GNCMA - General Communications

[yadayada]

isn't their infrastructure a bit like real estate? Once they laid out the infrastructure for 4g and fast internet, what kind of costs are they going to endure going forward? And it doesn't look like they have to spend another billion on that in the medium term.

It looks to me that within like 5 years or so, this thing can turn into a cash machine. Once they only (or mostly) have maintenance cap exp. Even better if they somehow manage to grow ebitda even more.

[plato1976]

You are basically assuming there won't be a faster alternative to 4g etc. in a few years; otherwise they need to heavily invest into infrastructure again. In a fast changing technology landscape, I'd rather the company to balance growth and cash yield

 

isn't their infrastructure a bit like real estate? Once they laid out the infrastructure for 4g and fast internet, what kind of costs are they going to endure going forward? And it doesn't look like they have to spend another billion on that in the medium term.

It looks to me that within like 5 years or so, this thing can turn into a cash machine. Once they only (or mostly) have maintenance cap exp. Even better if they somehow manage to grow ebitda even more.

[jm25]

The stock is on fire today!

[yadayada]

You are basically assuming there won't be a faster alternative to 4g etc. in a few years; otherwise they need to heavily invest into infrastructure again. In a fast changing technology landscape, I'd rather the company to balance growth and cash yield

 

isn't their infrastructure a bit like real estate? Once they laid out the infrastructure for 4g and fast internet, what kind of costs are they going to endure going forward? And it doesn't look like they have to spend another billion on that in the medium term.

It looks to me that within like 5 years or so, this thing can turn into a cash machine. Once they only (or mostly) have maintenance cap exp. Even better if they somehow manage to grow ebitda even more.

 

yeah but if you look at it logically, would you say when 2g and 3g were around that it could be likely that there isn't a need for something better?

 

But with 4g, you could make very convincing arguments that there isn't much need for an even faster infrastructure. Because you dont really stream movies on the go. Very few people do that. Even if you do, you dont need a massive resolution because screens will always sstay small.

 

And with internet at home, a limit is reached as well. You wont really get 8k movies very soon. anything above 2k, and you wont see the difference below like 40-50 inch tv's.

 

You couldn't exactly say that when dvd's where around. I remember the first time I saw a 2k nature movie on my hd tv. It blew me away how beautifull it looked. But when I saw the 4k resollution I was very underwhelmed.

[jwfm1985]

 

GCI REPORTS FOURTH QUARTER 2013 FINANCIAL RESULTS

 

Consolidated revenue of $218 million, $812 million for the year

 

Adjusted EBITDA of $68 million, $267 million for the year

 

March 5, 2014, Anchorage AK - General Communication, Inc. ("GCI") (NASDAQ:GNCMA) today reported record performance for 2013, with fiscal year 2013 results of consolidated revenues of $812 million, adjusted EBITDA of $267 million, and net income of $9 million or $0.23 per diluted share. The EBITDA performance was slightly ahead of previously provided guidance. These results reflect the consolidation of the The Alaska Wireless Network ("AWN") transaction, which was effective July 23, 2013.

 

For the fourth quarter of 2013, revenue increased to $218 million or 19 percent over the fourth quarter of 2012. Adjusted EBITDA increased to $68 million or 28 percent over the fourth quarter of 2012. Net loss for the fourth quarter was $(7) million or $(0.17) per share.

 

"2013 has been a year of great significance for GCI, for many reasons. Record EBITDA is the most visible measure, but it was achieved on the basis of substantial investment and achievements in all areas of the business," said Ron Duncan, GCI president and chief executive officer. "We are now prepared to realize the rewards of our investments in the network, in AWN, and in our operations."

 

Operating Highlights

 

Wireless:

As mentioned above and previously announced, the AWN transaction closed on July 22nd, and was effective on July 23rd. This transaction combined the wireless networks of GCI and Alaska Communications ("ACS"). AWN provides wholesale wireless services to AWN's owners, GCI and ACS, as well as roaming and backhaul service to other wireless carriers. This quarter is the first full quarter of AWN's operations.

