Q3 2019 Earnings Call
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Good morning, and welcome to charters third quarter 2019 in best recall.
Isn't taking that accompanies this goal can be found on our website I or door charter dot com under the financial information section.
Before we proceed I would like to remind you that there are number of risk factors and other cautionary statements contained in our FCC filings, including our most recent 10-K and also our 10-Q filed this morning.
Well not review those risk factors and other cautionary statements on this call. However, we encourage you to read them carefully.
Various remarks that we make on this call concerning expectations predictions plans and prospects constitute forward looking statements.
These forward looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results.
Any forward looking statements reflect management's current view only and shorter undertakes no obligation to advise or update such statements or to make additional forward looking statements in the future.
During the course of today's call, we'll be referring to non-GAAP measures as defined and reconciled in our earnings materials.
non-GAAP measures as defined by shorter may not be comparable to measures with similar titles used by other companies.
Please also note that all growth rates noted on this call and in the presentation are calculated on a year over year basis, unless otherwise specified.
On today's call, we have Tom Rutledge, Chairman and CEO and Chris Winfrey, our CFO with that let's turn the call over to Tom.
Good morning.
Our product and service strategy is working well across all our service areas.
And the benefits of the recently completed large integration being realized through accelerated customer relationship growth.
Lower service transactions per customer.
Declining capital.
Cable capex intensity.
Significant free cash flow generation.
Although our product mix is different today than it was several years ago, we're driving customer relationship growth given our superior products pricing and network combined with execution capabilities that continue to improve.
The third quarter, we had a net gain of 310000 customer relationships with customer growth of 4% over the last 12 months. We also added 380000 internet customers in the quarter.
1.4 million internet customers over the last year.
We added 200 676000.
Mobile line.
From 208000 additions last quarter.
We grew cable adjusted EBITDA by 5%, which combined with our lower cable capital expenditures human strong year over year cable free cash flow growth.
Really $850 million worth 120, 825% in the third quarter I.
Consolidated free cash flow was up nearly $750 million, even including our investment in stuck in mobile.
Yeah for high quality products package with good service and attractive pricing, which is our core operating strategy that approach works with customers leads to improving relationship growth rates profitability and cash flow over long periods of time.
We continue to improve our products and service and as result of our pricing migration strategy, 85% of our residential internet customers received 100, megabits and higher speeds and over the past two month, we raised our minimum spectrum Internet speed from 100, Megabits to 200 Megabits in a number of additional markets now.
Offer minimum speeds of 200, megabits and approximately 60% of our footprint.
40% previously we continue to offer 400 back a bit.
Our ultra product and our gigabit speed tiers across our entire footprint.
Demand for speed throughput and low latency uniquely offered through our network. Today continues to increase that demand will continue to grow is more devices attached to our network more IP video is consumed online gaming continues to grow new technologies and applications emerge.
Our network go about from an already low latency DOCSIS 3.1 to 10 gig symmetrical on an upgrade path, we control at relatively low incremental capital costs.
Monthly data usage continues to rise rapidly our non video internet customers use over 450 gigabytes per month, which compares to average mobile usage of well under 10 Gigabits per month that translates to a 50 times price per gig value advantage, we truly unlimited service high throughput.
And reliability to all devices in the home business.
In October we launched our advanced in home wildfire in Austin, Texas, given our network software operating platform and top rated self support tool, where do you unique position to provide enhanced security privacy and control overall, all IP devices and our customers home.
Easily managed by customers in a single.
While simultaneously delivering a superior customer experience through better in home Wi Fi coverage and managed Wi Fi solutions through dynamic ban switching and channel optimization within the bands and overtime, we plan to roll this product out to our entire footprint starting with additional markets in late 2019.
Our self installation program continues to ramp quickly with customer self installations, now representing 50% of our sales volume.
Turning briefly briefly to video.
Over 90% of the time when we sell video you just packaged with Internet and it's an important attribute to our selling proposition for fixed and mobile connectivity services, yet pricing and lack of security continues to be the main problems contributing to the challenges paid video growth.
Turning to mobile our spectrum mobile products continued to perform well and arent selling accelerating mobile line net adds are very encouraging.
Third quarter bring your own device capabilities became fully available across all of our sales channels and all devices and we recently launched spectrum mobile services to small and medium business customers in all channels.
Mobile remains a key area of our focus for charter going forward and we're uniquely positioned to take advantage.
Wireline and wireless network convergence overtime is our fully distributed wireline network ultimately positioning us for long term growth under the operating strategy I mentioned at the beginning of today's call superior products, Good service and attractive pricing now I'll turn it over to Chris.
Thanks, Tom.
