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Derrick Barry’s Britney Spears-Inspired Makeup Transformation Will Blow Your Mind

Derrick Barry’s Britney Spears-Inspired Makeup Transformation Will Blow Your Mind

Does Britney Spears have a secret twin nobody knows about? Because this video is pretty damn convincing! Drag queen Derrick Barry has made a living impersonating Godney (as I like to call her), so he’s an absolute pro at transforming into the pop icon right before your eyes. Those smokey eyes, voluminous lashes, and pink pout are all on point, and TBH, that wig might be even better than Brit’s real hair!

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Unpacking the video game twists of Russian Doll with co-creator Leslye Headland

Unpacking the video game twists of Russian Doll with co-creator Leslye Headland

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Natasha Lyonne in Russian Doll.
Netflix

The Netflix series is here ‘to entertain you, and push you a little off balance’

Turn back if you haven’t yet dug into Netflix’s Russian Doll. Carefully constructed like, well, a Russian doll, the layers merit being unshelled at their own pace.

All is not well in Russian Doll. Nadia (Natasha Lyonne) keeps dying, and each time she does, she resets to the same moment on the night of her 36th birthday. As she relives the same stretch of time over and over again — and dies in different ways — the shifting nature of the reality she’s found herself in becomes apparent.

[Ed. note: We’re getting spoilery from here on out!]

By the end of the season, Nadia has reached a temporary sense of resolution. However, mysteries still abound, as clarity with regards to old traumas and moving on is the priority rather than clarity of “the rules.” But to get a little more clarity from an audience perspective, Polygon spoke with Leslye Headland — who juggled the hats of writer, producer, and director on the series — about bringing Nadia’s world to life, as well as whether or not that reference to Rockstar Games is incidental.

Polygon: I read that Natasha initially brought you the idea for the show. What was that initial conversation like, and how much did she have already?

Leslye Headland: I remember that she and Amy had been working together on some form of a show about a woman that was at a party, and we were watching the party, and there was this restarting thing with it as well. With Amy, I remember talking so much about how we have infinite choices and yet our coding or our makeup or our psychology dictates our choices at the same time. I remember Natasha talking about the All That Jazz aspect of re-looking at your life and your choices, like from a hospital bed, seeing your life choices flash before your eyes in a very kind of magical realism way as opposed to a pure trauma, much more like you’re laughing because it’s so crazy.

To be honest, we’ve been working on it for so long that I don’t remember exactly how much was in place at that point, because after that, Natasha and I started essentially having a mini writer’s room between her and myself, and of course Amy. Whenever we were in town with her, we would go and have dinner. I remember there was one moment before we pitched Netflix where it was like, “Great, so now we just need to make decisions.” We know the repeating behavior of the show, we kind of understand this protagonist and what her wants or needs are.

Natasha, I think, nails it when she says “an existential adventure show.” That’s the kind of thing that she wants to delve into and call it, so now we’ve got to sit down and make these decisions, and start coming up with rules. What are the rules that keep this story afloat and keep this environment intact? That was kind of the shortened version of it. I was looking through my emails, I think for the premiere to find tickets or something, and I found an email from Amy that was from early 2016 that was like, “Hey guys, here are our notes on whatever.” I was like, “Oh, right, this has been going on for so long, and longer for Amy and Natasha.”


Charlie Barnett as Alan, and Lyonne, both stuck in the same cycle.
Netflix

Did you all have any difficulty in figuring out how the recursive time works?

Oh my God, that’s an understatement. It wasn’t difficult because there are shows like this, or movies like this — meaning, I’m a big fan of mystery box shows, I’m a big fan of noirs, which is a big genre that inspired us at the beginning. Natasha, I remember saying early on, “Where’s the female Long Goodbye? Where’s the female character that is existentially trying to solve this problem?”

The hard thing was cracking the why and the who, and then the how was the thing that we had to really learn on the go. As you’re writing these things, it’s like, “Okay, but does that mean that if, at 9 p.m. every day, does that mean that if she doesn’t make this choice, does that mean at 9 p.m. this thing always happens no matter what?” We really did go through each time loop and map out everything single thing that happened. Especially once we introduced other characters that were going through a similar experience, that’s when we mapped those characters as well and we were like, “This is where this character is.” Natasha just made this joke in another interview, so I don’t want to reuse it, but it was so funny. She was like, “What’s that movie where Benedict Cumberbatch invents math?” It was like that.

Was there ever discussion about having more than one other character who’s experiencing time like this?

Yes, I think so. That actually may have come after we sold the show. Alan was always a character and he was a very integral character to her journey, but I think he changed a little bit once we started dissecting how we were going to stick the landing of this thematic, emotional ending. What’s the magical realism or the device with which we can stick that landing? It started to be about human connection, and connection with others, so on and so forth.

