Q2 2022 Charter Communications Inc Earnings Call

July 29, 2022

[music].

Please standby your program is about to begin if you need assistance during the conference today. Please press star zero.

Hello, and welcome to the charter Communications second quarter 2022, Investor call. We ask that you. Please hold all questions until the completion of the formal remarks at which time, you'll be given instructions for the question and answer session.

Also as a reminder, this conference is being recorded today.

If you have any objections. Please disconnect at this time.

I would now like to turn the conference over to Stefan <unk>. Please go ahead Sir.

Good morning, and welcome to Charter's second quarter 2022 Investor call.

The presentation that accompanies this call can be found on our website IR charter dot com under the financial information section before we proceed I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings.

Including our most recent 10-K and also our 10-Q filed this morning.

We will 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 charter undertakes no obligation to revise or update such statements or to make additional forward looking statements in the future.

During the course of today's call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. These non-GAAP measures as defined by charter may not be comparable to measures with similar titles used by other companies.

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 , Chris Winfrey, our COO and Jessica Fisher, our CFO with that let's turn the call over to Tom.

Thank you Stephanie.

Business continues to grow despite an unusual macro economic environment.

During the second quarter, we added 38000 internet customers when excluding an unfavorable impact related to the discontinuation of.

The emergency broadband benefit EBV program.

And additional definitional requirements of the affordable connectivity program.

Customer relationship churn remains historically low.

Due to current consumer behavior and connect activity remained slow primarily due to the low activity environment.

At the same time, we continue to see very strong mobile line growth with let with line net additions of approximately 350 and.

And over the last year, we've grown our mobile lines by nearly 50%.

We now have over $4 3 million total mobile lives financials were also strong in the second quarter.

Second quarter.

Revenue grew by six 2% and EBIT grew by nine 7%.

Looking forward, we remain well positioned our fixed and mobile broadband service continues to converge technically and operationally we offer them along with all of our other high quality products at attractive prices. Our growth is driven by offering value rich packages that differentiate us from our competition at prices customers.

Can afford regardless of the economic environment.

And we plan plan to continue to do that to continue to improve our service.

We're focused on evolving our network data usage continues to grow at a very fast pace during the second quarter Internet customers do not buy traditional video from us used over 650 gigabytes per month.

Nearly 25% of those customers now use a terabyte or more data per month.

And even with the rise.

Work from home peak usage pattern still prevail, but the vast majority of data usage occurring during the evening hours.

Our network is built to handle that peak demand and delivers consistent speeds, regardless of the time of day.

With our ditch dense HFC network, we deliver gigabit speeds today everywhere, we offer service and in the near term, we're implementing spectrum split upgrades, which expand our plant capacity and allocate more bandwidth to the upstream.

All using our DOCSIS three one infrastructure in turn we will be able to offer our customers higher symmetrical speeds and multi gigabit speeds in the downstream.

Our long term network evolution path includes DOCSIS Port auto recent testing using DOCSIS four <unk> technology simultaneously delivered over eight gigabit in the downstream and over six gigabit in the upstream for amplifier cafe Cascade to a single modem.

We will develop this technology, even further but the test demonstrated that we can successfully drive bidirectional multi gigabit speed offerings across our entire network and a very capital efficient manner and without the major disruption to our customers and operations other kinds of upgrades require.

So we can deliver a future proof network that delivers the most compelling connectivity services.

Capital and time efficient manner and in turn offer those services to consumers at highly attractive prices.

But we're not only working to improve speeds and latency and our network. We're also working to improve network quality and reliability, reducing service transactions driving longer customer lives and reducing churn, we're doing that through better maintenance practices using artificial intelligence telemetry and machine learning technologies to drive what we call.

All operational intelligence.

Now able to ingest aggregate correlate and analyze millions of data points from our network offering us intelligence about the health of our network services and anomalies in our network that are critical to the customer experience in the past. This type of real time network intelligence did not exist.

Substantial human effort manual analysis, we're required to manage our network, which was time consuming and brought only limited insights and required thousands of service transactions in many cases, our intelligence now allows us to avoid network outages and disruptions altogether, maintaining the plant more efficiently with far less activity and costs.

Fewer outages and service transit transactions.

Our mobile business is growing at an extremely rapid pace, we remain the fastest growing mobile provider in the nation, and we continue to improve and enhance our products and a number of ways differentiating our offerings, helping to drive customer growth and making our mobile business economics, which are good even better ultimately.

With our mobile product, we're able to offer consumers a unique and superior fully converged connectivity service package, while saving customers hundreds or thousands of dollars a year and our share of household connectivity spend including mobile and fixed broadband is still very low.

In fact, we capture less than 30% of household spend on wireline and mobile connectivity within our footprint.

So theres, a large opportunity for us to increase market share by saving customers money and through our latest offerings. We can do that which in turn raises connects reduced churn and drives overall customer relationship growth and.

In addition, our mobile business will drive meaningful EBITDA for charter, even in our existing and very attractive mobile price points, giving us EBIT grow simply by growing our mobile customer base.

Sure.

Underpenetrated and our opportunity is large charter remains uniquely positioned to deliver superior services at superior prices offering consumers. The most attractive products for their connectivity needs. Our service services remain the best choice for consumers, giving us the opportunity to continue to grow our business at a very healthy pace now ill turn the.

Call over to Jessica.

Thanks, Tom.

Now, let's turn to our customer results on slide five.

Including residential and SMB relax 21000 internet customers in the second quarter at.

As part of the ABB to ACP transmission, a small portion of subsidized internet customers either <unk> <unk> to.

To continue their service after the EBV program and that did not meet the ACP requirements, particularly in M&A requirements customers use their service needs 30 day period, which covers the vast majority of the impacted subscribers.

This resulted in 59000 customer disconnects during the quarter ex.

Excluding that headwind, we organically grew 38000 internet customers in the quarter.

Looking forward, we expect the theory usage ACP customers will have a smaller impact on our quarterly results and what we saw this quarter.

Looking at the broader marketplace, while we saw seasonal increases in the typical of the second quarter moves remained well below pre COVID-19 levels and voluntary churn when excluding the ABB ACP impact on Nanchang, maybe even lower than last year, all of which reduced our selling opportunity.

Turning to video video customers declined by 226000 in the second quarter. Following a programming pass through increased wireline voice declined by 266000, and we added 344000 mobile lines.

Despite the lower number of selling opportunities and a reduced activity level, we continue to drive novo ground with our high quality attractively priced.

Moving to financial results starting on slide six over the last year, we grew total residential customers by 282000 or 1%.

Residential revenue per customer relationships increased by two 8% year over year, driven by promotional rate step ups and early our video rate adjustments versus last year that pass through program a rate increase.

These effects were partly offset by the same bundle and mixed trends, we've seen over the past year, including a higher mix of non video customers and a higher mix of lower priced video packages within R&D.

Also keep in mind that our residential arm did not reflect any mobile revenue.

As slide six shows residential revenue grew by 44, 5% year over year.

Turning to commercial SMB revenue grew by three 7% year over year, reflecting SMB customer growth of three 7%.

Enterprise revenue was up by four 9% year over year, excluding all wholesale revenue enterprise revenue grew by eight 2%.

And enterprise <unk> grew by four 7% year over year.

Second quarter advertising revenue grew by 12% year over year that growth came primarily from political it was slightly offset by a 1% decline in our core advertising business due to lower local and national advertising revenue, including auto partly offset by our growing advanced advertising capabilities.

Mobile revenue totaled $726 million with $299 million of that revenue being device revenue.

Other revenue increased by 8% eight 8% year over year and includes royal construction initiatives subsidies totaling $29 million.

In total consolidated second quarter revenue was up six 2% year over year.

Moving to operating expenses and EBITDA on slide seven and <unk> total operating expenses grew by $307 million or three 9% year over year.

Programming costs declined by 2% year over year due to a decline in video customers, a three 2% year over year and a higher mix of lighter video packages, all of which was mostly offset by higher programming rates.

Looking at the full year in 2022, and we continue to expect programming cost per video customer to grow in the low to mid single digit percentage range.

Regulatory connectivity and produced content declined by 10, 3%, primarily driven by lower Lakers RF and costs and lower video CPE sold to customers.