Covering our results weren't administrative items on September six we closed the sale of Napa site, a managed cloud services business within spectrum enterprise, we've not prepared pro forma for naturals. However for the next few quarters, I'll discuss enterprise revenue growth, including and excluding nicely.
On an annual basis now side generated roughly $150 million in revenue and its impact on their EBITDA in capex was not material.
Turning to our results on slide five we grew total residential one SMB customer relationships by over 1.1 million at the last 12 month by 310000 in the third quarter.
Including residential in SMB, we grew our internet customers by 380000 in the quarter and by 1.4 million or 5.6% over the last 12 months video declined by 75000 wireline voice declined by 190000, and we added 276000 higher ARPU mobile wise.
[noise], 84% of a residential customers, including legacy charter Werent spectrum pricing and packaging at the end of the third quarter in residential customer relationship growth accelerated to 3.7% year over year, driven primarily by higher growth at legacy TWC and legacy charter with legacy Bright house remaining the fastest growing.
In residential Internet, we added a total of 351000 customers in the quarter better than last year's third quarter, resulting in residential internet customer growth at 5.4% year over year, driven by continued lower churn and improved connect performance.
Over the last year, our residential video customers declined by 2.6%.
Similar to Internet no overall relationship turn we benefited from a decline in total video churn year over year, but that was more than offset by lower video gross additions.
The wireline voice, we lost 213000 residential customers in the quarter driven by lower selling following our transition to selling over on the bundle and continued fixed and mobile substitution in the market generally.
Turning to mobile we added 276000 up aligns the quarter versus 208000 in the second quarter, a nice acceleration.
As of September Thirtyth, we had 794000 minds with a healthy next at both unlimited and by the gig watch.
So we're pleased with the trajectory of spectrum mobile with less EBITDA loss per line as the business scales to the expected standalone profitability, even at an accelerating net addition rate, but more importantly, the cable connectivity service benefits and converged platform objectives, we've laid out.
Over the last year, we grew total residential customers by 974000 or 3.7% residential revenue per customer relationship grew by 0.8% year over year, given a lower rate of SPP migration and promotional campaign roll off in previous rate adjustments those archery benefits were partly offset by a higher mix of.
Non video customers higher mix of choice in stream customers within our video base.
$30 million lower pay per view revenue year over year.
Slide six shows or cable customer growth combined with our ARPU growth resulted in accelerating year over year residential revenue growth of 4.4%.
Keep in mind that our cable ARPU does not reflect any mobile revenue today.
Turning to commercial SMB revenue grew by 5.7% faster than last quarter as the revenue effect from the repricing of our SMB products and legacy TWC and bright house continues to slow.
SMB customer relationships grew by 7.7% year over year still healthy growth, we're increasing speeds and modifying some promotions to reaccelerate SMB relationship growth.
[noise] enterprise revenue was up by 1.8% year over year were 4.4%, excluding NAV aside from fourth quarters, given the divestiture.
Excluding those cell backhaul and Mattersight enterprise grew by 7.1% nearly 9% PS your growth year over year.
So while our retail product and enterprise are growing faster, our wholesale business, including cell tower backhaul is not just factoring into the relative growth rate.
Third quarter advertising revenue declined by 10.6% year over year due to less political revenue in 2019.
On political revenue grew by over 5% year over year, primarily due to our advanced advertising capabilities and our recent abilities to efficiently sell highly engineered long tailed inventory using our own anonymized much more detailed feeling data.
Other revenue declined by 5.6% year over year, driven by lower home shopping revenues related to video subscriber declines and lower late fees driven by lower Nonpaid churn, partly offset by video at CP sold to customers.
Mobile revenue totaled $192 million with a $123 million is that revenue being device revenue.
In total consolidated third quarter revenue was up 5.1% year over year, 5.3% when excluding Napa site.
Cable revenue growth was three and half percent, 4.3% when excluding nematicide and advertising.
Moving to operating expenses on slide seven in the third quarter total operating expenses grew by $423 million or 6.1% year over year.
We put in mobile operating expenses increased 2.6%.
Programming increased the 0.4% year over year due to higher rates and that was offset by a higher video subscriber decline or video subscriber decline of 2.3% resi in SMB year over year.
There's also offset by a higher mix of lighter video packages, such as choices stream and lower pay per view expenses year over year tied to the $30 million lower pay per view revenue that I mentioned.
Regulatory connectivity and produce content grew by 12.3% driven by franchise and regulatory fees original programming cost the cost of video CP sold to customers in that order.
Cost of service customers grew by 2.2% year over year compared to 4% customer relationship for.
Excluding bad debt cost to service customers were essentially flat.
