Q2 2019 Earnings Call
At this time I would like to welcome everyone to the Altius U.S. say Q2 2019 earnings presentation.
Oh wants and placed on mute, but any background noise. After the speakers remarks, there will be a question and answer session.
If youd like to ask a question. Please press star one on your telephone keypad to withdraw your question press about thank you.
Nick Brown head of Investor Relations you May begin your conference.
Hello, everyone and thank you for joining in a moment I'll hand over to Dexter and Charlie who will take you through the presentation and then we'll move to Q and a.
As today's presentation may contain forward looking statements. Please read the disclaimer on page two.
The slides are available on the company's website and a replay of the call will be made available.
And now I'll hand, David to LTC USA C.I. next to Guy.
Thanks, Nick Hello, everyone.
I'm very pleased to report that LTC with they had an excellent second quarter as we continue to successfully execute against our strategic priorities.
To summarize on slide three.
We saw accelerated revenue growth in Q2 to 3.7%.
And as the company is performing better than expected, we have increased our revenue guidance for the year.
We now expect three to 3% to 5% growth for 2019 up from 2.5% to 3% previously.
Much of this improved performance is attributable to Ltcs, one in our continuous network investments, which are dropping both improved video and approve data customer trends.
We are consistently demonstrating that it's possible to achieve this higher growth.
While still enhancing profitability.
And this is before the complete execution of our new growth initiatives.
The launch of the L. piece mobile is no imminent with multiple network in handset partnerships in place.
Putting us in a really unique position to enter the wireless market.
The rollout of our fiber network and new home build activity continues at an accelerated pace.
Last month, we completed the charter acquisition to fuel growth in news and advertising in our advanced advertising platform continues to deliver positive results.
Finally, we executed on $600 million of share repurchases in Q2, bringing our total year to date to 1.2 billion.
LTC with <unk> Board has authorized a new incremental three your buyback authorization of $5 billion as we're coming to the end of last year as original 2 billion authorization underscoring the company's commitment to return capital to shareholders.
Once again I'd like to thank again, all of our dedicated employees and all of their hard work is paying off and we've had such great momentum right now.
On slide four we show the breakdown of total revenue growth, which was up 3.7% in Q2.
Our west Central business grew 3.4% and business services grew 6.1%.
We benefit from better customer trends I significant increase and the take rate of higher data speeds and data consumption, which supported broadband revenue up 13% plus the recent rate event at the other end of Q1.
Remember, we will lap the later than normal rate event.
Last year in Q3, so these divisions will likely show slower growth in the second half ex mobile.
Growth in advertising continues to be driven by the success of our advanced advertising platform, a four with revenue up 2.8% in Q2.
Although this would have been higher at 11% without the drop off in political advertising revenue year over year.
Political will also be a drag to growth in the second half, although we expect this to be mostly offset with our recent cheddar acquisition.
On slide five on the left hand side, we show residential ARPU growth of 2.9% to $244 with growth of 4.5% in the residential customer base year over year in Q2.
On the top right you can see we had better video trends again in Q2, with just 21000 net losses compared to a loss of 24000 last year.
Since launching LT. It's one this has been our sixth consecutive quarter of better video customer trends.
It's also worth noting that our ongoing network investment and the quality of LTC one's wife, My experience supported improved residential broadband trends as well in the quarter with net additions of 13000 compared to 10000 last year.
On slide six highlights our progress with the penetration of that she is one.
Well, we had just over 400000 customers at the end of Q2, representing about 13% penetration of our video base up from just 4% a year ago.
LT is what is helping us to reduce churn increased gross additions and take market share.
And we've had many more quarters of runway ahead of us as we deliver differentiated video and wife by servers to more and more of our customers.
On the video side I'll piece, one is our solution as a cost effective and convenient content aggregator, including seamless integration of linear and nonlinear services and we know from our old T. partners that we are delivering a better quality of experience relative to others in the marketplace.
On the broadband side, thanks to L. piece once built in advance wife play router. We are seeing LT is one customers consume 20% more data on average than our legacy customers.
This is a platform we were designed to evolve and add new features and products and we're excited about a pipeline of future enhancements. This is a perfect transition to slide seven.
Here, we show how customers are consistently taking higher broadband speeds and using more and more data.
These trends reflect the work we've done to upgrade our networks are attractive offers and the benefits of LTC ones such as its superior wife like capabilities.
We approach our broadband business with a build it and they will come mentality and this strategy is working well.
Not only does the strategy for parents to give customers what we know.
They will need based on the trends I'm about to walk you through but there are a major business benefits.
