Packer16 Posted February 11, 2012 Share Posted February 11, 2012 This is a management play. Histoircally, management has done a good job of integrating acquistions and FFH holds a large stake and hasn't sold any. Packer Link to comment Share on other sites More sharing options...
Arden Posted February 11, 2012 Share Posted February 11, 2012 Liberty- there are some risks. first, there is some new competition in the form of Iliad's Free, which is building up coverage to be the 4th operator in france. this may cause prices to fall. Free have a pretty weird/revolutionary model- they have virtually no stores (2 at the moment) and only online customer support. 80% of FTE's customers in france have a contract, and besides- until free finish laying their infrastructure (2018) they use FTE for roaming. There is some risk with taxes- the French may heighten taxes to support their debt, and there is the irritating fact that the government holds 27% of the company and that some of FTE's workers are employed with civil servant status, because FTE is a former government monopoly. On the other hand, even without layoffs, about 35% of FTE's work force is scheduled to retire until 2018, it is a drag, but I guess FTE don't see it that way because they are hiring new employees. Other than that, there is probably the risk that people will use cellphones less or start to use applications online. I think this is unlikely in the near future. Link to comment Share on other sites More sharing options...
alertmeipp Posted February 11, 2012 Share Posted February 11, 2012 I just got some. So the share price collapsed with the market last year and never bounce back with the market. I didn't spend much time on it yet so I don't see anything that lead us to believe the revenue will fall off the cliff. I see the revenue slowly declining but only at a slow pace, expense should come down as the cap exp cycle will be completed this year. They have 8 billions debt ... and 4 b market cap.. give out 0.8b in dividend. In theory, they can issue 1billions new share now, debt will be reduced to 4-5b which makes the business much more sustainable. Link to comment Share on other sites More sharing options...
Junto Posted February 12, 2012 Share Posted February 12, 2012 I have added at 4.15 and again at 4.01. Almost to a full position size. The more I dig the more I think it is a nice investment opportunity at today's prices. Earnings next week will be closely watched. Link to comment Share on other sites More sharing options...
Liberty Posted February 12, 2012 Share Posted February 12, 2012 Liberty- there are some risks. first, there is some new competition in the form of Iliad's Free, which is building up coverage to be the 4th operator in france. this may cause prices to fall. Free have a pretty weird/revolutionary model- they have virtually no stores (2 at the moment) and only online customer support. 80% of FTE's customers in france have a contract, and besides- until free finish laying their infrastructure (2018) they use FTE for roaming. There is some risk with taxes- the French may heighten taxes to support their debt, and there is the irritating fact that the government holds 27% of the company and that some of FTE's workers are employed with civil servant status, because FTE is a former government monopoly. On the other hand, even without layoffs, about 35% of FTE's work force is scheduled to retire until 2018, it is a drag, but I guess FTE don't see it that way because they are hiring new employees. Other than that, there is probably the risk that people will use cellphones less or start to use applications online. I think this is unlikely in the near future. Thanks for that. It matches what I've seen on a few SA or GF articles on the company. It seems undervalued and has a nice dividend that will probably stick around for at least 1 year, and maybe even increase if europe's problems subside in the near future, but aside from that I haven't found what I've seen about the company to be impressive enough to pass the hurdle of being compared to my current favorite companies. Still, I like learning about this industry. It's an interesting one. Link to comment Share on other sites More sharing options...
Arden Posted February 12, 2012 Share Posted February 12, 2012 In the last few days I've done some heavy reading about Free, the new competitor. I thought my estimates about them were conservative when I assumed this new competitor will have a 10-15 market share in a few years, but it seems people are much more attracted to their offer than anyone had anticipated, including me. Link to comment Share on other sites More sharing options...
beerbaron Posted February 12, 2012 Share Posted February 12, 2012 I would not be surprised to see lots of companies around the world come in with a business model similar to FREE. In places where margins are high (Canada??) I would watch out. This is a game-changer. BeerBaron Link to comment Share on other sites More sharing options...