The elevated amount of bad debt in the quarter relates to billings simplification changes, we made earlier this year, which pushed out the timing of previous cash collections and resulted in a higher account balance for disconnects and higher bad debt provision in the third quarter.
So were meaningfully lowering our per relationship service costs through a number of operating quality and efficiency improvements, which is core to our strategy key metrics like calls per customer truck rolls per customer churn all continue to move into right direction as Tom mentioned customer self installations represented 50% of our sales volume.
In the third quarter.
Keep in marketing expenses increased by 0.4% year over year in other cable expenses were up 6.7% driven by software cost enterprise labor cost and insurance.
Mobile expenses totaled $337 million and were comprised of mobile device costs tied to the device revenue subscriber acquisition and usage cost and operating expenses to stand up and operate the business, including our own personnel and overhead cost and our portion of the JV with Comcast.
When including the mobile Ebitdas startup losses of $145 million total adjusted EBITDA grew by 3.4% in the quarter.
Cable adjusted EBITDA grew by 5% in the third quarter, including a roughly 1.7% negative growth rate impact from advertising revenue net of its associated expense in both periods.
Similarly cable margin expansion year over year would've been 90 basis points versus the 60 basis points were showing today, excluding the effect of advertising sales.
Turning to net income on slide eight generated $387 million net income attributable to charter shareholders in the third quarter versus $493 million last year. The year over year decline was primarily driven by a noncash pension remeasurement gain into your prior year period, and higher interest expense, partly offset by higher adjusted either.
The and lower depreciation and amortization expense.
Turning to slide nine on capital expenditures totaled 1.6 point $5 billion into third quarter with our cable capex declining by over 500 million year over year, driven by lower CP and installation Capex two were due to fewer SPP migrations year over year and the completion of all digital in 2018.
There's also the positive capital effect of increasing self installations, lower video sales and higher mix of box was video outlets.
Scalable infrastructure also declined driven by the completion of DOCSIS three dot one last year and the associated benefit bandwidth benefit in 2019.
Support spending for cable was also lower driven by declining investments related to insourcing and integration.
We did spend $100 million a mobile related capex this quarter, which is mostly accounted for in support capital and was driven by retail footprint upgrades for mobile and software some of which is related to our JV with Comcast.
Despite likely spending a bit less than the $70 billion a total cable capex in 2019, we expect our cable capex intensity to continue to decline next year.
As a percentage of revenue, we're becoming very efficient capital expenditures. Despite our continued product network and service quality investment.
Slide 10 shows we generated nearly $1.3 billion, a consolidated free cash for the quarter, including just over $250 million of investment in the launch of mobile.
Switching level, we generated over one and a half billion dollars a cable free cash flow up nearly $850 million versus just last year's third quarter.
We finished third quarter.
$74.2 billion in debt principal our current run rate annualized cash interest pro forma for financing activity completed in October is $3.9 billion as of the ended the third quarter. Our net debt to 12 last 12 month adjusted EBITDA was 4.47 times.
And tend to stay at were just below the high end of our four to four and a half times leverage range and when calculating our leverage we include the upfront investment in mobile to be more conservative than looking at capable only leverage which was 4.34 times at the end of Q3.
During the quarter, we repurchased 7.8 million charter shares in charter holdings common units totaling about $3.1 billion at an average price of $398 per share.
Since September 2016, we've repurchased $25 billion or 23% charters equity at an average price of $337 per share.
As I've said before our operating model network capabilities now in the future and our balance sheet strategy all work together over long periods of time.
Expect our results to reflect the growing infrastructure assets for lot of ancillary products to use for Intel on top of our core connectivity services with good values in service to our customers to grow cash flow with tax advantaged Levered equity returns operator, we're now ready for QNX.
Thank you at this time she would like to ask a question. Please press star followed by the number one on your telephone keypad. Your first question comes from the line of Jonathan Chaplin from New Street Research. Please go ahead.
Thank you I'm wondering if you can Kim texture lies the pace of wireless growth, we're seeing at the moment, Chris It was obviously.
Phenomenally acceleration quarter over quarter is that driven by.
The new iPhone cycle or is this sort of a run rate of growth that you think can continue well can you even continue to accelerate from here.
Jonathan It's Tom I'll answer the question you know.
We I guess the short answer is we expect it to accelerate.
And the and the reason that is as we really just got all of our marketing and operating tools available across all the platforms that we.
Operating and as we look at the yield that we're taking out of each sales channel, we have and we'd look at things like bring your own device and.
And its implementation and its effect on sales.
We think that we'll continue to accelerate the growth rate.
And things like store build out in the other kinds of activities are not complete so in terms of our marketing footprint, it's not completely.
Deployed yet.
And when we look at the kinds of yields were getting in those channels our expectation is that.
Our mobile yields will continue to accelerate.