Natasha said something about Spike Jonze and Charlie Kaufman; the question was always an existential, spiritual, or emotional question, and the device was just a thing that helped you answer that. To me, it’s not really reliving the same night, especially once you’ve watched the whole thing. It’s more about a woman that’s unable to move to the next level. It’s much more of a video game analogy than it is like a Groundhog Day or Happy Death Day. I mean, I totally understand the comparisons because I remember watching the trailer for Happy Death Day, and being like, “Oh shit! We just sold this show to Netflix.” To me, the analogy is a little bit more like, “What if life treated you way that a video game treats you, which is that you can’t move forward until you accomplish this thing, and you’re just not allowed to until you accomplish this thing?”

And so to me, because that was answering an existential, emotional question, a lot of the other technical aspects of what was happening in each time loop, what was being taken away, what was rotting, what wasn’t, how many people were missing each time, pieces of furniture that would go like — all of that was basically informed by what was going on with our lead characters that were stuck in this situation.


Barnett and Lyonne playing video games.
Netflix

With regards to the video game analogy, was Nadia being a game designer always baked into the story?

I think it may have been in the pitch, and if not, it came very quickly after the pitch. I think the only reason we may have not been completely on board with it was because we just didn’t want it to feel too, like, was it going to help or hurt kind of thing. That’s the kind of thing I think you don’t know until you start writing the scripts. You’re like, “Oh, no, this is working, actually. Her knowledge in that is helping us.”

Everyone has such a different interpretation of the show, which is so good, and as it absolutely should be. I remember getting the question from somebody, whether it was one of the writers or an exec or something, that was like, “Why is Ruth a therapist?” And I was like, “I don’t know, but it feels important.” And then one of the women that was interviewing me was like, “I felt like the show was the closest thing, narratively, to what it’s like to go through therapy.” Not that it was a therapeutic show, but that it illustrated what the process of therapy is. And I was like, “Oh, thank God we made her a therapist.”

You just make these gut instinct choices, and they aren’t really intellectualized until later, kind of that Kierkegaard, “It can only be lived forward but understood backward.” A lot of time, at least with the stuff that I work on, later I’m like, “Oh, that’s why we made that choice,” but at the time, it’s really coming from a gut place or feeling.

Are there any other big revelations that have hit you about the show?

That was the one that I thought was the most inventive, meaning I was like, “That is so true.” But it’s not something that we necessarily— it was something we talked about so often. When I saw Maniac, I was like, “Oh gosh, there are so many similar things that we had talked about insofar as what the future of processing your experience is in a world where essentially everything is designed to distract you from your experience.”

Somebody was asking me, “Is there like a moral?” And I was like, “Oh, no, no, no, no. No. I don’t believe in morals. That is not my place as a human.” But I do think that as storytellers, when you tell a journey like the one that Nadia goes through, the best thing that can happen is that the viewer extrapolates their own meaning. I’m a little bit more of a “death of the author” type person. I can tell you what I think, but it kind of doesn’t matter what I think. I can tell you why I think the deaths happen the way that they do, I can tell you why I think they’re happening, I can tell you that there was a lot of logic and thought put behind how things reveal themselves and so on and so forth throughout the journey. But then I’m also like, it’s kinda up to you insofar as what that means.

My goal is always just to entertain you, and push you a little off balance so that you are laughing, and then you feel a little uncomfortable, and then maybe you’re crying a little bit, and then when it’s over, it gives you a little bit more of a pause when you’re interacting with the themes or the conflicts or the circumstances that the art was highlighting. Sleeping With Other People, for example, with a rom-com, maybe before you swipe left or right, you’re thinking about something a little bit different than you did before you saw the movie. Maybe you’re seeing that affair that you’re having with a married guy in a different way than you were before, or whatever it might be.

I definitely feel like I don’t have a moral ever in mind when I’m making something, but I definitely think that it’s worth trying to have your audience pleasantly off-kilter so that they can make their own decisions about how they’re going to live moving forward, or the decisions that they’re going to make, or even just the way that they see female characters or the female experience.


Lyonne, in a bit of a tough spot.
Netflix

I was curious about the final scene of the show, with the parade. Is there a particular significance to that being the way that the first season closes?

I would say that everyone that worked on the show, including Amy and Natasha, could answer this question completely differently. We definitely weren’t like, “Okay, this is what it means, let’s go, action.” It’s just that as soon as it was pitched, and I think it was Natasha that pitched it, we all were just like, “Yeah, that’s exactly how it should end. That’s exactly how it should end.” And I think, for me personally, what I loved about it was I love when Fellini’s films end that way, like in where they’re all at the carnival, or La Dolce Vita when they all walk into the woods.

It reminds me a little bit of theatre, which is where I come from and what my major was in college and how I started writing. It reminds me of almost a curtain call, in the sense of it’s kind of going like, “Hey, this was a thing we made!” We’re not necessarily trying to totally break the fourth wall, but kind of going, “Let’s celebrate the fact that it’s over now!” And acknowledge that there kind of is no end. This has to end because that’s the nature of the medium it’s in, but there’s kind of also no ending. So when those two Nadias go by her at the end, hopefully you, again, get that feeling of completion and narrative satisfaction. But then also that kind of question mark of, “Is it ever really the end? Do these things ever really stop?”