Arden Posted February 12, 2012 Share Posted February 12, 2012 I agree.. if this works in france, it would be an evolutionary leap forward. A telecom with almost no persennel, using the savings to lower price. If this works it would mean hundreds of thousands of workers around the world become redundant. Something like this only happens rarely in ANY industry, and it's just unlucky for me that it may be happening now. on the other side- FTE still has the roaming agreement, so FREE stealing everyone's customers is OK for now. BTW, Free's parent is publicly traded (iliad). It has a very strong brand in France. If its plan works, it will take many many years until anyone imitates its structure, and it's uncertain that anyone can imitate it at all (What CEO can fire 100 thousand workers in a half socialist country? look at the response when Peugeot tried to fire 5000 workers: http://www.reuters.com/article/2011/11/17/france-psa-sarkozy-idUSL5E7MH2QZ20111117) The problem is no one knows if the current offer is even profitable for them, but iliad can support FREE for the few coming years while it's building its infrastructure (Iliad has little debt and it's profitable,). you can see the report here:http://www.iliad.fr/en/finances/2011/CP_010911_Eng.pdf In summary, all of this is based on the assumption that what Free is doing will work well, and I know that people are lining up for their service in millions, but that's no enough info because they have a package that they give free of charge for Iliad's subscribers, which are almost 5 million, so even if we do know that 2-3 million people have subscribed to FREE's service, it's still too early to forecast how this plays out, but even with all this mayhem- FTE is still best positioned. it's the biggest player in the market and earning money when people join FREE (Only until 2017-18), but if FREE does grow big, the smaller operators become unprofitable, forcing huge consolidations or huge bankruptcies. In the end it's almost certain that orange will stay on top, but I have no idea what its margins will be. Link to comment Share on other sites More sharing options...
tombgrt Posted February 12, 2012 Share Posted February 12, 2012 The GEICO story in telecom. Interesting! 8) Link to comment Share on other sites More sharing options...
AZ_Value Posted February 16, 2012 Share Posted February 16, 2012 http://finance.yahoo.com/news/Frontier-Communications-bw-1757655184.html?x=0 Mrs. Wilderotter added: “Frontier’s Board of Directors also made the decision to lower the quarterly dividend to $0.10 per share. This will enable Frontier to reduce debt, improve our leverage, have ample cash to invest in the network and other strategic initiatives, and to provide a more sustainable shareholder return through a lower dividend payout ratio. This was a difficult decision, but we believe it is in the best interest of all stakeholders and will make Frontier a competitively stronger business in both the near term and long term.” There it goes... It does sound like operationally they didn't do too bad though. Still need to look at the filing in detail. Link to comment Share on other sites More sharing options...
finetrader Posted February 16, 2012 Share Posted February 16, 2012 Isn'it no later than the previous quarter conference call that the CEO said that the dividend is safe? Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 16, 2012 Share Posted February 16, 2012 Isn'it no later than the previous quarter conference call that the CEO said that the dividend is safe? So the question goes, what do they need the cash for? The debt maturities seemed OK to me. Link to comment Share on other sites More sharing options...
alertmeipp Posted February 16, 2012 Share Posted February 16, 2012 I think it's a needed move to make sure they de-leverage a bit. As a recent shareholder, I don't mind. A safer 9% is good. The money goes to shareholder either way. Link to comment Share on other sites More sharing options...
Myth465 Posted February 17, 2012 Author Share Posted February 17, 2012 Tough one there. Same same whether they pay a dividend or pay down debt, but its hell on the stock price. FTR trades on yield. They have pretty much pegged the stock price at $4 for the year or so. I havent seen FTR trade too far below a 10% to 7.5% yield. I think they made a mistake, and should have held the dividend until the synergies kicked in. Link to comment Share on other sites More sharing options...
biaggio Posted February 17, 2012 Share Posted February 17, 2012 maybe they were pressured by lenders and or rating agencies to lower dividend? I don t get or agree how they calculate FCF of $1.1B, I am only getting $735 million (net income + depreciation + ammort -capex). Do you guys feel this is misleading? Nevertheless they yielded FCF or owners earnings by my calculation of $0.74/share (good value for a $4 stock, but of coarse I bought at$7 and $ 7.50...). I liked the divi but don t mind them paying down debt. I normally try to stay away from high debt (lesson learned again?) Upon reviewing my notes, it seems that everything is working out as planned or better except the original revenue projections I had. Link to comment Share on other sites More sharing options...
S2S Posted February 17, 2012 Share Posted February 17, 2012 Not to beat a dead horse but folks, there's nothing special about a RLEC trading at 10% div. yield. Case in point: CTL, WIN. Especially one with significant execution risk to boot. So the question goes, what do they need the cash for? The debt maturities seemed OK to me. It probably has something to do with the $500M+ note maturing in Jan 13. Link to comment Share on other sites More sharing options...
Junto Posted February 17, 2012 Share Posted February 17, 2012 Not to beat a dead horse but folks, there's nothing special about a RLEC trading at 10% div. yield. Case in point: CTL, WIN. Especially one with significant execution risk to boot. So the question goes, what do they need the cash for? The debt maturities seemed OK to me. It probably has something to do with the $500M+ note maturing in Jan 13. I think it had more to do with the rating agencies than anything. Operationally a good quarter at first glance. I was expecting the dividend cut so the cut was built into my estimates. Link to comment Share on other sites More sharing options...