Specifically when you consider the additional efficiencies we gain as we reduce customer churn and see less technical service instance, with improve network quality and capacity.
So what are we seeing.
On the left you can see the average speed of our customers take has increased about four fold in the <unk> in the past three years to over 200 Megabits per second.
Remember what their fiber network upgrade it won't be long before we're offering 10 gigabits of services well ahead of our peers.
On the right you can see household data usage continues to grow 20% year over year to over 280 gigabytes per month with an average of 12 in home connected devices.
The top 10% of our customers are using close to one terabyte of data per month with an average of 30 in home connected devices, which is just an incredible as a forward indicator.
One key point to notice that data usage is correlated with speed for example customers that take more than 200, Megabits you, 75% more data on average than customers that take less than 200 megs.
And most of this data usage is being driven by video streaming services.
As I mentioned earlier, our customer growth trends had been improving but data usage is the real and sustainable structural growth driver of our residential business.
These usage patterns imply to us that the utility of broadband is rapidly increasing for customers.
By contrast, the average data usage from mobile customers in the U.S. is only about seven gigs per month.
And the average speeds being delivered by wireless networks are much slower than what we can deliver with our broadband network.
This means the average revenue per gigabyte of usage for mobile operators is about 10 times higher than our offers.
In other words customers are getting much less value for money with their current mobile providers, which is where LTC mobile comes in.
Slide eight gives us an update on LTC mobile, where we're still on track for a full commercial launch this summer and we recently launched exclusively to our employees.
Ill piece mobile is unique in the U.S. as it has its own core infrastructure network.
Full access control over the customer experience and strategic roaming partners.
I'll just nobody will also leverage USAID LTC assays own upgraded public Wi Fi its fiber assets and shared small cell infrastructure.
By integrating this infrastructure with our own mobile core network. It allows us to maximize Wi Fi offload coverage and quality of service.
Separately LTC Wednesdays mobile partnership with sprint will be expanded to the new T mobile network, including Fiveg services with a contract extension at DLJ merger conditions and commitments that Timo is made to the FCC.
It's also worth noting that we have signed a complimentary new nationwide roaming contract with 18 tea.
As well as new international roaming contracts with multiple other partners. This will ensure an aggregate 99% nationwide coverage across the U.S. and additional international coverage and network testing phase for L. T. Mobile is now complete demonstrating excellent nationwide coverage speed and quality.
All these factors set mobile LT small ball up for a successful launch and a long term strategy by which L. piece can access the latest technologies and deliver a superior and differentiated mobile experience for customers.
And now I'll hand, this over the Charlie will take us through some financials in more detail.
[noise].
Great. Thank you very much Dexter and Hello, everyone.
Dexter mentioned that our EBITDA grew by 7.3% in the second quarter and on slide nine we show that.
Our l. tissue essays adjusted EBITDA margins also continued to expand every year and reached 44% in the second quarter that included $5 million of mobile losses, and if you were to exclude that our EBITDA margin would have been 44.2% in the quarter and thats over that's 800 basis points higher than it was three years ago. When we completed the Cablevision acquisition.
And as you can see 170 basis points higher than just in the last year alone.
That's substantial margin improvement as we often discussed is supporting higher investments in all of our growth initiatives and as always we'll continue to look for ways to optimize our cost structure further the mindset in our efficiency practices are really ingrained in the Companys culture at this point.
Turning to the next page, we've got a breakdown of our capital expenditures, which increased year over year as planned due to our growth investment in fiber, our new home build and some spend on DOCSIS 3.1 and of course mobile.
Our total capex intensity was 12.9% in the quarter.
As a percent of revenues, but if you strip out fiber a new home build.
That that percentage would have been below 10% and you'll recall that thats, what we see as our long term recurring capex level.
Our mobile Capex is certainly very limited since we've already completed the core network build and it's only a relatively small number of stores that were upgrading given that our product will be have more of a digital first focus when we launch.
Turning to slide 11.
Here, we're showing our usual free cash flow waterfall.
You'll note that we generated $472 million of free cash flow in the quarter, some of which was absorbed by the Cheddar acquisition, which we completed in June .
We saw cash outflow and from our financing activities of $600 million for share repurchases and that was at an average price in the quarter of $24 per share our cash taxes remain very limited and cash interest we expect to come down with the recent refinancing activity. We've done this year as well as what we expect to be able to do.
Over the next 12 to 24 months.
And speaking of our balance sheet.
Slide 12 summarizes our debt maturity profile at the end of the quarter. This is pro forma for the recent 1 billion 2030 senior notes that we issued in July and that was mainly used to repay our revolving credit facility in full and it's worth noting that that financing was our lowest ever.
