Wed, Nov. 16, 3:56 PM
- Perhaps seeing writing on the wall at the FCC, Chairman Tom Wheeler has dropped a planned reform of the the U.S. business data services market, a $45B industry occupied by key telecom infrastructure players.
- Following pressure from Republicans on Congress' oversight panels, Wheeler pulled a vote on the BDS reform from tomorrow's agenda. Any measures approved in the next couple of months would face reversal if president-elect Donald Trump restocks the FCC as a Republican-majority panel.
- Wheeler had already scaled back original plans for reforming BDS, a market that covers special access lines that run much of modern society (including ATMs and credit card readers among other financial networks, and hospital/school networks, as well as mobile backhaul).
- Key BDS players are moving into the close: T +1.1%, VZ +1.2%, CTL -0.7%, FTR +3.8%, BT -0.7%.
- Previously: With White House changing, set-top box reform may be on life support (Nov. 16 2016)
- Previously: Frontier Communications issues statement on FCC fact sheet; FTR, CTL jump (Oct. 07 2016)
Wed, Nov. 16, 3:31 PM
- With Donald Trump set to take over the White House, FCC Chairman Tom Wheeler's plan to reform the pay TV set-top box market is "95% dead," according to one analyst.
- Wheeler's proposal to kill off the boxes met with opposition from the industry even after it was modified to be much closer to pay TV providers' app-focused approach. The FCC said the market for the boxes sat at $20B a year and that the cost of renting them had gone up 185% since 1994, while other consumer electronics dropped 90% in price over that period.
- "I would say it's 95 percent dead," said Bloomberg Intelligence's Matthew Schettenhelm. "It's a very long road to get this done.”
- House Republicans have asked Wheeler to focus on the ongoing broadcast incentive spectrum auction, and not to move forward with “complex and controversial items that the new Congress and Administration will have an interest in reviewing."
- That includes an open item on Business Data Services as well, not to mention lengthy reviews ahead for AT&T/Time Warner and Level 3/CenturyLink deals.
- Public Knowledge's Chris Lewis says it's too early to hold a funeral: "We don't know what Trump thinks about set-top boxes."
- Pay TV players: CMCSA, CHTR, CVC/OTCPK:OTCPK:ATCEY, T, DISH, VZ, FTR, CTL
- Previously: FCC pulls set-top box vote from today's meeting agenda (Sep. 29 2016)
Tue, Nov. 15, 4:37 PM
Wed, Nov. 9, 11:34 AM
- While Time Warner is trading lower as investors digest a slimmer chance of a buyout by AT&T under a Trump administration, Sprint (NYSE:S) -- a company long thought to again become a merger prospect after a change in the White House -- is up 12.5% and hitting two-year highs today.
- Its oft-discussed merger matchup partner, T-Mobile (NASDAQ:TMUS) is up 3.8%.
- Meanwhile, changes are likely coming to the FCC, Wells Fargo argues: It will at least be more conservative, if not working under new leadership soon; expecting Chairman Tom Wheeler to stay a full term is "no longer realistic."
- "If the rhetoric of those surrounding Trump’s campaign rings true, we can expect a Republican FCC to make a big push to roll back some of the regulations put in place under President Obama such as the Title II/Net Neutrality rules," writes analyst Jennifer Fritzsche. "There may also be a push to roll back some or all of what the FCC just did on privacy."
- "It’s unclear whether Chairman Wheeler will be able to act on the open items related to Business Data Services or set top box reform before he departs and if he does not, some suggest a Republican FCC will reverse course on these two items. There is also a big question on how a Trump FCC will view transactions including the recently announced T/TWX merger and the LVLT/CTL transaction."
- LVLT +0.4%; CTL +0.5%. TWX -1%. Names tied to net neutrality: T, VZ, CMCSA, CHTR, OTCPK:ATCEY, CTL, FTR, CCOI, DISH.
Tue, Nov. 8, 12:11 PM
- Oppenheimer's downgraded AT&T (T +0.5%) on the prospect that the FCC could jump in with the Justice Dept. on a review of the telecom's $85B deal for Time Warner (TWX +0.1%).
