Charter Communications, Inc.

Please stand by. Your program is about to begin. If you need assistance during the conference today, please press star zero. Hello and welcome to the Charter Communications second quarter 2022 investor call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I would now like to turn the conference over to Stephan Aniger. Please go ahead, sir.

Good morning, and welcome to Charter's second quarter 2022 investor call. The presentation that accompanies this call can be found on our website, ir.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 cautionary 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 year-over-year basis unless otherwise specified. On today's call, we have Tom Rutledge, Chairman and CEO, Chris Winfrey, our COO, and Jessica Fisher, our CFO. With that, let's turn the call over to Tom.

Thank you, Stephan. Our business continues to grow despite an unusual macroeconomic environment. During the second quarter, we added 38,000 Internet customers when excluding an unfavorable impact related to the discontinuation of the Emergency Broadband Benefit program and additional definitional requirements of the Affordable Connectivity Program. Customer relationship churn remains historically low due to current consumer behavior and connectivity remains low, primarily due to the low activity environment. At the same time, we continue to see very strong mobile line growth with line net additions of approximately 350,000. And over the last year, we've grown our mobile lines by nearly 50%. We now have over 4.3 million total mobile lines. Financials were also strong in the second quarter. Second quarter revenues grew by 6.2%, and EBITDA grew by 9.7%. Looking forward, we remain well-positioned. Our fixed and mobile broadband service continues to converge technically and operationally. We offer them along with all of our other high-quality products at attractive prices. Our growth is driven by offering value-rich packages that differentiate us from our competition at prices customers can afford regardless of the economic environment. and we plan to continue to do that. To continue to improve our service, we are focused on evolving our network. Data usage continues to grow at a very fast pace. During the second quarter, internet customers who do not buy traditional video from us used over 650 gigabytes per month. Nearly 25% of those customers now use a terabyte or more of data per month. And even with the rise of of work from home, peak usage patterns still prevail, with the vast majority of data usage occurring during the evening hours. Our network is built to handle that peak demand and delivers consistent speeds regardless of the time of day. With our dense HFC network, we deliver gigabit speeds today everywhere we offer service. And in the near term, we're implementing spectrum split upgrades, which expand our plant capacity and allocate more bandwidth to the upstream, all using our DOCSIS 3.1 infrastructure. In turn, we'll be able to offer our customers higher symmetrical speeds and multi-gigabit speeds in the downstream. Our long-term network evolution path includes DOCSIS 4.0. Recent testing using DOCSIS 4.0 technology simultaneously delivered over 8 gigabits in the downstream and over six gigabits in the upstream in a four amplifier cascade to a single modem. We will develop this technology even further, but the test demonstrated that we can successfully drive bidirectional multi-gigabit speed offerings across our entire network in a very capital efficient manner without the major disruption to our customers and operations that other kinds of upgrades require. so we can deliver a future-proof network that delivers the most compelling connectivity services in a capital and time-efficient manner, and in turn offer those services to consumers at highly attractive prices. But we're not only working to improve speeds and latency in our network, we're also working to improve network quality and reliability, reducing service transactions, driving longer customer lives, and reducing churn. We're doing that through better maintenance practices using artificial intelligence, telemetry, and machine learning technologies to drive what we call operational intelligence. We're now able to ingest, aggregate, correlate, and analyze millions of data points from our network, offering us intelligence about the health of our network, services, and anomalies in our network that are critical to the customer experience. In the past, this type of real-time network intelligence did not exist. and substantial human effort and manual analysis were required to manage our network, which was time-consuming and brought only limited insights and required thousands of service transactions. In many cases, our intelligence now allows us to avoid network outages and disruptions altogether, maintaining the plant more efficiently with far less activity and cost and fewer outages in service transactions. Our mobile business is growing at an extremely rapid pace, We remain the fastest growing mobile provider in the nation, and we continue to improve and enhance our products in a number of ways, differentiating our offerings, helping to drive customer growth, and making our mobile business economics, which are good, even better. Ultimately, with our mobile product, we're able to offer consumers a unique and superior fully converged connectivity service package while saving customers hundreds or thousands of dollars a year. And our share of household connectivity spend, including mobile and fixed broadband, is still very low. In fact, we capture less than 30% of household spend on wireline and mobile connectivity within our footprint. So there's a large opportunity for us to increase market share by saving customers money. And through our latest offerings, we can do that, which in turn raises connects, reduces churn, and drives overall customer relationship growth. In addition, our mobile business will drive meaningful EBITDA for charter even at our existing and very attractive mobile price points, giving us EBITDA growth simply by growing our mobile customer base. We're underpenetrated and our opportunity is large. Charter remains uniquely positioned to deliver superior services at superior prices, offering consumers the most attractive products for their connectivity needs. Our services remain the best choice for consumers, giving us the opportunity to continue to grow our business at a very healthy pace. Now I'll turn the call over to Jessica.

