The Charter Communications Q3 Conference Call began with an operator welcoming participants and reminding them to hold questions until the end. The call was being recorded and participants were directed to the company's website for the accompanying presentation. The CEO and CFO then provided updates, including the addition of 63,000 Internet customers and nearly 600,000 mobile lines. Revenue remained flat due to temporary challenges within the quarter. The company expects mobile penetration to grow in the future.

In the second paragraph, the speaker discusses the growth of adjusted EBITDA and the progress being made on the company's multiyear strategic initiatives. These initiatives include expanding their footprint, improving customer experience, and evolving their network and services. The speaker highlights the success of their rural builds, employee retention and training, and the increasing digitization of their service platforms. They also mention that their network evolution project will allow them to maintain their fast internet and WiFi service claims throughout their entire footprint, unlike their competitors. This evolution is seen as beneficial for the communities they serve and for the company itself.

Charter expects its network evolution to cost $100 per passing, with the timeline for completion depending on supply chain and capital spend. They will not invest in states with unfavorable BEAD rules. Their Spectrum One product offers fast connectivity and savings for customers, while their Xumo platform allows for unified search and access to linear and direct-to-consumer video content. Charter has also reached an agreement to carry Disney's linear networks and DTC services for their customers, which they believe is a positive step for the video ecosystem and adds value to their video packages.

Charter has maintained flexibility to offer lower cost packages and plans to modernize all distribution agreements upon renewal in a way that works for customers. They will not carry channels that require customers to pay twice for similar DTC and linear programming, but are open to selling their content in an à la carte app. Their goal is to provide a modern and seamless video marketplace for customers, with a clear path to solve key issues of choice, value, and utility. Charter's strategy is to provide high quality products priced and packaged in customer-friendly ways to drive higher penetration of their services.

In the third quarter, the company's strategy of investing in high-quality service and focusing on customer acquisition resulted in significant value for shareholders. The CEO transition was smooth, with Tom Rutledge retiring and Eric Zinterhofer reassuming the role of non-Executive Chairman. Customer results for the quarter showed an increase of 63,000 Internet customers, while video customers declined by 327,000, partly due to the temporary loss of ESPN and the Disney programming dispute. The company handled the dispute well, but there was a lingering impact on customer net adds in the early part of the fourth quarter. The company also added 594,000 mobile lines and saw a decline of 286,000 wireline voice customers.

In the third quarter, overall market activity and customer additions remained low due to low move rates. The company faces competition from fiber and fixed wireless access providers in certain areas, but their product is slower and less reliable. Despite a dispute with Disney, residential Internet churn reached a record low and Spectrum Mobile performed well. The majority of new lines come from existing Internet customers, but there has been an increase in new customers. Boarding from other carriers also grew. The company remains confident in their Spectrum One promotional lines. In rural areas, subsidized rural passings growth accelerated and the company expects 300,000 new passings this year.

The company has identified 300,000 adjacent passings that were not originally included in their RDOF build, bringing the total number of passings to be constructed to 1.3 million. Despite increased labor and equipment costs, the net cost per passing is expected to remain similar to the original estimate. Residential customer growth was driven by internet, but revenue per customer relationship declined due to a higher mix of non-video customers and customer credits related to the Disney lockout. Commercial revenue declined for SMBs but grew for enterprises.

In the third quarter, the company saw a decline in advertising revenue due to less political revenue, but other revenue increased. Overall, consolidated revenue was up slightly. Operating expenses remained flat, with a decrease in programming costs and an increase in other costs. Cost to service customers increased due to investments in employee structure and benefits, but sales and marketing costs decreased.

In the third quarter, Charter had some additional overtime in their call centers due to the Disney dispute, but it was not a significant expense. Adjusted EBITDA grew slightly, while net income increased due to higher adjusted EBITDA and lower operating expenses. Capital expenditures totaled $3 billion, primarily driven by network upgrades, line extensions, and purchasing Xumo devices. For the full year 2023, Charter expects capital expenditures to be approximately $11.2 billion, with an increase in spending on CPE and network upgrades. They also expect to spend approximately $100 per passing to evolve their network for faster speeds. Their 2024 operating plan is currently being finalized.

The company plans to partially fund its increased rural passings and construction opportunities by slowing its network evolution plan. They will provide a more detailed outlook on their plans in January 2023. Capital expenditures have remained consistent and are expected to decline in the future. Free cash flow declined in the third quarter due to higher CapEx. The company expects a negative change in working capital and lower cash taxes. They finished the quarter with a high level of debt but intend to stay within their target leverage range.

During the quarter, Charter repurchased two million shares and invested heavily in future growth, which has put pressure on EBITDA growth for 2023. However, this pressure is expected to ease in 2024 with improved transaction efficiency and revenue growth from the roll-off of mobile free line offers and political advertising. The company also expects faster rural build and convergence momentum to drive customer net additions and improve churn. In the long term, network evolution and transformational changes to the video business will enhance the value of the company's products for connectivity customers. Despite slower progress in core markets, the investments made and planned will drive future growth.

The speaker is asking Chris about the differences in their core markets, specifically in terms of slower pull-through from Spectrum One and pressures from fixed wireless broadband. They also ask for Chris's thoughts on the future of the video business, and when it will become a growth driver instead of a drag on growth. Chris responds by discussing the success of their subsidized rural construction and the anticipated acceleration of construction in the future. He also mentions the impact of back-to-school dynamics and the low end of the market with fixed wireless access.

