saltybit Posted February 4, 2014 Share Posted February 4, 2014 https://soundcloud.com/the-odd-lot/john-hempton-audio-interview Link to comment Share on other sites More sharing options...
sys Posted February 4, 2014 Share Posted February 4, 2014 very interesting. thanks for the link. Link to comment Share on other sites More sharing options...
Guest Posted February 4, 2014 Share Posted February 4, 2014 John Hempton is a very fine gentleman, right, Sanj? ;) Link to comment Share on other sites More sharing options...
gary17 Posted February 5, 2014 Share Posted February 5, 2014 very interesting talk - thank you for sharing Link to comment Share on other sites More sharing options...
indythinker85 Posted February 5, 2014 Share Posted February 5, 2014 John Hempton is a very fine gentleman, right, Sanj? ;) LOL i think he has a different sense of humor. He seems like good guy, but I would NOT want to be on his bad side. Just discovered his letters are public. http://brontecapital.com/Letters.html Link to comment Share on other sites More sharing options...
gary17 Posted February 7, 2014 Share Posted February 7, 2014 It is interesting John has this thesis that the telcos will get good pricing power moving forward - I am wondering if anyone else on this board has thought about this? His argument is that due to the engineering limitations, it won't be possible to have an infinite number of cell towers to supply the demand for boradband wireless data in the next decade.... and as a result... telcos will have the ability to raise their prices. i quickly checked my cell phone bills - seems like there is some truth to that. i am wondering if others agree with this observation. Are there any experts in telcos here (Packer? and others... ? ) that could weight in on this? Thanks Gary Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted February 7, 2014 Share Posted February 7, 2014 It is interesting John has this thesis that the telcos will get good pricing power moving forward - I am wondering if anyone else on this board has thought about this? His argument is that due to the engineering limitations, it won't be possible to have an infinite number of cell towers to supply the demand for boradband wireless data in the next decade.... and as a result... telcos will have the ability to raise their prices. i quickly checked my cell phone bills - seems like there is some truth to that. i am wondering if others agree with this observation. Are there any experts in telcos here (Packer? and others... ? ) that could weight in on this? Thanks Gary I think he's on to something. With more things utilizing broadband data (cars, phones, laptops, tablets, appliances) the demand should only rise. Another angle might be to buy QCOM. Even my cable internet had pricing power on me- comcast, time warner aren't losing pricing power considering regional monopolies Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 7, 2014 Share Posted February 7, 2014 It is interesting John has this thesis that the telcos will get good pricing power moving forward - I am wondering if anyone else on this board has thought about this? His argument is that due to the engineering limitations, it won't be possible to have an infinite number of cell towers to supply the demand for boradband wireless data in the next decade.... and as a result... telcos will have the ability to raise their prices. i quickly checked my cell phone bills - seems like there is some truth to that. i am wondering if others agree with this observation. Are there any experts in telcos here (Packer? and others... ? ) that could weight in on this? Thanks Gary John needs to do some research and actually try to understand the technology: http://ovum.com/2011/10/19/ericsson-has-a-hetnet-vision-but-it-is-just-one-of-many/ http://www.infonetics.com/pr/2013/2H12-Carrier-WiFi-Equipment-Market-Highlights.asp http://venturebeat.com/2011/07/28/steve-perlman-unveils-dido-white-paper-explaining-impossible-wireless-data-rates/ http://gigaom.com/2012/01/30/is-the-spectrum-crisis-a-myth/ Those are just some of the approaches. Essentially, scarcity is created by limitations in current technology and structural inefficiencies imposed by FCC. If you solve those problems, you have virtually unlimited capacity. Link to comment Share on other sites More sharing options...
