Charter Communications at JPMorgan Conference: Strategic Insights and Challenges

On Tuesday, 13 May 2025, Charter Communications (NASDAQ:CHTR) presented at the 53rd Annual JPMorgan Global Technology, Media and Communications Conference. The company highlighted its strategic focus on delivering quality products and services, while acknowledging challenges in maintaining EBITDA growth. Despite a competitive market, Charter remains optimistic about its financial targets and business growth.

Key Takeaways

• Successful launch of Spectrum Life Unlimited, enhancing product offerings and customer engagement.
• Anticipated challenges in sustaining EBITDA growth due to political and market factors.
• Commitment to rural buildout with 450,000 new passings expected in 2025.
• Continued investment in AI and machine learning for operational efficiency.
• Strategic focus on mobile convergence and network evolution.

Financial Results

• EBITDA: Growth expected to be challenging for the remainder of the year, influenced by political ramps and previous rate adjustments. Mobile and AI/ML investments are positive drivers.
• CapEx: Q1 expenditure was $2.4 billion, with a full-year target of $12 billion, indicating increased spending ahead.
• Leverage: Anticipated to rise to the midpoint of the 4 to 4.5 times range.
• Revenue: Mid-market and large business revenue grew by 3.9%, supported by a 4.4% increase in PSU growth excluding wholesale.
• Sales and Marketing Expense: Projected low to mid-single-digit growth, indicating a slowdown for the rest of the year.

Operational Updates

• Spectrum Life Unlimited: Rolled out at the end of Q3, now expanding to small businesses. It’s driving customers to higher product tiers, particularly in mobile and video.
• Mobile: Year-over-year growth in net adds. Initiatives like Anytime Upgrade and phone balance buyout plans are enhancing customer retention and reducing churn.
• CBRS Rollout: Plans to cover all CBRS licenses by the end of 2023, with successful early deployments.
• Video: Almost all programmer streaming apps deployed, with a digital storefront planned for later this year.
• Rural Build Out: Commitment to 450,000 new passings in 2025, with construction challenges during winter months.

Future Outlook

• Capital Allocation: Belief in undervalued shares, with ongoing buybacks to enhance shareholder value.
• Rural Buildout: Peak years for passings are 2025 and 2026, with expectations of 150,000 passings annually in 2026.
• Mobile Penetration: Targeting 20% penetration of the broadband base, with continued emphasis on value creation through share buybacks.

Q&A Highlights

• Seasonality: Expectation of some impact on Q2 broadband net adds due to seasonal factors.
• Mobile Substitution: Returning to pre-pandemic levels, with anticipated slowdown.
• Pricing Strategy: Focus not primarily on price increases, but open to adjustments where necessary.
• Business Services: Opportunities in SMB, with pricing and packaging strategies aimed at improved sales.
• Network Evolution: Marketing symmetrical speeds in certain markets, with step two expected to enhance capabilities.

For more detailed insights, readers are encouraged to refer to the full transcript.

Full transcript - 53rd Annual JPMorgan Global Technology, Media and Communications Conference:

Unidentified speaker: Value for the company. We’re coupling that with the work that we’ve been doing around investing in AI and machine learning to make the jobs of our customer service and field technicians easier to do and to make them more successful in being able to serve our customers better. What that does is to over time also allow us to serve customers more proactively and drive down the number of transactions that we have to have with the customer from a billing and service perspective. And when we drive that down, that also makes the business operate more efficiently from a cost perspective. So you pull it all back together, it’s all aligned with the strategy.

It’s been the same strategy for a long time. We’re providing high quality products at prices that customers can afford and that create value for customers and coupling that with high quality customer service which we think is the right strategy to grow the business.

Unidentified speaker: Great. And then some touching on well, coming back to something you just touched on there. So the brand relaunch with Spectrum Life Unlimited launched in September and based on 1Q results, the strategy appears to be working as you touched on there. Where are we in terms of sell in and attach rates? Is that still ramping?

I mean what inning is it in terms of that rollout?

