Charter Communications, Inc.

Good morning. My name is Jessa and I will be your conference operator today. At this time I would like to welcome everyone to Charter's third quarter 2019 investor call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. If you would like to ask a question during this time simply press star then the number one on your telephone keypad. If you would like to withdraw your question please press the pound key. Thank you. You may begin your conference.

Good morning and welcome to Charter's third quarter 2019 investor call. The presentation that accompanies this call can be found on our website .charter.com under the financial information section. Before we proceed I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings including our most recent 10-K and also our 10-Q filed this morning. We will not review those risk factors and other statements on this call. However we encourage you to read them carefully. Various remarks that we make on this call concerning expectations, predictions, plans and prospects constitute forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements reflect management's current view only and Charter undertakes no obligation to revise or update such statements or to make additional forward-looking statements in the future. During the course of today's call we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. These non-GAAP measures as defined by Charter may not be comparable to measures with similar titles used by other companies. Please also note that all growth rates noted on this call and in the presentation are calculated on a -over-year basis unless otherwise specified. On today's call we have Tom Rutledge, Chairman and CEO, and Chris Winfrey, our CFO. With that let's turn the call over to Tom.

Good morning. Our product and service strategy is working well across all our service areas and the benefits of the recently completed large integration are being realized through accelerated customer relationship growth, lower service transactions for customer, declining capital, cable capex intensity and significant free cash flow generation. Although our product mix is different today than it was several years ago, we're driving customer relationship growth given our superior products, pricing and network combined with execution capabilities that continue to improve. In the third quarter we had a net gain of 310,000 customer relationships with customer growth of 4% over the last 12 months. We also added 380,000 internet customers in the quarter and 1.4 million internet customers over last year and we added 276,000 mobile lines up from 208,000 additions last quarter. We grew cable adjusted EBITDA by 5% which combined with our lower cable capital expenditures yielded strong -over-year cable free cash flow growth of nearly $850 million or 125% in the third quarter. Our consolidated free cash flow was up nearly $750 million even including our investment in Spectrum Mobile. We offer high quality products packaged with good service and attractive pricing which is our core operating strategy. That approach works with customers and leads to improving relationship growth rates, profitability and cash flow over long periods of time. We continue to improve our products and service and as a result of our pricing migration strategy 85% of our residential internet customers receive 100 megabits in higher speeds and over the past two months we raised our minimum spectrum internet speed from 100 megabits to 200 megabits in a number of additional markets. We now offer minimum speeds of 200 megabits in approximately 60% of our footprint up from 40% previously. We continue offer 400 megabits our ultra product and our gigabit speed tiers across our entire footprint. Demand for speed throughput and low latency uniquely offered through our network today continues to increase. That demand will continue to grow as more devices attach to our network, more IP video is consumed, online gaming continues to grow and new technology and applications emerge. Our network will evolve from an already low latency DOCSIS 3.1 to 10 gig symmetrical on an upgrade path we control and at relatively low incremental capital costs. Monthly data usage continues to rise rapidly. Our non-video internet customers use over 450 gigabytes per month which compares to average mobile usage of well under 10 gigabits per month. That translates to a 50 times price per gig value advantage with truly unlimited service, high throughput and reliability to all devices in the home and business. In mid-October we launched our advanced in-home wi-fi in Austin, Texas. Given our network software operating platform and top rated self-support tool we're in a unique position to provide enhanced security, privacy and control over all IP devices in our customers home easily managed by customers in a single app while simultaneously delivering a superior customer experience through better in-home wi-fi coverage and managed wi-fi solutions through dynamic band switching and channel optimization within the bands. And over time we plan to roll this product out to our entire footprint starting with additional markets in late 2019. Our self-installation program continues to ramp quickly with customer self-installations now representing 50 percent of our sales volume. Turning briefly briefly to video, over 90 percent of the time when we sell video it is packaged with internet and it's an important attribute to our selling proposition for fixed and mobile connectivity services. And yet pricing and lack of security continues to be the main problems contributing to the challenges of paid video growth. Turning to mobile, our Spectrum Mobile products continue to perform well and our accelerating mobile line net ads are very encouraging. In the third quarter bring your own device capabilities became fully available across all of our sales channels and on all devices and we recently launched Spectrum Mobile services to small and medium business customers in all channels. Mobile remains a key area of our focus for charter going forward and we're uniquely positioned to take advantage of wireline and wireless network convergence over time with our fully distributed wireline network. Ultimately positioning us for long-term growth under the operating strategy I mentioned at the beginning of today's call. Superior products, good service and attractive pricing.

