on the airwaves. AT&T, through AT&T Spectrum Frontiers, spent $23.4 billion.

 

https://www.cnbc.com/2021/02/24/verizon-commits-more-than-45-billion-to-5g-spectrum-bid.html

[CorpRaider]

Isn't there a pithy Buffett quote about winning auctions?

[LearningMachine]

Verizon is the top bidder on 5G spectrum, committing more than $45 billion

 

They have $22.2 Billion in Cash already after issuing $12 Billion debt at record low rates with maturities ranging from 5 years to 40 years, for Weighted Average Maturity of 21.25 years.

 

Hoping they lock in some more low-rate long-term debt to pay for the remaining amount.

 

If scenario of higher inflation comes through, they can then monetize the spectrum (which is more reliably monetizable than gold) at higher rates (better than competitors due to their less price-sensitive customers) and pay back the debt in deflated dollars.

 

As the minimum wage goes up, let the folks with newly raised wages compete with each other to pay Verizon more per month.

[kab60]

They also have relatively low leverage at 2xnet debt/ebitda. This will bump it up to 3x.

 

With the risk of sounding like a debt addict - and with very limited knowledge as to how much this will help their 5G aspirations - I like it.

 

And I really, really like Buffetts recent moves of putting money to work in resilient and slow, growing companies like Verizon, Kroger and Pharma at 10xearnings in an otherwise mostly nutty environment.

 

Has anyone seen a good and nuanced take on the possibility of mobile operators moving into 4 and 5G broadband?

 

I live in Copenhagen and already cut the cable and have a 4G router that covers my needs, but my needs are also pretty simple with max 2 devices stream at a time.

[dwy000]

All 3 operators offer 5G right now but they are very different versions.  T-MOBILE has the widest availability but their version is often slower than others 4G.  Verizon is the only one doing mmWave which provides by far the fastest speed and capacity but only at very short distances so they are focused on cities and high density areas (likely never nationwide). 

 

In the cities it will be a real competitor to cable cos for home broadband.  But it will take a while to roll out.  Keep in mind the $45bn doesn't include another couple of billion required to clear the spectrum (currently used by satellite) as well as build out costs.

 

I was pretty surprised at how much they spent but frankly they have no option.

 

On the plus side, Comcast and Charter got nothing so they are more tied than ever to their Verizon relationship.

[LearningMachine]

On the plus side, Comcast and Charter got nothing so they are more tied than ever to their Verizon relationship.

 

When analysts were asking about cable companies potentially buying mid-band spectrum, Verizon CEO's answer was you can't build a network with just one band.

 

Imagine walking into a stadium and finding that Verizon phones are having the best experience with their high-band, even compared to mobile operators, not only potential cable companies.

 

The customer experience will be that they have a network that works well everywhere, even in a stadium, now confirmed by the social proof of the crowd around them, making it socially desirable.  Some will be willing to pay premium for that network.

 

 

[LearningMachine]

As we know, Buffett kept the Verizon investment secret after his purchases in Q3.  Wondering if that indicates how badly how he wanted to pile up more VZ shares before others riding on his coattails bid up the price.  Hold behold, he did pile up more in Q4.

 

Wondering if he has been buying more VZ since close of Q4 in Q1 as well, especially given that price has been lower than his earlier purchases?

 

Any way to deduce that ahead of his future filings?

[KJP]

For those who like Verizon, why do you like it more than US wireline broadband companies (e.g., Charter and Altice)?  Of course, you could be like Berkshire and own both.  But to the extent you like Verizon more, why is that?  Current valuation?  Industry structure?  Irreplaceability of the business (to the extent 5 or 6 or 7G could eventually displace wireline altogether, but vice versa seems hard to picture)?

 

I doubt I have enough knowledge of wireless to say anything useful about it.  But on the surface the industry looks both more saturated than wireline broadband (slower sub growth) and more competitive (three national carriers and Dish looming with ... something vs. the usually at most two broadband providers in any particular place), which suggests it should be structurally less profitable.

[dwy000]

Im not sure you have to like one more than the other per se.  I own both (actually all 3, Charter, Comcast and Verizon).

 

I've owned Verizon for like 15 years now.  It was originally a defensive play as a long term cash alternative but it has actually been a really decent investment.  I havent done the IRR but between the stock price appreciation, dividend and the stock spinouts that I sold immediately, I have probably quadrupled my money.