At the end of the season, we’re not like, “And now they’re immortal!” I’m assuming those characters will die. Did they stop the loop, or were their minds just expanded a little bit more, and so now because they understand a little bit of what multidimensionality is, and the fact that we don’t have just one reality, does that mean anything to them? Does it not? Because one side of the duo is enlightened and the other one isn’t, does that mean they’re destined for failure or does that mean they can come to the same kind of working together? The possibilities are endless.

That’s my answer to it, but I can guarantee you, if you were speaking to Amy or Natasha, they would have their own version of what that meant. It’s just that, again, there was that gut feeling of, “Yeah, that’s the ending.”

There’s chatter about a second season, and I don’t know if you necessarily already have the plans, but I wanted to ask what the idea for it was because it seems like the first season is such a perfect unit.

That was always our goal actually, was that the first season felt very complete. We pitched it as a three-season arc. I mean, I wouldn’t say a three-season arc; we pitched the show with three seasons when we pitched it to Netflix. That being said, the first season was always supposed to feel like what you just said. That was always the intention, even though of course things changed along the way, and the rules of it changed and some of the characters changed and morphed into other things.

Ultimately, that was always the point, was that it would feel like a complete whole, and then in the second season this thing happens, and in the third season this thing happens. I unfortunately cannot tell you any of those things, and that’s not to be cagey, but I do have two other brilliant collaborators that I work with, and of course would not want to speak out of turn. That’ll just be up to Netflix and the viewers, and Amy and Natasha and whatever happens next.


Lyonne and Brendan Sexton III.
Netflix

Was there ever more significance to the character of Horse? The series opens with Nadia saying that she finds him familiar, and then he’s present at the end as well.

Yes. I always thought— and again, this is my personal interpretation. It’s just so funny to talk about it, and I hope I don’t sound too hippy-dippy, but it’s truthfully this thing where whenever we talked about Horse — and Horse was a character that Natasha pitched and Natasha really brought to life and kind of molded out of clay — but to me, Horse was always the moon tarot card to her tarot reader. He’s the subconscious self. He’s this other part of her that she can dip into at any time and join at any time, and he’s both dangerous and a positive, kind of protective character. But he’s neither creation nor destruction.

If Alan is her double within the timelines, I feel like Horse is almost a subconscious or unconscious manifestation. I think, if I am remembering correctly, you never see Horse during the daytime. I think you see him waking up at that place where he’s sleeping, where she’s watching his shoes, so you see him like within the real world, but to me, he always felt like Nadia’s vampire self. But again, that’s just me. Who the fuck knows what else anybody else thinks. But whenever I was tasked with writing him or when we were pitching Horse storylines, I was like, “To me, Horse is the god Pan. He lives in the woods in Tompkins Square Park, and he is all of our unconscious or subconscious selves. We can dip in and visit Horse whenever we want.”

To circle back to Nadia, is her company’s name, Rock and Roll Games, a conscious reference to Rockstar Games? Or was that just kind of incidental?

Totally a reference to Rockstar Games. Hope they don’t sue me. I fucking love Rockstar. I love Bethesda. I’m a huge gamer. I love playing video games. I actually know Polygon; I think I’ve been on there to cheat some walkthroughs back in the day. But yeah, no, I love video games. I just finished Red Dead Redemption 2, I love the Fallout series. I’m really enjoying Fallout 76. I know it’s getting some shit, but I’m really enjoying it. I love Detroit: Become Human, Heavy Rain. And then, of course, any of those campaign games, like God of War or Uncharted, they’re super fun. I really enjoy them.

I think Kumail Nanjiani made the funniest joke about video games, which is that it’s the only medium that’s gotten better with technology. Because of technology, the storytelling medium has actually gotten so much better as a result of that. But yeah, I was like, “What sounds like Rockstar Games? What sounds like some bullshit titles?” I was shocked that cleared. I was like, “Oh God, please don’t take me down.”

One last question: In previous interviews about you’ve talked about how heavily music factors into your plays and your work, so — how did you settle on the Harry Nilsson song for this one?

Oh man, I do not remember whose idea that was. It must have been Natasha. Natasha must have at least been talking about Harry Nilsson, because from day one in the pilot, it was like, “‘Gotta Get Up’ by Harry Nilsson.” It must’ve been Natasha, though. I love Harry Nilsson as well and have a deep personal connection to that song, but Natasha, especially, just coming from her background with music and how much she knew about him and loved him, either she pitched that song or I put that song in as like, “I love you.” I don’t remember who came up with it first, but once we decided on it, it was always that song. I have listened to that song a thousand times. It’s absolutely wonderful.

