ALSK - Alaska Communications

[abcd]

I think platforms like SA generally have a much bigger impact than this board. Proof is in the jump after both this article and the one feom harry long. Where is the jump when packer announces his alak position?

 

I also read a claim that the board is moving SHLD in the shld topic... I really don't think our impact is that big.

 

Pain is ok, I made a lot more than I lost because of the same stock movement randomness so I can't complain. :)

 

But don't you think the attention span of people reading this board is longer than those that are reading other sources?

 

I, also, think that the impact on a stock like ALSK will be more than on something like SHLD or IBM.

 

[gary17]

That's quite an interesting price action today... interesting to see Mr. market in action... we were 1.9ish I believe a few weeks ago and now 2.2ish And all this time the business hasn't changed...

 

 

 

[plato1976]

I guess nothing too surprising

after all they are low volumn micro-cap / small-cap

 

That's quite an interesting price action today... interesting to see Mr. market in action... we were 1.9ish I believe a few weeks ago and now 2.2ish And all this time the business hasn't changed...

[gary17]

I have a non-financial question re ALSK

 

GNCMA just announced that they are upgrading their infrastructure so the cable internet will reach 1gb/s...

 

I am wondering if anyone knows the same can be implemented with ALSK's infrastructure....

 

Thanks

 

[racemize]

I have a non-financial question re ALSK

 

GNCMA just announced that they are upgrading their infrastructure so the cable internet will reach 1gb/s...

 

I am wondering if anyone knows the same can be implemented with ALSK's infrastructure....

 

Thanks

 

Isn't the fastest ALSK speed lower than GNCMA?  It just seems long term that GNCMA is in a much better position in every aspect than ALSK.  Please correct me if I'm missing something.

[HJ]

I have a non-financial question re ALSK

 

GNCMA just announced that they are upgrading their infrastructure so the cable internet will reach 1gb/s...

 

I am wondering if anyone knows the same can be implemented with ALSK's infrastructure....

 

Thanks

 

 

I don't have a long history with telecom, but 2 things that strike me about the business: 

 

(1) if there's little competition, then it ought to be a very good business (the old Ma Bell).  From that angle, GNCMA has a better set up than most other cable/telecom businesses, since there seem to be little competition up there in Alaska for them.  There only major competitor, ALSK seem not to be up to the task, and isn't well capitalized enough, or even have the will to compete.  I think fiber to the home build out is quite expensive.

 

(2) It's quite capital intensive, especially in the build out phase, and here is where I'm questioning the aforementioned infrastructure upgrade.  I read that it could cost more than $100MM for the whole exercise.  I just wonder if they need to do this by 2015, especially considering the competitive landscape.

 

http://www.newsminer.com/business/gci-announces-planned-leap-in-internet-speed/article_a4ccc4a4-6922-11e3-9055-0019bb30f31a.html. 

 

In reading some of the transcript for conference calls in '08 and '09, the analysts were pushing them to do a little bit of buy back, but they always prioritized capex build out.  There is no denying that this management team have done a great job over the past 2 decades in building the company, and that they seem to be the "favored son" by the Alaska community.  But they've never paid a dividend, and have done very little buy backs since inception.  In the balance between serving community and investors, they always seem to skew towards the community.  Nothing wrong with that, but I'm just wondering out loud what this should be worth in multiples.

 

 

 

[yadayada]

Shouldnt this greatly add to their moat tho? HOw much upgrades will they need to do in the future. 5g will be another 8-10 years away. So it looks like that GNCMA will have great FCF in about 3 years time. They will get even more ahead of ALSK and it will be even harder for Verizon to penetrate the market. And their buyout value is also higher.

 

Just trying to think of things that they might want to add in the future. It just seems broadband wont really get that much faster now. I doubt movies and games will go to 200 gb any time soon. Didnt they roll out 4g for the most part already? Or have a v fast 3 g network.

[gary17]

HJ

good points -

On GNCMA - I am not sure why either , but seems like the CEO , who I believe owns 30% , sees it as a good idea...   

