Cableco Charter Communications added 63,000 broadband internet subscribers in the third quarter. Net adds in new markets hit 31,000 in the third quarter, accelerating from 26,000 last quarter. A note from New Street Research said the company passed fewer homes in new markets than expected, “and so the pace of penetration growth is tracking ahead of expectations.”
Charter’s third-quarter revenue of $13.6 billion grew by 0.2% year-over-year, driven by residential internet revenue growth of 3.7%, residential mobile service revenue growth of 33.8% and other revenue growth of 28.8%, mostly driven by higher mobile device sales.
Free cash flow of $1.1 billion decreased from $1.5 billion in the prior year, due to higher capital expenditures, mostly driven by Charter’s network evolution and expansion initiatives.
As of September, Charter had a total of 32.2 million residential and SMB customer relationships, excluding mobile-only relationships.
“We continue to make significant progress against the multi-year strategic initiatives we outlined last year,” said Chris Winfrey, President and CEO of Charter. “These initiatives drive continuing improvements in the quality of our products, and when combined with our customer-friendly pricing and packaging and high-quality service, will drive significant, long-term growth in shareholder value.”
On its earnings call, CEO Winfrey said that “given the greater subsidized rural passings and construction opportunity,” Charter may even look to partially fund those new markets by “very modestly slowing our network evolution plan” — which includes upgrades to its hybrid fiber-coaxial footprint.
Winfrey said Charter expects to add approximately 300,000 new subsidized rural (NSR) passings in 2023 and to accelerate that pace in 2024. In the third quarter, 78,000 rural passings were activated. He added that Charter is ahead with its Rural Digital Opportunity Fund (RDOF) builds and “will end up with more (rural) passings than originally expected.”
However, NSR said Charter’s results in core markets were “disappointing,” with adds of 47,000 way below their estimate of 79,000. While NSR expected stabilization in pressure from fixed wireless access (FWA), Charter continues to see some impact from FWA competitors in the lower usage and price sensitive customer segments of its residential and SMB businesses.
Charter is raising its capital-expenditures (CAPEX) forecast for the year as it pours billions back into upgrading its network and its Xumo business. The company now expects to spend about $7.2 billion in CapEx, up from prior guidance of $6.5 billion to $6.8 billion. That excludes line-extension CapEx, which is still expected to be about $4 billion for the year. The $7.2 billion will be put to work upgrading and maintaining the cable company’s network. Some of it will also go toward sending Xumo stream boxes to customers. Xumo is a joint venture between Charter and Comcast that offers free ad-supported streaming TV. Charter shares fall 6%.
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