Unidentified speaker: We’re always tweaking the plan, but the rollout was really at the end of q three. We rolled to small business then sort of early in q one. So I think it’s been kind of across the footprint, at least it it was from most of the last quarter. But it’s doing the things we wanted it to do. It’s it’s selling more products per customer, particularly when you think about mobile and video.

It’s driving customers into those higher product tiers which allows it’s really you can take more total price because you’re providing more value inside of the bundle to the customer and really earning the value that you’ve put in. And I think it then enables you to be competitive against and in the new format really both fiber and cell phone internet in what you’re delivering in the market. And so we continue to be happy with the results that it’s been producing. I will tell people I think that it’s being successful at the things that we wanted it to do. It’s still competitive marketplace, right?

And so while the product is successful in what it does, we’re in a competitive business and we’re competing well, but the market is what it is.

Unidentified speaker: Yes. I guess sticking with that theme for a second. So 2Q broadband net adds as you look out and expectations, why should we be thinking about seasonality on a sequential basis? Over the last couple of years we’ve talked about between other competition as well as more maybe more maturation within the market, you’ve probably seen some of that seasonal shifts probably taper off to an extent, but in 2Q I would imagine you’d probably expect some level.

Unidentified speaker: 2Q I still expect to have some seasonality impact. As you mentioned, over the last several years it’s been more muted, but I think there’s still seasonality in Q2. And

Unidentified speaker: then you touched on within just speaking to Spectrum Life Unlimited, just the ability to earn price, right? But as you think about that product rollout and the focus on maybe managing promo roll offs and I guess particularly against this macro backdrop, does that change your view at all of taking price and maybe passing through programming cost inflation?

Unidentified speaker: So on the video side in particular, I think we’ve done a ton of work over the last year and a half to make sure that we were adding the value back to the video product and that we were enabling ourselves to be able to sell also skinnier packages that had customers wanted, what customers wanted but were also what they could afford. And so from that perspective, I think I’m comfortable with our ability to adjust for programmer rates to the extent that that’s necessary. Our strategy has never been to grow the business primarily by taking price, right? And that continues to be true. That being said, I think where it’s appropriate, we’re willing to make adjustments to rates and there’s nothing in macro right now or in consumer behavior that says to me that we wouldn’t be able to do that.

Unidentified speaker: Got it. And back to broadband for a moment there. On the call, Chris noted that mobile substitution still remains below pre pandemic levels but continues to normalize. Bit of area of focus coming out of first quarter results. Any notable change, I guess, in mobile substitution trends in 1Q relative to the last several quarters in terms of that return back to pre pandemic levels?

We continue to see sort of reversion in mobile substitution consistent I think with what Chris said. We sort

Unidentified speaker: of expect that as it comes back to where it was in pre pandemic levels that it’s self limiting and so that it will start to slow, but we haven’t seen evidence of that yet.

Unidentified speaker: Got it. Okay. So now shifting gears to just twenty twenty five EBITDA expectations, you reported a strong first quarter excluding a one timer. Tell us, is this level of growth sustainable in the second quarter and before maybe comps get a little bit tougher in the second half? And maybe what are some of the underlying drivers?

Durable within that outperformance, I guess, the first quarter?

Unidentified speaker: Yes. So as I think you’re pointing out, I think EBITDA growth is more difficult over the rest of the year than it was where we were in the first quarter. Some of that is because political ramps even starting in 2Q, right. Some of it is because I think when you get to August, we’ll lap a prior year rate adjustment and absent doing something with rates on our side, the comps become more difficult because of that. On the other side of that, I would point out, so the things that are driving our ability to say that we plan to have EBITDA growth in spite of those headwinds are really that the business is performing extraordinarily well on the mobile side and mobile does generate sort of financial growth.

And so when you think about the impact that mobile has on EBITDA over the course of this year, it’s quite positive. And in addition to that, the things that I talked about, those AI and machine learning plans that we’ve been doing as well as the investments in tenure and the impact I think that Chris talked about in Q1 that having on service rates and how many transactions we’re having to have with customers. It’s that improvement that I think is driving some of our expense outlook, particularly in cost to serve that creates it’s helpful in the face of those headwinds to getting to our plan to grow EBITDA for the year.