Cost for an unsecured note issuance that was at 5.75%, which certainly underscores the continued strong support that we are receiving from the credit markets.
And just to recap for you our average weighted average life of debt is 6.3 years.
Our weighted average cost of debt is 6.2% and 77% of that is is fixed rate.
And lastly.
With our Undrawn revolving credit facility as well as the cash in our balance sheet. We currently have liquidity of approximately $2.8 billion.
We have no major maturities in the near term and as you've come to expect will continue to be proactive in how we manage our balance sheet.
And then finally on slide 14, just recaps, our financial guidance for 2019.
As Dexter mentioned, we're upgrading our outlook for revenue growth to 3% to 3.5% and that compares to the prior guidance of 2.5% to 3%.
Year to date, we've grown revenues, 3.3%. So we're really in the middle of our new target range as of today.
We still expect EBITDA margin expansion, excluding mobile costs and were up 1.4 percentage points year to date in that regard Capex. We continue to expect in the range of $1.3 billion to $1.4 billion and Thats certainly supports all the growth initiatives that we've discussed and lastly, we expect to grow free cash flow. This year and that includes any mobile related costs and.
Our target year end leverage remains at four and a half to five times.
Our share buyback target for 2000, Nineteens 1.5 billion, although as you can see we've opportunistically front end loaded the program this year, given the lower share price.
And we've executed $1.2 billion of repurchases in the first half.
So you should expect a somewhat slower pace of repurchases in the second half excluding any M&A any M&A activity.
And just note that the new incremental three year $5 billion share repurchase authorization is equivalent to about 30% of our market cap and about two thirds of the free float. If you were to calculate that around recent share price levels, which really just illustrates the potential impact.
Of the Levered equity returns model that we are running.
And with that I think we will.
Close our formal remarks and open it up for any questions.
Thank you.
At this time I would like to remind everyone in order to ask a question. Please press star and the number one while your telephone keypad, we'll pause for this moment to compile the QD roster.
Your first question comes from Ken and then catches Schwark with Barclays. Your line is open.
[laughter]. Thank you a couple if I may.
One is on the light path. If you could just give us an update on how the process is going and in that context, how do you see your buyback BAF.
If that transaction was to be completed anytime soon.
And then secondly, when we think about the expense trajectory I guess, the big surprise every quarter is non programming opex and it looks like you came in lower again this quarter. So if you could just help us understand you know that.
The trend line there and.
How long this could go on and what the main drivers are.
Thank you.
Thanks Unlike.
We continue to review our.
Our strategic alternative there.
Yeah, as we were very clear when we entered the process.
This is an opportunistic situation for us.
This is not a must do and in all respects and so we're continuing to look at that.
Obviously have done a tremendous amount of work here.
We continue to like the trajectory of the business has seen our earnings release, the enterprise business is up over 5%.
In the quarter. So continues to perform very well I don't think it's necessary to.
To to think about how we're going to do.
Something regarding the buyback.
Should we do something like that will make that clear to the extent, we we announce something like that.
On the expense trajectory. It's a it's a interesting you mentioned non programming opex because that is something obviously that we don't raise in terms of the not quite sure anymore.
But it's clear that everything that we do on a daily basis, it's focused on revenue growth, but also on making sure that we're very focused on good capital allocation when it comes to our operating expenses and the trend line continues to be positive.
We continue to see a as I mentioned before and not necessarily home runs, but singles and doubles on lots of different initiatives that we embarked upon.
I don't think it makes any sense for us to list all those out to you.
But a quarter over quarter, we feel good about our margin growth.
Which is why we've guided the market to an uptick in our margins swing year over year perspective. So I think it's just that we'll continue to have that discussion quarter over quarter.
But we're on the right trajectory line, which is upward.
Thank you.
Your next question comes from Philip Cusick with JP Morgan Your line is open.
Hey, guys. Thanks.
First a follow up on the light path is this process is still ongoing and are you still in discussions with more than one potential partner or is it getting a little closer to the end or has it has it ended for now.
And then second on the wireless launch you said it imminent what remains to be done.
Before launching it sounds like everything is pretty much in place.
And any preview you can give us on pricing or packaging there. Thank you.
Unlike past it still is ongoing we still have a the opportunity here to speak to multiple parties.
Yeah, I think there's not much more to talk about them that you know that the process is a lengthy one.
It takes a tremendous amount of work at to separate the business and do the work to make sure that we are providing the right information.
On a network as an example, and making sure that.
We have all the materials available 23rd parties that are interested so I think Phil on that point, we will update the market when it is.
Timely to update the market.
On the wireless launch imminent nothing imminent.
