Charter’s Winfrey: We remain confident about returning to long-term growth
Charter was the latest provider to see its broadband subscriber base dwindle in the third quarter as the FCC shuttered its ACP program for low-income residents.
During the third quarter, Charter lost a total of 110,000 Internet customers.
Amidst the losses, Charter reported that Internet revenues grew by 1.7% yearly to $5.9 billion despite the losses. The cable MSO said that promotional rate step-ups and rate adjustments were partly offset by lower bundled revenue allocation and a decline in Internet customers during the last year.
Speaking to investors during Charter Communications' third-quarter earnings call, Christopher Winfrey, president and CEO, said that if ACP had not been an issue, the company would have expanded its broadband subscriber base.
“If it had not for the impact at the end of the ACP program in June, we would have grown our Internet customers during the third quarter,” he said. “Importantly, we've been successful in keeping low-income households connected.”
Despite the near-term broadband losses, Winfrey noted that Charter expects opportunities for the cable MSO to expand sales of broadband wireless services to accelerate.
“We continue to compete well against wireline overbuild and cell phone Internet, each with expanded footprints,” he said. “And we remain confident in our ability to return to healthy long-term growth.”
Seasonal gains, misses
The third quarter for Charter was a time of gains and misses.
While it lost broadband subscribers, Charter fared well on the wireless side, adding 545,000 Spectrum Mobile lines and over 2.1 million lines year-over-year. Third-quarter mobile service revenues totaled $801 million, up 37.6% yearly, driven by mobile line growth and higher bundled revenue allocation.
However, video customers declined by 294,000, and wireline voice customers fell by 288,000.
Jessica Fischer, CFO of Charter, said it worked to manage the impact of the ACP program ending.
“The end of the ACP program drove higher third-quarter nonpay and voluntary churn among former ACP customers, for a total estimated third-quarter impact of approximately 200,000 Internet losses,” she said. “Incremental non-pay disconnects drove more than half of those losses, and the rest of the effect was primarily driven by voluntary churn, with a small impact from lower connects.”
Amidst the ending of ACP, Charter saw an uptick in broadband subscribers from seasonal back-to-school connects and work stoppage at AT&T in the Southeast.
Fischer noted that “fourth quarter customer results will include impacts from the storms, about 100,000 incremental non-pay disconnects, and some wagon voluntary disconnects, both related to the end of ACP.”
She added, “After those effects in the fourth quarter, we expect the one-time impacts from ACP to be behind us.”
Company revenue grew by 1.6% to $13.8 billion in the quarter, while adjusted EBITDA grew by 3.6%.
Addressing fiber overbuilders
Fiber broadband providers are one key emerging competitor continually nipping at Charter and other cable MSOs.
As for Charter’s FTTH expansion efforts, the company passed over 900,000 locations with fiber today.
This includes a mix of traditional incumbents like AT&T and Verizon, which continue to make ground in attracting new subscribers and emerging fiber overbuilders.
While Winfrey acknowledged more competition for fiber-based gigabit services, he said providers face various issues in building new networks, including getting a good investment return. He estimates that the overlap in its footprint is about 55%.
What we typically see with any new overbuild, and that's not new,” he said. “As you see an initial uptake, it can put a few points of penetration impact at the outset when somebody comes in for the first 18, 24 months, and then the market kind of settles out.”
He added that when “we look to historical wireline overbuilders, many of which never got to the stated penetrations that today people say are required for return, I feel pretty good about where we can go over time, how we can compete.”
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Sean Buckley
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