And Tom how much of a pull through as it having on the broadband business at the moment.
It's hard to say, but we think it is having an effect and the.
The our hope is that that that will accelerate broadband growth as well.
Excellent. Thank you.
Thanks, Jonathan.
Your next question comes from the line of BJ giant from Evercore. Please go ahead.
Thanks.
So Tom you we've been talking for many quarters now about mitigating piracy and you brought that up again today, but some of you know carriage deals talk about working together, especially with the Disney and the Fox deals on addressing that can you sort of talk about what can be done when is it getting down is that something we should expect improving video trends and second.
Obviously.
You've seen some of your competitive peer group launch products that enable your broadband customer like the flex product at Comcast is that something that you guys are considering to thank you.
Yes, so I feel like a bidding my head against the wall talking about privacy.
Piracy and the.
Password sharing and pricing, but they're all interrelated issues.
I think that there's some recognition.
In the programming industry that they're now distributors and as a result being distributors that they need to know where their content is going.
And that has not been part of their DNA and and so.
Streaming products have been.
Sold with five streams and with no location based kind of security.
Most households in the United States.
I have two or less people in them.
And as result of that.
There are more streams than there are households available for free.
And.
By sharing passwords and by.
Not having location based or subscriber based relationships with those streams and and the fact that TV everywhere allows for massive numbers of streams replicated through virtual in vpgs and so forth.
There are it's just too easy to get the product without paying for it and when we look at data consumption.
We can see the video consumption isn't going down even when people disconnect. There paid video and as result of that.
It makes the price value relationship really difficult when it's free.
And that and so.
What can be done.
The people that on content are gonna have to come up with standards.
Security.
And and they're going to need to implement them.
There are needed and they're going to need to know where their services are being viewed.
And then and they need to have a.
Business model that works for them and so.
So that requires some effort and some collaboration and and we'll continue to push for it but it's a slow process.
Second question was from Oh.
I'm sorry.
We have discussed that with Comcast and it's an interesting idea and.
So I would say that.
We were considering it.
And.
It has advantages we have a significant number of app based.
Relationships that we've developed on multiple devices and.
That strategy is working for us and but but putting inexpensive devices out with your service makes some sense to us.
Your next question comes from the line of Peter Subpoena from Bernstein. Please go ahead.
Good morning could you please talk about how you're measuring and analyzing the benefit of the large investments that you've made in customer facing personnel in the acquired systems.
In particular I wonder if.
The results in the legacy charter footprint.
Tell us anything.
Whether it's the level or the trend of profitability and productivity about the future for the acquired systems. Thank you.
Yes, Peter.
We as you know our strategy is to have high quality.
Well paid.
Workers.
With high skills, who can interact with the customer in a way that.
Thats why is the customer the first time they deal with the customer and as a result of that you end up with less transaction you ended up with less repeat service calls you end up with longer tenured customers with more satisfaction. As result of that you have less disconnection connex churn.
And your cost to serve goes down even though your cost per transaction goes up.
And that's been our strategy since a legacy charter and Thats been the strategy across the whole integration of the company and it is successful in our if you look at our cost of certain trends they are coming down what that really means is that.
Our activity levels are coming down and as result of our activity levels coming down.
Our customers are more satisfied and their average life.
For the cash flow per customer is is going up as another website.
And so.
We do see continued.
Growth in legacy charter and we expect kind of continued growth.
And when I say growth I mean and.
Customer satisfaction.
And in a customer growth.
And increasing margins and and lower cost to serve.
In that environment, and we're seeing it across our entire footprint now because we've been at this integration for a while than we've been implemented. This strategy. We have brought most all of the transactions that were going offshore back onshore we rebuilt call centers. There was a period, where we had capital intensity and operating intensity as a result of the duplication.
Was required to stand up a new workforce in in the United States, but that has been largely accomplished.
And.
We expect to reap the benefits Peter one thing I'd add to that we virtualized, our entire call center and shield operation surface infrastructure, but we still have visibility obviously into the legacy charter.
Franchise areas and Dms.
So what you can see as that legacy charter metrics operating metrics whether its.
Good calls for customer drilling cost per customer retention cost per customer a truck rolls for customer all remained significantly below legacy TWC and bright house, despite legacy TWC and bright house, having significant improvements part of that is because of the previous investments into legacy charter infrastructure, but part of that as legacy charter has continued to get better and better.
Every year quarter over quarter continues to make pretty significant improvement. So it's a moving target, which just means that when you make that upfront investment in service. It's a virtuous cycle, we're continuing to get better and better and while we don't report or track that PNM legacy charter because the services Virtualized. If it had one at our cost to serve their wouldn't think continue.
