Charter Communications on Friday reported positive third quarter results, beating analysts’ estimates on both broadband and video subscriber metrics.
During the three-month period Charter added 266,000 residential broadband customers, up 6.4 percent from 250,000 a year ago. Overall, Charter added 308,000 broadband subscribers.
“For all the handwringing about saturation of the broadband business, and about AT&T fiber builds and Verizon’s 5G plans and the incursion of unlimited mobile substitution, Charter’s broadband base is still growing at a healthy 5.3%, a small acceleration from last quarter’s 5.2% rate,” MoffetNathanson analyst Craig Moffett wrote in a Friday research note.
Charter now has 23.3 million residential broadband customers, and more than 80 percent of those subscribers are paying for speed tiers of 100 Mbps or more. Charter said its DOCSIS 3.1-powered Spectrum Internet Gig service is now available in more than 95 percent of the operator’s footprint, and will expand to nearly all of its service areas by the end of the year.
On the video side, Charter lost 66,000 subscribers in the third quarter, but saw an improvement over last year’s loss of 104,000. The cable operator attributed the year over year improvement to fewer customers shedding limited basic packages than last year, and to sales of Charter’s Stream and Choice video packages.
Charter’s residential video ARPU was up 4.7 percent, which Moffett says “suggests a positive mix shift in video” where the loss of low value broadcast-basic subscribers is driving the mix of higher value bundles.
The company reported revenue of $10.9 billion, up 4.1 percent year over year, with residential revenue up 3.3 percent, commercial revenue up 4.3 percent, and advertising up 18.1 percent.
For the third quarter Charter reported adjusted EBITDA of $4 billion, up 3.5 percent. Costs related to the launch of Charter’s mobile service accounted for $66 million in capital expenditures.
Moffett pointed to Charter’s fledgling MVNO wireless offering, which launched across the operator’s footprint in early September, as the largest question remaining.
“There was a time when Charter’s advantaged infrastructure was thought to be critical to wireless,” Moffett wrote. “So much so, in fact, that Verizon apparently considered buying them. Whether that advantage would be best spent at retail or at wholesale was a prince’s problem.”
Now the questions of cost and future impact “are front and center,” according to Moffett.
“We are performing well through a very large integration, including completing all-digital and improving the quality and efficiency of our service operations. We have also significantly improved our products, including delivering faster Internet speeds with Gigabit speeds nationwide, and we have launched new products, like Spectrum Mobile,” said Tom Rutledge, Chairman and CEO of Charter, in a statement. “At the end of 2018, our integration of legacy TWC and Bright House will be largely complete and we will operate as a single company, with a superior product and value proposition. With significantly less customer-facing change in 2019, we expect continued improving service metrics with higher demand and retention, faster growth and falling capital intensity, driving meaningful free cash flow growth.”