So what else do we need to do I think we just no hang on watch the watch the tape, we're looking to launch as soon as practical and making sure that we're launching with and the best conditions possible for us to do so no indication here in price.
We're not ready I think you'll see that when we launch.
As part of the T Mobile transaction you extended your NVNO with sprint.
Does that change anything else like your renewal options or out of footprint rights.
Well to be clear, we haven't extended our existing agreement.
But as you saw from the deal Jays consent decree.
Our agreements expect to get extended through to the life of the consent degree, which is seven years from closing.
So we view that as you know plus or minus a four year extension.
Of our existing deal.
Other than that there's nothing really more to say about them that the base because the deal Hasnt closed yet so I think we'll see once that closes.
In terms of does it change how we think about things absolutely not.
We clearly have more time to think about it if if that's a that's one of your questions.
I think we are just as focused on launching currently launching successfully driving good momentum in our Standalone mobile business and hopefully benefiting from some ancillary benefits to our other businesses.
And then we will reconvene internally and see what the path is in the years to come.
Thanks Dexter.
Your next question comes from Brett Feldman with Goldman Sachs. Your line is open.
Yeah. Thanks in a few more questions on the NVNO you know just listening to dexter's comment it sounds like your opinion is that one of the key pain points for the consumer is we just pay too much for mobile broadband in so it certainly sounds like that's something you're hoping to address what the product and I can't imagine you would want to keep that much of a secret and so can you give us any sense as to how much upfront investment you want to make to make sure. The product has a successful launch and then what's the right way for us to sort of keep track of the product as it ramps to see that is driving value. It should we be greeting you want subscribers should we be greedy you want how quickly you generate EBITDA on key <unk> cash flow I guess, we just want to understand how you're thinking about the impact. It has on the business and then just the last one which is kind of an extension to Phil's question.
I believe the NVNO allows you to to market services, where you have assets and operations. If your business were to grow.
Organically or Inorganically does the ability to leverage that NVNO grow with your asset base. Thank you.
Sure I'm not going to pine on where their consumers take too much today.
For their mobile experience, but you'll see you know pricing.
Where we think.
We can be as we've said consistently that we believe that we have a standalone profitable business model in front of us.
In terms of our upfront investments clearly, we're going to put the right marketing dollars behind our launch.
As we enter the back to school season.
In terms of how to track a this.
We are very very focused obviously and number of subscribers.
Making sure that those subscribers are profitable subscribers by being very very thoughtful about managing the traffic.
I think you know you could take this offline with Nick and walk through the business model in terms of the key KBR to be tracking, but obviously number of subscribers is important.
We don't believe we will ever be.
Marketing negative gross profit subscribers and so then the whole question is how quickly can we ramp up to EBITDA positivity, which we think we can do in relatively near term basis that we have publicly said.
Historically that within 12 months, we we believe we'll be able to deliver EBITDA positivity there.
In terms of our NVNO contract, yes, we can market the places, where we do have assets and operations.
Clearly an expansion organically or inorganically will allow us to market more broadly in more geographies.
Thank you.
Your next question comes from Craig Moffett with Moffettnathanson. Your line is open.
Hi.
I Wonder if you could just comment on your thoughts about video. There's your your larger peers I think have been quite outspoken over the last couple of quarters ended the and on this round of earnings calls about.
Their willingness to let video subscribers go if they're not profitable.
Hey, Where's your thinking about the importance of video in the bundle and whether it does or doesn't.
Keep make broadband stickier and that sort of thing.
Thanks, Craig I mean listen we've been consistent here.
Which is number one video with a profitable.
On a product for us.
Two it does have good stickiness relative to other products, obviously, mainly broadband.
So we're going to continue to invest the resources.
In the video product, we continue to see I think as you've seen six straight quarters of better video.
Year over year performance here.
So I think you know this continues to be a very quick one across I don't think we share some of the comments.
That you're hearing from our other peers and we've been consistent that we maybe have.
Somewhat of a unique footprint.
In the New York Tri State area, which is a very very high.
Video bundle consumption, a market and also a very underpenetrated gunlink video market.
Which is taking advantage of one the LTC one launch.
Which has been very very strong success and secondly, maybe some of the difficulties of other of the other video providers, namely satellite guys, which we're able to take market share from so were seeing continued good market and momentum in both of our footprint on the video products will remain very very core to our strategy.
Dexter would you imagine there might come a time when wireless it's sort of substitutes for video in the importance of the bundle and the way that customers think about it.
I I wouldn't use those words, Craig I'm not so sure substitution is the way we think about things, we're all about incremental value creation.