 

Wireless revenues of $62 million for the fourth quarter of 2013 decreased from the third quarter of 2013 revenues of $66 million, reflecting a full quarter of AWN operations but offset by the seasonality of roaming. Wireless Adjusted EBITDA of $28 million decreased from the third quarter 2013 Adjusted EBITDA of $37 million due to the lower margin contribution of less roaming, and the cost of customer acquisition by the retail partners.

 

For the fourth quarter of 2013, the revenue detail is as follows: 

 

($ millions) 4Q 2013 4Q 2012 3Q 2013

Wholesale Wireless $24 $15 $22

Roaming and Backhaul $25 $10 $31

USF Support $13 $8 $13

Total Wireless Revenue $62 $33 $66

During the quarter, the company implemented many enhancements and improvements to the network, including:

 

The system in the Juneau area was substantially upgraded, with LTE and expanded GSM/HSPA capabilities. LTE service is scheduled to go live in Fairbanks later this month.

 

A new prepaid system was developed and implemented, which includes LTE data capability.

 

The first rural 3G system was launched in Dillingham.

 

148 new TurboZones were turned up, for a total of 1,110 sites. 

 

Wireline:

 

The Wireline segment posted revenues of $156 million for the fourth quarter of 2013, compared with $151 million for the same period in 2012, representing 3% growth. Adjusted EBITDA for the fourth quarter of 2013 was $40 million, a slight decline from 2012's fourth quarter Adjusted EBITDA of $41 million, reflecting an increased allocation of operating expenses to this segment.

 

Wireline -- Consumer:

Consumer revenues of $69 million for the fourth quarter of 2013 represented a slight increase over the same period in 2012. Increases in data offset decreases in wireless, voice and video revenues.

 

During the quarter, the Company announced several campaigns and new programs:

 

"March to a Gigabit" announced GCI's commitment to providing gigabit data service, which was accompanied by an immediate increase to data speeds in many of the urban areas. Data speeds were again increased yesterday, up to 200Mps in some areas. Responses to the offering and the increases have been robust.

 

While overall video had a slight decline, there has been an acceleration of demand for TiVo and TiVo box growth has been strong, which has helped reduce churn.

 

GCI launched a new wireless prepaid platform, offering statewide service under the brand name FastPhone. 

 

Demand has also been strong for cellular-enabled tablets, including the iPad. 

 

Wireline -- Business Services:

Business Services revenues of $56 million for the fourth quarter of 2013 increased 4 percent over the same period in 2012.

 

The fourth quarter reflected solid performance across all products, with cable advertising predictably strong throughout the holiday season. Overall, growth in the quarter was driven by video and voice, with data transport and storage charges also adding to the growth.

 

The Data revenue results can better be understood by examining the components of the category:

 

($ millions) 4Q 2013 4Q 2012 3Q 2013

Data Transport & Storage Charges $24 $23 $25

Professional Services $12 $15 $14

Total Data Revenue $36 $38 $39

Wireline -- Managed Broadband:       

Managed Broadband revenues for the fourth quarter of 2013 totaled $30 million, an increase of 6 percent over the fourth quarter of 2012. This positive performance is driven in part by the expansion of and increasing demand for the TERRA services in rural Alaska.

 

On November 5th, GCI completed another phase of its terrestrial broadband network, TERRA, with full service extending to Nome. GCI expects to complete the next phase, to Kotzebue, by the end of 2014.

 

Corporate Highlights

 

Capital Expenditures for the year were $181 million, which included $16 million of grant funded expenditures, for a net of $165 million. $28 million of the capital expenditures were attributable to the Wireless segment and $137 million were attributable to the Wireline segment. This is slightly below the previously announced guidance.

 

During 2013, the Company repurchased 1.8 million shares of GCI common stock, at a total cost of $15.6 million.

 

Following the acquisition of KTVA-TV (CBS) by the company's subsidiary, Denali Media, KTVA moved into a newly constructed, state of the art, high definition (HD) facility in December, and launched expanded HD news programming. KTVA is the first station in Alaska to present local news in HD.