The decline in Lakers RF and costs was primarily driven by the delayed start of the NBA season in 2020, which drove more Lakers games charges in <unk> 'twenty, one making train easier comparison this year.

Excluding the IRS and costs from both years regulatory connectivity and produced content declined by four 7%.

For the full year 2022, we continue to expect regulatory connectivity and produced content expense to decline in the mid single digit percentage range versus 2021.

Primarily due to lower video CPE sold to customers and lower of RSA costs, given an abnormally horse games schedule last year.

Cost to service customers increased by five 1% year over year. The increase was primarily driven by higher bad debt year over year.

Even lower bad debt in the second quarter of 2021, which benefited from government stimulus packages at the time.

And while this quarter's non pay churn and bad debt write offs, both remained well below pre COVID-19 levels, our bad debt accrual includes expectations for potential softening of consumer finances later this year.

Excluding bad debt from both years cost to service customers grew by one 1%, primarily due to a larger customer base and higher fuel costs.

Partly offset by productivity improvements.

As the year progresses prior year bad debt expense normalizes and should drive slower growth and cost to service customers expense during the second half of the year.

Marketing expenses grew by eight 6% year over year due to higher labor costs, driven by previously planned wage increases and higher staffing levels as charter completes the in sourcing of its inbound sales and retention call centers with a focus on providing better service to new and existing customers.

Full year 2022, we continue to expect marketing expense to grow in the mid single digit percentage range versus 2021.

Mobile expenses totaled $797 million and were comprised of mobile device cost tied to device revenue customer acquisition and service and operating costs and.

And other expenses increased by one 3%.

Yes.

Adjusted EBITDA grew by nine 7% year over year in the quarter.

Just a quick note on inflation before moving on to net income.

We've seen some inflationary pressure in fuel freight and utilities as well as pricing pressure on CPE and other network components.

And labor are planned move to $20 per hour, starting wage pointed the impact, but we still see pressure on the labor market, which we may need to more fully respond to you as the year progresses.

I would also note that our consumers are experiencing inflationary pressure, but given the availability of subsidies for broadband and our focus on saving customers hundreds of dollars per year by switching to a converged connectivity product. We believe that we're well positioned for this environment.

Turning to net income on slide eight we generated $1 $5 billion of net income attributable to charter shareholders in the second quarter versus $1 billion last year the.

The year over year increase was primarily driven by higher adjusted EBITDA.

Turning to slide nine capital expenditures totaled $2 $2 billion in the second quarter above last year's second quarter spend of $1 $9 billion.

We spent a total of $357 million on our rail construction initiative in the quarter most of that spend relates to design walk out and make ready and as expected has not yet resulted in significant <unk> growth and the vast majority of that spend is accounted for in line extension.

We spent $95 million on mobile related Capex, which is mostly accounted for in support capital and scalable infrastructure and was driven by investments in back office systems and wireless off road construction.

As slide 10 shows we generated $1 $7 billion of consolidated free cash flow this quarter versus $2 $1 billion in the second quarter of last year.

The decline was primarily driven by higher cash tax payments and higher capex, mostly driven by our rural construction initiatives.

We finished the quarter with $95 7 billion in debt principal our current run rate annualized cash interest is $4 5 billion.

As of the end of the second quarter, our ratio of net debt to last 12 months adjusted EBITDA was 445 times.

We intend to stay at or just below the high end of our four to four five times leverage range.

During the quarter, we repurchased $8 3 million charter shares and charter holdings common units totaling about $4 3 billion at an average price of $511 per share.

And given where the share prices than during the first two quarters of this year, we repurchased seven 2% of our fully diluted shares outstanding as of December 31, 2021 for approximately $7 8 million.

Operator, we're now ready for Q&A.

Thank you at this time, if you would like to ask a question. Please press star one on your Touchtone phone you may remove yourself from the queue at any time by pressing star Q.

Once again that is star one to enter the queue.

Thank you our first question will come from Ben Swinburne with Morgan Stanley . Your line is now open.

Thanks, Good morning a.

A couple on sort of.

The competition in your go to market you guys didn't talk a lot about fixed wireless or fiber builds that are happening in various parts of the country. I'm. Just wondering if you could comment on whether the competitive intensity has increased.

We're seeing in particular pressure in certain parts of your footprint.

Including in the third quarter I realize you don't like to comment quarterly, but obviously, there's a lot of focus on that and then.

Tom I was interested in your comment about generating mobile EBITDA.

It would seem like there is maybe some tension between sort of passing on efficiencies in that business to the consumer through lower prices, which can drive volume and maybe drive broadband volume as it gets pulled through by mobile.

But.

That tension exists versus sort of trying to make as much money as you can in that business. Just wonder if you could comment on how you think about balancing that particularly as you move more traffic on network.

Yes.

Sure I'll start there.

Look.

Theres always a tension between how you price a product and how much of that do drive it.

Into the marketplace.

Between price and volume.

And price and the volume you get ultimately is.

What youre trying to get to is the maximum amount of cash flow you can generate out of the business base that.

Right price and the right.

Volume distribution of that product at that price.

So that's what we're seeking and mobile and we think it's a huge opportunity for us.

It's.

Obviously.

We're creating customer relationships of those customers are paying us.

There's good margin in that business and at the pricing that we have and we think that we can get more efficient through time with that margin.

Offload and at the same time, we think were accretive to our.

Partner and that the 9 million customers that have been created out of that.

Our accretive and valuable to and should be really counted as customers in many ways too.

RMB partner.

But that's a shared relationship but the net of all of that is that we.

We have a.

Opportunity at the pricing that we have.

To continue to grow the business.

And that pricing is really valuable relative to the price in the marketplace that those products are currently being offered by our competitors.

And at the prices, we're offering it now.

We have an opportunity to create.

Right value for us through time.

And to have an improving margin through time as well.

But even without an improving margin is still a great value.

No.

We're in a pretty good place in terms of our mobile business and that we have.

Lots of opportunity.

Fully penetrated marketplace, and we have a very small share of it.

And we are growing rapidly.

With regard to the overall competitive environment.

Our.

Our churn is extremely low.

Activity levels in the marketplace are the biggest competitive for biggest impact on our growth rates relative to historic growth rates. The fiber competition that we have is typical if you go back to the second quarter of 2019 and look at fiber growth, it's not much different although the footprint is bigger.

And.

There is a new fixed wireless competitor, it's actually relatively small it's not a major component of our.

Quarterly performance, but it is a factor.

If you look at the numbers that the.

Fixed wireless competitors say, they're taking from cable.

Sure.

Proportionately look at that across our footprint.

Do the math, it's not the major driver of the change in in second COVID-19 versus second quarter.

2022.

What's the major driver is the activity levels, but also there are other factors.

Better.

Art off construction is beginning to ramp up so that's an opportunity for us.

Housing occupancy in new construction.

Is lower.

Because of supply chain issues. So that's I think we will get fixed in the interim.

Time, but it's an issue affecting growth at the moment.

And so.

We're pretty optimistic relatively speaking that is.

Post pandemic market activity levels.

Turning to normalize that our share of broadband growth.

Rise.

And.

We're pretty optimistic that our mobile business.

Really accretive.

Huge opportunity for us going forward.

Thank you.

Yes.

Operator, we will take our next question please.

Thank you. Our next question will come from the Jay Johns with Evercore. Your line is now open.

Thanks, So much a couple for me one.

You know really move tuna.

The phenomenon of that sort of new to us and what it sort of meets the thoughts can you just sort of help us understand is your share of.

The growth that <unk> higher than the share of move outs that have your service I think it needs to be for low move activity to be negative for net adds and if that's the case how has that shifted over time.

Obviously, you announced that you've increased your speeds.

About 100 Megabits for your service, but it was not on the upstream can you just talk about the importance of upstream obviously, the fiber guys keep talking about that being.

Advantage for them and how that's impacted.

The service so far thanks.

Did you can you can you clarify on your first question a little bit more I didn't fully understand what you meant by the move for flow.

This is Chris so.

Your share of the growth that pool.

Good news is is that higher than your share of move outs.

That hydro service, so given the move to an as a factor.

With that too needs to be.

