RDOC-Related Costs Up, but So Are Opportunities: Charter
Charter Communications is dealing with higher-than-expected costs for its Rural Deployment Opportunity Fund buildout but also is having more success than expected in penetration and number of passings being developed off RDOF projects, CEO Tom Rutledge told analysts Friday as the company announced Q3 results.
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RDOF work is facing supply chain and labor challenges, Rutledge said. "The cost of money and the cost of labor and the cost of everything will affect our competitors' ability to build as well," he said. Chief Operating Officer Chris Winfrey said Charter is using fiber incrementally and may decide to redo portions of its network with fiber longer term, but it isn't planning a fiber overbuild of its network. Chief Financial Officer Jessica Fischer said the company expects to ultimately spend $1.5 billion this year on rural buildouts.
Charter ended Q3 with 28.3 million residential internet customers, up 300,000 from the same quarter a year ago, including 75,000 added in Q3. Like Comcast this week (see 2210270043), Charter said it had far stronger mobile growth, ending Q3 with 4.7 million mobile lines vs. 3.2 million a year earlier. Rutledge said the 396,000 additions in Q3 was its best-ever quarter. Winfrey said broadband additions are being depressed by fixed wireless picking up some former DSL customers, though fixed wireless reliability and scalability should bring some of those former DSLers to cable eventually. He said a small amount of its market share also returned to mobile-only service. "Market transaction volume will eventually pick up, and so will our Internet net adds," he said.
Verizon and T-Mobile fixed wireless growth "means that cablecos Charter and Comcast hardly grow any longer [but] their Q3 is slightly better than their Q2," tweeted Tefficient.
Charter is still reporting financial losses for wireless, but it has a clear path to profitability because it's just starting to unload wireless traffic onto its CBRS spectrum, MoffettNathanson's Craig Moffett wrote investors. He said wireless accounts for more than 5% of Charter revenue, but the company has a small wireless market share in its footprint, giving it "a long runway ahead."
Charter had 14.6 million residential video subs in Q3, compared with 15.3 million a year earlier. Winfrey said cord cutting is driven primarily by the price of video and the programming rate increases that exceed inflation. If there's a recession, Rutledge said, video "will be challenged." Broadband, meanwhile, is "a staple product," insulated from recession, Winfrey said. Wireline voice subscribers were 7.9 million in the quarter compared with 8.8 million a year earlier. Fischer said video customer numbers were impacted by a Q2 rate increase.
Charter ended Q3 with revenue of $13.6 billion, up from $13.1 billion. Charter stock closed Friday at $368.24, up 3.7%.
Hurricane Ian will have a "very small" impact on Charter's Q4 results, Fischer said. She said about a million customers lost service, largely due to power outages, but the vast majority had service restored relatively quickly.
Winfrey, who assumes the CEO position Dec. 1 as Rutledge becomes executive chairman (see 2209210008), said he's "pretty committed to all things that we're doing today in terms of our strategy around products, pricing, package, service. I don't expect any seismic shifts."