Thanks, Tom. Now let's turn to our customer results on slide five. Including residential and SMB, we lost 21,000 internet customers in the second quarter. As part of the EBB to ACP transition, a small portion of subsidized internet customers either did not opt in to continue their service after the EBB program ended or did not meet the ACP requirements, particularly the requirement that customers use their service in each 30-day period, which covers the vast majority of the impacted subscribers. This resulted in 59,000 customer disconnects during the quarter. Excluding Met Headwind, we organically grew 38,000 internet customers in the quarter. Looking forward, we expect that zero usage ACP customers will have a smaller impact in our quarterly results than what we saw this quarter. Looking at the broader marketplace, while we saw seasonal increases in moves typical of the second quarter, moves remained well below pre-COVID levels. And voluntary churn, when excluding the EBB ACP impact I mentioned, was even lower than last year, all of which reduced our selling opportunities. Turning to video, video customers declined by 226,000 in the second quarter, following a programming pass-through increase. Wireline voice declined by 266,000, and we added 344,000 mobile lines. Despite the lower number of selling opportunities from our reduced activity levels, we continued to drive mobile growth with our high-quality, attractively priced service. Moving to financial results, starting on slide six. Over the last year, we grew total residential customers by 282,000, or 1%. Residential revenue per customer relationship increased by 2.8% year over year, driven by promotional rate step-ups and earlier video rate adjustments versus last year that passed through programmer rate increases. These effects were partly offset by the same bundle and mix trends we've seen over the past year, including a higher mix of non-video customers and a higher mix of lower-priced video packages within our base. Also, keep in mind that our residential ARPU does not reflect any mobile revenue. As slide 6 shows, residential revenue grew by 4.5% year-over-year. Turning to commercial, SMB revenue grew by 3.7% year-over-year, reflecting SMB customer growth of 3.7%. Enterprise revenue was up by 4.9% year-over-year. Excluding all wholesale revenue, enterprise revenue grew by 8.2%, and enterprise PSUs grew by 4.7% year-over-year. Second quarter advertising revenue grew by 12% year-over-year. That growth came primarily from political. It was slightly offset by a 1% decline in our core advertising business due to lower local and national advertising revenue, including auto, partly offset by a growing advanced advertising capability. Mobile revenue totaled $726 million, with $299 million of that revenue being device revenue. Other revenue increased by 8.8% year-over-year and includes rural construction initiative subsidies totaling $29 million. In total, consolidated second quarter revenue was up 6.2% year-over-year. Moving to operating expenses and EBITDA on slide 7, In 2Q, total operating expenses grew by $307 million, or 3.9% year-over-year. Programming costs declined by 0.2% year-over-year due to a decline in video customers of 3.2% year-over-year and a higher mix of lighter video packages, all of which was mostly offset by higher programming rates. Looking at the full year 2022, we continue to expect programming costs per video customer to grow in the low to mid single-digit percentage range. Regulatory connectivity and produced content declined by 10.3%, primarily driven by lower Lakers RFM costs and lower video CPE sold to customers. The decline in Lakers' RSN costs was primarily driven by the delayed start of the NBA season in 2020, which drove more Lakers games charges in 2Q21, making for an easier comparison this year. Excluding the RSN costs from both years, regulatory connectivity and produced content declined by 4.7%. For the full year 2022, we continue to expect regulatory, connectivity, and produced content expense to decline in the mid-single-digit percentage range versus 2021, primarily due to lower video CPE sold to customers and lower RSN costs given an abnormal Lakers game schedule last year. Cost to service customers increased by 5.1% year over year. The increase was primarily driven by higher bad debt year over year, given lower bad debt in the second quarter of 2021, which benefited from government stimulus packages at the time. And while this quarter's non-pay churn and bad debt write-offs both remain well below pre-COVID levels, our bad debt accrual includes expectations for potential softening of consumer finances later this year. Excluding bad debt from both years, cost-to-service customers grew by 1.1%, primarily due to a larger customer base and higher fuel costs. partly offset by productivity improvements. As the year progresses, prior year bad debt expense normalizes and should drive slower growth in cost-to-service customers' expense during the second half of the year. Marketing expenses grew by 8.6% year-over-year due to higher labor costs driven by previously planned wage increases and higher staffing levels as Charter completes the insourcing of its inbound sales and retention call centers. with a focus on providing better service to new and existing customers. For the full year 2022, we continue to expect marketing expense to grow in the mid-single-digit percentage range versus 2021. Mobile expenses totaled $797 million and were comprised of mobile device costs tied to device revenue, customer acquisition and service and operating costs, and other expenses increased by 1.3%. Adjusted EBITDA grew by 9.7% year-over-year in the quarter. Just a quick note on inflation before moving on to net income. We've seen some inflationary pressure in fuel, freight, and utilities, as well as pricing pressure on CPE and other network components. In labor, our planned move to a $20 per hour starting wage blunted the impact, but we still see pressure in the labor market, which we may need to more fully respond to as the year progresses. I would also note that our consumers are experiencing inflationary pressure, but given the availability of subsidies for broadband and our focus on saving customers hundreds of dollars per year by switching to our converged connectivity product, we believe that we're well positioned for this environment. Turning to net income on slide 8, we generated $1.5 billion of net income attributable to charter shareholders in the second quarter versus $1 billion last year. The year-over-year increase was primarily driven by higher adjusted EBITDA. Turning to slide 9, capital expenditures totaled $2.2 billion in the second quarter, above last year's second quarter spend of $1.9 billion. We spent a total of $357 million on our rural construction initiative in the quarter. Most of that spend relates to design, walkout, and make-ready, and as expected, has not yet resulted in significant passings growth. and the vast majority of that spend is accounted for in line extensions. We spent $95 million on mobile-related CapEx, which is mostly accounted for in support capital and scalable infrastructure, and was driven by investments in back office systems and wireless offload construction. As slide 10 shows, we generated $1.7 billion of consolidated free cash flow this quarter versus $2.1 billion in the second quarter of last year. The decline was primarily driven by higher cash tax payments and higher capex, mostly driven by our rural construction initiative. We finished the quarter with $95.7 billion in debt principal. Our current run rate annualized cash interest is $4.5 billion. As of the end of the second quarter, our ratio of net debt to last 12 months adjusted EBITDA was 4.45 times. We intend to stay at or just below the high end of our four to four and a half times leverage range. During the quarter, we repurchased 8.3 million charter shares and charter holdings common units, totaling about $4.3 billion at an average price of $511 per share. And given where the share price has been, during the first two quarters of this year, we repurchased 7.2% of our fully diluted shares outstanding as of December 31st, 2021. for approximately $7.8 billion. Operator, we're now ready for Q&A.