Now I'll turn it over to Chris. Thanks Tom. Before covering our results one administrative item on September 6th we closed the sale of Navisite a managed cloud services business within Spectrum Enterprise. We've not prepared for a form of financials however for the next few quarters I'll discuss enterprise revenue growth including and excluding Navisite. On an annual basis Navisite generated roughly 150 million dollars in revenue and its impact on our EBITDA and CAPEX was not material. Turned to our results on slide five, we grew total residential and SMB customer relationships by over 1.1 million in the last 12 months and by 310,000 in the third quarter. Including residential and SMB we grew our internet customers by 380,000 in the quarter and by 1.4 million or 5.6 percent over the last 12 months. Video declined by 75,000, wireline voice declined by 190,000 and we added 276,000 higher ARPU mobile lines. 84 percent of our residential customers including Legacy Charter were in Spectrum pricing and packaging at the end of the third quarter. Residential customer relationship growth accelerated to 3.7 percent year over year driven primarily by higher growth at Legacy TWC and Legacy Charter with Legacy Bright House remaining the fastest growing. In residential internet we added a total of 351,000 customers in the quarter better than last year's third quarter resulting in residential internet customer growth of 5.4 percent year over year driven by continued lower churn and improved connect performance. Over the last year our residential video customers declined by 2.6 percent. Similar to internet and overall relationship churn we benefited from a decline in total video churn over year but that was more than offset by lower video gross additions. In wireline voice we lost 213,000 residential customers in the quarter driven by lower sell-in following our transition to selling mobile in the bundle and continued to fix the mobile substitution in the market generally. Turning to mobile we added 276,000 mobile lines in the quarter versus 208,000 in the second quarter a nice acceleration. As of September 30th we had 794,000 lines with a healthy mix of both unlimited and by the gig lines. So we're pleased with the trajectory of Spectrum Mobile with less EVITA loss per line as the business scales to the expected standalone profitability even at an accelerating net addition rate but more importantly the cable connectivity service benefits and converged platform objectives we've laid out. Over the last year we grew total residential customers by 974,000 or 3.7 percent. Residential revenue for customer relationship grew by 0.8 percent year over year given a lower rate of SPT migration and promotional campaign roll-off and previous rate adjustments. Those are group benefits we're partly offset by a higher mix of non-video customers, a higher mix of choice and stream customers within our video base, and 30 million dollars in lower -per-view revenue year over year. Slide six shows our cable customer growth combined with our ARPU growth resulted in accelerating year over year residential revenue growth of 4.4 percent and keep in mind that our cable ARPU does not reflect any mobile revenue today. Turning to commercial SMB revenue grew by 5.7 percent faster than last quarter as the revenue effects from the repricing of our SMB products and legacy TWC and Bright House continues to slow. SMB customer relationships grew by 7.7 percent year over year. Still healthy growth but we're increasing speeds and modifying some promotions to re-accelerate SMB relationship growth. Enterprise revenue was up by 1.8 percent year over year with 4.4 percent excluding NaviSight from both quarters given the divestiture. Excluding both cell backhaul and NaviSight enterprise grew by 7.1 percent with nearly 9 percent PSU growth year over year. And so while our retail products and enterprise are growing fast our wholesale business including cell tower backhaul is not which is factoring into the relative growth rate. Third quarter advertising revenue declined by 10.6 percent year over year due to less political revenue in 2019. Our non-political revenue grew by over 5 percent year over year primarily due to our advanced advertising capabilities and our recent abilities to efficiently sell highly viewed long-tailed inventory using our own anonymized much more detailed viewing data. Other revenue declined by 5.6 percent year over year driven by lower home shopping revenues related to video subscriber declines and lower late fees driven by lower non-paid churn. Partly offset by video CPEs sold to customers. Mobile revenue totaled 192 million dollars with 123 million dollars of that revenue being device revenue. In total consolidated third quarter revenue was up 5.1 percent year over year or 5.3 percent when excluding NaviSight. Cable revenue growth was three and a half percent or 4.3 percent when excluding NaviSight and advertising. Moving to operating expenses on slide seven in the third quarter total operating expenses grew by 423 million dollars or 6.1 percent year over year. Excluding mobile operating expenses increased 2.6 percent. Programming increased 0.4 percent year over year due to higher rates and that was offset by a higher video subscriber decline or video subscriber decline of 2.3 percent Resi and SMB year over year. It was also offset by a higher mix of wider video packages