4. Charter Communications Inc. (NASDAQ:CHTR)
Number of Hedge Fund Holders: 71
Charter Communications Inc. (NASDAQ:CHTR) is a major US broadband connectivity and cable operator that delivers internet, video, mobile, and voice services under the Spectrum brand to residential and commercial customers. Focusing on advanced WiFi and fiber connectivity, it also provides sophisticated enterprise solutions and advertising services.
The company’s telecom business is driven by converged connectivity that blends broadband, mobile, and video services. Spectrum Mobile is a key growth engine for the company and added over 2 million lines in 2024. Simultaneously, Charter Communications Inc. (NASDAQ:CHTR) is expanding its broadband footprint, particularly in rural areas. It ended 2024 with 813,000 subsidized rural passings and expects to add another 450,000 in 2025. It’s also deploying faster internet speeds, which include symmetrical 1-gigabit and 2×1 gigabit services.
The company is actively investing in network upgrades and rural expansion but is also focused on operational efficiency and customer service. It’s using AI to improve agent efficiency and provide service credits to ensure customer satisfaction. The end goal is to increase household and product penetration, reduce service transactions and churn, and lower operating and capital costs per customer.
Conventum – Alluvium Global Fund sees significant value in the company’s broadband assets and is strategically managing its positions to capitalize on this. It stated the following regarding Charter Communications Inc. (NASDAQ:CHTR) in its Q4 2024 investor letter:
“We discussed in our last report that Liberty Broadband’s 40.7% return in the September quarter reflected an impending deal (explained here) with its main investment, Charter Communications, Inc. (NASDAQ:CHTR). In early November Charter released its third quarter update, which the market (and us) viewed favourably, and Liberty’s share price rose 11.7% on the day. As a result, the Fund’s position in Liberty reached 8.4%. Cognisant of the 5/10/40 UCITS restrictions (yet wanting to maintain our position in the underlying assets) we sold a fair chunk of Liberty (to get it under 5%) and bought a little Charter. A short time later the companies reached agreement on the consolidation deal. The market’s reaction (Liberty’s share price fell 4.7% on the day, whereas Charter’s rose 3.6%) suggests this was less favourable to Liberty than anticipated (we suspect due to the long timeframe). And as Liberty fell 3.2% and Charter rose 5.8% over the quarter, the discount that Liberty trades (to the implied Charter price) has only widened. This is unwarranted in our view, particularly as one of Liberty’s businesses, GCI, is not part of the deal. Our focus is on having access to these assets at the best possible price. We are not perturbed by the deal, whether or not it consummates, nor its timeline. And, there are no additional costs to holding Liberty rather than Charter (nor any foregone dividends). On our analysis, these US broadband assets (via the Charter corporate structure) are providing a circa 9.0% earnings yield and 6.5% free cash flow yield, which we are confident will continue to grow. We are comfortable with the Fund’s 5.6% investment, as represented by its positions of 1.5% in Charter and 4.1% in Liberty.”