 

Agreed, if ALSK does the same it'll be more in debt and take even longer to get back to dividends -

 

in this kind of environment telcos could end up spending a lot of money on just staying competitive and not returning any money to shareholders............

 

be interested to hear others' thoughts on this too.

 

thanks

 

I have a non-financial question re ALSK

 

GNCMA just announced that they are upgrading their infrastructure so the cable internet will reach 1gb/s...

 

I am wondering if anyone knows the same can be implemented with ALSK's infrastructure....

 

Thanks

 

 

I don't have a long history with telecom, but 2 things that strike me about the business: 

 

(1) if there's little competition, then it ought to be a very good business (the old Ma Bell).  From that angle, GNCMA has a better set up than most other cable/telecom businesses, since there seem to be little competition up there in Alaska for them.  There only major competitor, ALSK seem not to be up to the task, and isn't well capitalized enough, or even have the will to compete.  I think fiber to the home build out is quite expensive.

 

(2) It's quite capital intensive, especially in the build out phase, and here is where I'm questioning the aforementioned infrastructure upgrade.  I read that it could cost more than $100MM for the whole exercise.  I just wonder if they need to do this by 2015, especially considering the competitive landscape.

 

http://www.newsminer.com/business/gci-announces-planned-leap-in-internet-speed/article_a4ccc4a4-6922-11e3-9055-0019bb30f31a.html. 

 

In reading some of the transcript for conference calls in '08 and '09, the analysts were pushing them to do a little bit of buy back, but they always prioritized capex build out.  There is no denying that this management team have done a great job over the past 2 decades in building the company, and that they seem to be the "favored son" by the Alaska community.  But they've never paid a dividend, and have done very little buy backs since inception.  In the balance between serving community and investors, they always seem to skew towards the community.  Nothing wrong with that, but I'm just wondering out loud what this should be worth in multiples.

[HJ]

We should probably move these discussions to the General Cable board.  But (1) the aforementioned capex is not for wireless, but cable speed.  In other markets, whether it's ATT U-verse or Verizon Fios, or Google Fiber, there is competitive pressure to upgrade the infrastructure to a higher speed.  But in Alaska, that pressure doesn't seem to be there.  The only other company, ALSK, doesn't seem to have the appetite or capitalization to do this, which is what makes GNCMA attractive in the first place.  However, they are behaving no differently from other cable operators, or in some ways even more axed to do Capex, which sort of negates a somewhat better competitive position than most other telecoms. 

 

From shareholders' perspective, taking a 10+ year view, the stock was 7.5-8 in the late 90's.  15-20 years later, you are up 30%, with no dividend, in a less competitive market than those operated by, say, a Comcast. 

 

Now the stock does trade at a discount to other cable systems, which all kind of suffer from the same issues, which you can argue makes it relatively cheap.  If we were at some sort of Capex inflection point, where we are finally beginning to reap some of the benefits of their prior $2 billion infrastructure spend, it may well be very cheap fundamentally.  But I'm less willing to make that judgement when I just read that they are about to spend another $100MM in the next 2 years, in addition to whatever capex plan they already have committed to, on an infrastructure that is not under any meaningful competitive pressure, when their own market cap is only $400MM.  Just seem to me the least they can do is to space this thing out over a longer time frame.  Verizon put a temporary stop to their FIOs build out plan a couple of years ago, to at least get some cash flow in the door on previously sunk capital.  And with these guys, it just never seem to be a good time to harvest, and always a good time to build.

 

All this though, is from someone who doesn't really know enough of telecom, the competitive / technological dynamics, and trying to understand the industry better.  All this capex may indeed be very well justified.  I just don't know how to reach that conclusion.

[investor-man]

Shouldnt this greatly add to their moat tho? HOw much upgrades will they need to do in the future. 5g will be another 8-10 years away. So it looks like that GNCMA will have great FCF in about 3 years time. They will get even more ahead of ALSK and it will be even harder for Verizon to penetrate the market. And their buyout value is also higher.