Unidentified speaker: And as you think about the AI, ML and other just multi year focus on improving the customer experience and investing in your ten year sales force to me, a longer tenured sales force. Is this cost of serve tailwind, I’ll call it? Is this multi year? Is this opportunity perhaps?

Unidentified speaker: Absolutely multi year. And I think we’re early in our evolution of tools that we will bring for agents and for the way that we interact with customers over time. I think the potential to drive down customers’ need for service by proactively fixing things in the network and in our business. And then in addition to that, to make those service interactions more efficient and even sales interactions more efficient by driving better tools for agents and for customers continues to ramp over time. It’s difficult to say sort of when you reach the peak benefits of that, but we are far from it.

I think there are years of goodness to come.

Unidentified speaker: And the cost you announced cost program last year to focus on longer near term as well as longer term cost efforts, but nothing that would hinder acquisition strategy. There maybe longer term opportunities that are still on the come of programs that are perhaps in flight that we should be thinking about or any chunky opportunities to

Unidentified speaker: Chunky. So there are certainly things that will continue to have an impact over time. And I think there’s always a drive to make the business more efficient, but there are projects that because of the way you implement them it takes six, twelve, twenty four months to get them all the way into place. So, think there is still some goodness from that program to come. But what I would tell you is that in the context of what really drives the costs of the business, the thing that drives the cost of our business is how many transactions you have with customers, whether those be sales or service calls or billing calls or truck rolls.

And the way that we can really make the business more efficient is to make those types of activities more efficient. And the way that we will get there is around investing in employee tenure and investing in the tools and service capabilities that make us more efficient in delivering those transactions, as well as with the network upgrades, putting new parts in the car, which then will make it run more efficiently and make the business more efficient going forward.

Unidentified speaker: And thinking about the transaction side for a moment there, Spectrum Life Unlimited, right, you have maybe higher Connect activity, higher SAC to an extent, perhaps drove to some partially higher sales and marketing in the first quarter. Is that how do you balance those two, I guess, in terms of the efficiency side, but your new pricing and packaging strategy trying to drive a higher level of Connect activity, is that a pressure that we should anticipate continuing?

Unidentified speaker: If we have higher Connect activity and it generates more commissions and that puts some pressure on sales and marketing expense, that’s a good day, And so take that problem all day long. I’ll tell you from an expense outlook perspective. So growth, we’ve been a little bit higher, and I’ll try to get the words right, in our marketing and resi sales expense growth over the last several quarters. When you look at what I said about outlook for the year, which I think is low to mid single digits on that growth line, that means we have to grow at a lower rate over the rest of the year. That’s not a lower sales expectation.

It’s because we have some efficiencies coming inside of that space. I’m still quite confident in the outlook. But it’s because of some work that we’ve done behind the scenes on that side.

Unidentified speaker: Got it. Okay. That’s helpful. Now switching to convergence and mobile for a moment here. So net adds did reaccelerate in the first quarter.

Is that just entirely driven by the Life Unlimited gross add and churn benefits? And help us maybe think about how your new pricing and packaging bundle value proposition is resonating in the market. Just trying to think about that.

Unidentified speaker: Yes. So just to make sure that we’re talking about the same thing. So I think net adds grew in the year over year in the first quarter.

Unidentified speaker: Yes.

Unidentified speaker: If you look at the sequential, we’ve been in that 500s range for a few quarters. Pricing and packaging is not the thing that the only thing that drives sales in mobile, right? So we’ve been working on rolling out some new products that are helpful. So in Q2 of last year we launched Anytime Upgrade, which is part of our Unlimited Plus plan. We’ve had a lot more uptake in Unlimited Plus because of that and because of the pricing and packaging we launched in Q3.