Throughout the cycle to can continue to go down dramatically on a per relationship basis.
We expect the same for the rest of bodes well for the long long term.
We've had continuous improvement in charter over seven or eight years, and and we expect similar kinds of results.
The infrastructure.
Your next question comes from the line of Ben Swinburne <unk> from Morgan Stanley . Please go ahead.
Thanks, Good morning.
The best talked a lot about the advantage the cable infrastructure and architecture brings to.
Harder and and cable companies you brought in the past I'm. Just wondering if you could talk about kind of the next several years of network evolution for the business you've been throwing more speed customer as you talk a lot about.
102 hundred megabit minimums.
How are you thinking both from a kind of a network architecture perspective.
That would help us think about kind of product opportunities and also capital intensity I think theres a debate in the market about DOCSIS forward I know versus deep fiber I'm, just wondering where do you take the network and therefore, the product offering on the broadband side over the next couple of years and what might that mean for.
Capital intensity.
And then just a quick one for Chris just more short term.
You guys had some rate adjustments in the fourth quarter that a lot of folks are focused on im just wondering how you would describe those in the Grand scheme of charters philosophy, and whether there's sort of incremental enough that we should be thinking about incremental ARPU and incremental churn in Q4, maybe in Q1 next year.
Since obviously, there's been a lot of press coverage in sort of interest and that those changes. Thank you both.
Okay.
I think if we look over the next couple of years.
The best puts it started as the last couple of your assertion.
We did the DOCSIS three dot one rollout over two year period, which took.
Our capability from a couple of hundred megabits per customer up to one gig for customer everywhere, we operate and there's still more upside out of that infrastructure deployment that we made with Docsisthree dot one in terms of both speed and things that we can offer from a product perspective, but one of the.
Great things, that's coming out of that that.
We didn't really talk about as we did was our ability to manage traffic in the network and therefore reduced network investment associated with increased consumption.
And we've had a regular budget item associated with network consumption in our capital planning.
And.
Related to the growth in overall average consumption of data customer and.
Three dot one is allowed us to manage that less capital intensive way.
So you have you have.
That project and if you look at it was.
Taking a massive speed increase on a legacy infrastructure at a capital cost of about $9 per home pass.
A fairly small investment for home pass.
With a massive output and that's the fundamental.
Notion behind our 10 gig strategy doctors 4.0 strategy, which allows multiple pathways for development.
Depending on how deep you want to take fiber or whether you want to improve your bandwidth in your legacy.
Coaxial network both options are available in that in that specification.
To upgrade your network.
As products evolve.
In a way, that's very capital efficient and and strategic to the assets you deployed.
So what do we need to do over the next couple of years. What we're still you know we just completed Docsisthree dot wants and we've got a lot of.
Head room inside of the asset at the moment in terms of product.
But.
Things, we're thinking about continuing to do that we're experimenting with we're obviously experimenting with.
Convergence.
And we've done a bunch of radio and mobile.
Expert experiments this year testing.
Switching dual Sim technology, we've also.
Continued to work on the doctors 4.0 strategy, we've talked a.
With gaming companies about.
Putting.
Compute power deeper in the network when you look at our real estate footprint.
We have lots of hubs throughout our.
Architecture that.
We have spacing them as a result of the compression of.
Electronics through time, and as a result to that.
We are able to stand up high compute low latency.
Networks that are hard to replicate and we think that there's a product development cycle will occur there and give us an upside opportunity.
But.
But the fundamental position we're in at the moment is we still have lots of headroom.
From the last investment cycle, we made which was quite efficient.
We also weapon.
Launching as I mentioned the product.
In home Wi Fi management.
Which allows customers to manage their privacy their security into know what disconnected in their house and and what is connected to and to be able to manage that in an efficient way for not only privacy, but for parental control and all end to end and quality of the network itself throughout the home.
So.
We're continuing to invest in.
The customer experience.
In the product set itself.
That's helpful. Thanks, Chris Yes spend you asked.
About rate.
And so maybe some some thoughts our third quarter I think you mentioned fourth quarter side, just to clarify our third quarter residential ARPU does not reflect any of the recent rate increases that we implemented those are beginning.
Really at the start after the start of Q4, so it won't be a for fourth quarter and they're being applied to video, which reflects higher input or programming costs in some non promotional rates on the internet.
So if you take a look I know there were some questions around it they look at our Q3 results insured. So we believe we have a long runway for internet and customer relationship growth.
So there shouldn't be too much of a read through through that we've always believed that creating more customer relationships is the most valuable waiting for a long term cash flow.
And through the integration Weve been careful about driving additional filling calls or service transactions from rate increases and then I guess another read through as we'll manage the profitability of our overall customer relationship when we're using video to enhance that.