 

Denali Media also purchased KATH and KSCT, low power NBC affiliates in Juneau and Sitka.

 

Guidance

 

The Company also provided guidance for 2014.  With strong continued performance by all segments and customer groups, the Company is anticipating to achieve Consolidated Revenues in the range of $910 million to $930 million and Adjusted EBITDA in the range of $285 million to $305 million.

 

For capital expenditures, the base investment program is expected to be lower than last year, and should be $140 million to $150 million, down from the $165 million (net of grants) this past year. This does not include any real estate investment, as we continue to review our leased property portfolio. The Company has identified a unique opportunity in the wireless market to solidify its competitive position, and believes that an acceleration of the wireless build out is warranted, to bring full LTE service to 80% of Alaska. This is expected to accelerate approximately $30 million of planned expenditures from the outer years into 2014, bringing the total expected capital spend to about $170 million.

 

GCI will hold a conference call to discuss the quarter's results on Thursday, March 6, 2014 beginning at 2 p.m. (Eastern). To access the briefing, call the conference operator between 1:50-2:00 p.m. (Eastern Time) at 877-918-2314 (International callers should dial +1-517-308-9338) and identify your call as "GCI."  In addition to the dial-up access, GCI will make available net conferencing.  To access the call via net conference, log on to www.gci.com and follow the instructions.  A replay of the call will be available for 72-hours by dialing 800-839-2291, access code 7461 (International callers should dial +1-402-998-1194.)

[PullTheTrigger]

Anybody notice this investment by GNCMA?

 

http://www.prweb.com/releases/2014/02/prweb11598023.htm#.UwzlHH4qIq8.email

Texas Energy Network, LLC ("TEN" or the “Company”), a provider of next generation carrier-class communication services to the oil and natural gas industry, today announced the closing of a minority equity investment from General Communication, Inc. ("GCI"). TEN intends to use the proceeds of the GCI investment to fund the expansion of TEN’s world-class long-term evolution (“LTE”) wireless communication service offering to its primary customers.

 

Currently operating in the prolific Permian Basin in West Texas and the Eagle Ford shale in South Texas, TEN is the premier provider of LTE services to the oil and gas industry. TEN provides high speed internet connectivity to rigs, completion units, tank batteries, field offices, oilfield personnel camps and trucks for over 30 major and independent oil and gas companies.

 

Greg Casey, CEO of TEN, remarked, "We are thrilled to partner with GCI as a new equity investor in TEN. GCI brings a wealth of operational and technical expertise from its broad service offering in Alaska, including providing communication services to the oilfield in the harsh environments of Alaska and the Gulf of Mexico. GCI’s experience in these environments makes it an ideal partner as we expand our geographic footprint while continuing to provide best-in-class service to our customers."

 

Is this related to the statement today:

 

The Company has identified a unique opportunity in the wireless market to solidify its competitive position,

 

Also, looks like 2014 guidance for EBIDTA is almost exactly as Packer predicted.

[racemize]

Guidance seems lower than expected on EBITDA, since I presume it is consolidated?  Am I missing something?

[Packer16]

If look at Q4 2013 AWN EBITDA it is close to $110 m annualized.  If we pullout 1/3rd of AWN from the 2014 guidance number we get $248 to $268m.  The synergies I think were close to $40m so it would interesting to see how much of that is included in the guidance.  The midpoint of the guidance was $10m in excess of the analyst forecasts.  It is also nice the Feds are picking up $50m of cap ex for GNCMA's network.

 

Packer

[racemize]

If look at Q4 2013 AWN EBITDA it is close to $110 m annualized.  If we pullout 1/3rd of AWN from the 2014 guidance number we get $248 to $268m.  The synergies I think were close to $40m so it would interesting to see how much of that is included in the guidance.  The midpoint of the guidance was $10m in excess of the analyst forecasts.  It is also nice the Feds are picking up $50m of cap ex for GNCMA's network.

 

Packer

 

I was getting the same calculations as well.  I guess if these synergies don't come through it isn't quite as cheap as hoped.  I was hoping to see EBITDA guidance in the 350 range. 