Here. So you know mobile itself number one as a standalone product, we think it's a profitable product for us.
Number two obviously to the extent that we can get bundling effects.
A benefit that is.
I think on the cake for us.
It clearly has been positive in some of the commentary from our peers, but also in our experience of our sister company, who sees great bundling effects from adding mobile, but it's it's not a substitution.
Today, we are just adding a very attractive in our minds and profitable or additional services.
To to our lineup and it's not just in the the pure telecom space. It also is in the advertising.
And new space as you know so we're going to continue to try and deliver great shareholder value here across multiple products until there is a point in time, where things may be less profitable and we'll make those decisions a point in time.
Thanks, Doug.
Your next question comes from James Ratcliffe with Evercore ISI. Your line is open.
Hi, one on mobile and one on for you if I could on the mobile front can you talk about how extensive you expect to be why OTI to be out of the gate and how long it will probably take for you to start to explore ABS.
For your handset financing and on the video side and we're clearly seeing a lot of time way around.
Regional sports networks at the moment and Anthony the Optum business has exposure to some of the most expensive and Standalone. How is your view on the value of those networks.
Versus the cost involved at all thanks.
[noise] listed on the B Y O D side, we're going to obviously offer B Y O D.
We think the simplicity of fall off or when we launch it will lend itself to a good be why are the experience.
But at the same time, we've got great partnerships.
With the big handset providers, and we'll have a lineup available for people to acquire handsets as well.
In terms of handset financing, we continue to look at a different financing and working capital.
Advantageous structures.
But you know that's not necessarily core.
A core to our discussion today in terms of when we are going to provide a handset financing and in what form but it'll be very very clear when we do launch and in subsequent quarters as we add new services and products to our mobile.
That those those types of features.
We'll be very clear to our consumers.
On the video side listen the arts and experience.
You're very right.
To flag that or maybe the cost is not necessarily permanent.
As to the viewership numbers in terms of the ratings that you could see.
But we do believe that the particularly the New York Tristate area, the our sense continuing to be important.
For video consumers.
And I can't really give you my personal perspective on the value of those networks, but I do think that we have good relationships with our son partners in New York Tri State area and other parts of the funding side that will continue to have you know a good contract negotiations with them as we look to renew those contracts going forward.
Great. Thank you.
Your next question comes from Andrew Beale with a Red T. Research your line is open.
Hi, Andre <unk> current few more quick roaming ambient area I'm just wondering if you could cool current corporate group group are you about the different current price per gig.
When you are on or near your network on what.
Uh huh.
We grew from <unk> versus <unk>.
What it looked like away from your network I'm, just trying to get comfortable to pick through.
You know how much more north aggressive you could be.
Secondly.
Just wondering if you made any progress.
And Youre right in the remedy discussion on enemy in there and the dramatic Hamburger on I'm just talking about.
You might remember from me this is Marie forget.
What I can tell you the new one on sprint and T mobile mobile infrastructure and being or what do you.
When you use it.
Thanks.
[noise]. Thanks, Andrew I'm does it a couple of things I think listen on them you know.
Price per gig discussion that we have not spoken openly about what those price points are it's clear and it's you know I don't I don't mean to be pandering to the obvious but on network is cheaper than sprint and sprint, it's probably cheaper than 18 Tiet right.
So I think you know, we're very focused on making sure that we maximize offload onto our own network.
The second.
Oh port of call becomes obviously, the sprint network, which is the primary network.
Which.
Which were tethered to and then lastly to your point on 18 T data roaming contract, which is really for the edge side of our business, where the sprint network does not have a good coverage. So you know the the sequencing the waterfall of all of the economics are such we all of US expect the 18 T. A usage to be significantly and very very large quantum's a lot less than the than the sprint won and similarly, obviously the sprint usage relative to our own a Wi Fi network to be a fraction in terms of the usage. So we think overall the economics continue to be very compelling for us.
And you'll see with our price points and as we talk about a price point.
More openly and we can walk you through those economics are more clearly.
On the remedy aside listen you guys have seen as much detail as we have seen.
In terms of the consent decree and that commitment.
The new T mobile has done a with the FCC I can't really talk to you about anything more than that is what's out in the public domain in terms of what dish is received we do not know the detailed outside of whats been published in the consent degree to what dishes has has received nor are we in any position to talk about what we have.
Recede, because we have never been in discussions one on one on these types of very specific remedies.
With what the DJ and the FCC. This has really been in discussion, but they've had directly with some with chemo and sprint.
And that is in the public information.
Okay great.
One additional one I mean.
I mean, it's more a question about this is agreement are they describe them back to it seemed like there was a carve out but could apply to you with the permits its strategic.