We also launched a phone balance buyout plan in that quarter, which targets specifically households with high numbers of lines to bring over those four, five, six line households. And that plan also has been going quite well. In addition to that, I think our brand recognition and sort of respect for the brand in the marketplace continues to grow. And so when you put those three things together and then you put on top of it what we did with pricing and packaging in Q3 and then in Q1, I think it’s really the combination of all of the things that gets you to a place where we have higher gross adds this year than what we had last year in Q1 and gets you to that place of being confident in our ability to continue to grow the mobile business at a rapid rate, even as our base has continued to grow. And so naturally the absolute amount of churn on that base grows.

Unidentified speaker: Right. So actually to that last point, I think we’ve talked so absolute or just the number of disconnects getting thrown off that larger base is going But I think churn on a rate basis is going on a percentage basis.

Unidentified speaker: On a percentage basis has been down, yeah.

Unidentified speaker: Yeah, what’s driving that? How do you think

Unidentified speaker: about that? So there’s a few things there. One is just maturity of the base, right. So newer customers tend to churn more than customers who have been there longer. As our base grows naturally, the churn rate will come down.

The other is that we’ve been improving processes in how we deal customers on things like billing and on our customer service infrastructure. I think I talked probably a year ago about sort of having integrated together some of our traditional broadband and video service with the mobile service. It’s those incremental changes that you make in how you deal with the customer over time that I think drive improvement as well. As well as there are real benefits to having customers have their mobile be bundled with their broadband and generating higher value in the customer relationship that way as well as just more stickiness to drive value in the

Unidentified speaker: And where do you think, I guess what 20% of your broadband base is now penetrated by mobile? What is the team’s aspirations longer term for where that can go?

Unidentified speaker: I am not going to put a ceiling on it. But I think that what I can say is we’re continuing to improve the product. We already deliver the fastest mobile speeds because of the benefits of being on our broadband network and the Spectrum mobile network. We can save customers hundreds or even thousands of dollars against their traditional phone bills by switching to Spectrum. And so when you put those things together along with that increasing brand reputation, the share of gross ads that we take in the market is much larger than the portion of our total footprint that currently has our mobile product.

And so I think there is a ton of opportunity for us to continue to grow at a rapid rate for years to come.

Unidentified speaker: And then with I think you touched on in your opening remarks about the CBRS rollout. I think Chris said on the most recent call you plan to be in ’23 by year end. Any early learnings in your current deployments?

Unidentified speaker: You know, we’ve been very happy with the results of our early CBRS deployments. We made sure to spend the time to make sure that we can make the network work well for mobile customers because it’s important to us to provide high quality service. But in doing that, we have been really successful with the deployment that we have in Charlotte. We’re deploying against a number of new markets over the course of this year and have plans over the course of the next couple of years to deploy against all of the CBRS licenses that we own. And we’ve already sort of included the capital for that inside of our multi year capital outlook.

So, from a sort of level of investment that it takes to deploy and get the benefits of that and the return of it across the footprint, it’s an extremely efficient use of capital. And so we’re excited about the results that we’re seeing already and very excited to get it deployed across the rest of the footprint.

Unidentified speaker: Awesome. Shifting gears back to video as you touched upon earlier. I guess this seamless entertainment still on the come and I think Chris described it as a call option, right, on the first quarter call. Can you maybe just help us in terms of thinking about the update on the timing of the digital storefront and maybe next milestones or steps from here before launch?

Unidentified speaker: Yeah. So I think we have, let me say, almost all of the programmer streaming apps rolled out. There may be two left to go. The steps after that. So we’ve been working, thinking about, think of it as the back office side, but how do you make it so that a customer can upgrade from an ad free version of the app to from a with ads version of the app to an ad free version?

How do you make it so that the customer has a good experience in moving from their current subscription into utilizing subscription that’s provided as part of our product? How do we make sure that customers know what products they have access to by surfacing that content in spaces like the Spectrum TV app? So we’re making good progress, I think, across all three of those fronts. And then sort of when you then the next one, so inside of this year, I think we plan to roll out and I say that maybe later this year, we plan to roll out the digital storefront which then will also allow us to sell apps to our broadband customers and allow them to sort of move in and out of those apps utilizing that digital storefront. And so there are a lot of steps in the path there.