For for the loop it needs to be for low move activity to be a negative for net adds I think so I'm just trying to understand like this moved some phenomena and people moving in and out how that sort of impacts.

The growth of that opportunity.

I think the way I would say I think you are saying as well.

We're a net share taker when theres a toss up.

And.

Theres more toss ups.

When people are moving.

And so therefore, our gross ads.

<unk> is higher.

Then.

Of all moves is higher than our disconnect rate of all moves.

What you are saying and we still we're still a net share taker.

Q2, we're move activity.

Gains well below pre pandemic levels.

Non pay churn.

Below pre pandemic levels. We also saw the return to seasonality in college markets that didn't occur last year. So we expect to see those gross additions come back in August and September . So it was a seasonal Q2.

Had low move non pay and our lowest still lever voluntary churn when you exclude this <unk> impact and so without that activity I think what you're asking is.

If we were in a normalized environment are we still a net share taker of the answer is yes.

Okay.

That's our expectation.

Okay.

With regard to downstream and upstream usage is still significant 14 to one downstream versus upstream.

So from a practical point of view our products are appropriate.

We think over the longer term.

Upstream use will continue but it is actually growing faster than the downstream.

At the moment.

Operator, we will take our next question please.

Thank you. Our next question will come from Craig Moffett with Moffett Nathanson. Your line is now open.

Thank you.

I Wonder if you could just talk a little bit more about the broadband growth equation going forward.

Yes.

What you expect from.

Broadband <unk> and going forward and then how much.

You think that with our adopt and the early state level jobs Act.

Awards, you've gotten how much you think you can grow broadband homes passed and so it was just how you think about the sort of equation for total broadband growth.

And then separately.

Could you just comment on the degree to which you think you can offload wireless traffic I think you've called out Youll see brs.

Build out for the first time in today's.

<unk> materials.

What level of traffic do you think you can actually offload onto that network.

Okay.

In terms of broadband.

Opportunities in rural areas.

One about a million and a half passing so far.

And.

And the and the <unk> program and the various state programs Theres a lot of.

We have outstanding at the state level and there is a 42 billion dollar fund coming next year.

Which is a huge amount of money, which will allow for.

Additional construction, which we hope to bid on.

It would be successful with.

We haven't actually begun to offload on the Cbr's yet.

In a commercial way.

But.

It's interesting our Wi Fi first strategy.

In our mobile relationship with our customers allows significant offload.

Up mode.

Mobile traffic.

Onto the Wi Fi network.

So when you put those two things together.

The success, we're having them.

Our managed Wi Fi first environment.

And this and the potential success of CVR us.

That's what I was saying before we have a good relationship and our <unk> today with good volume based pricing.

And the significant margins and an opportunity if we are continuously successful to make that even better.

Hi.

Moving some of the traffic onto Wi Fi additional traffic on Wi Fi and onto our own <unk> <unk> network.

So it's it's a it's a good situation that can get a lot better.

Craig on the broadband growth I'd just add that.

Similar to what we're talking about with Vijay the market transaction volumes essentially it is going to pick up so our internet net adds will pick up again, we're confident in that.

Our recipe for broadband growth has always been about being competitive and price competitive in the marketplace.

We've had new entrants and overbuild for many many years. So when you asked the question about our tourism it relates a little bit too competitive.

And I don't see a major change there in terms of our strategy and how we go to market or how we need to go to market. In fact, I would argue because of the mobile product in the converged mobile product that Tom was talking about and the ability to put these together and that we can save customers money.

Significant dollars that has both good volume and our period impacts for broadband over time. So I think the outlook is still very very strong.

Thanks Thats helpful.

Thanks, Craig Operator, we will take our next question. Please.

Thank you. Our next question will come from Doug Mitchelson with Credit Suisse. Your line is now open.

Oh. Thanks, so much couple of questions. One just curious based on your comment about the tests on DOCSIS worth point out what percentage of your footprint is covered up plus four.

When do you think that equipment be ready for Prime time, and then I guess, Tom but maybe this is a jump ball I'm just curious when you think about stressing the consumer what they are.

Whether inflation impacting their wallets are ultimately.

Interest rate increases impacted the economy and overall consumer spending.

Or would you expect to see any pressures from the consumer your business first you've seen anything so far and where would you expect to see it in.

I'm just curious if you reflect back to think about the great recession and consumer Walt got tighter and there was some re addressing a pay TV spending in touring do you see across your business is there any risk of <unk>.

Peering down and how would you manage against that so I know not a fun question, but I'm just curious.

Hi.

Given your history.

Doom and gloom question.

Okay.

DOCSIS Borgata.

It hasnt been deployed.

Our footprint right now is DOCSIS 314, so we have one gig everywhere.

DOCSIS three one upgrade.

Opportunity is still significant meaning we haven't gotten everything out of DOCSIS three one by any means in terms of its full capacity. It can give us multi gigabit speeds downstream of multi gigabit symmetrical speeds upstream.

And so it's.

A quite robust.

Infrastructure, that's already been deployed and the CPE for that has already been deployed DOCSIS support auto is a complete new electronic drop in.

And in a whole new modulation scheme.

And so requires new CPE.

And.

It is not being deployed yet, but it's in the lab and the specs have been written and it's.

Another <unk>.

Technology upgrade that will allow us to get to very high speeds without having to replace our network.

Which means that you can do that in a really capital efficient way, which means that ultimately.

You have.

<unk> opportunities that others don't.

And that's the value of DOCSIS toward auto.

With regard to.

Inflation and its impact on.

Macroeconomic.

Forces on us.

No.

Look I mean, I think we have access to capital.

At good prices.

I think that inflation in some ways.

Particularly if it's temporary.

Has some market advantages for us.

As consumers are stressed the value of our products become more clear in the consumer's mind. If you look at how much consumers are spending.

On telecom products.

And our share of those telecom products and what we can do with pricing.

Or those telecom products I think.

A stressed consumer we'll find our products even more attractive.

So I mean, yes, we will have to deal with cost, but it's interesting when you look at our overall business and look at our cost structures.

Getting more efficient.

Our opportunity to serve and our cost to serve continues to improve.

And if we drive more customers that actually improves on a per customer basis. So.

We can now operate.

The difficult economic environment and we can.

Make our products valuable to consumers so.

I'd, rather operate in a normal environment, but.

I think we are pretty good assets and pretty good opportunities to be successful.

Yes.

The thing that I would add to that.

We've been big proponents on the affordability side and as part of that.

We are a larger participant in the <unk>.

On the affordable connectivity program.

And many of the other wells.

Our knowledge all of the other while wireline providers.

And we've done a lot to try to push.

The program to our existing subscribers so not as an acquisition program that is a way to.

Some of the stress on the consumer a lot in our customer base.

And I think that that also puts us in a better position than we would've been in 2008.

To retain customers and to do so by providing value to them.

And in a more challenged environment or where the wallet is more challenged.

I do think video would be more challenged in a downturn.

Or inflationary environment.

Then other products, but the margins are relatively.

She becomes smaller on that part of our business. So the net of it all.

It's somewhat of a market opportunity, but it's.

There will be stress on video.

Yeah. Thank you across all of that.

The final clarification, Tom at for amplifiers for DOCSIS 4.0, I get that it'll be a while before it arrives without cover the vast majority of your network or would you be seeing six amplifiers.

And Doug I think the one of the examples around it for amplifiers.

Is that the technology can work in and then amplify our cascade that would allow us to cover all of that.

However, a large portion of our network without having to move the nodes closer to the customers necessarily.

So I think its performance in that environment in the lab, but at this point. It is a strong example of.

How it is that we can make a capital efficiently when we deploy it down the road.

Yes, it could get better it could get better.

And probably well that would be our expectation our experience with these kind of platforms.

Perfect. Thank you.

Thanks, Doug Operator, we'll take our next question please.

Thank you. Our next question will come from Jonathan Chaplin with New Street. Your line is now open.

Thanks, guys two quick ones, if I may 1st it seems like wireless is becoming an increasingly important piece of the business and one of the pieces that maybe investors don't understand so well is how it contributes to EBITDA because on an aggregate basis. It's still it's still a drag can you give us some.

The idea of what the incremental margin is.

On the wireless side, but what the contribution to EBIT.

EBITDA per sub is from wireless.