Thank you. At this time, if you would like to ask a question, please press star 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to enter the queue. Thank you. Our first question will come from Ben Swinberg with Morgan Stanley. Your line is now open.

Thanks. Good morning. A couple on sort of the competition and your go-to-market. You guys didn't talk a lot about fixed wireless or the fiber builds that are happening in various parts of the country. I'm just wondering if you could comment on whether that competitive intensity has increased, if you're seeing in particular pressure in certain parts of your footprint, including in the third quarter. I realize you don't like to comment quarterly, but obviously there's a lot of focus on that. And then, Tom, I was interested in your comment about generating mobile EBITDA, because it would seem like there's maybe some tension between sort of passing on efficiencies in that business to the consumer through lower prices, which can drive volume and maybe drive broadband volume as it gets pulled through by mobile. But that tension exists versus trying to make as much money as you can in that business. I was wondering if you could comment on how you think about balancing that, particularly if you move more traffic on network. Thanks.

Sure. I'll start there. Look, there's always a tension between how you price a product and how much of it you drive. into the marketplace and the difference between price and volume and price and the volume you get ultimately is what you're trying to get to is the maximum amount of cash flow that you can generate out of the business based at the right price and the right volume distribution of that product at that price. So that's what we're seeking in mobile, and we think it's a huge opportunity for us. Obviously, we're creating customer relationships. Those customers are paying us. There's good margin in that business and at the pricing that we have, and we think that we can get more efficient through time with that margin by And at the same time, we think we're accretive to our MVNO partner and that the 9 million customers that have been created out of that MVNO are accretive and valuable to and should be really counted as customers in many ways to our MVNO partner. But that's a shared relationship. But the net of all of that is that we have an opportunity at the pricing that we have to continue to grow the business. And that pricing is really valuable relative to the price in the marketplace that those products are currently being offered by our competitors. And at the prices we're offering it now, we have an opportunity to create great value for us through time and to have an improving margin through time as well. But even without an improving margin, it's still a great value. We're in a pretty good place in terms of our mobile business in that we have lots of opportunity. We have a fully penetrated marketplace, and we have a very small share of it, and we're growing rapidly. With regard to the overall competitive environment, our churn is extremely low. And activity levels in the marketplace are the biggest impact on our growth rates relative to historic growth rates. The fiber competition that we have is typical. If you go back to the second quarter of 2019 and look at fiber growth, it's not much different, although the footprint's bigger. And there is a new fixed wireless competitor. It's actually relatively small. It's not the major component of our competition. quarterly performance, but it is a factor. If you look at the numbers that the fixed wireless competitors say they're taking from cable and proportionally look at that across our footprint, you do the math, it's not the major driver of the change in second quarter 19 versus second quarter 2022. The major driver is the activity levels But also there are other factors that are, you know, RDOF construction is beginning to ramp up, so that's an opportunity for us. Housing occupancy and new construction is lower because of supply chain issues. So that's, I think, will get fixed in time, but it's an issue affecting growth at the moment. And so... We're pretty optimistic, relatively speaking, that as the post-pandemic market activity levels return and normalize, that our share of broadband growth will rise. And we're pretty optimistic that our mobile business is highly accretive and a huge opportunity for us going forward.