Myth465 Posted February 17, 2012 Author Share Posted February 17, 2012 S2S is spot on without yield FTR is dead money. You could get many Euro Telecoms at 10% yield, and there are also many US Telecoms trading for the same yield. I am a fan of the company, but they should have kept the dividend, or cut it sooner without building up the fact that it was safe. I have till 2014, so we will see what happens. These things trade on yield, nothing else matters. Rightly so with a declining revenue stream... You win some, and you lose some... Link to comment Share on other sites More sharing options...
Sea Island Posted February 17, 2012 Share Posted February 17, 2012 I too believe it was a mistake to cut the dividend especially after the CEO's remarks in the third quarter and the work as seen below that was already done on the balance sheet. Nov. 3rd the dividend is "stable" and now its not and they have known this for sometime. On October 14, 2011, the Company completed a bank financing for a $575 million senior unsecured amortizing term loan maturing October 14, 2016. Proceeds were used to repay in full the remaining outstanding principal on three debt facilities (Frontier's $200 million Rural Telephone Financing Cooperative term loan maturing October 24, 2011, its $143 million CoBank term loan maturing December 31, 2012, and its $130 million CoBank term loan maturing December 31, 2013) and the remaining proceeds will be used for general corporate purposes. This financing substantially satisfies maturities through 2012 and enables the Company to retain strong liquidity through its existing, undrawn $750 million revolving credit facility. Link to comment Share on other sites More sharing options...
cwericb Posted February 17, 2012 Share Posted February 17, 2012 There has been so much anticipation of a dividend cut for so long that this has been driving the share price down for months. It has also made FTR a target for shorts. Now that the the cut has finally been made, perhaps we will start to see a decent improvement in price as the situation steadies up over the coming months. So far the market seems to agree and the price up about up about 3-4% in heavy trading - 50+ million shares and counting, nearly 3 times normal volume. IMHO Link to comment Share on other sites More sharing options...
Myth465 Posted February 18, 2012 Author Share Posted February 18, 2012 The leaps I just bought a few weeks ago are in the green. Shows what I know. Would you guys sell or hold. I dont see FTR trading below a 7.5% yield. I like the rally though. Link to comment Share on other sites More sharing options...
enoch01 Posted February 18, 2012 Share Posted February 18, 2012 The leaps I just bought a few weeks ago are in the green. Shows what I know. Would you guys sell or hold. I dont see FTR trading below a 7.5% yield. I like the rally though. The dividend cut was priced in. The bigger news is that the predicted synergies are materializing. They had solid execution this quarter. The "look-through" yield hasn't changed (on track to improve after this year), they're just being more prudent with the balance sheet. I'm holding. Link to comment Share on other sites More sharing options...
cwericb Posted February 18, 2012 Share Posted February 18, 2012 FTR ended the day up 7% on nearly 4 times normal volume. That would seem to be a vote of confidence by the market and seems to verify that the stigma of a potential div cut has been overblowen and depressing the share price more than justified. Not only was the dividend cut already priced in, but no one knew how much it would be and the market hates uncertainty and reacted (or overreacted) accordingly. However, it was a blow to FTR's credibility to have recently given assurances that there would not be a dividend cut. So now the div is "only" 8-10%. I'm going to stick around and I would not be surprised to see an improvement in share price now that the pressure is off and while I don't expect to see $7 anytime real soon, I've been wrong before. My biggest regret is that I didn't didn't follow through with my intention to buy a little more around the $4.00 range a few days ago. Balancing paositve and negative factors it would seem that there is a lot more upside potential than downside at this point. Link to comment Share on other sites More sharing options...
T-bone1 Posted February 18, 2012 Share Posted February 18, 2012 The dividend cut is disappointing, but I think their hand was forced by the rating agencies. The important thing in my mind is that this actually raises intrinsic value (or at least it will). When they term out $1 billion in debt maturities at low rates because they just cut the dividend, shareholders will be the beneficiaries. This investment hasn't worked out the way I expected it to, but I think it is attractive now Link to comment Share on other sites More sharing options...
Sea Island Posted February 20, 2012 Share Posted February 20, 2012 Perhaps someone can explain why the short interest was increasing going into an earnings call where the dividend was likely to be cut if this was going to be good news for the company. If you were short on Thursday, what do you do now? Was Friday everyone covering and now the stock will drift back to the 17-18% dividend yield area? Link to comment Share on other sites More sharing options...
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