The operator introduces the Charter Communications' Second Quarter Investor Call and reminds listeners that the call is being recorded. Stefan Anninger, the speaker, reminds listeners to read the risk factors and other cautionary statements in the SEC filings. He also mentions that any forward-looking statements reflect management's current view only and Charter undertakes no obligation to revise or update such statements. Chris Winfrey, the President and CEO, discusses the loss of 149,000 internet customers due to the end of the Affordable Connectivity Program, but adds that they have added over 550,000 Spectrum Mobile lines and retained the majority of ACP customers. Revenue and adjusted EBITDA have also increased.

The focus is on customers' ability to pay for services over time, and the impact of the lack of ACP on market churn and connectivity opportunities. Despite a seasonally weak quarter, the company performed well in internet services and remains confident in its ability to return to long-term growth. The company's success is based on its high capacity network and the ability to deliver fast and reliable products. With a one gigabit network and plans for a multi-gig capable network, the company is poised for continued growth in data demand and new technologies. The company's combination of wireline and mobile capabilities creates the nation's first converged network.

Comcast is unique in providing fast and seamless connectivity through their own gigabit capable WiFi network. Their converged connectivity product set is constantly improving through speed upgrades and access point deployment. They are well positioned in the market with high-quality products, lower pricing, and the ability to offer a bundle of services. Internet usage and demand for faster speeds is increasing, with a significant portion of customers using over a terabyte of data per month. The company saw strong results in their mobile offering, with their highest port ends quarter ever. They also introduced new features such as Anytime Upgrade and a repair and replacement plan at a competitive price point.

Spectrum has launched new affordable value-added services, such as a phone balance buyout program, to attract new customers and drive profitable growth. They have seen success with their Spectrum One offering, with approximately 8% of their total passings taking advantage of the converged internet and mobile service. However, the video segment continues to experience losses due to programmer rate increases and the loss of ACP. To differentiate themselves in the market, Spectrum is considering leveraging their unique capabilities across all their products, including video, and has reached a new agreement with Paramount to offer their direct-to-consumer services at no additional cost to traditional cable package customers.

The company plans to launch the Paramount DTC inclusion offer to customers in September and has already made ViX and Disney Plus Basic available to eligible customers at no extra cost. They will also offer Disney Plus Premium and Hulu to customers for an additional fee later this year. The company believes that this hybrid DTC linear model will provide value and stability for both customers and programming partners. They also believe that evolving the video business can still have positive cash flow and provide potential for future growth. The company remains focused on driving growth and creating long-term value for shareholders.

Jessica Fischer discusses the company's customer results for the second quarter, including a loss of 149,000 Internet customers due to the end of the ACP program. This program provided a $30 subsidy for customers, which was reduced to $14 and eventually eliminated in June. This resulted in a $30 million headwind to revenue and some customers with past due balances had their balances eliminated or put on payment plans. The company is performing well with ACP retention, but expects to see more non-pay disconnects in the third and fourth quarters. They are working to preserve connectivity for former ACP subsidy recipients.

In the second quarter, the company has various products and offers to help those who have lost their ACP subsidy, including Spectrum Internet Assist and Internet 100. They also offer a free mobile line for one year to ACP customers and continue to market to low income customers. In terms of rural areas, they have added 89,000 new passings and expect to activate 450,000 more in 2023. The RDOF build is also expected to be completed two years ahead of schedule. In terms of financial results, Residential customers declined by 1.3%, but revenue per customer relationship increased by 0.4%. Commercial revenue also saw growth, with SMB revenue up 0.6% and Enterprise revenue up 4.5%. Advertising revenue grew by 3.3% due to political revenue.

In the second quarter, other revenue increased by 6%, primarily due to higher mobile device sales. Total operating expenses decreased by 1.4% due to lower programming costs and increased productivity. Adjusted EBITDA grew by 2.6%, and for the first time, standalone mobile adjusted EBITDA was positive, indicating the company's progress in establishing a profitable mobile business.

In the second quarter, the company saw solid EBITDA growth despite facing challenges such as the end of the ACP program and a competitive environment. They expect to continue this growth through expense management, the roll-off of Spectrum 1 promotions, and political advertising revenue. Net income was in line with last year, with higher adjusted EBITDA offset by other operating expenses. Capital expenditures for the quarter were similar to last year, with an increase in line extension spend due to rural construction and network expansion. The company has reduced its outlook for 2024 capital spending, citing lower customer net additions and actively managing vendor rates and construction materials. They still expect significant spending on line extensions and network evolution.

In the second quarter, the company saw an increase in free cash flow of $630 million compared to the same time last year. This was mainly due to higher adjusted EBITDA, lower cash taxes, and a favorable change in working capital. The company has been managing its balance sheet to improve cash flow and flexibility, including selling its towers portfolio and launching a new credit facility. They also continue to work with vendors to extend payment terms and utilize supply chain financing. The company has $96.5 billion in debt, but their sensitivity to higher interest rates is low. They have a target leverage range of 4x to 4.5x and are committed to maintaining their split rated debt structure.

The company remains confident in its long-term potential and expects strong growth and value creation in the coming years. The impact of the ACP program has resulted in over 100,000 net edition losses, with half of the impact coming from voluntary churn and the other half from reduced gross editions due to lower market activity among low-income segments. The impact on ARPU has been minimal, with a 1.7% broadband ARPU reported, but without ACP, it would have been higher.

During the earnings call, Chris mentioned that they have been competing well against fixed wireless and fiber despite their expansion. With the increase in open access and other host cell providers entering the market, there has been a noticeable increase in fiber deployments. This has led to a rise in competition from non-incumbent fiber companies.