I'll keep it quite us up.

And then on broadband can you give us a sense of sort of how you saw trends progressed as you came out of June into July .

So Jonathan.

Take this one.

The wireless.

The it is increasingly important and I don't think it's well understood by the marketplace. It has a reported EBITDA loss right now, but that's entirely driven by subscriber acquisition cost for sales and marketing.

EBITDA for wireless pass the positive point really some time ago, I don't remember where quarter, but it's probably a year plus.

So it's a it's an attractive product.

And we're growing it fast and we're not going to get into margin analysis or forecast, but I will tell you that everything that I've ever looked at the people publish on the topic grossly underestimate our our margin that's inherent inside that business and what we can do with it to try at the business overall, including <unk>.

And net additions so its powerful I don't think it's very well understood and thats, Okay for now.

And the second question was what was on volume.

June July on volume, yes.

Look that's a tough question because you've got seasonal disconnect period that goes through June and July .

You have heard me mentioned earlier.

We have we have had a more return to seasonal disconnects in our college markets, which actually bodes well for August and September assuming that comes back.

I would say that our medium and long term confidence is very high we will be back market will return when that activity short term, it's just difficult to see with volume in July is a very difficult month to go after that question. So we'll see and just one other comment on wireless and its impact just.

We are a wireless company.

And.

We have 450 million wireless devices connected to our network.

Which is when you when you think about and when you think about our new video strategy, our new joint venture.

With zoom.

Mo and.

Our ability to connect video customers in the future of wirelessly all of our products would be wirelessly delivered.

Okay.

Thanks, guys.

Thanks, Jonathan.

Operator, we will take our next question please.

Thank you. Our next question will come from Bryan Kraft with Deutsche Bank. Your line is now open.

Hi, Good morning, I was wondering if I could ask you how you're thinking these days about potential acquisitions in the cable business.

And other types of assets, whether it's business services and wireless and maybe cable specifically if you could talk about just how you would evaluate a potential.

Today. Thank you.

Well, we've always said, we look cable, which is why we've been buying our own stock back because we haven't been able to buy cable.

And Thats.

It's a great business and.

We think that.

The future of <unk>.

These assets can do is significant.

And a huge opportunity so.

Nothing about our view of M&A has changed.

Okay. Thank you.

Jessica sorry.

I mean, I, just I will add to that that obviously it has to be cable and at attractive pricing.

It'll be accretive to the shareholders in the long term so.

So we're very.

We are always out there looking for and looking at cable assets.

Whether they be small cable assets or others.

But ultimately we do think it has to bring value to the shareholders.

So it will be fully accretive.

Thank you very much.

Thanks, Brian Operator next question please.

Thank you. Our next question will come from Phil Cusick with J P. Morgan. Your line is now open.

Hi, guys. Thank you.

I Wonder if we can go back and talk about the progression of a broadband through the quarter.

Forgive me. If this is just too much in May we talked about green shoots and in mid June it looked like broadband would be slightly positive.

I assume it's fair to say that June was worse than expected and the July is probably not trending well I'm curious.

If June being worse is bigger seasonal seasonality in that type of market.

Or was it worse in the other markets, where the underlying business.

And then second if I can sort of a big picture question, how much do you take competitive response into account when you price a product like wireless.

As you price wireless at 30, Verizon Spa responds with $25 broadband and it seems to be cycling down is this really the situation you want to create and do you think you have an advantage in that over time. Thank you.

So I'll start on that one I think would you heard us in May and June .

Talking about Green shoots we are talking about additional activity I don't know.

<unk>.

Which wasn't necessarily additional additions at that point and in June we did still at that point I expect to report total positive Internet ads.

Even though.

Even with the headwind that was associated with the ABB to ACP transition.

I don't think that there was a large deterioration in market conditions or performance in June after that time on.

On a quarterly basis net adds is an aggregate of more than $1 billion connects offset by disconnects and.

Very small movement in either side of that equation can lead to very small changes in what the ultimate outcome is in net adds which which ultimately to 20% and 25000 subscribers.

I think that our position on where where activity has been through the quarter. It is not that different now from where it was before.

I'll start off on the pricing and then some.

Tom will chime in as well.

So the question on competitive price of course, we think about not only the moves that we're making but the secondary mirrors in the market responses.

Our pricing for mobile is 29 99, and it takes three lines or more it's very simple, there's new taxes and fees.

And it's the longest have where take broadband.

Any kind together with that product.

Some of the other offers out in the marketplace midnight on a wireless product you got to go spend $10 $20 more.

Then you can get discounted prices on broadband so when you put the all in package together are all in package of broadband plus.

Wireless services dramatically cheaper taxes and fees included.

No upcharge on the core service required.

It's really attractive so.

I think even with some of those responses in the marketplace, which may or may not be related to us.

We can be very attractive and save customers thousands of dollars a year with a better product integrated is a converged broadband product for years to come the other big benefit is that we have the ability to offer mobile and a 100% of our footprint. So we have $54 million passing should we have gigabit service everywhere. We operate if you did not red line were full.

The upgraded we have a path to multi gig symmetrical services.

In addition to that we have mobile everywhere, we operate at a price point that is very very competitive with a product that's actually not only the fastest growing mobile, but the fastest mobile service in the country. If you put all that together and.

We feel pretty good about our competitive positioning and long term.

Yes.

To your broader question, yes, we think about what it does to.

How competitors might price against us.

Our view is that.

We can do the pricing, we're doing and still be.

Create extremely good value for customers and at the same time created an extremely good value for us and.

The.

Macro situation with regard to us is that we're underpenetrated, we have 45% of the.

Of the mobile dollars in our marketplace and.

When you just add up all the telecom spend we have a very small piece of it and.

And so.

Our opportunity is volume.

You saw that even in the second quarter, so second quarter seasonal quarter low volume in the cable side across the entire market and yet we still have 344000 net adds on mobile at a very low cable environment I think that illustrates the opportunity when the market comes back Internet sales will go back up along with the market activity, but mobile industries.

We're right now from our lines net adds perspective, it's depressed.

Compared to what it could or should be in a normalized market. So we'll continue to grow.

Thanks, very much guys yep. Thanks, Phil Operator, we'll take our next question. Please.

Thank you. Our next question will come from Peter Zaffino with Wolfe Research. Your line is now open.

Alright. Thank you two questions on pricing across two different products.

Mobile.

Chris I, particularly appreciated your comments on the cost structure.

And I'm aware that mobile has not historically sold at high rates to new broadband subscribers.

The context of a business with sliding gross adds I wondered if there is an opportunity in the future.

To attach more mobile to gross adds and use it as a way to stimulate overall sales of your converged connectivity product and then <unk>.

Parallel on broadband pricing I'd love to know your views on retail price increases at this point. Thank you.

So nothing to announce today, Peter but clearly we think a lot about mobile and.

The ability not only to attach to existing internet customers, which has been the predominant path so far.

As the market understands better our product. The fact that it is the fastest mobile for our mobile product in the country.

And that is real that it really does save customers a lot of money new contracts new taxes no fees.

Im.

I do think there is a really powerful case that we can use to have mobile actually drive significant internet net adds.

And particularly in a market with low volume to be able to kick start some volume in the marketplace by using mobile to do just that so we're constantly testing different concepts into marketplace economically. It's a no brainer and it makes a lot of sense, but it is a new package structure for educating customers to get them to think about buying a household.

Service and an individual service together, so that they can get those savings and they can get that better product and that may take a little bit of time for us to find the right connection as well as to educate the marketplace.

And then the second question.

It should make a note of the second question was on kind of pricing retail pricing for broadband.

Our goal has always been to.

The best pricing in the marketplace and to the extent that we can withstand some of the inflationary pressures.

And save customers lots of money with that converged product, which includes both internet as well as.

As well as mobile that's going to be our pass it doesn't mean that.

We are.

We're dogmatic about never taking rate increases, where we need to so that issue is always available, but our preference has always been to be competitive and value value leader in the marketplace.

Really helpful answers. Thank you.

Thanks, Peter Operator, we will take our final question. Please.

Thank you our final question will come from <unk> morale with RBC capital markets. Your line is now open.

Good morning, and thanks for taking the question a big picture one on broadband.