oddballstocks Posted February 7, 2014 Share Posted February 7, 2014 It is interesting John has this thesis that the telcos will get good pricing power moving forward - I am wondering if anyone else on this board has thought about this? His argument is that due to the engineering limitations, it won't be possible to have an infinite number of cell towers to supply the demand for boradband wireless data in the next decade.... and as a result... telcos will have the ability to raise their prices. i quickly checked my cell phone bills - seems like there is some truth to that. i am wondering if others agree with this observation. Are there any experts in telcos here (Packer? and others... ? ) that could weight in on this? Thanks Gary I have a ton of thoughts on this, I've emailed some of this stuff to others on the board privately in the past. Some of this might be just a brain-dump, bear with me and feel free to ask followup questions. Yes, an antenna has a certain amount of bandwidth available for connections on a tower. If enough devices need access it's possible a tower might not have enough space for antennas. Towers sell space by slot, not bandwidth or use. If you wanted to put a ham radio antenna on a tower you'd be paying the same as what AT&T might be paying. The key constraint on a tower is backhaul. A tower's capacity is limited by the bandwidth available at the site. This means a tower in NYC is going to have a much higher capacity than a tower in Ruff Creek PA. Backhaul is the name of the game, the higher the backhaul pipe the more capacity towers have. The issue is no one likes towers, they're ugly and have a lot of physical limitations. The idea cell environment is a flat geography with a lot of low buildings. Hilly areas have a lot of dead spots and require many more towers to get the same coverage. Building a tower can be expensive, many of the big tower companies have towers with infinite payback periods. There are also tower that are paid back in a few years. The most profitable towers are a fascinating study in itself. I no longer have access to ARPU per tower numbers, but I remember digging into this stuff years ago. Where I live there was an obscenely profitable tower that was located in a suburban park. A number of local roads converged near this tower, and it was very well utilized. Since it was in a park the city leased the land for next to nothing. A small aside, land owners who lease land are often receiving much less than they should. There is a whole poaching industry around this. Anyways due to the limitations of the tower infrastructure the industry has been moving towards small cells. Instead of an antenna on a tower small cells are mesh networks of small antennas spread over a large area. This reduces coverage issues and dead spots. Think of a tower, you only have so many angles to hang an antenna, and antennas for the most part are directional. More antennas means more coverage. More and smaller antennas also reduces the backhaul needs. If a tower has say 30 antennas you need a backhaul to support those 30. If the antennas are spread out the backhaul for each antenna is much smaller. Spreading out users among antennas with bigger backhaul is what's enabling higher speeds. So going forward if you have an antenna with a fiber connection you in theory have a pipe that can handle 14 Tbps. The limiting factor on that is the routing equipment where the fiber terminates. I have Verizon FIOS at home, there is a fiber line to our home. I had seen a few years back that they could support up to 600Mbps with the current lines and current routing equipment. As the termination equipment improves the max speed could theoretically improve as well. I think here's the next step with this evolution. Companies start to distribute MiFi type devices to homes. The users own home network would provide the backhaul, and it would be the ultimate mesh network. Everyone in this space seems to gravitate towards the tower and bandwidth providers. The problem is they are being required to provide more product (bandwidth) at the same or lower prices. Ten years ago 768kbps DSL was acceptable, now for the same price 10x the bandwidth is available. A few other random tidbits that I learned while in the industry. Companies have created artificial pricing power over data, it really doesn't cost any more to transfer a lot verses a little data. On the whole it's something like 5% of a network's users who use the majority of the data. Rate limiting them could provide unlimited data to everyone else. The second thing is text messages are the gravy train for cell providers. A text message is encoded in the packets your phone sends to the tower to check signal strength. That's why the length is limited on them. This is "free" in the sense that your phone is always checking in with towers. Adding a text message to piggyback on that is just using the full packet instead of leaving a portion of it empty. The fact that carriers found a way to charge, and charge a lot for this is amazing. Link to comment Share on other sites More sharing options...
oddballstocks Posted February 7, 2014 Share Posted February 7, 2014 It is interesting John has this thesis that the telcos will get good pricing power moving forward - I am wondering if anyone else on this board has thought about this? His argument is that due to the engineering limitations, it won't be possible to have an infinite number of cell towers to supply the demand for boradband wireless data in the next decade.... and as a result... telcos will have the ability to raise their prices. i quickly checked my cell phone bills - seems like there is some truth to that. i am wondering if others agree with this observation. Are there any experts in telcos here (Packer? and others... ? ) that could weight in on this? Thanks Gary John needs to do some research and actually try to understand the technology: http://ovum.com/2011/10/19/ericsson-has-a-hetnet-vision-but-it-is-just-one-of-many/ http://www.infonetics.com/pr/2013/2H12-Carrier-WiFi-Equipment-Market-Highlights.asp http://venturebeat.com/2011/07/28/steve-perlman-unveils-dido-white-paper-explaining-impossible-wireless-data-rates/ http://gigaom.com/2012/01/30/is-the-spectrum-crisis-a-myth/ Those are just some of the approaches. Essentially, scarcity is created by limitations in current technology and structural inefficiencies imposed by FCC. If you solve those problems, you have virtually unlimited capacity. You said it much more eloquently than I did. Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 7, 2014 Share Posted February 7, 2014 http://blogs.wsj.com/tech-europe/2011/02/07/alcatel-lucent-shrinks-cell-tower-to-a-cube/ Link to comment Share on other sites More sharing options...