The speaker discusses the increase in open access and wholesaler options and how it may affect the competitive environment. They mention that the pace of fiber overbuilding has remained steady and that they are competing well in both the wireline and cell phone internet spaces. They also mention that the economics of overbuilding on an existing footprint are not very good and that the impact of these options is relatively small. The speaker emphasizes the importance of having a ubiquitous technology, such as their gigabit network, in order to effectively provide products in the marketplace.

The company is upgrading their wireline network to have symmetrical and multi-gig speeds everywhere, combined with their WiFi and CBRS capabilities and a strategic partnership with Verizon. This gives them a unique advantage in the marketplace, similar to Comcast. The recent joint venture announcements are seen as flattering and a testament to the company's strategic asset. Wireless lines were up even without the retention offer for ACP subscribers.

Chris Winfrey discusses the success of the mobile division in the current quarter, which was even stronger than the previous quarter. The company has evolved its product by introducing unique programs such as the Anytime Upgrade Program and a service and repair function, which have improved their selling capabilities. While the company does not intend to subsidize phones, they have attractive programs that encourage customers to join and stay with Spectrum Mobile. The main advantage of the service is the ability to provide high-quality, fast mobile service and save customers money.

Chris and Jessica from Spectrum discussed the company's broadband market growth and free cash flow during a recent earnings call. Chris explained that the ACP impact from lower gross ads in the first quarter was roughly the same as in the second quarter, but underlying growth may have improved slightly. Jessica mentioned that the working capital benefit is not just a timing impact in the second quarter, but a change in how they manage it, which should continue to benefit free cash flow throughout the year.

Chris Winfrey confirms that the company's performance in the first quarter was better than previous years due to competitive switching. However, there was a significant drop in available gross ads, which was attributed to factors such as housing starts and removal of ACP for new connects. In the second quarter, the broadband market shrunk for the first time due to these one-time factors. Despite this, the company's performance and relative competition are still strong. Winfrey believes that the market will rebound in the future.

The speaker believes that the housing market will eventually recover, leading to an increase in moves, housing starts, and apartment rental rates. They are confident in their company's product investments and value proposition to thrive when this happens. They are also working on improving their balance sheet and may see better results than expected in terms of working capital. They plan to continue with buybacks and maintain their leverage goals.

Charter has a strong capital allocation strategy, prioritizing high ROI investments and potential M&A opportunities over share buybacks and balance sheet management. They have not given a guide on total buybacks in order to maintain flexibility for the business. They have taken cost actions, but have not touched customer-facing resources. There is no visibility into Q3 ACP impact from the 100,000 customers. Bad debt has declined, but the reasons for this are not clear.

The speaker is responding to a question about their expectations for the third quarter ACP and whether they expect cost of service to remain flat for the year. They mention that they will not be providing customer net additions guidance, but there will likely be more non-pay disconnects in the third quarter. They also mention that June was the best month for loss in the second quarter and that July's internet net ads trends have been similar. They explain that the ACP transitions are a one-time event and they are focused on evaluating their performance in retaining customers and the underlying trend without the ACP impact. The other speaker adds that there are a few things going on with bad debt in the year-over-year comparison.

The company has seen improvements in their mobile customer base, particularly for those with EIP plans. They have also taken steps to reserve bad debt for customers in their ACP program, and for some customers, they did not recognize revenue due to low expectations of payment. This, along with lower residential revenue and expense management processes, has helped to reduce bad debt expenses. The company is continuously looking for cost reduction opportunities across the business.

The company has made progress in reducing vendor costs and implementing tools to increase efficiency. They expect programming costs to be flat or decline, and sales and marketing costs to be at the low end of their projected range. The focus is on becoming a better service operator and investing in the frontline and better tools and systems. The comments on working capital only apply to cable, not mobile.

The company is seeing real results from cost reductions, particularly in reducing service calls and truck roles. They believe that having more customers and products per household and higher revenue will lead to better operating leverage and lower costs. They are focused on expense management without impacting sales or service. The take-up of direct-to-consumer in hybrid linear offers is going well and they have upcoming launches with Paramount Plus and Hulu. They expect political advertising to pick up in the second half of the year, but did not provide specific details.

Disney Plus Basic launched in January and has been growing every month. Additional features, such as the Disney Plus Premium add-on and the Disney Duo Basic bundle, will further accelerate growth. Implementing these features has been complex due to varying authentication principles. ESPN Plus is also seeing good uptake, and Paramount Plus and ViX have recently launched. The goal is to have a fully developed set of products within the next year.

The speaker is discussing the importance of providing valuable video content on their broadband bill and how it can drive customer relationships. They also mention the need to include direct-to-consumer applications in their video package and the potential for upselling opportunities. They also mention their stance on political advertising, which varies by state and can be affected by current events.

The speaker discusses the impact of political advertising on fundraising and the volatility in swing states. They mention the importance of focusing on the underlying growth profile of the subscription business, which includes core advertising. They also touch on the potential effects of the ACP program on broadband churn rates in the future.

The speaker discusses the importance of broadband and the industry's role in driving programs to make it more accessible. They also mention the potential increase in customer turnover without programs like ACP, but highlight their own affordable and unique products, such as Internet 100 and Spectrum One, which offer savings and benefits similar to ACP. These products were not available before the implementation of these programs.

The speaker believes that by making broadband offers more available to low-income populations, they can save customers more money than they were getting through ACP. They are confident in their ability to address the base, but anticipate higher market activity in the coming years. The call has now concluded.

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