Magnitude of the slowdown in subscriber growth has been fairly meaningful a lot of the factors like low market activity comping. The pandemic pull forward and competition are pretty well understood at this point.

No theres been the expectation that we will get some normalization.

Stabilization with at least some of these issues, but it's just taking a bit longer than we would've hoped for so I guess with that is there a sense of greater urgency to reaccelerate that subscriber growth and based on an answer earlier it seems like youre satisfied with the current retail playbook, but is there a desire to rethink things like accelerating.

Network investments rural build leaning even more into mobile or anything else or is the view that the long term opportunity remains intact and we just need to stay the course and cycled through.

Current dynamics thanks.

I think both of those statements are correct, which is the long term remains intact and in theory, we could just wait it out but I think you've heard.

And I actually like the way that you described the entire situations. So long term outlook is very good we could wait it out that's not what we're doing we're accelerating everywhere, we can on rural buildout to add to the growth.

Taking a look at mobile opportunities, which I just mentioned on the prior question to Peter.

And.

We're serious about putting multi gig symmetrical everywhere, we operate and so I think both both barbells of what you described are actually true.

Some execution opportunity too.

The pandemic created.

Assortment issues for us and operational issues for us.

Have an impact on our ability to generate orders as well.

No.

We were aggressive with trying to.

Improve our ability to execute.

If you think about the long term types of that too.

So we have we have the ability to Craig asked about broadband and <unk> and <unk> I talked about that we talked about mobile convergence and how that could kick start the thing that we haven't talked about is the digitization of our service platform really creates a long term path to not only enhance customer satisfaction and the way they interact with us.

But to reduce our cost to serve per customer relationship and a very material win and as good as that has been over the past few years, it's really the very tip of the iceberg in terms of what we can do with that over time, which has a double impact of increasing customer satisfaction and letting them deal with us the way that they want to reducing the number of interactions and service issues.

Getting in front of impairments before the customer even noticed they exist.

And when they interact with us the way they want often times thats without a physical transaction, which has.

Benefits.

Benefits on both sides, both to the customer as well as to our P&L.

That's great. Thank you both.

Thank you there are no further questions at this time I will now turn the call back over to Stefan <unk>. Please go ahead.

Thanks, everyone and we will see you next quarter.

Thank you ladies and gentlemen. This concludes today's event you may now disconnect.

Okay.

[music].

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

Yes.

Yeah.

Okay.

[music].

Yes.

Okay.

Yeah.

Thank you.

Yes.

Okay.

Yes.

[music].

Okay.

Yes.

[music].

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Yes.

Sure.

Okay.

[music].

The.

[music].

Yeah.

Yes.

Okay.

Yes.

[music].

Yes.

Okay.

[music].

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

<unk>.

Okay.

[music].

Sure.

[music].

Yes.

Sure.

Okay.

Yes.

Okay.

[music].

Yes.

Yeah.

[music].

Yeah.

Yes.

Okay.

Sure.

Okay.

Yes.

Sure.

Okay.

Sure.

Okay.

Yes.

Yeah.

Sure.

Yes.

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

[music].

Yes.

Okay.

Also as a reminder, this conference is being recorded today.

If you have any objections. Please disconnect at this time.

I would now like to turn the conference over to Stefan <unk>. Please go ahead Sir.

Good morning, and welcome to Charter's second quarter 2022 Investor call.

A presentation that accompanies this call can be found on our website IR charter dot com under the financial information section before we proceed I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings.

Including our most recent 10-K and also our 10-Q filed this morning, we will 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.

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 , Chris Winfrey, our COO and Jessica Fisher, our CFO with that let's turn the call over to Tom.

Thank you Stephan <unk>.

Our business continues to grow despite an unusual macro economic environment.

During the second quarter, we added 38000 internet customers when excluding an unfavorable impact related to the discontinuation of the emergency broadband benefit EBV program.

And additional definitional requirements of the affordable connectivity program.

Customer relationship churn remains historically low due.

Due to current consumer behavior and connect activity remained slow primarily due to the low activity environment.

At the same time, we continue to see very strong mobile line growth with led with line net additions of approximately 350000.

And over the last year, we've grown our mobile lines by nearly 50%.

We now have over $4 3 million total mobile lines Finn.

<unk> were also strong in the second quarter.

Second quarter.

Revenue grew by six 2% and EBIT grew by nine 7%.

Looking forward, we remain well positioned our fixed and mobile broadband service continues to converge technically and operationally.

We offer them along with all of our other high quality products at attractive prices. Our growth is driven by offering value rich packages that differentiate us from our competition at prices customers can afford regardless of the economic environment.

And we plan plan to continue to do that to continue to improve our service.

We are focused on evolving our network data usage continues to grow at a very fast pace during the second quarter Internet customers, who do not buy traditional video from us used over 650 gigabytes per month nearly <unk>.

5% of those customers now use a terabyte or more of data per month, and even with the rise of <unk>.

Work from home peak usage pattern still prevail, but the vast majority of data usage occurring during the evening hours.

Our network is built to handle that peak demand and delivers consistent speeds, regardless of the time of day.

All using our DOCSIS three one infrastructure in turn we will be able to offer our customers higher symmetrical speeds and multi gigabit speeds in the downstream.

Our long term network evolution path includes DOCSIS support auto recent testing using DOCSIS four <unk> technology simultaneously delivered over eight gigabytes in the downstream and over six gigabit in the upstream and a four amplifier cafe cascade to a single modem.

We will develop this technology, even further but the test demonstrated that we can successfully drive by directional multi gigabit speed offerings across our entire network and a very capital efficient manner without a major disruption to our customers and operations that other kinds of upgrades require.

So we can deliver a future proof network that delivers the most compelling connectivity services.

Capital and time efficient manner and in turn offer those services to consumers at highly attractive prices.

All operational intelligence.

Fewer outages and service transit transactions.

Fact, we capture less than 30% of household spend on wireline and mobile connectivity within our footprint.

We are.

Underpenetrated and our opportunity is large shrugged remains uniquely positioned to deliver superior services at superior prices offering consumers. The most attractive products for their connectivity needs. Our service services remain the best choice for consumers, giving us the opportunity to continue to grow our business at a very healthy pace now or tons.

The call over to Jessica.

Thanks, Tom.

Now, let's turn to our customer results on slide five.

Including residential and SMB, we lost 21000 internet customers in the second quarter at.

As part of the ABB to ACP transmission, a small portion of subsidized internet customers either did not opt in to continue their service. After the EBV program and that did not meet the ACP requirements, particularly to meet their requirements of customers use their service needs 30 day period, which covers the vast majority of the impacted subscribers.

This resulted in 59000 customer disconnects during the quarter.

Excluding that headwind, we organically grew 38000 internet customers in the quarter.

Looking forward, we expect the theory usage ACP customers will have a smaller impact on our quarterly results and what we saw this quarter.

Looking at the broader marketplace, while we saw seasonal increases in the typical of the second quarter moves remained well below pre COVID-19 levels and voluntary churn when excluding the ABB ACP impact I mentioned with even lower than last year, all of which reduced our selling opportunity.

Turning to video video customers declined by 226000 in the second quarter. Following a programming pass through increased wireline voice declined by 266000, and we added 344000 mobile lines.

Despite the lower number of selling opportunities from our reduced activity levels, we continue to drive novo ground with our high quality attractively priced.

Moving to financial results starting on slide six over the last year, we grew total residential customers by 282000 or 1%.

Residential revenue per customer relationships increased by two 8% year over year, driven by promotional rate step ups and early our video rate adjustment versus last year that pass through program our rate increases.

These effects were partly offset by the same bundle and mix change we've seen over the past year, including a higher mix of non video customers and a higher mix of lower priced video packages within our base.

Also keep in mind that our residential does not reflect any mobile revenue.

As slide six shows residential revenue grew by 44, 5% year over year.

Turning to commercial SMB revenue grew by three 7% year over year, reflecting SMB customer growth of three 7%.

Enterprise revenue was up by four 9% year over year, excluding all wholesale revenue enterprise revenue grew by eight 2%.

And enterprise Psus grew by four 7% year over year.

Second quarter advertising revenue grew by 12% year over year and that growth came primarily from political it was slightly offset by a 1% decline in our core advertising business due to lower local and national advertising revenue, including auto partly offset by our growing advanced advertising capabilities.