From a directorial standpoint, I think Natasha always had faith in it and always was like, “This is the song that’s going to be there.” I think, of course, there was a part of me that went like, “This has got to be a song that doesn’t get on your nerves.” So I was a little worried about it, but once we got into the edit, Natasha and I were both like, “Oh my God, it’s perfect. It’s the best song ever.” I think it’s a testament to fucking Nilsson. Even his upbeat song is kind of scary and upsetting, which is I’m sure why Natasha probably picked it in the first place. It’s got to really have that feeling of authenticity to the tone of the show, but also what’s going to feel like a party. What’s going to be like Nadia, you know? I definitely was like, “Well, we’re probably going to have to replace it, it’s probably too expensive. It’s going to get annoying.” But she saw it all the way through to the end and was like, “We’re getting this no matter what.” And we did.

Russian Doll is streaming on Netflix now.

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If Frontier Can Dodge Its Debt Risk, Its Equity Could Have 25x Upside By 2021

If Frontier Can Dodge Its Debt Risk, Its Equity Could Have 25x Upside By 2021

Introduction: A 97% Ride Lower in Three Years

There may not be a more hated stock than Frontier Communications (FTR).

The idea was brought to us by friend and contributor Adam Spittler, and with his help, we took a deep dive into the company’s debt maturity schedule and potential to generate cash over the next couple of years. We arrived at the conclusion that the equity should be viewed essentially as a call option at this point, but that there is a favorable enough risk/reward profile for us to consider a small speculative investment in the name.

If you know the story or have seen the stock chart, chances are you probably hate it. If you don’t know the story, after about 2 minutes of reading, you are most likely too scared to dig deeper. Here’s what the stock’s performance has looked like over the last 3 years. The equity is down about 97%.



The History

To better understand what happened to Frontier, one must understand the history and underlying technology of the company. Note that I am not a radio frequency engineer, so this explanation is a bit “lay”.

Frontier is a telco, or legacy telephone company, cobbled together from a bunch of disparate networks, no different than Verizon (NYSE:VZ) or AT&T’s (NYSE:T) legacy telephone network. Telephone “data” is transmitted via low voltage electrical current through copper wire called twisted pair. Anyone who has cut through a telephone line can see the small strands of copper inside of it. As the signal travels through the twisted pair copper line, there is friction, which reduces the speed at which data can travel. The bigger (or thicker) the copper line, the more data that it can carry.

To oversimplify, think of the smallest wire being the old line you plugged into your land line phone, and the largest, a year 2000 era T1 trunk handling data to a cell site, or to a large business. The twisted pair copper is held within a cardboard sheath, then covered in rubber to keep moisture out. Air (primarily nitrogen) is fed through the copper line to keep moisture at a minimum.

As telephone networks are many decades old and as the rubber outer coating begins to dry rot, moisture permeates the inner copper and causes severe signal leakage. When this happens, the affected span of copper has to be completely replaced, resulting in significant network maintenance fees annually. This is the same regardless of whether the utilities within the municipality are aerial (on telephone poles) or underground (in innerduct).

In the ’80s and ’90s, companies began to overbuild the legacy telco networks with coaxial cable as a means of providing more data at faster speeds. Coaxial cable is similar in makeup to twisted pair. However, the copper core is solid. This allows the low voltage electrical cable to reduce friction, thereby increasing speed. This presented a problem to the legacy telcos: not only were they small and segmented, post AT&T breakup, but coax technology wasn’t compatible with telephone, meaning they would have to build a completely separate second network to upgrade to the new technology, which at the time was only marginally faster and more efficient than telephone.

A superior technology wouldn’t be deployed en masse until the early 2000s, with Verizon building Fios Fiber to the home (FTTH). As a result, the telcos (save for VZ and AT&T which expanded into wireless) did the same thing they always did: focused on long distance subscribers and paying a hefty dividend that their shareholders had grown accustomed to receiving.

As the wireless industry grew and a new generation grew up in the mobile phone era, long distance subscribers began to decline. However, many telcos were able to offset revenue contraction with their newly offered DSL service and video packages. In the early 2000s, all of these legacy telecoms reached a significant dilemma. With fiber technology proving superior to both legacy copper and coax, everyone could see the future. However, many of these firms had paid out so much in dividends, their balance sheets were still overloaded with debt, while their primary competitors, the cable companies, had spent their capex on a newer network and were able to focus on ways to compress data and improve speeds with many years of viability on their new networks.

Verizon was the first to build fiber to the home with its Fios product. After spending billions on building out select markets, they experienced something they hadn’t factored into their equation: the cost to keep a legacy copper network running alongside a new fiber network was astronomical, and their legacy franchise agreements with each municipality forbade them from forcing customers off of copper and onto fiber, particularly in rural areas where the losses to keep existing copper active were starting to take their toll.

By the end of the 2000s, it was apparent that legacy telcos offering 12 Mbps DSL, regardless of the price, were never going to be able to complete with a competing Cable or Fiber provider offering speeds in excess of 100 Mbps. While the strategies varied, some began to build fiber over their legacy network as financing afforded, and others went for economies of scale (this is what FTR chose). One thing remained constant: they all continued to pay large dividends with highly levered balance sheets.