such as choice and stream and lower pay review expenses year over year tied to the 30 million dollar lower -per-view revenue that I mentioned. Regulatory connectivity and produced content grew by 12.3 percent driven by franchise and regulatory fees, original programming cost and cost of video CPEs sold to customers in that order. Cost of service customers grew by 2.2 percent year over year compared to 4 percent customer relationship growth. Excluding bad debt cost of service customers were essentially flat. The elevated amount of bad debt in the quarter relates to billing simplification changes we made earlier this year which pushed out the timing of previous cash collections and resulted in a higher account balance for disconnects and higher bad debt provision in the third quarter. So we're meaningfully lowering our per relationship service cost through a number of operating quality and efficiency improvements which is quarter our strategy. Key metrics like calls per customer, truck rolls per customer, in turn all continue to move in the right direction. As Tom mentioned, customer self-installations represented 50 percent of our sales volume in the third quarter. Cable marketing expenses increased by 0.4 percent year over year and other cable expenses were up 6.7 percent driven by software cost, enterprise labor cost and insurance. Mobile expenses totaled 337 million dollars and were comprised of mobile device costs tied to the device revenue, subscriber acquisition and usage costs, and operating expenses to stand up and operate the business including our own personnel and overhead cost and our portion of the JV with Comcast. When including the mobile EVA-DOS startup loss of 145 million dollars, total adjusted EVA-DOS grew by 3.4 percent in the quarter. Cable adjustity that I grew by 5 percent in the third quarter including a roughly 1.7 percent negative growth rate impact from advertising revenue net of its associated expense in both periods. Similarly, cable marketing expansion year over year would have been 90 basis points versus the 60 basis points we're showing today excluding the effect of advertising sales. Turning to net income on slide 8, we generated 387 million dollars in net income attributable to charter shareholders in the third quarter versus 493 million dollars last year. The -over-year decline was primarily driven by a non-cash pension measurement gain in the prior year period and higher interest expense partly offset by higher adjusted EVTA and lower depreciation and advertising expense. Turning to slide 9, capital expenditures totaled 1.65 billion dollars in the third quarter with our cable capex declining by over 500 million year over year driven by lower CP and installation capex due to fewer SPP migrations year over year and the completion of all digital in 2018. There's also the positive capital effect of increasing self-installations, lower video sales and a higher mix of boxless video outlets. Scalable infrastructure also declined driven by the completion of DOCSIS 3.1 last year and the associated bandwidth benefit in 2019. Support spending for cable was also lower driven by declining investments related to insourcing and integration. We did spend 100 million dollars on mobile related capex this quarter which is mostly accounted for in support capital and was driven by retail footprint upgrades for mobile and software some of which is related to our JV with Comcast. Despite likely spending a bit less than the 7 billion dollars of cable capex in 2019 we expect our cable capex intensity to continue to decline next year. As a percentage of revenue we're becoming very efficient with capital expenditures despite our continued product network and service quality investment. Slide 10 shows we generated nearly 1.3 billion dollars of consolidated free cash flow this quarter including just over 250 million dollars in investment in the launch of mobile. It's living mobile we generated over one and a half billion dollars of cable free cash flow of nearly 850 million dollars versus just last year's third quarter. We finished the third quarter with 74.2 billion dollars in debt principal. Our current run rate annualized cash interest pro forma for financing activity completed in October is 3.9 billion dollars. As of the end of the third quarter our net debt to last 12 months adjusted even though is 4.47 times. We intend to stay at or just below the high end of our 4.4 and a half times leverage range and when calculating our leverage we include the upfront investment in mobile to be more conservative than looking at cable only leverage which was 4.34 times at the end of Q3. During the quarter we repurchased 7.8 million charter shares and charter holdings common units totaling about 3.1 billion dollars at an average price of 398 dollars per share. Since September of 2016 we've repurchased 25 billion dollars or 23 percent of charters equity at an average price of 337 dollars per share. As I've said before our operating model network capabilities now in the future and our balance sheet strategy all work together over long periods of time. We expect our results to reflect the growing infrastructure asset with a lot of ancillary products to use for and so on top of our core connectivity services with good value in service to our customers to grow cash flow with tax advantage levered equity returns. Operator we're now ready for Q&A.

