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Consolidated Communications Holdings Inc. Message Board

  • newtomodachi newtomodachi Apr 9, 2009 8:18 AM Flag

    VERY CONCERNED ABOUT VIABILITY OF CNSL ---WOULD GREATLY APPRECIATE CONSTRUCTIVE COMMENTS

    I WOULD GREATLY WELCOME CONSTRUCTIVE COMMENTS TO MY CONCEWRNS ABOUT CNSL BELOW. Many THANKS IN ADVANCE.

    BACKGROUND

    My father currently purchased 1500 shares of CNSL a while ago for which he paid $12.23ea. for a total investment of $18,345.

    ANALYSIS

    I have compared CNSL with AT&T & Verizon on a relative basis for 2008.

    I ISSUE 1

    CNSL paid more than 3X in dividends as its 2008 earnings per share(EPS): $1.55 dividend vs. 0.42 EPS. (AT&T: $2.16 EPS, $2.02 Div/ Verizon: $$2.26 EPS, $2.24 Div)).

    CONCLUSION 1:

    Paying more in DIV than your EPS makes no sense to me, also reflected by the fact that neither AT&T nor Verizon did so. I do not think this is sustainable, especially when an unexpected need for cash occurs.

    II ISSUE 2

    In 2008 CNSL's debt of $881M is more than 2X its 2008 revenue ($418M) and 176X its 2008 Net Income ($$5.3M). In contrast, AT&T's debt($$75B) is only 60% of its 2008 Revenue($124B) and 6X its Net Income($$12.9B). Similarly , Verizon's debt($52B) is only 54% of its 2008 Annual Revenue($$97B) and 8X its 2008 Net Income($$6.4B).

    CONCLUSION 2:

    CNSL has way too much debt as proven on a RELATIVE basis when compared with AT&T and Verizon.

    III ISSUE 3:

    CNSL has very little cash as reflected in its .85 quick ratio and may not be able to respond if new cash is required especially given the tight credit markets today.

    CONCLUSION 3:

    "Cash is King" and CNSL does not have much of it.

    IV ISSUE 4:

    According to an April 4, 2009 S&P Stock Report:

    "The outcome of FCC proceedings that could take place during 2009 are likely to change the way CNSL receives compensation from, and remits compensation
    to, other carriers and its end-user customers as well as universal service reform. In 2008, CNSL received $55 million (13% of revenues) from federal and state subsidies to promote affordable rural phone services."

    CONCLUSION 4:

    The possibility exists that the government subsiddies may decline and more stringent regulatory restrictions may be imposed on an already cash strapped CNSL.

    V FINAL COMMENTS

    I am very concerned that my father has purchased stock in a company, CNSL, that is not financially responsible. By paying more in dividends that it takes in as EPS and by holding an enormous debt load, CNSL's poor management of finances may ultimately cripple the company. In addition, possible tighter FCC regulations and government subsidy decreases may greatly impact CNSL's ability to survive.

    MANY THANKS FOR YOUR CONSTRUCTIVE COMMENTS!!!

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CNSL
28.60+0.53(+1.89%)Dec 26 4:00 PMEST

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