Investor in this world.
I didn't know if my reading was the same time as yours is not something that.
I was hoping you would give us more than just a technical profitability and you have many food that's correct.
[laughter], Oh, I have a lot of thoughts, Andrew, but [laughter] listen I think as I read it and from memory here.
This could really a time periods when dish is probably not incentivized.
To do things with third parties, and then becomes progressively more incentivized or the value of a change of control potential feature.
Or a co investment by a permitted.
Strategic comes more advantageous than I think off the top my head that's three years.
Into the consent decree, where there is a a shift.
At which point it may make sense for them to have more strategic discussions with third party.
What do we think about that I think it's obviously a an opportunity.
Has to have a discussion at the right time and if it makes sense.
But again those are things that are so far away from our thought process today given that we're so focused.
Just on the launch of our existing product.
We do have a seven year, plus let's call it because the transaction hasnt closed the consent decree.
The seven year consent degree fund closing so we've got a seven year plus lifeline of our existing NVNO and the time to to thinking to speak to all the relevant parties out there as to the next step and evolution of our product and potentially network to the extent that makes sense.
Great. Thank you.
Your next question comes from Doug Mitchelson with Credit Suisse. Your line is open.
Oh, thanks, so much ducs or you're still building out wife, I nodes in the New York City area I'm not sure. If those are the target coverage or other metric you would discuss there and then I think the main line of questioning fiber strategy is a big differentiator for all these in addition to your mobile strategy you've made comments on this in the past, but I continue to get a lot of investor questions.
On the fiber plan. So if you could just maybe walk us through again the cost per home passed is substantially below what other companies in the U.S. and been able to achieve so what's the secret sauce Aaron.
Can you just confirm sort of how many homes passed to me and you think fiber will have and then the second part of the fiber question is just when do we start to see proof points and the potential to remarket against violence, and upsells faster speeds and the cost of Capex benefits, you've previously outlined Missouri.
You know geography, or a market you might launch you know.
Product first to be able to report back in a certain timeframe anything on those lines. Thanks.
I'm fast and furiously, Doug writing down all your question. So let me try and go through these one by one yes, we are continuously regularly.
Enhancing our Wi Fi network in the Tri State area that is a a an annual commitment that we do as part of our capital expenditure budget and we'll continue to do so not just for mobile usage, but obviously for our residential and SMB clients to go get access to to I phone network.
In terms of the fiber strategy Ah, yes. It it is core to our plan.
I think the secret sauce is none other than we have a attractive footprint that we're working with in terms of the geographic in the densities features and the relationships we have with the local communities.
But more importantly, I think the secret sauce is that.
Ourselves and our sister company.
Ah at LTC Europe have been rolling out fiber for many many many years and very very large quantities.
Which is probably unique relative to some of the other providers here in the U.S.
Who have not done as much a fiber to the home robot as we have.
And probably don't benefit from relationships such as we have with.
With L.T. slab.
As an example, which is core to to our fiber strategy and really all of our infrastructure strategy.
That we have globally between L., PCR and LTC was saying.
In terms of the number of homes I think you know we are looking to fiber rice the entire optimum footprint. The Tri state area, which is 5 million homes weve been consistent talking about that.
We are currently at about 300000 homes ready for service.
And about a million homes tables or pass today, which you will then become obviously ready for service as we continue to drive our investment.
In terms of proof points.
A couple of things number one is we've been also very clear that we are upgrading.
And the interim our optimum footprint to one gig on DOCSIS three dot one.
So that is almost complete will be complete by the end of this year. So our entire footprint pretty much will be one gig ready by the end of this year. So in terms of.
Competition relative to a files one gig product, we will be delivering that competition before year end.
Secondly, I think the most relevant proof point relative to our fiber to the home is that we believe we're going to be a 10 gig ready.
As early as the first half of next year.
So we will market a 10 gig product, we're expecting to be able to market a 10 gig product.
Up and down.
Within the first half of 2020.
I think that is probably the best proof point for you in terms of our ambitions.
To create a differentiated experience for our customers, but also provide our customers with more alternatives for an advanced product relative to to file two other any other of our competitors out there.
All right. Thanks, so much extra.
Your next question comes from Marci Ryvicker with Wolfe Research. Your line is open. Thanks I have two the first from mobile are you launching across your entire footprint on day, one and then my second question related to it they're raised to your revenue guide is that all just from advertising or something else also driving that.
On mobile, yes, it's across the entire footprint on the res I think at the confluence of all of our divisions.
Doing well or better than expected.
Or you have to remember Marci that we are launching mobile also.