Mobile revenue totaled $726 million with $299 million of that revenue being device revenue.

Other revenue increased by 8% eight 8% year over year and includes royal construction initiatives subsidies totaling $29 million.

In total consolidated second quarter revenue was up six 2% year over year.

Moving to operating expenses and EBITDA on slide seven and <unk> total operating expenses grew by $307 million or three 9% year over year.

Programming costs declined by 2% year over year due to a decline in video customers at three 2% year over year and a higher mix of lighter video packages all of which we can mostly offset by higher programming right.

Looking at the full year of 2022, and we continue to expect programming cost per video customary to grow in the low to mid single digit percentage range.

Regulatory connectivity and produced content declined by 10, 3%, primarily driven by lower Lakers alright.

And lower video CPE sold to customers.

Excluding the IRS and costs from both years regulatory connectivity and produced content declined by four 7%.

For the full year 2022, we continue to expect regulatory connectivity and produced content expense to decline in the mid single digit percentage range versus 2021, primarily due to lower CPE sort to customers and more of our ethane costs, given an abnormally hit games sketch out last year.

Cost to service customers increased by five 1% year over year. The increase was primarily driven by higher bad debt year over year, given lower bad debt in the second quarter of 2021, which benefited from government stimulus packages at the time.

And while this quarter's non pay churn and bad debt write offs, both remained well below pre comfort by bonds.

Our bad debt accrual includes expectations for potential softening of consumer finances later this year.

Excluding bad debt from both years the cost of service customers grew by one 1%, primarily due to a larger customer base and higher fuel costs.

Partly offset by productivity improvements.

As the year progressed and prior year bad debt expense normalizes and should drive slower growth and cost to service customers during the second half of the year.

Marketing expenses grew by eight 6% year over year due to higher labor costs, driven by previously planned wage increases and higher staffing level as it was China completes the interesting inbound sales and retention call centers with a focus on providing better service to new and existing customers.

For the full year 2022, we continue to expect marketing expense to grow in the mid single digit percentage range versus 2021.

Mobile expenses kind of $797 million and were comprised of mobile device cost tied to dice revenue customer acquisition and service and operating costs and.

And other expenses increased by one 3%.

Adjusted EBITDA grew by nine 7% year over year in the quarter.

Just a quick note on inflation before moving on to net income.

We've seen some inflationary pressure in fewer freight and utilities as well as pricing pressure on CPE and other network component.

And labor are planned to move to a 20 dollar per hour starting wage pointed the impact, but we still see pressure on the labor market, which we may need to more fully respond to you as the year progresses.

I would also note that our consumers are experiencing inflationary pressure, but given the availability of subsidies for broadband and our focus on saving customers hundreds of dollars per year by switching to a converged connectivity product, we believe that we're well positioned for that environment.

Turning to net income on slide eight we generated $1 $5 billion of net income attributable to charter shareholders in the second quarter versus $1 billion last year the.

The year over year increase was primarily driven by higher adjusted EBITDA.

Turning to slide nine capital expenditures totaled $2 $2 billion in the second quarter above last year's second quarter spend of $1 $9 billion.

As slide 10 shows we generated $1 $7 billion of consolidated free cash flow this quarter versus $2 $1 billion in the second quarter of last year.

The decline was primarily driven by higher cash tax payments and higher capex, mostly driven by our royal construction initiatives.

We finished the quarter with $95 $7 billion in that country.

Our current run rate annualized cash interest is $4 5 billion.

As of the end of the second quarter, our ratio of net debt to last 12 month adjusted EBITDA was 445 times.

We intend to stay at or just below the high end of our four to four five times leverage range.

During the quarter, we repurchased $8 3 million charter shares and charter holdings common units totaling about $4 $3 billion at an average price of $511 per share.

Yeah.

Operator, we're now ready for Q&A.

Thank you at this time, if you would like to ask a question. Please press star one on your Touchtone phone.

You may remove yourself from the queue at any time by pressing star Q.

Once again that is star one to enter the queue.

Thank you our first question will come from Ben Swinburne with Morgan Stanley . Your line is now open.

Thanks, Good morning a.

A couple on sort of.

We're seeing in particular pressure in certain parts of your footprint.

Including in the third quarter I realize you don't like to comment quarterly, but obviously, there's a lot of focus on that and then.

Tom I was interested in your comment about generating mobile EBITDA.

But.

Yes.

Sure I will.

I'll start there.

Look.

Theres always a tension between how you price a product and how much of that do drive.

Into the marketplace.

Between price and volume.

And price and the volume you get ultimately is.

What youre trying to get to is the maximum amount of cash flow you can generate out of the business base that.

Right price and the right.

Volume distribution of that product at that price.

So that's what we're seeking and mobile and we think it's a huge opportunity for us.

It's.

Obviously.

We're creating customer relationships of those customers are paying us.

There's good margin in that business and at the pricing that we have and we think that we can get more efficient through time with that margin.

<unk> offload and at the same time, we think were accretive to our <unk>.

Partner and that the 9 million customers that have been created out of that.

Our accretive and valuable to and should be really counted as customers in many ways too.

RMB partner.

But that's a shared relationship but the net of all of that is that we.

We have a.

Opportunity at the pricing that we have.

To continue to grow the business.

And that pricing is really valuable relative to the price in the marketplace that those products are currently being offered by our competitors.

And at the prices, we're offering it now.

We have an opportunity to create great value for us through time.

And to have an improving margin through time as well.

But even without an improving margin, it's still a great value.

No.

We're in a pretty good place in terms of our mobile business and that we have.

Lots of opportunity we have.

Fully penetrated marketplace, and we have a very small share of it.

And we are growing rapidly.

With regard to the overall competitive environment.

Our.

Our churn is extremely low.

And.

There is a new fixed wireless competitor, it's actually relatively small it's not a major component of our.

Quarterly performance, but it is a factor.

If you look at the numbers that the.

Fixed wireless competitors say, they're taking from cable.

Sure.

Proportionately look at that across our footprint.

Do the math, it's not the major driver of the change in the second COVID-19 versus second quarter.

2022.

What's the major driver is the activity levels, but also there are other factors.

Better.

Art off construction is beginning to ramp up so that's an opportunity for us.

Housing occupancy in new construction.

Is lower.

Because of supply chain issues. So that's I think we will get fixed in the <unk>.

In time, but it's an issue affecting growth at the moment.

And so.

We're pretty optimistic relatively speaking that is.

Post pandemic market activity levels return and normalize that our share of broadband growth will rise.

<unk>.

And.

We're pretty optimistic that our mobile business is highly accretive and a huge opportunity for us going forward.

Thank you.

Operator, we will take our next question please.

Thank you. Our next question will come from Vijay Jayant with Evercore. Your line is now open.

Thanks, So much a couple for me one.

You know really move tunas.

Nominal.

Sort of new to us and what it sort of meets the thoughts can you just sort of help us understand is your share of the growth that <unk> higher than the share of move outs that have your service I think it needs to be for low move activity to be negative for net adds and if that's the case how has that shifted over time.

Obviously, you announced that you've increased your speeds.

By about 100 Megabits for your service, but it was not on the upstream could you just talk about the importance of upstream obviously, the fiber guys keep talking about that being a real advantage for them and how that's impacted.

The service so far thanks.

Did you can you clarify on your first question a little bit more I didn't fully understand what you meant by the move or flow.

This is Chris so.

Your share of the growth that pool.

It is.

Is that higher than your share of move outs that that hydrocephalus. So given the move to an as a factor.

That too needs to be.

The growth that opportunity I think.

The way I would say I think you are saying is that.

We're a net share taker when theres a toss up.

And.

And theres more toss ups.

When people are moving.

And so therefore, our gross ads.

Moves is higher.

Then.

Of all moves is higher than our disconnect rate of all moves.

What you are saying and we still we're still a net share taker.

Q2, where move activity.

<unk> well below pre pandemic levels.

Non pay churn.

Below pre pandemic levels. We also saw a return to seasonality in college markets that didn't occur last year. So we expect to see those gross additions coming back in August and September . So it was a seasonal Q2.