 

Just trying to think of things that they might want to add in the future. It just seems broadband wont really get that much faster now. I doubt movies and games will go to 200 gb any time soon. Didnt they roll out 4g for the most part already? Or have a v fast 3 g network.

 

+1 -- this is a good thing IMHO

[investor-man]

But I'm less willing to make that judgement when I just read that they are about to spend another $100MM in the next 2 years, in addition to whatever capex plan they already have committed to, on an infrastructure that is not under any meaningful competitive pressure.

 

I assume they (GNCMA) are doing this in response to Verizon making moves into the area. Is it not safe to assume Verizon would be offering fiber?

[yadayada]

We should probably move these discussions to the General Cable board.  But (1) the aforementioned capex is not for wireless, but cable speed.  In other markets, whether it's ATT U-verse or Verizon Fios, or Google Fiber, there is competitive pressure to upgrade the infrastructure to a higher speed.  But in Alaska, that pressure doesn't seem to be there.  The only other company, ALSK, doesn't seem to have the appetite to do this, which is what makes GNCMA attractive in the first place.  However, they are behaving no differently from other cable operators, or in some ways even more axed to do Capex, which sort of negates a somewhat better competitive position than most other telecoms. 

 

From shareholders' perspective, taking a 10+ year view, the stock was 7.5-8 in the late 90's.  20 years later, you are up 30%, with no dividend, in a less competitive market than those operated by, say, a Comcast. 

 

Now the stock does trade at a discount to other cable systems.  If we were at some sort of Capex inflection point, where we are finally beginning to reap some of the benefits of their prior $2 billion infrastructure spend, it may well be very cheap.  But I'm less willing to make that judgement when I just read that they are about to spend another $100MM in the next 2 years, in addition to whatever capex plan they already have committed to, on an infrastructure that is not under any meaningful competitive pressure.

I think the idea here is that they are too cheap right now. And besides, Ebitda tripled in the last 13 years (cant find any fillings before that). Their buyout price greatly increased. And like I said, what major costs are going to come up in the future? We have seen a technological revolution in the last 10-15 years. And this is moving much slower now, bandwith requirements are coming down as caps are reached in what people think is necessairy. the new 4k pixels is probably going to bomb. You barely see the difference between 1080p and super HD sitting on your couch. So going much higher will be pointless.

 

And 3G was crappy, but with wireless backhaul 4g is going to be more then competent to fill people's needs. And we dont really need much faster broadband, both at home and away from home. And I think the reason they do it now, is because they prefer it over paying taxes in the future? And it probably has to be done anyway, and it will put more pressure on ALSK. So I dont see what billion$ investments they will have to make in the next 8-10 years.

 

If you assume a fair value of 20$ on this, that is still a 9% compound return. If you ignore the crazy valuations of 13 years ago, then they did even better? Im not an expert on this, this is my amateur, consumer point of view :) .

 

 

Btw, maintenance cap exp for ALSK is 35 million$. What would be safe to say for GCI? 70 million? if we make it a 100, with the estimated 290 million$ in ebitda- 60 million in interest, that is between 100-130 million $ in FCF. Could be safe to say that in 2-3 years they should be worth at least a  billion$? That is not a  bad return  in the last 13 years. For some Alaska cable company.

 

But yeah we should probably continue this in the other thread :) .

 

[krazeenyc]

GNCMA is a much better company and has been run much better than ALSK in the past and now. For ALSK, it's a good thing that AWN is being run by GNCMA for both their benefits -- as GNCMA executes better. I own both. What I like about ALSK is at this point they have a single mandate - boost broadband revenues -- in particular to businesses. This effort involves basically two tasks -- building out their network and selling to businesses. It sounds like they're doing an excellent job selling -- and the network buildout should follow. How much share do you think GNCMA will capture in the next 5 years due to gigabit ethernet -- why do you think gigabit ethernet is not widely available in large metropolis'.  Also at the end of the day there are 4 pipes running into Alaska. ALSK owns 2 of them -- including the newest and best -- from an asset standpoint this value is enormous relative to ALSK's market cap.