This is where Frontier comes into play. Frontier was a small rural telephone company focused on long distance subscribers. Maggie Wilderotter was Frontier CEO from 2004 through 2015 and came from AT&T. Her focus was simply adding long distance subscribers because the legacy network was in place and the return on investment was astronomical, as the cost per incremental subscriber was virtually zero.

The problem with her strategy was that, while focusing on a dying business, it was to neglect developing fiber and new technologies to better complete with Coax and Fiber, and to make it up with scale.

The first significant acquisition was in 2009 when Frontier announced it was going to acquire 4.8m landline subscribers from Verizon for $8.6 billion. This was after two other firms which acquired legacy copper network pieces from Verizon had gone bankrupt. Verizon knew what they were doing and understood the technology was on its last legs, but Frontier needed the scale, and regardless of the price, they may not have had a choice. After leveraging the company, Wilderotter insisted on continuing the dividend. Frontier was forced to reduce their dividend in Q3 2010 and again in Q1 2012, before a large cut in Q1 2017 followed by complete elimination by year end 2017.

The second large acquisition occurred in October of 2014 when she acquired AT&T’s DSL and U-verse business in Connecticut. U-verse was AT&T’s attempt to build fiber closer to the house in order to improve DSL speeds. Think of it as fiber ¾ of the way from the head end to your house and legacy copper the remaining ¼ of the way. You have massive data flowing through the fiber, and when it converts to copper, there is a rapid slowdown of the RF signal. However, this methodology does improve end user network speed and performance.

The final shoe to drop was announced in February of 2015 when Frontier announced an agreement to buy Verizon’s legacy copper and Fios networks in California, Texas, and Florida. This acquisition included 3.7m telephone, 2.2m broadband and 1.2m Fios video subscribers for the bargain basement price of $10.54 billion. Of note, only an estimated 54% of homes acquired (total potential customers) were Fios-enabled. Frontier used that as a sales pitch, but it was really a capital expense liability and provides opportunity today, which we will touch on later. In addition, Frontier had to spend ~$350m in integration capex to allow the networks to talk to each other.

After 11 years with the company, Maggie had managed to encumber the balance sheet, while cutting the dividend in an environment of contracting long distance and basic telephone package subscribers. For that, we say bravo. However, other investors may use a different adjective.

Dan McCarthy was promoted in early 2015 and took over in earnest in early 2016 after Maggie left as Executive Chairman. Dan’s background as COO included a significant amount of time in field operations, which is vital to Frontier’s go forward strategy and execution. Since Dan has taken over, Frontier had to execute integration of the CTF (California, Texas, Florida) acquisition and address the network competitive mismatch as years of neglect and lack of upgrade saddled many customers with a 12 or 24 Mbps DSL option, while Charter (NASDAQ:CHTR), for example, was offering 100 Mbps service in the same markets.

While we appreciate the criticism of the current management team, the task at hand takes time – a lot of it, as Frontier is forced to overbuild fiber closer to the home in order to reach the 100 Mbps competitive speed offering.

The Opportunity

Frontier Communications is an over-levered legacy telecom with $252m of equity value and ~$17b in debt. No one would dispute that Frontier is priced for bankruptcy. The fasted way to BK is to overlever and have revenue contract on you, and that’s precisely what has happened to FTR over the past three years. Everyone hates Frontier for various reasons, and we’re here to explain why we think everyone is wrong.

For Frontier, free cash flow is the key to the equation. While 2018 has been disappointing from an FCF perspective, their Q3 full year guidance is $625m after capital expense and interest expense. While many debate that their capital expense isn’t sustainable while covering debt maturity, I argue otherwise.

Churn rates have improved, and revenue contraction QoQ has declined significantly to under 2% in Q3 2018. The most important part of growth execution is to push fiber closer to the premise to offer a competitive 100 Mbps option to challenge Charter and other cable companies. I anticipate that the large overspend on capex in Q3 2018, in tandem with the company’s rebranding, was an effort to push 100 Mbps service to as many customers as possible and reverse the trend of declining revenue and EBITDA.

Another area of revenue growth is due to many of the legacy CTF “sweetheart” Verizon teaser deals expiring. In 2015, Verizon was offering a 3-year introductory discount price, and all of those will convert to full price subscribers by ~April 1, 2019. While this may drive some churn, its already in the historic numbers as these contracts run off, which should provide tail winds to improved churn rates.

In October of 2018, Frontier changed their pricing structure similarly to a change made in Q4 of 2017.



In Q4 2017, Frontier added a $1.99 network service fee, which increased their ARPC from 81.61 to 83.26. While this may not seem like much, $2 per month on $4.2m subs adds up very quickly and falls straight to the bottom line. In October 2018, Frontier announced this network service fee was increasing from $1.99 to $3.99. They have also transitioned away from allowing customers to buy their own modem and charge $10 a month. While this may seem annoying to customers, it is happening across the board to allow networks to be upgraded.