Thank you at this time if you would like to ask a question please press star followed by the number one on your telephone keypad. Your first question comes from a line of Jonathan Chaplin from New Street Research please go ahead.

Thank you I'm wondering if you can contextualize the pace of wireless growth we're seeing at the moment Chris it was obviously a phenomenal acceleration quarter over quarter is that driven by the new iPhone cycle or is this sort of a run rate of growth that you think can continue or can you even continue to accelerate from here? Jonathan it's Tom I'll answer the

question you know we I guess the short answer is we expect it to accelerate and the reason that is is we really just got all of our marketing and operating tools available across all the platforms that we operate in and as we look at the yield that we're taking out of each sales channel we have and we look at things like bring your own device and its implementation and its effect on sales we think that we'll continue to accelerate the growth rate and things like store build out and other kinds of activities are not complete so in terms of our marketing footprint it's not completely deployed yet and when we look at the kinds of yields we're getting in those channels our expectation is that our mobile yield will continue to accelerate.

And Tom how much of a pull through is it having on the broadband business at the moment?

It's hard to say but we think it is having an effect and the and we our hope is that that that will accelerate broadband growth as well.

Excellent thank you. Thanks Jonathan.

Your next question comes from the line of BJ Giant from Evercore please go ahead.

Thanks so Tom you've been talking for many quarters now about mitigating piracy and you brought that up again today but some of your carriage deals talk about working together especially with the Disney and the Fox deals on addressing that can you sort of talk about what can be done when is it getting done you know is it something we should expect improving video trends and second obviously you know you've seen some of your competitors I don't know your peer group launch products that you know enable your broadband customer like the flex product at Comcast is that something that you guys are considering too? Thank you.

Yeah so I feel like I'm beating my head against the wall talking about privacy or piracy and the password sharing and pricing but they're all interrelated issues. I think that there's some recognition in the programming industry that they're now distributors and as a result of being distributors that they need to know where their content is going and that has not been part of their DNA and so streaming products have been sold with five streams and with no location-based kind of security. Most households in the United States have two or less people in them and as a result of that there are more streams than there are households available for free and by sharing passwords and by not having location-based or subscriber-based relationships with those streams and the fact that TV Everywhere allows for massive numbers of streams replicated through virtual MVPDs and so forth there are it's just too easy to get the product without paying for it and when we look at data consumption we can see that video consumption isn't going down even when people disconnect their paid video and as a result of that it makes the price value relationship really difficult when it's free and so what can be done you know the people that own content are going to have to come up with standards of security and they're going to need to implement them and they're going to need to know where their services are being viewed and they need to have a business model that works for them and so that requires some effort and some collaboration and we'll continue to push for it but it's a slow process. Second question is for... Oh flex yeah I'm sorry. We have discussed that with Comcast and it's an interesting idea and so I would say that we're considering it and it has advantages. We have a significant number of that we've developed on multiple devices and that strategy is working for us and but putting inexpensive devices out with your service makes some sense to us.

Your next question comes from the line of Peter Supino from Bernstein. Please go ahead.

Good morning. Could you all please talk about how you're measuring and analyzing the benefit of the large investments that you've made in customer facing personnel in the acquired systems? In particular I wonder if the results in the legacy charter footprint tell us anything whether it's the level or the trend of profitability and productivity about the future for the acquired systems. Thank you.

Yeah Peter, we you know as you know our strategy is to have high quality well paid workers with high skills who can interact with the customer in a way that satisfies the customer. The first time they deal with the customer and as a result of that you end up with less transactions, you end up with less repeat service calls, you end up with longer tenured customers, with more satisfaction and as a result of that you have less disconnects and connects churn and your cost to serve goes down even though your cost per transaction goes up. And that's been our strategy since legacy charter and it's been the strategy across the whole integration of the company and it is successful in our if you look at our cost to serve trends coming down what that really means is that our activity levels are coming down and as a result of our activity levels coming down our customers are more satisfied and their average life or the cash flow per customer is going up is another way of saying it. And so we do see a continued growth in legacy charter and we expect that kind of continued growth and when I say growth I mean in customer satisfaction and in customer growth and in increasing margins and lower cost to serve in that environment and we're seeing it across our entire footprint now because we've been at this integration for a while and we've been implemented this strategy. We have brought most all of the transactions that were going offshore back on shore. We rebuilt the call centers. There was a period where we had capital intensity and operating intensity as a result of the duplication that was required to stand up a new workforce in the United States but that has been largely accomplished and