 

It is a slow growth, yield play right now with wireless being pretty saturated.  I think now that there are 3 players they will all be relatively rational and pretend to fight it out on pricing but not really.  What has not been priced in (in my view) is the potential for home broadband as well as alternative use cases.  If you consider all the things that will be internet enabled or "connected" down the road, including cars, they will need a network - and there are only 3 of them in the US that are robust and connected enough. 

 

Right now cable broadband has a fantastic product with considerable more growth available to it.  And even with 5G home, it will still be a competitive product.  That's why the cable cos are higher valued.  But they will never have their own mobile network.  They will always be a "renter"

 

With phone saturation, Verizon will have limited growth for a while.  But they also have something that no cable company has - a nationwide wireless network.  They will gradually expand home/business broadband offerings and have a package of their own that the cable companies won't.  Plus all the optionality of the additional connected mobility of internet of things/industrial internet.  In the meantime they gush out cash - paid in dividends or to buy spectrum for now.

 

I'm playing both sides of the equation right now.  They're no Snowflake or Tesla but I also don't have to worry about the whims of daytraders or justifying ridiculous valuations using revenue multiples while it burns cash.

[LearningMachine]

First, let's consider survivability:

• Survivability in current environment: Who has got lower Debt-to-EBITDA and higher debt rating today?
  
• Survivability in high interest rate environment:  Who is locking in long term debt today at low rates?
  
• Survivability in high inflation environment:  Who has less price-sensitive customers who can take higher prices?
  

 

Now, let's consider valuation:

• What is the EV/EBITDA of each?
  

 

 

Now, let's consider monopsony power that could possibly lead to upside. Can you imagine Charter or Comcast being able to

• negotiate with Disney to let them include Disney's $18.99 monthly Disney+ESPN+etc. in their bundle at much lower price than Disney gives others or sells themselves, or
  
• negotiate exclusive contract with Discovery, or
  
• have many streaming companies line up to take them into the bundle, but say no (for now at least), or
  
• negotiate with Apple to let them have so much stage time with less price-sensitive Apple customers
  
• negotiate with AWS and Azure on hosting Edge compute nodes that work with those cloud providers and get revenue from those services?
  
• negotiate with Apple and other device manufacturers to pass a higher quality standard, e.g. on dropped calls, data-speed, etc. on their network than other carriers impose
  

 

Wonder why that is?  Maybe having 90-100 million less-price sensitive customers being billed monthly already?  Does anyone else have a monthly billing relationship with that many less-price-sensitive people other than maybe Netflix?  Many of Netflix's customers picked Netflix for being low price - so, they are probably price sensitive.  Verizon's customers picked Verizon despite being higher price.  So, Verizon's customers are less price sensitive. How much do you think Verizon could ask these streaming companies for saying yes eventually?

 

Malone talks about this power in one of the videos in the recent years - the power to bundle that cable companies have lost - that Google or Amazon or Apple could try to build.  If memory serves right, I think he thought Apple would be mostly likely to build that power at the time.

 

Guess what, Apple is having to come to Verizon to take their Apple Music into the Verizon bundle, not the other way around. 

Guess what, Malone's Discovery is having to come to Verizon to take them into Verizon's bundle, exclusive on Discovery's part but not on Verizon's.

 

If memory serves right, Malone got early Discovery channel equity and equity in other video providers in the first place for free for letting them be part of the bundle at TCI at the time. 

 

Now, who is got that power to get equity stake in streaming providers for free in the future?

 

Now, let's consider upside possibilities in other areas:

• Home internet: Some claim 5G high-band internet is much higher speed than cable internet.  Verizon is looking to build a 30-million subscriber home internet business.  That is effectively a new additional business with more than the current subscribers of Comcast or Charter.  Imagine just getting that additional market cap for free in some years?
   
  
• Conspicuous consumption:  When the stadiums open up, and folks find Verizon phones are having a great in-stadium experience, how much do you think some might be willing to pay what others visibly have?  Can Comcast, Charter or other carriers easily replicate it?  Well, who has got the biggest chunk of high-band spectrum?
  

 

 

[KJP]

dwy & LM:  Thanks for your perspectives.

[LearningMachine]

Some of the things I liked from their Investor Day yesterday at https://www.youtube.com/watch?v=C0JNCwmCmCg:

• Huge spectrum across 48 contiguous states with no gaps acquired effectively for free on a cash basis:  They have to pay ~$4B in interest but get back $5B in lower cash taxes because they can amortize the spectrum cost over 15 years and deduct interest (See 58:08).
   