[HJ]

I think the idea here is that they are too cheap right now. And besides, Ebitda tripled in the last 13 years (cant find any fillings before that). Their buyout price greatly increased. And like I said, what major costs are going to come up in the future? We have seen a technological revolution in the last 10-15 years. And this is moving much slower now, bandwith requirements are coming down as caps are reached in what people think is necessairy. the new 4k pixels is probably going to bomb. You barely see the difference between 1080p and super HD sitting on your couch. So going much higher will be pointless.

 

And 3G was crappy, but with wireless backhaul 4g is going to be more then competent to fill people's needs. And we dont really need much faster broadband, both at home and away from home. And I think the reason they do it now, is because they prefer it over paying taxes in the future? And it probably has to be done anyway, and it will put more pressure on ALSK. So I dont see what billion$ investments they will have to make in the next 8-10 years.

 

If you assume a fair value of 20$ on this, that is still a 9% compound return. If you ignore the crazy valuations of 13 years ago, then they did even better? Im not an expert on this, this is my amateur, consumer point of view :) .

 

 

Btw, maintenance cap exp for ALSK is 35 million$. What would be safe to say for GCI? 70 million? if we make it a 100, with the estimated 290 million$ in ebitda- 60 million in interest, that is between 100-130 million $ in FCF. Could be safe to say that in 2-3 years they should be worth at least a  billion$? That is not a  bad return  in the last 13 years. For some Alaska cable company.

 

But yeah we should probably continue this in the other thread :) .

 

But what got me started was this announcement that they are going to do Gigabit on their cable system $100MM in 2 years, Not wireless.  I wouldn't have had the same rant if the $100MM was for wireless, or wireless backhaul.

[HJ]

How much share do you think GNCMA will capture in the next 5 years due to gigabit ethernet -- why do you think gigabit ethernet is not widely available in large metropolis'. 

 

Precisely THE question regarding this $100MM spend for the next 2 years.  I don't' know.  From what I've been reading, sounds like they already have their rightful share in consumer market already.  How much more are they going to get, or how much more can they charge associated with this $100MM?

 

If there's meaningful cash flow down the road because of this, it's one thing, but if this is just to preempt some future competitive threat, well, that says something about the business as well.

[yadayada]

I think the idea here is that they are too cheap right now. And besides, Ebitda tripled in the last 13 years (cant find any fillings before that). Their buyout price greatly increased. And like I said, what major costs are going to come up in the future? We have seen a technological revolution in the last 10-15 years. And this is moving much slower now, bandwith requirements are coming down as caps are reached in what people think is necessairy. the new 4k pixels is probably going to bomb. You barely see the difference between 1080p and super HD sitting on your couch. So going much higher will be pointless.

 

And 3G was crappy, but with wireless backhaul 4g is going to be more then competent to fill people's needs. And we dont really need much faster broadband, both at home and away from home. And I think the reason they do it now, is because they prefer it over paying taxes in the future? And it probably has to be done anyway, and it will put more pressure on ALSK. So I dont see what billion$ investments they will have to make in the next 8-10 years.

 

If you assume a fair value of 20$ on this, that is still a 9% compound return. If you ignore the crazy valuations of 13 years ago, then they did even better? Im not an expert on this, this is my amateur, consumer point of view :) .

 

 

Btw, maintenance cap exp for ALSK is 35 million$. What would be safe to say for GCI? 70 million? if we make it a 100, with the estimated 290 million$ in ebitda- 60 million in interest, that is between 100-130 million $ in FCF. Could be safe to say that in 2-3 years they should be worth at least a  billion$? That is not a  bad return  in the last 13 years. For some Alaska cable company.

 

But yeah we should probably continue this in the other thread :) .

 

But what got me started was this announcement that they are going to do Gigabit on their cable system $100MM in 2 years, Not wireless.  I wouldn't have had the same rant if the $100MM was for wireless, or wireless backhaul.

why do wireless. Whos gonna watch 1080p+ movies on their phone? You need the fat pipe for at home to download those HD movies and enormous sized video games. When your on your phone or table you use facebook or other undemanding apps.

