Fi Fiber Fo Fum, I Smell the Blood of a Telcoman

Long anticipated Google Fi is here. Specifically uncovered in regulatory filings last fall, providing a (good) network was a natural extension for a firm whose growth comes from increased internet usage.  It turns out to have been considered since at least 2007.  On Fi you’re on a, you guessed it, Wi-Fi network first.  If none is available you get Sprint and T-Mobile’s Network, whatever is working best at the time. No doubt Google’s wireless network to come to help replace, ahem, compliment them.

This comes on top of — and ultimately related to — Google Fiber.  One report a year ago had Google Fiber winning 75% market share…and 30% of low income households where after all the service at 5 megs is free.  Who cares if Time Warner and Comcast had merged or not?

Free – or less than free – is tough to beat, and the writing is on the wall.  Verzion and AT&T have higher quality networks…for now.  As Bill Gurley says in the link regarding the GPS market:

Despite these challenges, it would be a dangerous strategy for any of the many threatened players in these markets to hang on to this “quality” rationalization for very long.

It’s hard to see how the cable and telco stock prices haven’t tanked in anticipation of the forthcoming price war against Google that only Google (or Facebook, or Amazon, or Apple) can win.

End of 4/24/2015 prices of giants that could fall:

T: $34.01 (5.7% dividend yield)

VZ: $50.03 (4.5%)

S: $5.27 (0)

CMCSA: $59.64 (1.7%)

GOOG: $565.06 (0)

 

 

 

A Fun/Dangerous Hypothetical from David Swensen

Robert Shiller’s survey course on finance at Yale is available from both 2008 and 2011.  These lectures while sometimes basic for the experienced investor are chock full of gems and I should get around to putting my notes online.  Meanwhile one fun/dangerous note I feel like playing with from David Swensen’s guest lecture in the Spring of 2011:

I could take Yale’s $17 or $18 billion dollars and put it all in Google stock. If I did that, I’m not sure how long I’d keep my job. It might be fun for a while, but that would probably be damaging to my employment prospects. But if I did that, asset allocation would have almost nothing to say about Yale’s returns. It would be the idiosyncratic return associated with Google that would determine whether the endowment went up or down or stayed flat.

This comes from his elucidation to investment returns could come from stock selection but basically that is a very hard game.  Well, what if he HAD put $17 billion into GOOG on February 2, 2011 (assuming no market move from building in a Larry or Sergei-sized stake in GOOG)?

GOOG was $612 on Feb 2 2011 and $699 now; a 14.2% return just over 17 months.   Yale’s endowment report for 2011 (up to June 2011) had a 21% return that year (announced late September); but no fiscal 2012 results have been announced yet; will be fun to see and compare.

Chart forGoogle Inc. (GOOG)

 

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