  
• Debt to EBITDA to go up from 2.0 to 2.8x: I was surprised to see that their Debt to EBITDA will go up only to 2.8x even though they have to pay $53B for spectrum (See 1:01:54).  Looks like the reason might be that they generate ~$35B in cash flow from operations.  It is a cash generating machine.
   
  
• Largest direct to consumer distributor of digital products & services in the U.S.: Wonder what Ronan meant by the wink at the end of his quote at 1:58:24: "We are the largest direct to consumer distributor of digital products and services in the U.S.  We think that is incredibly valuable asset to be used very discerningly with high quality brands. As a result, we'll evolve the model how we work with those brands. Watch this space."
   
  
• Nationwide fixed wireless 5g home internet to be faster & more reliable than cable internet: With the new spectrum, they are planning to rollout nationwide 1+ Gbps fixed wireless home broadband using 5g antennas hanging off their FIOS backbone. They believe they will have higher speed and reliability than cable internet.
  

[shamelesscloner]

Some of the things I liked from their Investor Day yesterday at https://www.youtube.com/watch?v=C0JNCwmCmCg:

• Huge spectrum across 48 contiguous states with no gaps acquired effectively for free on a cash basis:  They have to pay ~$4B in interest but get back $5B in lower cash taxes because they can amortize the spectrum cost over 15 years and deduct interest (See 58:08).
   
  
• Debt to EBITDA to go up from 2.0 to 2.8x: I was surprised to see that their Debt to EBITDA will go up only to 2.8x even though they have to pay $53B for spectrum (See 1:01:54).  Looks like the reason might be that they generate ~$35B in cash flow from operations.  It is a cash generating machine.
   
  
• Largest direct to consumer distributor of digital products & services in the U.S.: Wonder what Ronan meant by the wink at the end of his quote at 1:58:24: "We are the largest direct to consumer distributor of digital products and services in the U.S.  We think that is incredibly valuable asset to be used very discerningly with high quality brands. As a result, we'll evolve the model how we work with those brands. Watch this space."
   
  
• Nationwide fixed wireless 5g home internet to be faster & more reliable than cable internet: With the new spectrum, they are planning to rollout nationwide 1+ Gbps fixed wireless home broadband using 5g antennas hanging off their FIOS backbone. They believe they will have higher speed and reliability than cable internet.
  

 

May I ask LearningMachine... have you taken a position?

[kab60]

I think it's starting to look like an good bargain in large cap space. Resilient, cash generative, predictable, cheap. If wireless broadband@HOME takes off the narrative could change. I like some of these liquid, resilient things in the portfolio that will do fine on their own and can be sources of liquidity in times of crisis, if illiquid small caps get killed. Not sure if it's better than plain Berkshire, but it is less volatile, so in times of stress it could be a good member of a portfolio.

[LearningMachine]

Some of the things I liked from their Investor Day yesterday at https://www.youtube.com/watch?v=C0JNCwmCmCg:

• Huge spectrum across 48 contiguous states with no gaps acquired effectively for free on a cash basis:  They have to pay ~$4B in interest but get back $5B in lower cash taxes because they can amortize the spectrum cost over 15 years and deduct interest (See 58:08).
   
  
• Debt to EBITDA to go up from 2.0 to 2.8x: I was surprised to see that their Debt to EBITDA will go up only to 2.8x even though they have to pay $53B for spectrum (See 1:01:54).  Looks like the reason might be that they generate ~$35B in cash flow from operations.  It is a cash generating machine.
   
  
• Largest direct to consumer distributor of digital products & services in the U.S.: Wonder what Ronan meant by the wink at the end of his quote at 1:58:24: "We are the largest direct to consumer distributor of digital products and services in the U.S.  We think that is incredibly valuable asset to be used very discerningly with high quality brands. As a result, we'll evolve the model how we work with those brands. Watch this space."
   
  
• Nationwide fixed wireless 5g home internet to be faster & more reliable than cable internet: With the new spectrum, they are planning to rollout nationwide 1+ Gbps fixed wireless home broadband using 5g antennas hanging off their FIOS backbone. They believe they will have higher speed and reliability than cable internet.
  

 

May I ask LearningMachine... have you taken a position?

 

Yes.