Lastly, as Frontier upgrades service regions from legacy DSL to 100 Mbps service, ARPC will increase due to the price of the upsell.

On the cost side, there is one very important opportunity that most, if not all, non-industry folks fail to factor in. Historically, franchise agreements between the telco and municipality have been inflexible and forced migration (from copper to fiber) initiatives have been nonstarters. Since 2015, many of the legacy telcos have made inroads with negotiating improved service for the right to transition subscribers off of legacy copper to fiber, and if the ROI doesn’t make sense, outright refuse service once the legacy contract expires (Termed as fire the customer).

While this process will extend another 5 years, once the copper network losses are eliminated, FCF will increase dramatically as legacy network maintenance and capex cost decline significantly. While there is no way to quantify what these savings may be, it’s fair to assume that at least 50% of capex is tied to the legacy copper network. While that figure may never be zero, it’s easy to see a few hundred million coming out of that in the CTF markets alone. This is referred to as a network transformation plan.

Yet another tailwind is the merger of Charter with Time Warner’s (NYSE:TWX) cable assets and Brighthouse Networks. While this seems counterintuitive, this is a massive integration, and all three companies are trying to understand what the future go-to-market looks like. They have also reduced marketing expense until they figure things out. This should provide at least another 6 months of benefit to FTR provided they are offering a comparable product speed.

Lastly, many of you have heard about people “cutting the cord”. There is a certain stigma that cord cutters will approach 100% of former subscribers for all providers, but this is a fallacy. Cord cutting really refers to folks cancelling their existing video package and substituting something like HULU or Netflix (NASDAQ:NFLX). While it is true revenue per customer declines, that customer still needs a broadband connection, and reduction on the legacy telephone business has slowed dramatically as many folks transitioning from land line to mobile have done so.

Most providers have transitioned to broadband service that allows for certain data usage. Even if a customer is streaming content not being sold by Frontier, they still have to pay for the right to have that content delivered, and that will always be (at least for the next 10 years) via wireline network. 5G “wireless” technology is years away, and every device will require a wireline input feed to power the “wireless” network.

The Capital Expense Wild Card

Forward capital expense is vital to the overall conversation with Frontier. During Frontier’s December 4th UBS conference, Dan McCarthy specifically mentioned their initiative to upgrade legacy copper to compete with cable companies.



This is specific to our prior point that in order to fuel growth, their network has to be transformed to at least a 100 Mbps service offering. What this means is that they are well positioned going into Q4 and 2019 to compete with the Charters and Comcasts (NASDAQ:CMCSA) of the world. In addition, this most likely will yield reduced capital expense in the forward periods. At the same conference, Dan provided high level 2019 Capex guidance of $50m to $100m lower YoY, or a 7% reduction over 2018.



For comparison’s sake, we have broken out capital expense by year:



As reflected in this table, capital expense has been trending in the company’s favor and improving cash flow, resulting in an incremental $50 to $100m without factoring in potential subscriber growth from the benefit of upgraded service offerings. This is a point that management did an extremely poor job explaining on the Q3 conference call. However, they did explain the situation on the December 4th conference call, after the stock had taken a hit.

Cash Flow Trend

Simply put, the cash flow trend at Frontier has continued to increase year over year.



Note that 2019 assumes flat EBITDA and management has unofficially guided for a target of $800m for 2019. While I don’t believe $800m is reasonable, an increase to $700m is quite reasonable.

But What About the Debt?

One common point of contention is the massive debt load that Frontier currently holds – it is a very valid point. There is, however, one item of clarification that many folks do not understand. All of Frontier’s unsecured debt is fixed rate. So, if rates go up, there is no incremental interest expense to Frontier at the time of interest payments. Their secured debt is all pegged to LIBOR, so that debt will float.

We’ve seen the argument being made interest rates going up could be a death blow to Frontier, and that’s simply not true. In fact, one could make the argument that as market rates go up, and the pricing of their unsecured debt declines, excess free cash flow can redeem the debt at a larger discount. This is putting the cart before the horse to some extent, so let’s look at the current debt maturity structure:



While this charge may look bad, it certainly doesn’t paint the picture of imminent bankruptcy that the market appears to be pricing in. 2019 and 2020 debt redemption is not an issue. 2021, while it appears to be tight from a cash flow perspective, is primarily secured debt, which should be generally straightforward to roll out. Note that there are various approvals required by the unsecured tranches in order to roll secured debt, but as long as the cash flow levels stay at or above ~700m annually, this shouldn’t be a show stopper. The elephant in the room is the $2.7b of 2022 unsecured debt (currently priced ~70). The table below shows all debt maturities through the end of 2023.



For simplicity purposes, we ignored their standing line of credit and straight lined an estimated $700m of cash flow per year to determine where the real stress comes. We’ve also assumed that all secured debt is rolled, and only unsecured debt is redeemed at par. We’ve also assumed an 8% interest rate on the unsecured debt. The max pain point comes in January of 2023 where they have to solve a ~1.354b problem.