But that being said to the overall rate increases not that materially different than what we tightened the past.
We have a lot of customers in year, one and year to promotional rates that are subject to some of the increases.
For video, we increasingly have a higher mix of customers and lighter packages without boxes, which won't have the same increases.
So our goal is to maintain our competitiveness across all products and our preference or strategy and our optimism for growing by volume as opposed to just buy rate that remains unchanged.
You asked about in the fourth quarter impact similar to past increases and because it's not that material was some lighter.
Feared or hoped and we don't anticipate any meaningful negative impact on the fourth quarter net additions as a result rate increase but I would highlight to you and others just keep in mind the.
Fourth quarter last year was a pretty good quarter for charter and we expect to the back half of this year inclusive Q3 Q4 to the things we set in the past to be better as it relates to internet and customer relationships.
That doesn't mean that we don't expect a good fourth quarter and this year as well. It's just keep in mind, we had pretty good one last year too.
So I would say just to sum that up our strategy with regard to growth with rates and customers is unchanged. We believe the majority of the revenue growth that will produce will be through growth.
And new customer relationships and.
Our pricing and packaging is designed to give consumers a better value than they can get with the individual products priced as as they are in the marketplace. If you look at what how much money, we're saving people from a mobile perspective, it's significant our products are valuable products and they are designed to drive.
Hi customer relationships.
Thank you guys.
Thanks Ben.
Your next question comes from the line of Craig Moffett from Moffettnathanson. Please go ahead.
Hi, Thanks.
Two questions if I could.
There's been a lot written recently about your potential interest in Crs spectrum.
And offload strategy for.
For your wireless business could you just put to meet on the bones about that and just talk about.
What you were what your latest thoughts are about.
Traffic offload and what that network.
Deployment might look like over the next few years and then a second a more tactical question with the business services line.
You've been engaged in the repricing of the legacy time Warner cable customers for a long time now.
When when do you think we might be through the process of repricing those customers that we can start to see business services revenue growth start to normalize a bit.
Relative to where others are and what I suspect your volume growth looks like.
Well I'll answer the last part of that.
First which is.
You were already getting the growth in business services, where.
The.
Revenue growth and the rate of customer creation.
Converging and.
And that was not true than we initially started the pricing and packaging, but it is true now if you look at our quarter over quarter change you'll see that.
Revenue growth is occurring.
Because rate its current because.
The customer growth.
There are enough new customers at that growth rate that data and less customers at the historic pricing.
Such that those two numbers are converging.
Growth and revenue growth.
Customer growth equals revenue growth at some point.
So.
In terms of Crs.
The interesting thing about that we've talked about our dual Sim technology opportunities and the testing that we've done we're quite optimistic about the capability of that strategy.
And we're quite optimistic about the ability to make select investments in.
In areas, where traffic dictates in such a ways to move.
Services that we pay rent for onto our own platform.
And.
That opportunity already exists with Wi Fi in a significant number of our customers.
Well the majority of our customers are using wildfire most of the time and and Wi Fi is highly efficient and the bulk of data 80% of all data on mobile platforms.
Our being delivered to the Wi Fi network. So.
We think theres continued opportunity to move traffic that way and we've experimented with a bunch of.
Methodologies to do that and Crs does worked very well.
And as you know, there's a significant amount of free.
Vrs spectrum available, which we've been using we've also done some experiments with that spectrum with fixed wireless.
Conductivity, we've got an experiment going with that to an actual live customers going in rural low density areas.
So it's a pretty valuable piece of spectrum, there's some.
[noise] private.
Spectrum of CPR us that's going to be auction next year.
The question were evaluating is should we be involved in that.
But.
We haven't determined that yet, but we're looking at it closely.
And.
But there you know I'd say this that theres, a significant amount of spectrum available already.
And.
The more cells you have the less spectrum you need.
Thanks, Tom.
Thanks for us here.
A question comes from the line of Philip Cusick from JP Morgan. Please go ahead.
Hey, guys. Thanks.
I Wonder if we can unpack a little bit the broadband subs momentum improvement.
Is that being driven mostly by better churn as you had forecast.
Or by better connect volumes as well.
And have there been any changes in the promotional pricing that are being offered to those customers. Thanks.
Yes so.
The churn improvements that we've talked about in the past that continue.
Year over year basis for Internet was also an improvement in connection.
So it was the latter what you said it was a combination of both.
There's been no major dramatic change and the pricing or go to market as it relates to broadband.
We have a generally now 60% of our footprint footprint to now 200 Megabits per second minimum speed. We also go to market with ultra which is 400 and as a headline that with availability, but not that much takeup has a one gig services. That's the 400 and the one gig or nationwide. So theres been there.