loganc Posted February 8, 2014 Share Posted February 8, 2014 I believe that Hempton is correct in terms of making a bet on high broadband utilization. However, it seems to me that the more sensible vehicle to effect such a bet is in cable rather than telecom. Hempton would be well serviced by listening to Malone, in my opinion. When I look at telcos, I see enormous capex that doesn't stop. Looking at cable, it seems like high bandwidth is available with minimal capex. Link to comment Share on other sites More sharing options...
frommi Posted February 8, 2014 Share Posted February 8, 2014 The best way to play this is probably to buy the content providers. If they weren`t that expensive at the moment i would bet on GOOG,DIS and NFLX. Telcos are in the long run not necessary for in-city communication when you have a lot of connected wifis. But that would mean the market is partially right with the current valuations ... ;D Link to comment Share on other sites More sharing options...
Packer16 Posted February 8, 2014 Share Posted February 8, 2014 I think the one item he pointed out is that the worse decline of the telco industry is reflected in the prices of most telcos today (not so much in cable cos) so what ever upside he envisions it is upside from here. Since most of the telcos are leveraged the upside will be magnified. It is an interesting idea and if it is true we will start to see declines in revenue and EBITDA turn into growth. The other interesting development in Europe is the regulators being open to telcos making money on networks versus forcing them to sell access at below market prices. That is why beaten down European telcos like Telecom Italia and Orange are interesting. Packer Link to comment Share on other sites More sharing options...
gary17 Posted February 8, 2014 Share Posted February 8, 2014 The best way to play this is probably to buy the content providers. If they weren`t that expensive at the moment i would bet on GOOG,DIS and NFLX. Telcos are in the long run not necessary for in-city communication when you have a lot of connected wifis. But that would mean the market is partially right with the current valuations ... ;D With all the security, etc, I just can't see people using wifi. I don't use wifi, it's slow and takes forever to login , etc... Time is valuable, and I don't have it! It really comes down to wireless broadband... Interesting bell in Canada is offering wifi tv which sends HD content directly to a wifi box.... If we r talking wireless broadband , does it still matter if it's copper or cable? The back haul (the connection after the cell tower) is always fibre right? --- I wasn't impressed with orange's IR page. Lots of useless stuff, I spent ten minutes and can't find the data I'm looking for. Telecom italia on the other hand has everything nicely organized in a spread sheet in ir, only took me 3min to find. Link to comment Share on other sites More sharing options...
txlaw Posted February 8, 2014 Share Posted February 8, 2014 It is interesting John has this thesis that the telcos will get good pricing power moving forward - I am wondering if anyone else on this board has thought about this? His argument is that due to the engineering limitations, it won't be possible to have an infinite number of cell towers to supply the demand for boradband wireless data in the next decade.... and as a result... telcos will have the ability to raise their prices. i quickly checked my cell phone bills - seems like there is some truth to that. i am wondering if others agree with this observation. Are there any experts in telcos here (Packer? and others... ? ) that could weight in on this? Thanks Gary Is he referring specifically to US wireless providers? At what point in the interview does he discuss? Link to comment Share on other sites More sharing options...
gary17 Posted February 8, 2014 Share Posted February 8, 2014 In the beginning. I think he was talking about Australia, but then says it could be a global trend for the next decade so all telcos should do well. But in case this theis is wrong, he'd exit, so the margin of safety is buy cheap ones (low multiple) I'm surprised he's talking about PE instead of EV ebitda Link to comment Share on other sites More sharing options...
gary17 Posted February 8, 2014 Share Posted February 8, 2014 Another question I have for the tech experts on this board - let's say mobile payment takes off - what role will telcos play? just simply transmitting data or is there an opportunity for them to be more like Visa? thanks Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted February 8, 2014 Share Posted February 8, 2014 I think he was talking about Australia, but then says it could be a global trend for the next decade so all telcos should do well. The Bronte Capital letters suggest that they own Verizon and possibly other non-Australian telecoms. http://brontecapital.com/Letters.html Link to comment Share on other sites More sharing options...