The company is seeing success in the fiber market and fixed wireless access, despite challenges in the broadband market. They are also growing in both their existing and rural subsidized footprint. In terms of video, they believe there will still be a traditional video business in five years, but they also have plans to evolve to a state-of-the-art video marketplace that offers a combination of linear, DTC, and SVOD products. This will provide value to customers who can afford it and be a valuable product for the company.

The speaker discusses the changing landscape of the video market, driven by the availability of à la carte options and the influence of programmers. They mention their joint venture with Xumo and the potential for monetizing the platform through advertising. They acknowledge that traditional linear video is not expected to grow, but they see a path to create value for customers and enhance the value of their connectivity services. They also mention the launch of Spectrum One and the potential for bundling DTC apps with their services. The speaker expresses optimism for the first time in 15 years about the future of the video market.

Craig Moffett asks Jessica Fischer about the impact of Spectrum One on ARPU for both broadband and wireless. Fischer explains that as the free lines from Spectrum One start to roll off, it will no longer have a negative impact on ARPU. In fact, as the base grows and the number of free lines stabilizes, there could be a positive pressure on ARPU. However, there is still some legacy pricing that needs to roll off. On the wireless side, there has been steady net additions over the past four quarters, and as the base grows and the number of free lines stabilizes, there could be a little bit of positive pressure on ARPU. On the Internet side, without the Spectrum One mobile allocation, ARPU growth would have been 3.7%, but with it, it was 2.6%. As the free lines start to roll off, the total number of free lines in the system will become steady in the year-over-year.

Ben Swinburne asks about AT&T's CapEx outlook and strategy, specifically focusing on three buckets: digital evolution, line extensions, and video. AT&T expects to spend $5.5 billion on network evolution, with a shift in timing and a potential increase in 2026. The $4 billion per year for line extensions may increase due to the higher RDOF opportunity. There has been minimal spending on video CPE, but AT&T plans to invest in Xumo. Chris Winfrey will address network evolution and video CPE, while Jessica will cover expansion and any additional information.

The speaker discusses the potential for a six-month delay in network evolution and how it may impact competition and investor expectations. They also mention the benefits of showing discipline in terms of capital investments and the potential for suppliers to catch up with technology during this extended time frame. Additionally, the speaker mentions the decrease in spending on video CPE due to the ability to recycle World Boxes for Xumo.

The company is planning to deploy more new boxes for video CPE through Xumo, which is going well. The cost of the boxes is expected to decrease over time, and there will be a combination of volume and lower price point. The company is still working on their operating plan for next year, but they are confident they will meet their goal of 300,000 rural passings in Q4. This would result in a $500 million increase in spending compared to this year, assuming all other components remain the same. Network evolution spending is also front loaded.

The company is facing high costs for preparing and building inventory before they can begin their high split operations. They plan to spend over $1 billion this year and are considering adjusting their timing to offset additional line extension expenses. They are also looking for ways to create more transparency and visibility around the value of their investments in rural areas, such as through additional disclosures or potentially creating a tracking stock. This will help investors understand the value created by these unique one-time capital investments.

The company has built 315,000 rural passings at an average cost of $3,800 each, creating a current value of $2.8 billion. The company plans to increase transparency and provide more information on their capital spend and the value it adds to the business. They are committed to long-term capital allocation and shareholder value creation, but also understand the importance of shareholder confidence and plan to provide additional disclosure to demonstrate their strong track record as good allocators of capital.

During the earnings call, Vijay Jayant asked about the company's cost cycle and the BEAD and state processes. Jessica Fischer responded that there is no change in the expectation for cost to serve and sales and marketing to exit the year close to zero. She also mentioned that as the tenure in those areas mature, the company expects to become more efficient. Chris Winfrey added that they have lapped the one-time increase in cost to serve and sales and marketing and should expect to be more efficient going forward.

Chris Winfrey and Jessica Fischer from BEAD discuss their difficulties forecasting their pipeline due to state allocations. They are disappointed in the potential guidelines from NTIA and will focus their investments on states that allow them flexibility to run the business and earn a healthy return. They are also disciplined in their bidding process and take into account regulatory limitations. Phil Cusick from JPMorgan asks for follow-ups.

During a conference call, a question was asked about the company's goal to add more broadband subscribers year-over-year and if it was still achievable. The company's CFO responded that it may be difficult to achieve due to recent trends, but they are optimistic about meeting this goal in 2024. They also discussed the impact of political advertising on EBITDA in the upcoming quarter and the potential for cost efficiencies in the future.

In the fourth quarter, the company expects to start generating revenue from the mobile free line roll-off, which will have a small impact initially but will grow over time. They also anticipate increased efficiency from their investments. The company has seen better than expected retention rates for Spectrum One and is not having to do much to retain customers due to the active use of the lines. The company also addressed questions about their exposure to the ACP program and the overlap between ACP customers and Spectrum One customers.

The company has customers who are similar to existing customers, and they have a high device purchase rate. Their mobile product at $30 is the fastest and most affordable in the country, giving them a competitive advantage. The company also participates in the affordable connectivity program, which has helped customers who wouldn't have access to broadband otherwise. The White House has asked for more funding for the program, and the company hopes Congress will approve it. If not, most customers who currently receive ACP support were already internet customers before the program was founded.

The company has low-income broadband programs that existed before ACP began, and they believe they will continue to retain these customers due to the value they provide in connectivity. They have ways to save these customers money by moving them to lower speed products and offering mobile services. They hope the program will be successfully renewed, but they are prepared to use their tools to keep these customers if necessary.

This summary was generated with AI and may contain some inaccuracies.