Had low move non pay and our lowest still lever voluntary churn when you exclude this <unk> impact and so without that activity I think what you're asking is.

If we were in a normalized environment are we still a net share taker and the answer is yes.

Okay.

That's our expectation.

Yes.

With regard to downstream and upstream usage is still significant 14 to one downstream versus upstream.

So from a practical point of view our products are appropriate.

We think over the longer term.

Upstream use will continue but it is actually growing faster than the downstream.

At the moment.

Operator, we will take our next question please.

Thank you. Our next question will come from Craig Moffett with Moffett Nathanson. Your line is now open.

Thank you.

I Wonder if you could just talk a little bit more about the broadband growth equation going forward.

What you expect from.

Broadband <unk> and going forward and then how much.

You think that with our adopt and the early state level jobs Act.

Awards, you've gotten how much you think you can grow broadband homes passed and so it was just how you think about the sort of equation for total broadband growth.

And then separately.

Could you just comment on the degree to which you think you can offload wireless traffic I think you've called out Youll see brs.

For the first time in today's.

The materials.

What level of traffic do you think you can actually offload onto that network.

Okay.

In terms of broadband.

Opportunities in rural areas.

One about a million and a half passing so far.

And the and the <unk> program and the various state programs Theres a lot of bids we have outstanding at the state level.

There's a 42 billion dollar fund coming next year.

Which is a huge amount of money, which will allow for it.

Additional construction, which we hope to bid on.

And be successful with.

We haven't actually begun to offload on the Cbr's yet.

In a commercial way.

But.

It's interesting.

Hi Fi first strategy.

In our mobile relationship with our customers allows significant offload.

Most welcome.

Mobile traffic.

Onto the Wi Fi network.

So when you put those two things together.

The success, we're having in.

Our managed Wi Fi first environment.

And this and the potential success of CVR us.

That's what I was saying before we have a good relationship and our <unk> today with good volume based pricing.

And the significant margins and an opportunity if we're continuously successful to make that even better.

Bye.

Moving some of their traffic onto Wi Fi additional traffic on Wi Fi and onto our own five G. C Brs network.

So it's it's a it's a good situation that can get a lot better.

Craig on the broadband growth I'd just add that.

Similar to what we're talking about with Vijay the market transaction volume essentially it is going to pick up so our internet net adds will pick up again, we're confident in that.

Our recipe for broadband growth has always been about being competitive and price competitive in the marketplace and we've had new entrants and overbuild for many many years. So when you asked the question about our tour I assume that relates a little bit too competitive.

Significant dollars that has both good volume and our period impacts for broadband over time. So I think the outlook is still very very strong.

Thanks Thats helpful.

Thanks, Craig Operator, we will take our next question. Please.

Thank you. Our next question will come from Doug Mitchelson with Credit Suisse. Your line is now open.

Oh. Thanks, so much couple of questions. One just curious based on your comment about the tests on DOCSIS worth point out what percentage of your footprint is covered a plus for us.

And when do you think that equipment be ready for Prime time, and then I guess, Tom but maybe this is a jump ball I'm just curious when you think about stressing the consumer.

Whether inflation impacting their wallets are ultimately.

Interest rate increases impacted the economy, and overall consumer spending where would you expect to see any pressures from the consumer your business first you've seen anything so far and where would you expect to see it and.

I'm just curious if you reflect back do you think what the great recession and consumer wallets got tighter and there was some readdress into pay TV spending and tearing do you see across your business is there any risk of <unk>.

Peering down and how would you manage against that so I know not a fun question, but I'm just curious.

Hi, good morning.

Your no history.

Doom and gloom question.

Well.

Okay.

So DOCSIS, Florida auto.

It hasnt been deployed.

Our footprint right now is DOCSIS 314, so we have one gig everywhere.

DOCSIS three one upgrade.

And so it's.

Quite robust.

Infrastructure, that's already been deployed and the CPE for that has already been deployed DOCSIS support autos fleet, new electronic drop in.

And in a whole new modulation scheme.

And so requires new CPE.

And.

It is not being deployed yet, but it's in the lab and the specs have been written and it's.

Another <unk>.

Technology upgrade that will allow us to get to very high speeds without having to replace our network.

Which means that you can do that in a really capital efficient way, which means that ultimately.

You have.

<unk> opportunities that others don't.

And that's the value of DOCSIS toward auto.

With regard to.

Inflation and its impact on.

Macroeconomic forces on us.

Yes.

<unk>.

Look I mean, I think we have access to capital.

And at good prices.

I think that inflation in some ways.

Particularly if it's temporary.

<unk> has some market advantages for us as consumers are stressed the value of our products become more clear in the consumer's mind. If you look at how much consumers are spending.

On telecom products and <unk> and.

Our share of those telecom products and what we can do with pricing.

For those telecom products I think.

A stressed consumer will find our products even more attractive.

So I mean, yes, we will have to deal with cost, but it's interesting when you look at our overall business and look at our cost structures.

We're getting more efficient.

Our opportunity to serve our cost to serve continues to improve.

And if we drive more customers that actually improves on a per customer basis. So.

We can operate in a.

Difficult economic environment, and we can make.

Make our products valuable to consumers so.

Yes.

Rather operate in a normal environment, but.

I think we are pretty good assets and pretty good opportunities to be successful.

Yes, Doug.

Yes.

The thing that I would add to that.

We've been big proponents on the affordability side and as part of that.

We are a larger participant in the <unk>.

In the affordable connectivity program.

Many of the other well and all the best.

Her knowledge all of the other while wireline providers.

And we've done a lot to try to push the program to our existing subscribers. So not as an acquisition program that is a way to.

<unk> some of the stress on the consumer lots in our customer base.

And I think that that also puts us in a better position than we would've been in in 2008.

To retain customers and to do so by providing value to them.

And in a more challenged environment or where the wallet is more challenged.

I do think video would be more challenged in a downturn.

Or inflationary environment.

Then other products, but the margins are relatively high.

She comes smaller on that part of our business. So the net of it all is.

It's somewhat of a market opportunity, but it's.

There will be stress on video.

Yeah. Thank you cross all of that.

The final clarification, Tom at for amplifiers for DOCSIS 4.0, I get that it'll be a while before it arrives without cover the vast majority of your network or would you be seeing six amplifiers.

And Doug I think the one of the examples around it for amplifiers.

Is that the technology can work in and then amplify our cascade that would allow it to cover.

However, a large portion of our network without having to move the nodes closer to the customers necessarily.

So I think its performance in that environment in the lab, but at this point. It is a strong example of.

How it is that we can make a capital efficiently when we deploy it down the road.

Yes, it could get better it could get better.

And probably well that would be our expectation our experience with these kind of platforms.

Perfect. Thank you.

Thanks, Doug Operator, we'll take our next question please.

Thank you. Our next question will come from Jonathan Chaplin with New Street. Your line is now open.

The idea of what the incremental margin is.

On the wireless side, but what the contribution to EBITDA.

EBITDA per sub is from wireless.

I'll keep it quite us up.

And then on broadband can you give us a sense of sort of how you saw trends progressed as you came out of June into July .

So Jonathan.

Take this one.

The wireless.

The it is increasingly important and I don't think it's well understood by the marketplace. It has a reported EBITDA loss right now, but that's entirely driven by a subscriber acquisition cost for sales and marketing.

EBITDA for wireless pass the positive point really some time ago, I don't remember what quarter, but it's probably a year plus.

So it's a it's an attractive product.

<unk>. Net addition, so it's powerful I don't think it's very well understood and thats, Okay for now.

And the second question was what was on volume.

June July on volume, yes.

Look that's a tough question because you've got seasonal.

Disconnect period that goes through June and July .

You heard me mentioned earlier.

We have we have had a more return to seasonal disconnects in our college markets, which actually bodes well for August and September assuming that comes back.

And I would say that our medium and long term confidence is very high we will be back market will return net activity short term, it's just difficult to see with volume in July is a very difficult month to go after that question. So we'll see.

Just one other comment on wireless and its impact yes.

We are a wireless company.

And.

We have 450 million wireless devices connected to our network.

Which is when you when you think about and when you think about our new video strategy, our new joint venture.

With zoom.

Mo and.