 

GNCMA is a much better company and has been run much better than ALSK in the past and now. For ALSK, it's a good thing that AWN is being run by GNCMA for both their benefits -- as GNCMA executes better. I own both. What I like about ALSK is at this point they have a single mandate - boost broadband revenues -- in particular to businesses. This effort involves basically two tasks -- building out their network and selling to businesses. It sounds like they're doing an excellent job selling -- and the network buildout should follow. How much share do you think GNCMA will capture in the next 5 years due to gigabit ethernet -- why do you think gigabit ethernet is not widely available in large metropolis'.  Also at the end of the day there are 4 pipes running into Alaska. ALSK owns 2 of them -- including the newest and best -- from an asset standpoint this value is enormous relative to ALSK's market cap.

Who owns the other 2? Where can i read more about this?

[HJ]

why do wireless. Whos gonna watch 1080p+ movies on their phone? You need the fat pipe for at home to download those HD movies and enormous sized video games. When your on your phone or table you use facebook or other undemanding apps.

 

Because that's where there is revenue and demand growth to show for their capex, and where they have to defend against Verizon.

[yadayada]

isnt that what they are currently spending money on? How far are they rolling out 4g or fast 3g? Im reading some telco's just upgrade their 3g, which are like 3/4 of what 4g is expected to be.

 

Another thing I read, most phones with those quad cores I think and 4g capability run out in battery really quickly.

at 2:18. Some networks just upgrade 3g and call it 4g. Not sure how far GCI is with this.

 

Which is what GNCMA is doing:

Our network provides access for both global system for mobile communications (“GSM”) and code division multiple access (“CDMA”) based devices, and fourth generation evolved high-speed packet access (“HSPA+”) based wireless communications.

HSPA+ is basicly really evolved 3G, and if you watch the video that is what T-Mobile is doing, and GCI as well. It has upgraded capacity and high speed. And like I said, who needs insane speeds on their phones or tablets outside their homes? You only need that if your gonna watch a 1080p+ movie on your tv at home. And in that case regular wire networks need to be fast? 3g was actually insufficient for alot of things with its low datacap and speed. And often you had bad signal. But upgraded 3g, or '4g', basicly does everything you need on your phone, or tablet well enough.

 

At least that is how I see it. Feel free to prove me wrong :) . And also, from what I gather management seems really competent. They probably looked into this, and I think you gotta trust them on this.

[gary17]

Ppl will want to download movies to their phone and watch it on any big screen TV anywhere in the world - the phone will just be a portable computer and can be connected to a screen on the plane or smart TV at home or at the neighbour's.

 

 

[krazeenyc]

I think the idea here is that they are too cheap right now. And besides, Ebitda tripled in the last 13 years (cant find any fillings before that). Their buyout price greatly increased. And like I said, what major costs are going to come up in the future? We have seen a technological revolution in the last 10-15 years. And this is moving much slower now, bandwith requirements are coming down as caps are reached in what people think is necessairy. the new 4k pixels is probably going to bomb. You barely see the difference between 1080p and super HD sitting on your couch. So going much higher will be pointless.

 

And 3G was crappy, but with wireless backhaul 4g is going to be more then competent to fill people's needs. And we dont really need much faster broadband, both at home and away from home. And I think the reason they do it now, is because they prefer it over paying taxes in the future? And it probably has to be done anyway, and it will put more pressure on ALSK. So I dont see what billion$ investments they will have to make in the next 8-10 years.

 

If you assume a fair value of 20$ on this, that is still a 9% compound return. If you ignore the crazy valuations of 13 years ago, then they did even better? Im not an expert on this, this is my amateur, consumer point of view :) .

 

 

Btw, maintenance cap exp for ALSK is 35 million$. What would be safe to say for GCI? 70 million? if we make it a 100, with the estimated 290 million$ in ebitda- 60 million in interest, that is between 100-130 million $ in FCF. Could be safe to say that in 2-3 years they should be worth at least a  billion$? That is not a  bad return  in the last 13 years. For some Alaska cable company.