gary17 Posted February 8, 2014 Share Posted February 8, 2014 yes they do - but during the interview he said he owns 11 telcos - not sure personally or for the fund though. gary Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 8, 2014 Share Posted February 8, 2014 Another question I have for the tech experts on this board - let's say mobile payment takes off - what role will telcos play? just simply transmitting data or is there an opportunity for them to be more like Visa? thanks They're trying hard to get a piece of the mobile payments pie through an effort called Isis. They've had very little success. I don't expect them to beat Apple or Google in this game. Apple has dropped hints that payments is coming. Apple has greater control on the device that operators. On Android, the operators dictate what does on the device but Google just introduced a technology for payments called HCE to bypass operator control on the device. Link to comment Share on other sites More sharing options...
gary17 Posted February 8, 2014 Share Posted February 8, 2014 i see thanks.... might be a bit off topic of my original question, but i just find it easier to deal with my phone company than apple or google. who do you call at apple if something goes wrong? a bill mailed to me at month end is easy to read and i know where the shop is at if i have a problem. there's also a 1 800 number to call i just recall i got a apple gift card once and it wasn't activated properly - and nobody could help me...... not even the folks at apple store. don't know about google.... still, no 1800 number i know of. i'm not about to hand my finances to an entity with no number to call.... Link to comment Share on other sites More sharing options...
saltybit Posted February 8, 2014 Author Share Posted February 8, 2014 I think the one item he pointed out is that the worse decline of the telco industry is reflected in the prices of most telcos today (not so much in cable cos) so what ever upside he envisions it is upside from here. Since most of the telcos are leveraged the upside will be magnified. It is an interesting idea and if it is true we will start to see declines in revenue and EBITDA turn into growth. The other interesting development in Europe is the regulators being open to telcos making money on networks versus forcing them to sell access at below market prices. That is why beaten down European telcos like Telecom Italia and Orange are interesting. Packer Packer, how would you rank the various telcos in order of attractiveness? I assume Telecom Italia and GNCMA are high up on that list? Also, since telecom is a very regulated industry, which countries/regions tend to have friendlier regulation vis a vis telco companies? Link to comment Share on other sites More sharing options...
gary17 Posted February 8, 2014 Share Posted February 8, 2014 hi saltybit - you didn't ask me, but I want to respond! i have alsk & gncma... but started thinking about telecom italia & orange. i think i like them equally - alaska is very simple - it only needs to work on its wireline business. pay down debt. then it'll do ok. gncma - cable co & wireless + tv i like this one too and i agree with others' calcs that both alsk & gncma are very cheap... they may never get acquired though... i'm just thinking about manitoba telecom in canada - it's been flat for 5 years and it was talked about as a potential for being acquired by one of the big 3s in Canada - so may be the market in alaska is too small no body will want these guys and they continue to trade at a discount. i like telecom italia & orange for their exposure to EM and the fact europe, in my opinion, is going to do alright in the long term. both are very cheap if not as cheap as the alaskan ones. i've been debating about whether 'cheap' = margin of safety when it comes to telcos though. when the price is cheap, the risk of going to zero is a lot less - on the other hand, telcos that are fairly valued seem to have less debt and positive cash flow - this is a natural advantage - if i'm cheap because i'm in debt, how do i compete with the guys that have much less debt in a capital intensive industry? so may be in the end the fair valued guys do deserve the slight premium and will do better in the long run. perhaps this is why WEB says buy great businesses at fair value - just my 2 cents Gary Link to comment Share on other sites More sharing options...
plato1976 Posted February 8, 2014 Share Posted February 8, 2014 Why QCOM ? Don't think their patent dominance can continue - they are already not dominant in 4G patents It is interesting John has this thesis that the telcos will get good pricing power moving forward - I am wondering if anyone else on this board has thought about this? His argument is that due to the engineering limitations, it won't be possible to have an infinite number of cell towers to supply the demand for boradband wireless data in the next decade.... and as a result... telcos will have the ability to raise their prices. i quickly checked my cell phone bills - seems like there is some truth to that. i am wondering if others agree with this observation. Are there any experts in telcos here (Packer? and others... ? ) that could weight in on this? Thanks Gary I think he's on to something. With more things utilizing broadband data (cars, phones, laptops, tablets, appliances) the demand should only rise. Another angle might be to buy QCOM. Even my cable internet had pricing power on me- comcast, time warner aren't losing pricing power considering regional monopolies Link to comment Share on other sites More sharing options...
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