Dramatic change to promotional pricing beyond what we typically done in the past.
Thanks, Chris.
Your next question comes from the line of Michael Rollins from Citi. Please go ahead.
Good morning, Thanks for the question.
If we look at the footprint expansion it was about 2% across the different products in the quarter was above.
Average rate of household growth in the country. So how important is that growth.
Driving some of the strength in broadband and how long can continue at these elevated pay.
The final part of that is it's a pretty slow down.
Does that significantly helped your capital spend thanks.
Yes, so Michael it's a good question.
Passings and it's not unique for charter it's across the board has really estimated marketable homes and it's not a direct correlation one for one as it relates to new build.
And so as we go through the integration of three different companies in the systems and the definitions of even what marketable homes passed is.
We're adding stuff into the diller as potentially marketable sometimes that's brightness not always.
Only fund out once you're on actually market or try to sell.
So theres a lot of cleanup, that's still going on in that and we're not we're not alone. So I wouldn't take that as a 100% new build or.
Or household formation, but it's true and it's Directionally still right.
The complete the correct, but it's directionally correct and we've been building more particularly into rural areas and our new build there you can see that through the Capex line extension line item. This has grown over the past couple of years and accelerators, we meet or commitments and.
I have good or wise to developing.
Broadband footprint in these more rural areas.
New household formation is helpful to the overall growth rate has been a lot of work done around that.
We think that our growth is not just a function of new household formation that were gaining significant share.
Not only in the legacy DSL, but as some of you versus U verse like whether it's 18 tier century, Mike as some of the previous you versus speeds turn into looking more and more like DSL as our speech increase over time. So we're taking significant share and that tends to be the bulk of we're adding as opposed to just new household formation.
Thanks very much.
Thanks, Michael.
Your next question comes from the line of Marci Ryvicker from Wolfe Research. Please go ahead.
Thanks, two questions first Tom you've mentioned 10 gig quite a bit can you just talk about when this might be available and what kind of the it's not an ARPU.
You might be expecting is this another step up at some point in time and then second for Chris is there anything we should be thinking about in terms of programming expenses for Q4 2020, as we update our models. Thanks.
But 10 GE 10 gig is a specifications that specifications that we developed.
For our networks that allowed us to get to 10 gigabit symmetrical.
There aren't products today at the residential level, but.
Demand that kind of capability.
And.
One.
So.
It's a long term evolution capability of our network that allows us to in a very efficient way from a capital perspective get to those kinds of capabilities. If you look at historic trends of data use it'll it'll show you that.
Unless.
The trends over the last 20 years significantly change.
At some point, we're going to need that capability.
And and products will be developed the virtual reality products and.
Hi capacity low latency.
Content, which would include games and entertainment education will ultimately be.
Developed including light field products holograms.
That will change the very nature of all communications and that our networks are capable.
From an investment perspective of.
Providing those products at at the most effective investment rate.
And when we would actually do that or deploy that is really a function of how the market develops.
Theres no immediate capital requirement for us to do anything with regard to 10 G.
We can use elements of that as different opportunities arise, we still have a lot of capability and our three dot one deployment.
Which is a prior DOCSIS deployment specification to 10 G, which we're now calling DOCSIS 4.0.
Because were brander [laughter].
Yes.
That's a joke.
But.
It's really just to an opportunity and a way of showing.
The kinds of historic capital investments, we've been able to make to upgrade our network will continue into the future.
Marci on on programming, we've been we've been low this year relative to our expectations on year over year growth and part of that as.
I think we've done okay on some of our renewals.
But the bigger pieces that we had a subscriber decline of resi and S&P of 2.3%.
In a mix shift as it relates to the stream the choice products for sure.
Less channels and side, it's done and then on top of that the pay per view environment, particularly the past two quarters has not been particularly good on the revenue side, which means that your cost are going down year over year for pay per view.
All of that as packing into a current 0.4% year over year growth growth in programming.
But your actual unit cost of expanded.
Cost per customer relationship, it's kind of been what it's been for many years in the mid single digit ranch and.
And we've had some pretty big renewals has publicly announced tied to some of the security and.
Password sharing collective efforts. So you know, which those are so there will be some a step up associated with that but I think as you look out through next year. There's nothing we see today that causes there to be a dramatic change from where therefore marketplaces spend for the type of rate increases that we expect to see on that product and so we've talked about.
Before historically, we've not passed all that through too.
To our customers and we're evaluating our ability to continue to do that even as we used the video product to drive connectivity services.
It we've spoken about some of that as it relates to the most recent rate increases.
So I don't expect anything dramatic changes other than growth is a big factor mix is a big factor.