 

But yeah we should probably continue this in the other thread :) .

 

But what got me started was this announcement that they are going to do Gigabit on their cable system $100MM in 2 years, Not wireless.  I wouldn't have had the same rant if the $100MM was for wireless, or wireless backhaul.

why do wireless. Whos gonna watch 1080p+ movies on their phone? You need the fat pipe for at home to download those HD movies and enormous sized video games. When your on your phone or table you use facebook or other undemanding apps.

 

GNCMA is a much better company and has been run much better than ALSK in the past and now. For ALSK, it's a good thing that AWN is being run by GNCMA for both their benefits -- as GNCMA executes better. I own both. What I like about ALSK is at this point they have a single mandate - boost broadband revenues -- in particular to businesses. This effort involves basically two tasks -- building out their network and selling to businesses. It sounds like they're doing an excellent job selling -- and the network buildout should follow. How much share do you think GNCMA will capture in the next 5 years due to gigabit ethernet -- why do you think gigabit ethernet is not widely available in large metropolis'.  Also at the end of the day there are 4 pipes running into Alaska. ALSK owns 2 of them -- including the newest and best -- from an asset standpoint this value is enormous relative to ALSK's market cap.

Who owns the other 2? Where can i read more about this?

 

4 pipes going into alaska. 2 owned by GNCMA and 2 owned by ALSK. ALSK may have done a poor job in the past at running their business. But anyone (AT&T or VZ) who may want to expand their presence in Alaska could certainly use ALSK's assets to their benefit.

 

This is a little bit about AKORN, the newer of their 2 pipes. Akorn took 18 months and $105 million to build -- got up and running in early 2009 I believe.

 

http://akorn.alaskacommunications.com

 

ALSK acquired Crest Communications back in 2008 for $70 million (no debt) mainly to buy Northstar (much older pipe) crest communications generated $3 million of cash flow/ebitda (since no debt).

[HJ]

isnt that what they are currently spending money on?

 

Not the new $100MM commitment they just made with this roll out  http://www.gci.com/news-release/gigabit-broadband-ak-in-anchorage-2015

 

 

[yadayada]

Ppl will want to download movies to their phone and watch it on any big screen TV anywhere in the world - the phone will just be a portable computer and can be connected to a screen on the plane or smart TV at home or at the neighbour's.

Dont people use net flix for that? Or you simply connect to your wireless at home. Seems unpractical to do that by phone. You either do it with your laptop or with xbox or ps3. And some tv boxes now also offer internet access. And memory is only 64 gb on a phone. So on a plane you can only download one HD movie then. Just seems to me most people would just torrent a 1.4 gb movie in their own home, and put it on their phone.  Or just connect with their wireless.

 

Which is what im gonna do on my next flight btw, so thanks for the tip :) .

[gary17]

In future everything will be cloud. You carry your access, ie, the phone with you wherever you go.

 

Cell phones will probably be of 500gb storage in a few years. 5g wireless will probably download. Movie in less than a minute.

 

Why sit at home download when you could do the same while in a bus or on coffee break?

[yadayada]

yeah but I and almost everyone I know usually watches movies comfortably at home on a tv or computer. So then you use your home network. Who watches movies on their phone on a lunch break? And if you do, then current bandwith is enough already for a small screen. You dont even need 1080p resolutions. Current speed is 7mbit, that is enough to stream a movie with the size of 1.4 gigabytes. I can barely tell difference between a properly downscaled movie that size, and a movie that is 50gb on my tv. If you go above that on a ipad or iphone, you cannot really see the difference. Resolution is only like 1024x768 and not 1920x1080. And if you watch movies on a phone or ipad, I doubt your the kind of person who nitpicks about barely visibile difference in quality here.

 

 

[gary17]

Phone is just a hard drive. You can connect your phone to any screen, the one on the plane, the monitors in your office, or the 70in TV at home.