[Packer16]

If you use the mid-point of the guidance numbers you get an EBITDA multiple of 5.5x which is still cheaper than cable cos which trade for 8x to 9x and have lower EBITDA growth rates, the guidance is a 10% EBITDA growth rate, the highest in the industry.

 

Packer

[gary17]

If look at Q4 2013 AWN EBITDA it is close to $110 m annualized.  If we pullout 1/3rd of AWN from the 2014 guidance number we get $248 to $268m.  The synergies I think were close to $40m so it would interesting to see how much of that is included in the guidance.  The midpoint of the guidance was $10m in excess of the analyst forecasts.  It is also nice the Feds are picking up $50m of cap ex for GNCMA's network.

 

Packer

 

can we simply pull out 1/3rd of AWN to account for ALSK? I thought during this time ALSK gets 50M which is more than 1/3... 

[Palantir]

I don't believe the synergies are that high. The press release states synergies of 30M but I believe they were for both firms in total, not GCI alone...

[gary17]

I asked IR , and here's the response I got:

 

We don’t really track “synergy” as a separate component, I’m afraid.

 

I am aware that, long ago it seems, there was an estimate put out there as to synergy, really a short cut of estimating how the integrated costs of one organization would compare with two separate, competing organizations. But to track it in actuals, we would have to know what ACS and GCI might have been planning for 2014 as separate organizations, and that exercise has not been done.

 

What we have provided is our best look at 2014 for AWN, as it ended up being structured, as the market ended up being, and as an integrated, GCI-managed whole.

 

So, in conclusion, we will not be commenting on the old guidance numbers that were floating around, nor identifying any specific synergy savings.

 

Regards,

 

[Packer16]

Thanks Gary so I guess we are $258m economic EBITDA $295m - $110m/3 (we can add the PV of $8.3 million over 4 years of debt (difference between $45m and $110/3)).  This results in an EBITDA multiple of 5.7x and an upside at 8x EBITDA of 133%.  We also have EBITDA growing at 10% per year.

 

Packer

[Packer16]

There is a good amount of debt almost 4x EBITDA.  It is well covered at 3.4x EBITDA and has growing EBITDA unlike many other telcos.

 

Packer

[gjangal]

Hi All,

 

The company's forward revenue and EBITDA numbers look promising. Management shrinking the share count consistently seems like a good sign. I have a very naive question, with the company being so cheap compared to other cable cos, why is it not being acquired by some big player who wants a foothold in the Alaskan market? Are there Antitrust issues in doing so?

 

Thanks!

[krazeenyc]

This results in an EBITDA multiple of 5.7x and an upside at 8x EBITDA of 133%.

 

I must be missing something obvious or misreading, but from 5.7x to 8x, isn't that 40% upside?

 

Leverage. 40% increase in EV would result in about 133% gain in the price of the equity.

[prevalou]

two remarks:

-wireless ebitda around 110 m$ annualized but it is more than AWN (wireless wholesale, roaming and retail). I think AWN is wholesale+roaming

-there is no growth in internet subscribers  (the most profitable segment). It is different from other cable operators who gain internet subscribers, even if they lose video subscribers.

[tombgrt]

Rather weak wireless ebitda number, too bad!

[Packer16]

I guess we will get the AWN breakout today with ALSK's earnings release.

 

Packer

[tombgrt]

Anyone any idea why GNCMA's numbers are seen as a positive for ALSK? TIA.

[gary17]

I don't think it is. I think alsk is up because of the AWN gain in the restated quarterly report. Doesn't change cash flow but changes the one time gain.  Unless I'm really mistaken.

[mg0516]

So, based on the guidance...~$150M OCF less interest expense of $70M or ~$80M FCF on a market cap of ~$430 or a 18% fcf yield in '14.  And, running with far lower leverage than is possible for a recurring revenue biz like this...

 

Packer, what am I missing?

[prevalou]

interest cost ! minimum $70 m

[yadayada]

How will the fibre change their internet bottom line?