There are two simplistic solutions to this problem: the first of which is to buy September 2022 debt at the current 30% discount with their free cash flow generation (Note that this doesn’t solve the entire problem as the debt would have to trade down and be redeemed for ~60). One cannot forget, however, that the continued spend of $1.1b per year will allow for incremental secured borrowings on Frontier’s network assets, the current secured debt allows for 20% security on network assets (for every $100 spent on network they can borrow $20 in secured debt. This is how Frontier must navigate their mountain of debt, and it isn’t close to being as insurmountable as the market currently thinks. This also will yield $3.5 to $4.5b of reduced unsecured debt at ~8% coupon or an incremental ~$300m of free cash flow.

Another solution that Frontier could consider, although, in our opinion, it is too early for this, is an unsecured debt swap to extend maturity dates and reduce overall debt load. While this is generally not great for the unsecured debt holders, it is good for both secured debt and equity.

From what we understand, there may have been rumors in the summer of 2018 that an ad hoc bondholder group had begun discussions with Frontier on a restructuring plan, and those may still be ongoing. While we have no insight as to whether this is true, or what the structure or discussions would have been, we believe they would most likely push out maturity of the “problem” tranches in return for a bump in value. For example, in return for exchanging 2022 unsecured currently trading at ~70, they would agree to push maturity out a number of years in return for a par value of ~85, with perhaps a warrant kicker. This would help Frontier’s liquidity while reducing their overall debt – and the bondholders would receive 15 on the current market value and reduced risk of being impaired in the future.

The Case Against Bankruptcy

While many folks believe that bankruptcy is a foregone conclusion, one must think of the benefit/detriment to the creditors. Bankruptcy would render the equity worthless; however, it would only provide $200m of relief on a $17b debt stack. The other detriment is that given the multitude of debt issuances, the legal battle to sort out whom receives what would be extremely complicated and cost prohibitive. Frontier also has ample free cash flow to run its day to day operations while covering interest expense. As such, creditors most likely prefer to grant relief versus blowing the current financial situation up. On the other hand, if Frontier were to get into a situation where it had difficulty covering interest expense, a judge would be the only way to sort out the go-forward, if creditors started to butt heads.

Caveats and Primary Risk

The primary risk to the thesis presented in this piece is that the massive spend to improve network speeds do not result in a return to subscriber and revenue growth. In this situation, free cash flow continues to erode and bankruptcy is guaranteed. Another potential pitfall is significant dilution if a bondholder group were to voluntarily convert part of their debt to equity. In my opinion, this is highly unlikely based on the current debt/equity ratio and the belief that bondholders simply want their coupon and return of principal at the maturity of the tranche.

Summary/Conclusion

Frontier common equity has gotten absolutely destroyed over the past few years. Many “experts” believe they are ripe for imminent bankruptcy. This is under the assumption that revenue and EBITDA contraction trends continue to decline. Many also believe that upcoming 2022 debt maturity will be the penultimate death blow to Frontier.

While there is a chance that Frontier Management will fail, we believe the market is wrong. Frontier currently has $250m of equity value and $17b of total enterprise value, or 4.8x EBITDA. CenturyLink (NYSE:CTL), by comparison, has an enterprise value of ~$53.25b on EBITDA of 8.32b or 6.4x EBITDA. Let’s assume that Frontier executes as I have laid out in this article and the market no longer prices them for bankruptcy, and the multiple moves 50% of the way toward what CenturyLink currently is valued at. Given current EBITDA levels, a 5.6x valuation would yield a total enterprise value of $19.86b.

By the end of 2020, once there is a clearer picture of the Frontier turnaround, net debt levels could be an estimated ~14.776B for a total equity value of $5.084b or just under $50 per share, a return of almost 25x. This level of potential return rarely exists in the market today and often only comes from severely depressed stock prices.

Looking at the risk/return profile of such a potential investment, and keeping in mind the serious caveat of a significant debt load, we believe Frontier equity could be severely underpriced and, for us, is worthy of a speculative investment.

Disclosure: I am/we are long FTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Sandra Oh and Andy Samberg Give Out Free Flu Shots at the 2019 Golden Globes

Sandra Oh and Andy Samberg Give Out Free Flu Shots at the 2019 Golden Globes

With the 2019 Golden Globes finally here, it’s time for celebratory shots … but definitely not the kind you’re thinking of!

During Sunday night’s glamorous event, hosts Sandra Oh and Andy Samberg paused the awards ceremony to give out something else: flu shots.

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“So roll up your sleeves, Hollywood, because you’re all getting flu shots,” Oh excitedly announced, as Samberg joined in, before a large group of people wearing white lab coats and holding syringes appeared on stage.

As the line of shot administers entered into the audience, LMFAO’s “Shots” played in the background.

Can’t get enough of the Globes? Check out our full Golden Globes coverage for the latest news, fashion and more.