we expect to reap the benefits. One thing I'd add to that we've virtualized our entire call center and field operation service infrastructure but we still have visibility obviously into the legacy charter franchise areas and DMAs and so what you can see is that legacy charter metrics operating metrics whether it's calls per customer billing calls per customer retention calls per customer truck rolls per all remained significantly below legacy TWSC and Bright House despite legacy TWSC and Bright House having significant improvements. Part of that is because of the previous investments in the legacy charter infrastructure but part of that is legacy charter has continued to get better and better every year and quarter over quarter continues to make pretty significant improvements so it's a moving target which just means that when you make that upfront investment and service it's a virtuous cycle of continuing to get better and better and while we don't report or track the P&L of legacy charter because the service is virtualized if it had one our cost to serve there would have been continuing throughout the cycle to continue to go down dramatically on a per relationship basis. Do we expect the same for the rest of you know folks well

for the long long term in that you know we've had continuous improvement in charter over seven or eight years and we expect similar kinds of results throughout the infrastructure.

Your next question comes from the line of Ben Swinburne from Morgan Stanley please go ahead.

Thanks good morning Tom you've talked a lot about the advantage the cable infrastructure and architecture brings to you know charter and cable companies you've had a lot of work on in the past I'm just wondering if you could talk about kind of the next several years of network evolution for the business you've been throwing more speeds at customers you talk a lot about you know 100 and 200 megabit minimums how are you thinking both from a kind of a network architecture perspective that would help us think about kind of product opportunities and also capital intensity I think there's a debate in the market about DOCSIS 4.0 versus deep fiber I'm just wondering how you would take the network and therefore the product offering on the broadband side over the next couple years and what might that mean for capital intensity and then just a quick one for Chris just more short term you guys had some rate adjustments in the fourth quarter that a lot of folks have focused on I'm just wondering how you would describe those in the grand scheme of charter's philosophy and whether they're sort of incremental enough that we should be thinking about incremental ARPU and incremental churn in Q4 maybe in Q1 next year since obviously there's been a lot of press coverage and sort of interest in those changes thank you both

so Ben you know I think if we look over the next couple years the best place to start is the last couple years and you know we did the DOCSIS 3.1 rollout over a two-year period which took our capability from a couple of hundred megabits for customer up to one gate for customer everywhere we operate and there's still more upside out of that infrastructure deployment that we made with DOCSIS 3.1 in terms of both speed and things that we can offer from a product perspective but one of the great things that's coming out of that that we didn't really talk about as we did it was our ability to manage traffic in the network and therefore reduce network investment associated with increased consumption and we've had a regular budget item associated with network consumption in our capital planning and related to the growth and overall average consumption of data per customer and 3.1 has allowed us to manage that in a less capital intensive way so you have that project and if you look at it it was taking a massive speed increase on a legacy infrastructure at a capital cost of about nine dollars per home pass a fairly small investment per home pass with a massive output and that's the fundamental notion behind our 10 gig strategy DOCSIS 4.0 strategy which allows multiple pathways for development depending on how deep you want to take fiber or whether you want to improve your bandwidth in your legacy coaxial network both options are available in that specification to upgrade your network as products evolve and in a way that's very capital efficient and strategic to the assets you've deployed so what do we need to do over the next couple years well we're still you know we just completed DOCSIS 3.1 so we've got a lot of head room inside of the asset at the moment in terms of product but things we're thinking about continuing to do that we're experimenting with we're obviously experimenting with convergence and we've done a bunch of radio and mobile experiments this year testing switching dual-sum technology we've also continued to work on the DOCSIS 4.0 strategy we've talked with gaming companies about putting compute power deeper in the network when you look at our space in them as a result of the compression of electronics through time and as a result of that we are able to stand up high compute low latency networks that are hard to replicate and we think that there's a product development cycle that'll occur there and give us an upside opportunity but you know but the fundamental position we're in at the moment is we still have lots of head room from the last investment cycle we made which was quite efficient we also you know have been launching as i mentioned the product of in-home wi-fi management which allows customers to manage their privacy their security and to know what is connected in their house and and what it's connected to and to be able to manage that in an efficient way for not only privacy but for parental control and all and and and quality of the network itself throughout the home so we're continuing to invest in the the customer experience in the product set itself