In the second half so given that we are imminently launching Mac.
We feel comfortable that that will produce also on the sort of revenue. So it's not a advertising per se I think I've flagged in and the presentation part.
Of our discussion today that advertising on a year over year basis will be softer given that.
Last year, the third and fourth quarter were heavy political quarters.
So it's clearly not the advertising side of the business that is driving that I'm really not seen or b to C business.
Beat expectations at least in terms of our expectations of the performance.
The b to B to B business continues to do extremely well.
Advertising per se is doing better on a relative basis.
Than our peers given the investments we've done there Cheddar, obviously, it's come online and it's going to deliver some incremental revenue contribution and then as mobile which will not be zero. So it'll just be higher than zero and that will also be contributing to the top line. So we feel good about our new buttons.
Are there and we'll see how that pans out.
Thank you.
Your next question comes from Ben Swinburne.
Stanley Your line is open.
Thanks, Good afternoon.
Just Charlie on the balance sheet going back to your guidance slide are you or should we expect or are you expecting to be at a.
Five times or below level by the end of the year, that's sort of the implication of the slide but I wanted to just ask specifically because you've been.
As you know operating above that level. So just wanted to just start there.
Well, yeah, Ben Thanks, that's one of the El Duque way basis.
And we you know we have because of just the seasonality of the quarters and so on that's why we're a little bit higher this quarter, but as you also know we were within that same guidance at the end of last year and it's our expectation that that's.
World, where it will be like wise at the end of this year.
Okay got it.
And then a question on the.
You know sprint T mobile front I think they had built out dating sprint I think 19000 small cells I think that was the number I'm assuming that this transaction between sprint Timo closes do you guys have any expectation as to whether they're going to add more.
Small cell capacity on your network or or what are your expectations around that if any.
[noise] Ben 19000 is the right number I think that's a a dialogue that we're going to have with the new timo.
Whenever that that comes about.
I you know I don't think were Privy yet to their network strapping, The New York Tri State area as to whether.
You know, they're going to keep their own existing T mobile network.
Or prioritize the sprint network, which has been heavily invested in.
Or do some combination of both right. So I think the expectations, obviously is that they have the ability.
To use us.
To to continue densify their network.
I don't see why they wouldn't want to do that.
No, but I can't say for certain that that's what they're planning on doing.
Okay, and then just lastly on back on the advertising question I guess Dexter how did you noted you have cheddar closed and you've got a number of news businesses.
You know any any update on sort of how you feel about these businesses and how they are performing relative to expectations. Whether you think you know talking in more digital media assets might make sense for the company as you build out this business and I don't know if you guys who want to size. The cheddar contribution in revenue for the back half, but I thought I would at least ask.
Yeah, I mean listen we were very clear that the Cheddar acquisition was very specific.
Two things.
Number one is it fits a.
And.
Product that we don't have in our portfolio of news and so now we have a full suite of a news products both on the linear side and the digital side, and secondly, bringing onboard and exceptional management team that's proven out a two to be differentiating.
And not only driving a news coverage and good content.
But also being exceptionally good at a a driving national advertising.
And you know what are we two months into it today I can tell you that we are thrilled to have John Steinberg and his team as part of LTC USA. He has already done wonders internally with drug strategy integrating the various news assets.
Thinking about the next week.
Products.
And content that we can deliver and a very unique fashion.
And has pushed the organization towards let's call it new.
A new thought processes and a new partnerships with third parties, which were not part of our quiver of things that we were thinking about are doing and so it I know it's early in a in the life of our experience with the with charter and the team, but I think we're over the moon, it's probably a good.
A good example of how we feel about about that acquisition.
In terms of the contribution I'll, let Nick kind of drive that discussion with you been offline.
And to the extent he's willing to do that with you.
Okay [laughter] [laughter].
Your next question comes from Jonathan Chaplin with New Street Research. Your line is open.
Decks, just a high level question to start off so that was talked at the beginning of the process with sprint.
And T mobile the cable could get involved and maybe pick up some nationwide spectrum.
And I'm I'm it.
Seems like it could be a great opportunity for you guys collectively obviously, maybe not such a great opportunity for all t. So on its own but I'm I'm wondering wondering what might have stood in the way of a.
You guys collectively taking advantage of an opportunity like that.
And then I'm wondering just more broadly how you guys think about spectrum down the road given the size of your footprint would you be interested in C band or Crs.
In your own right or is that something that only really makes sense in the context of the cable industry when acting together.
On the first one listen you know there really wasn't a.
Hey, necessarily an opportunity here to get nationwide spectrum, I don't know what our peers.
Our thing, but the process.