Flu shots at the Golden Globes

NBC

RELATED: Golden Globes Hosts Andy Samberg and Sandra Oh Mock Oscars in Hilarious Opening Monologue

“You know you wore a sleeveless gown for a reason!” joked Oh, as stars were approached by the white coats and needles, looking understandably freaked out.

“From the Rite Aid at Echo Park,” added Samberg, before noting, “If you are an anti-vaxxer, just put a napkin on — perhaps over — your head and we will skip you.”

Andy Samberg and Sandra Oh

Paul Drinkwater/NBCUniversal via Getty

Their flu stint came during a night where the duo already showed off some of their antics together.

When the two first-time Golden Globes hosts took to the stage to deliver the 76th annual award show’s opening monologue, Oh kicked off the night by joking that she and Samberg only got selected for the job because, “We’re the only two people in Hollywood who haven’t gotten in trouble for saying something offensive.”

RELATED VIDEO: Golden Globes Glam! Find out How to Do This Awards-Worthy Makeup

Samberg went on to quip that his least favorite race of people is “the Hollywood half-marathon.”

They also offered up the Oscars hosting gig in the wake of Kevin Hart stepping down following backlash over old homophobic tweets.

“We are gonna have some fun, give out some awards and one lucky audience will host the Oscars!” Samberg said.

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The makeup counter of the future wants to guess your age and fix your problems at CES 2019 video – CNET

The makeup counter of the future wants to guess your age and fix your problems at CES 2019 video – CNET

Hi guys.
I’m here at SK-II booth and I’m about to find out everything that I probably don’t want to about my skin.
I already know that beauty products are out there and I can buy a whole bunch of different moisturizers, toners, everything that I need for my skin.
But the difference here is that SK-II is using facial recognition to work out who I am as I move through this simulated retail experience.
Now we’ve already seen this pop ups appear in Asia and this is a demonstration of what the future of skin care could look like.
Behind me we have facial recognition cameras that can recognize the expression on your face and they’ll change the color of the face artwork on the screen based on what I am doing with my face.
So if I smile, it’s yellow and if it’s green, I’m surprised.
[BLANK_AUDIO]
Smile.
[BLANK_AUDIO]
You can kinda see my face there, okay.
This is just to get you used to the idea of facial recognition.
Not gonna change your skin, but that’s what happens through here.
All right, so inside here we’ve got a spot where you can get your face scanned to tell you how old your skin is Forget what your birth certificate says that doesn’t matter here anymore.
It’s all about your skin age.
Alright so I’m gonna jump in and I’ll get my face scanned and I’ll learn about whether I’m actually the age I really am or whether I’ve hideously aged because im on the CES show floor.
Alright?
Thanks.
Alright.
I’m lining up my eyes.
I have to be neutral.
And it’s going to scan my face.
If all else fails I can always tap the wristband that I got at the front door.
Just a moment.
This feels very futuristic.
I normally just throw on a bit of soap and moisturizer and then I’m done with it.
[BLANK_AUDIO]
It’s gonna really highlight all those lines.
[BLANK_AUDIO]
Okay, once it’s finished the face scan I got from the station and I go around and I check my results that’s the scary part I guess.
So here I’m gonna walk up and the cameras gonna recognize me from that face scan and it’s going to tell me my scan results.
[BLANK_AUDIO]
Fingers closed that I don’t get 73 years old.
[Background Noise] Alright, analyzing.
Now what SK is doing is they’re measuring my five core metrics, so there’s Radiance, Spot Control Texture, firmness and wrinkle resilience.
It combines all of those into one score.
I’m going to swipe to view.
And I am 28 years old.
That’s pretty good.
Okay, maybe I need to be partying harder in Vegas for [UNKNOWN].
All these things Are gonna measure specific parts of my skin.
So I’m okay on firmness, but spot control and radiance, my radiance is way down.
That’s where I go over to the SK-II sales booth to be given a solution to all of my problems.
Over here, I’m gonna see the five dimensions of my skin.
And SK-II Wants to sell me something that’s gonna solve all of my problems.
So as soon as I pick up one of these products, it’s gonna detect that I’ve lifted it off the shelf.
And it’s gonna match my face results because it’s recognized me from this camera.
And it’s gonna know which product I’m holding and say, well.
SK-II GenOptics is perfect for your firmness, right for your radiance, but maybe you want a different product if you need to get those wrinkles under control.
So this is a kind of a vision of what the future of beauty tech could look like.
You’re not necessarily just gonna go into a store and wildly stab in the dark for something you think might make your skin better.
You’re going to have a personalized experience match to your face, both with facial recognition and your actual skin age.
Then hopefully you’ll be able to choose the right product for you and you’ll be radiant and you’re to face CES with that natural glow.
I mean, I don’t know if I have it but I’m really keeping fingers crossed.
Okay, thanks guys, we’ve got so much more coming from TechWest Including high tech stuff just like this.
So stay tuned and come back after the break on CNET.
[BLANK_AUDIO]

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