that's helpful thank you yeah then you asked about reed and and so maybe some some thoughts our third quarter i think you mentioned fourth quarter so i just to clarify our third quarter residential art through does not reflect any of the recent rate increases that we implemented those are beginning really at the start after the start of q4 so it won't be a full fourth quarter and they're being applied to nvideo which reflects higher input or programming cost and some non-promotional rates on the internet so if you take a look i know there were some questions around it if you look at our q3 results it shows we believe we have a long way for internet and customer relationship growth so there shouldn't be too much of a read through through that we've always believed that creating more customer relationships is the most valuable way to grow long-term cash flow and through the integration we've been careful about driving additional billing calls or service transactions from rate increases and then i guess another read through is we'll manage the profitability of our overall customer relationship when we're using video to enhance it but that being said the overall rate increase is not that materially different than what we've had in the past we have a lot of customers in year one and year two promotional rates that aren't subject to some of the increases and for video we increasingly have a higher mix of customers in lighter packages without boxes which won't have the same increases so our goal is to maintain our competitiveness across all products and our preference or strategy and our optimism for growing by volume as opposed to just by rate that remains unchanged you asked about in the fourth quarter impact similar to past increases and because it's not that material as some might have feared or hoped we don't anticipate any meaningful negative impact on the fourth quarter net additions as a result of the rate increase but i i would highlight you know to you and others just keep in mind that you know the fourth quarter of last year was a pretty good quarter for charter and you know we expect the back half of this year inclusive q3 to you know things we've said in the past to be better as it relates to internet and customer relationships and that doesn't mean that we don't expect a good fourth quarter this year as well let's just keep in mind we had a pretty good one last year too

so i would say just to sum that up our strategy with regard to growth with rates and customers is unchanged we believe the majority of the revenue growth that we'll produce will be through growth and new customer relationships and our pricing and packaging is designed to give consumers a better value than they can get with the individual products priced as they are in the marketplace if you look at what how much money we're saving people from a mobile perspective it's significant our products are valuable products and they're designed to drive customer relationships thank you guys thank you guys thanks

Your next question comes from the line of Craig Moffett from Moffett Natsinson please go ahead.

Hi thanks two questions if I could there's been a lot written recently about your potential interest in cbrs spectrum and an offload strategy for your your wireless business could you just put some meat on the bones about that and just talk about what your what your latest thoughts are about traffic offload and and what that network deployment might look like over the next few years and then a second more tactical question you know we the business services line you've been engaged in the repricing of the legacy time Warner cable customers for a long time now when when do you think we might be through the process of repricing those customers so that we can start to see business services revenue growth start to normalize a bit relative to to where others are and and what I suspect your volume growth looks like

Well I'll add to the last part of that first which is we're already getting the growth in business services where the the revenue growth and the customer creation are converging and that was not true when we initially started the pricing and packaging but it is true now if you look at our quarter over quarter change you'll see that revenue growth is occurring and it's not because of rate it's occurring because the customer growth there are enough new customers at that growth rate that that and and less customers at the historic pricing such that those two numbers are converging growth and revenue growth customer growth equals revenue growth at some point so in terms of cbrs you know the interesting thing about that and we talked about our dual sim technology opportunities and the testing that we've done and we're quite optimistic about the capability of that strategy and and we're quite optimistic about the ability to make select investments in in areas where traffic dictates in such a way as to move services that we pay rent for onto our own platform and that opportunity already exists with wi-fi and a significant number of our customers uh well the majority of our customers are using wi-fi most of the time and and wi-fi is highly efficient and the bulk of data 80 of all data on mobile platforms are being delivered through the wi-fi network so we think there's continued opportunity to to move traffic that way and and cbrs does work very well and as you know there's a significant amount of free cbrs spectrum available which we've been using we've also done some experiments with that spectrum with fixed wireless connectivity and we've got an experiment going with that too and actual live customers going in rural low density areas so it's a pretty valuable piece of spectrum there's some you know private uh spectrum of cbrs that's going to be auctioned next year and the question we're evaluating is is should we be involved in that but we haven't determined that yet but we're looking at it closely and uh but there you know i would say this that there's a significant amount of spectrum available already and the more cells you have the less spectrum you need thanks don't