- And that deal review should be a long slog, says Tim Horan: lasting into 2018, he figues, during which time he expects AT&T stock to be range-bound.
- The DOJ suing the company over the Dodgers' TV channel is an "ominous sign," he says, and the FCC will likely want a piece due to the approach to "zero rating" of the DirecTV Now streaming service.
- He reduced the firm's rating on shares to Market Perform. Meanwhile, seeing a more attractive dividend at CenturyLink (CTL +4%), Horan upgraded CTL to Outperform. Oppenheimer has a $30 price target, implying near 24% upside from today's higher price.
Fri, Nov. 4, 9:37 AM
- CenturyLink (NYSE:CTL) has opened up 2% after news that it's reached a deal to sell its data center/co-location business, to a consortium led by BC Partners and Medina Capital.
- That consortium will pay $2.15B in cash and a stake of about $150M in its newly formed infrastructure company. It will assume control of the portfolio of 57 data centers at closing, a set that covers about 195 megawatts of power across 2.6M square feet of raised floor.
- BC Partners was reported to be in the lead for the business last month, and CenturyLink ended up getting close to its desired $2.5B in the deal.
- CenturyLink will use proceeds in part to fund its acquisition of Level 3 Communications (LVLT +1.1%).
- The sale is expected to close in the first quarter; it will need Hart-Scott-Rodino clearance as well as the Committee on Foreign Investment in the United States, among others.
Mon, Oct. 31, 7:43 PM
- The deal to be acquired by CenturyLink (CTL -12.5%) has gotten Level 3 Communications (LVLT +3.9%) an affirmed credit rating, though a lower, stable outlook from Moody's.
- The ratings company affirmed Level 3's Ba3 corporate family rating and its ratings of existing debt, and affirmed the Ba3 probability of default rating. It changed the outlook on Level 3 to stable from positive, though.
- The acquisition isn't going to have much effect on existing debt instruments, Moody's says. The firm is putting CenturyLink's ratings on downgrade review, and it will focus on leverage and cash flows at the combined entity, along with growth potential.
- Any downgrade to CenturyLink is expected to be contained to one notch (possibly to Ba3).
Mon, Oct. 31, 6:41 PM
- While Level 3 Communications (LVLT +3.9%) escaped CenturyLink's (CTL -12.5%) stock-price fate on confirmation of its buyout, the company saw downgrades as analysts digested post-merger upside.
- William Blair downgraded shares to Market Perform, saying that while the merger makes for a better competitor to AT&T and Verizon, growth could become an issue. "Neither Level 3 nor CenturyLink has been aggressively investing in network build-outs to support customer dark fiber deployments, which has hindered wholesale expansion," writes Jim Breen. "CenturyLink’s consolidated revenue was declining, and Level 3's core enterprise revenue has been decelerating."
- Cowen & Co. cut to Hold as well, analyst Colby Synesael expects the deal's structure means the two stocks trade in line with each other.
- "We'd point out that the real value of this deal from a CTL perspective is Level 3’s FCF (plus the additional cost synergies)," he writes, "and to that point the reduction in Level 3 expected top-line performance has less impact on EBITDA/FCF as we note that even with the miss the company still managed to beat on EBITDA/FCF." He expects both companies' stocks to "bleed up" in coming quarters.
Mon, Oct. 31, 2:14 PM
- CenturyLink (CTL -12.8%) and Level 3 Communications (LVLT +4.3%) have headed in opposite directions today after confirmation of CenturyLink's $34B deal to acquire the networking firm.
- Level 3 has hung just off its 52-week high on the news, while CenturyLink is at its lowest point since February. The particulars of the deal -- a 49% premium to Level 3's closing last Wednesday -- may have CenturyLink's investors balking (the same folks who bid CenturyLink up 9.7% when early reports of a deal began to break last Thursday).
- Despite that big decline, the news may be good for CenturyLink's dividend, which is likely more secure, argues Wells Fargo's Jennifer Fritsche. "Improved free cash flow will enhance the combined company's financial flexibility and significantly lower its payout ratio; CTL expects to maintain its annual dividend of $2.16 per share."