And I think the team is doing a great job deploying each one, but the product will continue to get better over time and easier for users to utilize, which ultimately is the goal. We don’t want our customers to have to pay twice for content when we want them to get all of the content that they have access to. And so we’re working hard at making sure that can happen.

Unidentified speaker: Got it. And then on the business services side, as we think about SMB, PSUs there, the decline in PSUs has maybe accelerated a little bit over the last couple of quarters. Help us think about whether this is a function of just FWA and fiber pressures accelerating there. And you touched upon earlier the new rollout of Life Unlimited pricing and packaging in this segment. Maybe help us think about the team’s expectations in terms of bending the trend PSUs there.

Unidentified speaker: Yeah. The real pressure in SMB is related to cell phone internet and in particular the push there to for low utilization businesses. I think what we did around rolling out pricing and packaging inside of Q1 is intended to be helpful to that. But most of what that pricing and packaging is doing is the same things we see it doing in resi. It’s driving better sales of packages that include more products, including again mobile and video, and driving better tiering.

And I think ultimately we think that it’s set up to be able to deliver against the opportunity in SMB. We’ve always been underpenetrated in SMB relative relative in small business relative to our competitors. And I think we continue to be underpenetrated. So the opportunity is still there. There’s pressure from cell phone internet today, but ultimately I think what we’re pulling together will enable us to deploy well against the opportunity and grow again in the medium to long term.

Unidentified speaker: Got it. And then on the mid market and large business side, revenue was up 3.9 driven by accelerating PSUs with growth up 4.4% ex wholesale. Didn’t ask, but it’s good to see maybe the cell tower backhaul component of that wholesale is not as much of a headwind as it has been. Maybe we’re on the other side of the tunnel there. But as we think about the steady growth in volume improvement there, is this what are you seeing there?

Is this a durable trend? And again, are we near that end of the headwind on the wholesale side?

Unidentified speaker: The trend in medium and large business continues to be good and I think can continue to be good. It’s driven by few things inside of the large business segment. We had invested over the last several years in being able to deploy against particular verticals. You think about something like hospitality and have been successful in deploying against those verticals, which has been driving a lot of growth there. We’re excited now about the business changes that we made around moving the way that we address sort of small, medium and large business together as the spectrum business overall component of the business and through that doing a better job of addressing middle market where I think maybe we haven’t been as engaged in the opportunity and we think that there’s a good growth opportunity for us going forward.

And then you’re right. The good news about having shrinking cell tower backhaul is that some point it becomes smaller as a portion of the total base. And so even if it continues to shrink, the impact that it has on the larger revenue category is less impactful. And I think that’s where we are. It just has gotten smaller as a portion of the total.

Unidentified speaker: Okay. And then maybe as we kind of near the end here, as we think about capital allocation, I think you said on the call you now expect leverage to gradually increase to the midpoint of your four to 4.5 time range pro form a. And I think I asked you this, but why not accelerate the pace of that pace of buybacks bit faster?

Unidentified speaker: I don’t know that I need to tell this room, but the market is extraordinarily volatile right now for reasons that have not a lot to do with our business. And that being the case and having a buying program that works the way that ours does, I think that coming back into the stock over time will be is a good strategy for us. That said, you shouldn’t misinterpret it. We continue to believe that the shares are undervalued and that continuing to buy back our shares creates value for shareholders in the long term. And so we will be out there doing that.

Unidentified speaker: Got it. And then should we expect the midpoint of the range as you kind of made that pivot last year I think. Is this the new kind of longer term destination on the leverage side?

Unidentified speaker: So we’ve always said, and it’s true, we continue to evaluate the leverage range all the time. That being said, we recognize that there’s value to stability where we sit in our target. And so based on our evaluation today, don’t expect us we continue to target the midpoint of our four to 4.5 times target leverage range.

Unidentified speaker: And within that, as we think about CapEx, came in just a little light or low in terms of the first quarter at $2,400,000,000 but CapEx guidance for the year was reiterated at $12,000,000,000 which implies pretty sharp ramp for the remainder of the year. We have been this is not abnormal, I guess, in terms of particularly Cable and Communications in terms of timing and seasonality. But is there any risk to the guide coming in below?