Our ability to connect video customers in the future of wirelessly all of our products would be wirelessly delivered.

Okay.

Thanks, guys.

Thanks, Jonathan.

Operator, we will take our next question please.

Thank you. Our next question will come from Bryan Kraft with Deutsche Bank. Your line is now open.

Hi, Good morning, I was wondering if I could ask you how you're thinking these days about potential acquisitions in the cable business.

And other types of assets, whether it's business services and wireless and maybe cable specifically if you could talk about just how you would evaluate a potential.

Today. Thank you.

Well, we've always said, we love cable, which is why we've been buying our own stock back because we haven't been able to buy cable.

And Thats.

It's a great business and.

We think that.

The future of <unk>.

These assets can do is significant.

And a huge opportunity so.

Nothing about our view of M&A has changed.

Okay. Thank you.

Jessica sorry.

I mean, I, just I will add to that that obviously it has to be cable and at attractive pricing.

It'll be accretive to the shareholders in the long term so.

So we're very.

We are always out there looking for and looking at cable assets.

Whether they be small cable assets or others.

But ultimately we do think it has to bring value to the shareholders.

And so it will be fully accretive.

Thank you very much.

Brian Operator next question please.

Thank you. Our next question will come from Phil Cusick with J P. Morgan. Your line is now open.

Hi, guys. Thank you.

I Wonder if we can go back and talk about the progression of a broadband through the quarter.

Forgive me. If this is just too much in May we talked about green shoots and in mid June it looked like broadband will be slightly positive.

Assume it's fair to say that June was worse than expected and the July is probably not trending well I'm curious.

If June being worse is bigger seasonal seasonality in that type of market.

Or was it worse in the other markets, where the underlying business.

And then second if I can sort of a big picture question, how much do you take competitive response into account when you price a product like wireless.

So I'll start on that one yet and I think what you heard us in May and June .

Talking about green shoots we are talking about additional activity.

<unk>.

Which wasn't necessarily additional additions at that point and in June we did still at that point I expect to report total positive Internet ads.

And even though.

Even with the headwind that was associated with the ABB to ACP transition.

I don't think that there was a large deterioration in market conditions or performance in June after that time on.

On a quarterly basis net adds is an aggregate of more than 1 million connects offset by disconnects and as very small movement in either side of that equation can lead to very small changes in what the ultimate outcome is in net adds which which ultimately to $20 25000 subscribers.

I think that our position on where where activity has been three to where it is not that different now from where it was before.

I'll start off on the pricing and then some.

Like Tom will chime in as well.

So the question on competitive price of course, we think about not only the moves that we're making but the secondary mirrors in the market responses.

Our pricing for mobile is 29 99, and it takes three lines or more it's very simple, there's no taxes and fees.

And it's so long as you have where take broadband really any kind together with that product.

Some of the other offers out in the marketplace, maybe not on a wireless product you've got to go spend 10 to $40 more.

And then you can get discounted prices on broadband so when you put the all in package together are all in package of broadband plus.

Wireless services dramatically cheaper taxes and fees included and no upcharge on the core service required.

It's really attractive so.

Even with some of those responses in the marketplace, which may or may not be related to us.

We can be very attractive and save customers thousands of dollars a year with a better product integrated is a converged broadband product for years to come the other big benefit is that we have the ability to offer mobile and a 100% of our footprint. So we have 54 million passengers. We have gigabit service everywhere. We operate if you did not red line, where.

Fully upgraded we have a path to multi gig symmetrical services and in addition to that we have mobile everywhere. We operate at a price point that is very very competitive with a product that's actually not only the fastest growing mobile, but the fastest mobile service in the country. If you put all that together and.

We feel pretty good about our competitive positioning long term.

Yes.

To your broader question, yes, we think about what it does to.

How competitors might price against us.

Our view is that.

We can do the pricing, we're doing and still be.

Create extremely good value for customers and at the same time created an extremely good value for us and.

The.

Macro situation with regard to us is that we're underpenetrated, we have 45% of the.

Of the mobile dollars in our marketplace and.

When you just add up all the telecom spend we have a very small piece of it and.

And so.

Our opportunity is volume.

We're right now from our lines net adds perspective, it's depressed compared to what it could or should be in a normalized market. So we'll continue to grow.

Thanks, very much guys yep. Thanks, Phil Operator, we'll take our next question. Please.

Thank you. Our next question will come from Peter Zaffino with Wolfe Research. Your line is now open.

Alright. Thank you two questions on pricing across two different products first on mobile.

Chris I, particularly appreciated your comments on the cost structure.

And I'm aware that mobile has not historically sold at high rates to new broadband subscribers.

Context of a business with sliding gross adds I wondered if there is an opportunity in the future.

Touch more mobile to gross adds and use it as a way to stimulate overall sales of your converged connectivity product and then in parallel on broadband pricing I'd love to know your views on retail price increases at this point. Thank you.

So nothing to announce today, Peter but clearly we think a lot about move on to.

The ability not only to attach to existing internet customers, which has been the predominant passed so far.

As the market understands better our product. The fact that it is the fastest mobile for our mobile product in the country.

And that is real that it really does save customers a lot of money new contracts new taxes no fees.

I do think there is a really powerful case that we can use to have mobile actually drive significant internet net adds.

But it is a new package structure for educating customers to get them to think about buying a household service and an individual service together so that they can get those savings and they can get that better product.

And that May take a little bit of time for us to find the right connection as well as to educate the marketplace.

And then the second question.

Should make a note of the second question was on TL pricing retail pricing for broadband.

Our goal has always been to have.

The best pricing in the marketplace and to the extent that we can withstand some of the inflationary pressures.

And save customers lots of money with a converged product, which includes both internet as well.

As well as mobile that's going to be our path and it doesn't mean that.

We are.

We're dogmatic about never taking rate increases, where we need to it. So that issue is always available, but our preference has always been to be competitive and value value leader in the marketplace.

Really helpful answers. Thank you.

Thanks, Peter Operator, we will take our final question. Please.

Thank you our final question will come from Ken morale with RBC capital markets. Your line is now open.

Good morning, and thanks for taking the question a big picture one on broadband the magnitude of the slowdown in subscriber growth has been fairly meaningful a lot of the factors like low market activity comping. The pandemic pull forward and competition are pretty well understood at this point.

There's been the expectation that we will get some normalization or stabilization with at least some of these issues, but it's just taking a bit longer than we would've hoped for so I guess with that is there a sense of greater urgency to reaccelerate that subscriber growth.

Based on an answer earlier it seems like Youre satisfied with the current retail playbook, but is there a desire to rethink things like accelerating network investments the rural build leaning even more into mobile or anything else or is the view that the long term opportunity remains intact and we just need to stay the course and cycled through the current.

Thanks.

And I think both of those statements are correct, which is the long term remains intact and in theory, we could just wait it out but I think you heard.

And.

We're serious about putting multi gig symmetrical everywhere, we operate and so I think both both barbells of what you described directionally true.

Some execution opportunity too yeah.

The pandemic created.

Assortment issues for us and operational issues for us.

Have an impact on our ability to generate orders as well and so.

We're aggressive we tried to.

Improve our ability to execute.

You think about the long term types of that too.

So we have we have the ability to Craig asked about broadband and <unk> and our dolphin I talked about that we talked about mobile convergence and how that could kick start the thing that we haven't talked about is the digitization of our service platform really creates a long term path to not only enhance customer satisfaction and the way they interact with us.

But to reduce our cost to serve per customer relationship and a very material win and as good as thats been over the past few years, it's really the very tip of the iceberg in terms of what we can do with that over time, which has a double impact of increasing customer satisfaction and letting them deal with us the way that they want to reducing the number of interactions and service issues.

Getting in front of impairments before the customer even noticed they exist.

And when they interact with us the way they want often times thats without a physical transaction, which as you know.

Benefits on both sides supposed to the customer as well as to our P&L.

That's great. Thank you both.

Thank you there are no further questions at this time I will now turn the call back over to Stefan <unk>. Please go ahead.

Thanks, everyone and we will see you next quarter.

Thank you ladies and gentlemen. This concludes today's event you may now disconnect.

Q2 2022 Charter Communications Inc Earnings Call

Request a DemoDemo

CHTR

Charter Communications

Earnings