Was very much away from like let's call it at least LTC, let's say.
In terms of opportunity.
To be a potential acquirer of those summer any of the third party assets being divested Tonight. So we were never given the opportunity to look at it and so I can't I can't say anything more than that because I don't know.
In terms of spectrum down the road.
We have been obviously looking at all the different alternatives as to to the extent we wanted to.
Build anything else from a from a.
Future standpoint, it's really too early to tell as to.
A what we would do or what we would really think about doing a given that we are you know on the eve of launching here.
Our infrastructure based on being now so.
I can't really comment on anything because we don't have a path.
Until we really see the success of this business and are able to map out the right capital allocation strategy going forward. So to the extent when you want to allocate more capital to mobile business.
And one quick follow up if I may Dexter is there an opportunity for you guys to improve your deal with T. Mobile further as they go through their discussions with the states could you get full core controlled way dish has potentially without something.
Did you try to get in the last set of discussions and they weren't willing to give.
Listen I I don't want to to to be presumptuous on anything here.
Which is you know we've been very clear as to why we initially opposed the transaction.
The FCC Indio, Jay have gone to great lengths.
To assuage or or our fears and our concerns.
And so we got a lot of great great benefit.
Out of out of both agencies.
I don't know what the state agencies are looking for and whether or not.
They will be pushing for additional things for people like ourselves or other third party competitors.
Oh, but anything's possible Jonathan you know a week, we clearly will take advantage of opportunities to the extent they are present.
For us to get improved improve deals, including the things that you talk about in terms of real full network control cornet will control, which is really driven by the entity that the handoff side to it but.
You know we already have very good core control.
Which is already a big advantage and we'll see what happens over the next month.
Got it thanks, Thanks, Sir.
The last question that we have time for today comes from the line of John <unk> with you. Yes. Your line is open.
Okay, great. Thanks, maybe two quick follow ups on wireless and one on data.
Texture, the press reports say that.
With the.
You are currently testing with employees at a price point of 25 Bucks a month for unlimited service is that not the right price or we should think about going forward.
And number two.
Right and you may have touched on this a little bit earlier, but if if.
[noise] Ltcs acquired by say another cable company does that does the current NVNO terms would they travel to the acquired.
Companies a cable company that's it on wireless and then on the data side.
13% growth in data.
Again is sort of industry, leading nice acceleration from last quarter.
Now you anniversary the July price increase, but we should talk about the runway you have in terms of growth on the on the data side and do you think you can you can maintain that that industry leading growth going forward. Thanks.
So John I don't mean to be coy, but you see the price point for employees, we see the price for employees I think when we launch.
You'll see the price point that will come to market with Mike. So I think that continues to be something that we're going to keep close to our best until we actually launch.
Got me I'd give it a shot down.
[laughter] good shot [laughter], if all the else. It's I'll tease gets acquired I think it's really based on the the proper structure of the transaction. A you know you do you're not privy to the actual agreement.
But there are scenarios that would clearly see that that deal survive and so we think that's an attractive asset that we own.
Oh for us to to allow that to survive.
All the data side, Yeah, I mean listen I'm, we're very pleased with our data revenue growth performance.
You know we continue to believe we have incremental runway going forward.
What we are seeing primarily and I know that we're lapping a price increase from last year. So we may see some year over year comparisons in Q3, and Q4, which all are less than the 13% we're seeing here in Q2.
But the most important thing that we're seeing is a super Super majority.
Of this growth in data revenue is driven by up tiering of our clients.
Right proactive upped hearing on their behalf.
Of higher and higher speeds and so we've seen that consistently you know if you go back to all of our.
All of our Investor relations material, you'll continue to see the curve going in the right direction from from left to right in an upward trend.
We don't see any slowing down of that today.
Yeah. So we do believe that we can see how good a good runway and as I mentioned on answering one of your colleagues questions here you know with the launch of.
A fiber to the home.
10 gig product next year.
We obviously between one gig and 10 gig have a lot of room again to have multiple tiers of products, which are not available to consumers nationwide other than through us.
So that's really the differentiator for us that we continue to drive great network investments good capital allocation decisions.
That we believe will continue to drive good upward trends in our businesses I can't tell you, whether you know quarter over quarter, we're going to be at 5% or 13% or 20% or something like that in terms of our data revenue growth.
But all the trends continue to push in the right direction.
On the Datacom side.
Great. Thanks, guys.
[noise].
So without you guys back to the presenters for any closing remarks.
Thank you. Thank you for joining and we look forward to catching up with you next few weeks. Thank you.
Thank you.
This concludes today's conference call you may now disconnect.