Unidentified speaker: 12,000,000,000 is a lot of capital. Yes. We will have to execute well across the year to spend the $12,000,000,000 But that being the case, you’re quite right. The history of our business is that often we underspend a bit in the first quarter and then ramp over the course of the year. We certainly believe that we’ll be able to execute well against our plan over the course of the year, and that’s why we kept the outlook for the year where it was.

Unidentified speaker: Got it. And then in terms of your capital program, the rural build out, you reiterated expectations to build 450,000 new rural subsidized passings in 2025 despite maybe getting out the gate a little bit slower in the first quarter here. Maybe similar to the CapEx question, I guess, what gives you confidence in terms of meeting your 2025 target given the slower start?

Unidentified speaker: Yes. Construction for us is seasonal. The winter months are more difficult than as we get into the spring and summer. I think in the first quarter we actually were up in our build year over year. And with that, I have all the confidence in the business that we’ll be able to deliver against the $450,000 target over the course of this year.

Unidentified speaker: And is this maybe the right pace as we think about 2026? And as you kind of, or was it 2027 is when you believe you will near the end of the program? Or just help us think about the cadence of build activity as you complete the program.

Unidentified speaker: Yes. So in 2026, we do expect another sort of hundred and $50,000 a year. From there, because the RDOF build is largely complete at the end of twenty twenty six, then the passings per year do ramp down in our outlook. Obviously the outlook excludes speed, we still have to see what happens there. But I think this year and next year are sort of the peak years for passings.

Unidentified speaker: Yeah. And any update on Bead in terms of considerations, appetite? No.

Unidentified speaker: Nothing since the last time we talked about it. Think we still have to wait and see how it all plays out.

Unidentified speaker: Got it. And then lastly within the network roadmap, help us think about the network evolution and update us perhaps where you are on that build timeline of completion.

Unidentified speaker: Yes. So our step one markets, were the first eight markets, are largely completed. We have distributed access architecture, which is sort of the step two of our plan operating in several markets today. And we expect to ramp that later in the year to really gain some pace on those distributed access architecture markets. And then ultimately we could plan for the full footprint upgrade, the rest of the footprint to be completed in 2027.

Unidentified speaker: Got it. As we think about scale within those step one markets and moving on to step two, when should we perhaps expect maybe pricing and packaging updates or changes or maybe increased emphasis on sales and marketing within those high split markets? What’s the timing on that?

Unidentified speaker: Sure. So in the step one markets, you’ll see that we’ve deployed across some of those a new two by one product. And we’ve also inside of those markets, we’re generally marketing symmetrical speeds to customers. From a sales and marketing perspective, often we sort of spend some experimenting with what works for customers. And so I think that you’ll see us have offers and have products and when we have something that works well, then you’ll see a lot of it and that method works well for us.

So we believe in the power of upgrading the network and its ability to make us competitive, more competitive both with fiber and cell phone internet providers, and to seed those technologies that will generate further demand for broadband from customers over time. So we think it’s the right thing to do for the long term of the business. It’s the right thing to do for competitiveness. How that plays out and exactly what you see in offers is hard to tell, but we’re excited about getting it done.

Unidentified speaker: So to date you’re already offering or marketing symmetrical speeds in some of your markets,

Unidentified speaker: you We are.

Unidentified speaker: And remind us I think Chris, remind us where are you again on the step one markets in terms of the number of markets that have been deployed already?

Unidentified speaker: So there are eight in the step one, eight step one markets.

Unidentified speaker: Okay. And to date, but eight total at this this point.

Unidentified speaker: Eight eight that were in step one. So from this point forward, you’ll see us move into distributed access architecture. So into that step two, which provides us the capability to get to something like five down by one up.

Unidentified speaker: Got it. And then I think that’s probably a great place to end it. Jessica, thank you for joining us. Thanks everybody.

Unidentified speaker: Thanks.

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