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next question comes from the line of philip q6 from jp morgan please go ahead

hey guys thanks um i wonder if we can unpack a little bit the broadband sub-momentum improvement is that being driven mostly by better churn as you had forecast or by better connect volumes as well and have there been any changes in the promotional pricing that are being offered to those customers thanks

yeah so you know the churn improvements that we've talked about in the past they continue uh on a -over-year basis for internet was also an improvement in connect so it was the latter of what you said it was a combination of both there's been no you know major or dramatic change in the pricing or market as it relates to broadband um you know we have a you know generally now 60 of our footprint footprint to now 200 megabits per second minimum speed we also go to market with ultra which is 400 and you know as a headline with availability but not that much take up as a one gig service and that's the 400 and the one gig are nationwide so there's been no dramatic change to you know

thanks christian

your

next question comes from the line of michael rollins from city please go ahead

good morning thanks for the question if we look at the footprint expansion it was about two percent across the different products in the quarter which is above average rate of household growth in the country so how important is that growth at driving you know some of the strength in broadband and how long can it continue at this elevated pace and the final part of that is if it were to slow down does that significantly help your capital spending thanks

yeah so uh michael it's a good question um passings and it's not unique for charter it's across the board it's really estimated marketable homes and it's not a direct correlation one for one as it relates to a new build and and so as we go through the integration of three different companies and the systems and the definitions of even what a marketable home past is we're adding stuff into the bill area is potentially marketable and sometimes that's right and it's not always and you only only find once you go and actually market or try to sell so there's a lot of cleanup that's still going on in that and we're not we're not alone so i wouldn't take that as a hundred percent new build or or household formation but it's true and it's directionally still right it may not be completely correct but it's directionally correct and we've been building more particularly into rural areas and our new build there you can see that through the capex line extension line item has grown over the past couple years and accelerated as we meet our commitments and you know have good or wise to developing a broadband footprint in these more rural areas new household formation is helpful to the overall growth rate there's been a lot of work done around that we think that our growth is not just a function of new household formation that we are gaining significant share not only in the legacy dsl but as some of the u-verse and u-verse like whether it's at&t or century link as some of the previous u-verse speeds turn into looking more and more like dsl as as our speeds increase over time so we're taking significant share and that tends to be the bulk of where we're adding as opposed to just new household formation

thanks very much thanks michael

your next question comes from the line of marcy ryvaker from wolf research please go ahead

thanks two questions first for tom you've mentioned 10 gigs quite a bit can you just talk about when this might be available and what kind of boost to southern arpu you might be expecting is this another step up at some point in time and then second for chris is there anything we should be thinking about in terms of programming expenses for q4 or 2020 as we update our models thanks

look 10g 10 gig is a specific set of specifications that we've developed for our networks that allow us to get to 10 gigabit symmetrical there aren't products today at the so it's a long-term evolution capability of our network that allows us to in a very efficient way from a capital perspective get to those kinds of capabilities if you look at historic trends of data use it'll it'll show you that unless the trends of the last 20 years significantly change at some point we're going to need that capability and products will be developed that virtual reality products and high capacity low latency content which would include games and entertainment education will ultimately be developed including light field products holograms that will change the very nature of all communications and that our networks are capable from an investment perspective of providing those products at the most effective investment rate and when we would actually do that or deploy that is really a function of how the market develops there's no immediate capital requirement for us to do anything with regard to 10g we can use elements of that as different opportunities arise we still have a lot of capability in our 3.1 deployment which is a prior DOCSIS deployment specification to 10g which we're now calling DOCSIS 4.0 because we're branders that's a joke uh but uh it's it's really just a uh an opportunity and a way of showing um the kinds of historic capital investments we've been able to make to upgrade our network will continue into the future

marcy on uh on programming we've been we've been low this year relative to our expectations on -over-year growth and part of that is uh maybe we've done okay on on some of our new rules but the bigger piece is that we've had a subscriber decline of resi and smd of 2.3 percent there's been a mixed shift as it relates to uh stream and choice products which just have less channels inside of them and then on top of that the -per-view environment particularly the past two quarters has not been particularly good on the revenue side which means that your costs are going down -over-year for -per-view all of that is packing into a current 0.4 percent -over-year growth growth and programming but your actual unit cost of expanded cost per customer relationship it's kind of been what it's been for many years in the mid single digit range and and you know we've had some pretty big renewals as publicly announced tied to some of the security and and uh password sharing collective efforts so you know which those are so there will be some step up associated with that but i i think as you look out through next year there's nothing we see today that causes there to be a dramatic change from where the overall marketplace has been for the type of rate increases that we expect to see on that product and as we've talked about before historically we've not passed all that through to to our customers and we're evaluating our ability to continue to do that even as we use the video product to drive connectivity services and we've spoken about some of that as it relates to the most recent rate increases so i i don't expect any big dramatic changes other than growth is a big factor mix is a big factor the -per-view market has been under under some challenge past two quarters which is lower the programming expense it's unclear how much that'll continue but absent the volume and mix issues i don't see any big dramatic changes