- "The increased scale afforded by the combined company is expected to generate $975 million of annual run-rate cash synergies, primarily from the elimination of duplicative functions, systems consolidation, and increased operational and capital efficiencies," Fritsche writes.
- The combo should also benefit from almost $10B in net operating losses that Level 3 has.
Mon, Oct. 31, 12:56 PM
Mon, Oct. 31, 9:19 AM
Mon, Oct. 31, 6:44 AM
Mon, Oct. 31, 6:43 AM
- CenturyLink (NYSE:CTL) and Level 3 Communications, Inc. (NASDAQ:LVLT) announce that CenturyLink will acquire Level 3 in a cash and stock transaction valued at approximately $34B, including the assumption of debt.
- LVLT shareholders will receive $26.50/share and 1.4286 shares of CTL stock for each Level 3 share they own, which implies a purchase price of $66.50/LVLT share - a premium of approximately 42% based on Level 3's unaffected closing share price of $46.92 on 26-Oct-16, the last trading day prior to market speculation about a potential transaction.
- Upon the closing of the transaction, CenturyLink shareholders will own approximately 51% and Level 3 shareholders will own approximately 49% of the combined company.
- The combined company will have approximately $19B in pro forma business revenue and $13B in business strategic revenue.
- Combined company is expected to have improved adjusted Ebitda margins, revenue growth and pro forma net leverage of less than 3.7x at close, including run-rate synergies. The combined company will benefit from Level 3's nearly $10B of net operating losses. These NOLs will substantially reduce the combined company's net cash tax expense over the next several years, positioning it to generate substantial free cash flow.
- CenturyLink expects to maintain its annual dividend of $2.16 per share.
- Conference call today at 8:00 AM ET. (866) 610-1072 within the U.S. and (973) 935-2840 for all other locations. Confirmation code is 10841687.
Fri, Oct. 28, 1:40 PM
- CenturyLink (CTL -1.4%) is giving back some of yesterday's merger-chatter gains, but Level 3 Communications (NASDAQ:LVLT) is adding on, up another 3.9% today.
- Level 3 jumped 10.6% yesterday, and CenturyLink rose 10%, on a report that the two were in advanced talks to merge.
- Level 3's at $53.90 today (after closing at $46.92 on Wednesday), and it's looking for at least $60/share in a buyout and $65 "could be reasonable," says Raymond James, which cut CenturyLink to Market Perform from Outperform -- thinking that stock could trade sideways for the months it could take to close such a deal.
- UBS sees the deal cresting $1B in synergies, given the companies' overlapping infrastructure. Analyst Batya Levi is assuming an all-stock deal at 9-11 times EBITDA and has CenturyLink at a Buy with a $36 price target (implying 18% upside).
- Oppenheimer's Timothy Horan, meanwhile, sees more of a 50/50 cash/stock split at a $60 valuation for LVLT. He's got CTL at Market Perform but boosts LVLT to Outperform at that $60 target.
- Among peers (and other potential targets) today: CCOI -1.2%, INXN +2%, GTT flat, ZAYO +1.9%, AKAM +0.9%, FTR -2.4%.
Thu, Oct. 27, 3:00 PM
Thu, Oct. 27, 2:02 PM
- The FCC split on party lines again today in adopting tough new privacy regulations on broadband Internet providers, rules that require an opt-in before sharing most customer data.
- That could present a problem growing advertising for big providers including Comcast (NASDAQ:CMCSA), Charter (NASDAQ:CHTR), AT&T (NYSE:T) and Verizon (NYSE:VZ).
- The vote passed 3-2 with strong dissents from the panel's two Republican commissioners. More public information (names, addresses) will be treated leniently, but providers will need to ask permission before sharing more sensitive data (like phone-tracked location, or sites visited and apps used).
- The new rules, while scaled back, have drawn heavy criticism from cable/telecom and advertising sectors, with companies that fret that the move will restructure the Internet's free-content approach.
- Other players: OTCPK:ATCEY, FTR, CTL, WIN, S, TMUS, CCOI