Pay per view market has been under under some challenge past few quarters, which is lowered our programming expenses. It's unclear how much that will continue.
But absent the volume and mix issues I don't see anything dramatic changes.
Thank you.
Yep.
Your next question comes from the line of Mike Mccormack from Guggenheim Partners. Please go ahead.
Hi, guys. Thanks, maybe Tom just a quick comment on the stream products, what you're seeing there as far as perhaps cannibalization of.
Traditional linear and then why not use that as a more aggressive tool because the pricing for that a double play as a lot more attractive than some of these synthetic bundles out there with other OTI offerings.
And sorry, if I missed this but in the wireless side any comments on the LTL pricing.
And then I guess thinking about the pacing of adds obviously, a big wrap up how should we think about that as we go into Fourq you. Thanks.
I guess in terms of stream.
We've been selling that to people who are.
Financially constrained mostly in a very selective way.
And.
And that's a big problem in the whole video space and that the traditional bundled product is very expensive and the rate the actual unit rate.
Of that product continues to rise and Thats price a lot of people how the market as I said earlier, it's free.
To a lot of consumers who.
Hi, good friends with passwords.
And so.
Okay.
Our ability to sell that product is ultimately constrained by our relationship with content and and we have to manage that.
In terms of the kinds of power that the content companies have in terms of what we can do with bundling and not.
And and so it's a it's really a limited solution.
Ross.
In terms of video and the bulk of our customer relationships.
Long term and video will continue to be.
Big packaged expensive.
Bundles of content, because that's what it sold to us and dictated that we.
Provided in that form.
In terms of bell piece pricing.
I know it's.
It's good.
And our pricing is quite valuable to to consumers and saves them, an enormous amount of money on annual basis.
And we think that our pricing is good in terms of driving growth and.
They want to sell their product at $20 thinking thats, great constructed pricing its.
Different NVNO with a different operator and.
For a different timeframe.
And but I think it's generally good for cable that they're they're out there driving and pushing that type of an aggressive product as well.
Greg Chris just on the pacing of wireless subs.
Yes.
I think Tom was asked the question Jonathan early on the pace of growth.
We did we were still hitting our full stride and you'd say that all of our be why the was fully implemented through the ended the quarter S&P at just barely started to launch actually hadn't really launched in earnest by the ended the quarter.
Our store footprint is going to continue to expand and so at all or sales channels continue to perform better get better our yield continues to get better so.
It's a it's still a relatively years upstart business and so there are some risk and saying, what we're saying but.
We don't see the reason that issue and continue to get better and to have more more sales and more yield and more net additions over time and add more value to cable.
Great. Thanks, guys.
Your last question comes from the line of John Hodulik from <unk>. Please go ahead.
Great Chris I, just want to follow up on your on your comments that the company is getting more and more efficient and it's in its use of capital.
Hey, does that suggest that sort of another step down in capital intensive as we look out to 2020 <unk> can you give us some examples of how that that's the case and the is the your view that the business model in general is getting more capital efficient as we move more towards a connectivity model and unless from.
I don't away from a video centric model.
Yes.
John you're trying to do be into 2020 guidance on capital when we talked a little bit permits 19.
No look and I'm not going to talk about a dollar amount for 2020, it's way too early for that and I'm not sure that we're going to anyway, but what I did say today and we feel strongly about is that our cable capital intensity. So capable capital expenditure as a percentage of revenue is going to continue to decline into 2020 for all the reasons that we mentioned before.
Just a mere fact that integration spend continues to decline is essentially be gone next year and but also the amount of DOCSIS 3.1, headroom that Tom talked about before.
The point that you just raised that increasingly video is more and more box.
And as it becomes tied to the IP internet product any way, it's becoming less capital intensive.
I think theres a lot of.
Factors inside the business that are driving us to do much lower capital intensity I could go down less more self installation.
Headroom mid size at the network.
The lack of CP E per connect and the use of box Willis connects the average age of our existing boxes, meaning that can be replaced one for one as opposed to new boxes being purchased to replace cold boxes.
And it's just.
The amount of churn inside the business. If you think about churn coming down that also takes down your capital significantly so theres theres a lot of momentum.
In the business to not only remove your costs were lower your cost to serve per customer relationship on opex that related to the same thing on a.
On a Catholic spaces, and ultimately lot of that Capex is fixed capex for the network.
And to the extent have higher penetration, we're probably the fastest for cable company at least as the western World. When you have and that type of growth in that type of penetration expansion image become more efficient on your capital as well as your Opex and so we're seeing the benefit of all time.
Okay. Thanks, Chris.
Yep.
Great. Thank you everyone. We look forward to doing the same next quarter take care.
Thank you. This concludes today's conference call you may now disconnect.