thank you

uh your next question comes from the line of mike mccormick from guggenheim partners please go ahead

hey guys thanks uh maybe tom just a quick comment on the stream product uh what you're seeing there as far as perhaps cannibalization of uh traditional linear and then why not use that as a more aggressive tool because the pricing for that uh that double play is a lot more attractive than some of these synthetic bundles out there with offerings and then sorry if i missed this but on the wireless any comments on the altis pricing and then i guess thinking about the pacing of ads obviously a big ramp up how should we think about that as we go into 4q thanks

i guess in terms of stream we've been selling that to people who are financially constrained mostly in a very problem in the whole video space in that the traditional bundle the product is very expensive and the rate the actual unit rate of that product continues to rise and and it's priced a lot of people out of the market and as i said earlier it's free to a lot of consumers who have friends with passwords and so our ability to sell that product is ultimately constrained by our relationship with content and and we have to manage that in terms of the kinds of power that the content companies have in terms of what we can do with bundling and not and and so it's it's a really a limited solution for us in terms of video and the bulk of our customer relationships long term and video will continue to be big packaged expensive bundles of content because that's the way it's sold to us and dictated that we provide it in that form in terms of altis pricing and i you know it's it it's good and our pricing is quite valuable too to consumers and saves them an enormous amount of money on an annual basis and we think that our pricing is good in terms of driving growth and they want to sell their product at $20 i think that's great

it's attractive pricing it's a you know different mvno with a different operator and over a different time frame and but i think it's generally good for cable that they're they're out there driving and pushing that type of an aggressive product as well

great chris just on the pacing of wireless subs

yes and i mean i think tom you know was asked a question by jonathan early on the pace of growth we didn't we're still hitting our full stride you say that all of our byd was fully implemented through the end of the quarter s&p had just barely started to launch actually hadn't really launched in earnest by the end of the quarter our store footprint is going to continue to expand and so all of our

sales channels continue to perform better to get better

our yield continues to get better so you know it's it's a it's still a relatively new upstart business and so there's some risk in saying what we're saying but we don't see any reason that it shouldn't continue to get better and to have more more sales and more yield and more net additions over time and add more value to cable

great thanks guys yep

your last question comes from the line of jon hodlick from ubs please go ahead

great chris i just want to follow up on your on your your comments that the company's getting more more efficient in its in its use of capital a does that suggest a sort of another step down in in capital intensity as we look out to 2020 can you give us some examples of of of how that that's the case and is the is the your view that the the business model in general is is getting more capital efficient as we move more towards a connectivity model and less from a away from a video-centric model

yeah jon you're trying to dupe me into 2020 guidance on capital when we told you we do a little bit time in 2019 so um now look um i'm not going to talk about a dollar amount for 2020 it's way too early for that and i'm not sure that we're going to anyway but what i did say today and and we feel strongly about is that our cable capital intensity so cable capital expenditure is a percentage of revenue is going to continue to decline into 2020 for all the reasons that we mentioned before just the mere fact that integration spend continues to decline is essentially gone next year and but also the amount of docs 3.1 headroom that tom talked about before the point that you just raised that increasingly video is is more and more boxless and as it becomes tied to the ip internet product anyway it's becoming less capital intensive um i think there's a lot of factors inside the business that are driving us to be much lower capital intensity i could go down less more self-installation the headroom inside of the network the the lack of cpe per connect in the use of boxless connects the average age of our existing boxes meaning they can be you know replaced one for one as opposed to new boxes being purchased to replace old boxes it's just and you know the amount of churn inside the business if you think about churn coming down that also takes down your capital significantly so there's there's a lot of momentum in the business to not only remove your cause or lower your cost to serve for customer relationship on op-ex but related to the same thing on a on a capex basis and you know ultimately you know a lot of that capex is fixed capex for the network and to the extent you have higher penetration and we're probably the fastest growing cable company at least in the western world when you have um you know that type of growth and that type of penetration expansion it means you become more efficient on your capital as well as your optics and so we're seeing the benefit of all of that

okay thanks chris

yep that's it all right thank you everyone we look forward to doing the same next quarter take care

thank you this concludes today's conference call you may now disconnect