Thank you. Operator, we'll take our next question, please.

Thank you. Our next question will come from Vijay Jayant with Evercore. Your line is now open.

Thanks so much. A couple for me. One, you know, really, move-churn is a phenomenon that is sort of new to us and what it sort of means to subs. Can you sort of help us understand, is your share of the gross ad pool higher than the share of move-outs that have your service, I think it needs to be for low move activity to be negative for NetAds. And if that's the case, how has that sort of shifted over time? And obviously, you announced that you've increased your speeds by about 100 megabits for your service, but it was not on the upstream. Can you just talk about the importance of upstream? Obviously, the Fiverr guys keep talking about that being a real advantage for them and how that's impacted the service so far. Thanks.

BJ, can you clarify on your first question a little bit more? I didn't fully understand what you meant by the mover flow. This is Chris.

So your share of the gross ad pool is that higher than your share of move outs that have your service, so given move churn as a factor. For that to, you know, needs to be for the low, it needs to be for low move activity to be a negative for net ads, I think. So I'm just trying to understand this move some phenomena and people moving in and out, how that sort of impacts the gross ad opportunity.

Yeah, I think the way I would say what I think you're saying is we're a net share taker when there's a toss-up. And there's more toss-ups when people are moving. And so, therefore, our gross ads out of moves – is higher than, of all moves, is higher than our disconnect rate of all moves.

That's what you're saying. And we're still a net share taker. You're in a Q2 where move activity remains well below pre-pandemic levels, non-pay churn well below pre-pandemic levels. We also saw the return of seasonality in college markets that didn't occur last year. So we expect to see those gross additions come back in August and September. So it was a seasonal Q2 where we had low move non-pay and our lowest still ever voluntary churn when you exclude this EVB impact. And so without that activity, I think what you're asking is if we were in a normalized environment, are we still a net share taker? And the answer is yes.

That's our expectation. With regard to downstreams and upstreams, usage is still significant, 14 to 1 downstream versus upstream. And so from a practical point of view, our products are appropriate. We think over the longer term, upstream use will continue, but it isn't actually growing faster than the downstream use at the moment.

Operator, we'll take our next question, please.

Thank you. Our next question will come from Craig Moffitt with Moffitt Nathanson. Your line is now open.

Thank you. I wonder if you could just talk a little bit more about the broadband growth equation going forward. What you expect from... broadband ARPU going forward, and then how much you think that with RDOF and the early state-level Jobs Act awards you've gotten, how much you think you can grow broadband homes past, and just how you think about the sort of equation for total broadband growth. And then separately, could you just comment on the degree to which you think you can offload wireless traffic? I think you called out your CBRS build out for the first time in today's materials. What level of traffic do you think you can actually offload onto that network?

You know, in terms of broadband opportunities in rural areas,

We've won about a million and a half passings so far in the RDOT program and the various state programs. There's a lot of bids that we have outstanding at the state level. And there's a $42 billion fund coming next year, which is a huge amount of money, which will allow for additional construction, which we hope to bid on and be successful with. We haven't actually begun to offload onto CBRS yet in a commercial way. But it's interesting, our Wi-Fi first strategy in our mobile relationship with our customers allows significant offload of mobile traffic onto the Wi-Fi network. So when you put those two things together, success we're having in a managed Wi-Fi first environment and the potential success of CVRS, that's what I was saying before. We have a good relationship in our MVNO today with good volume-based pricing and significant margins and an opportunity if we're continuously successful to make that even better by moving some of the traffic onto Wi-Fi, additional traffic onto Wi-Fi and onto our own 5G CBRS network. So it's a good situation that can get a lot better.

Yeah, Craig, on the broadband growth, I'd just add that similar to what we were talking about with BJ, the market transaction volume eventually is going to pick up. So our internet net ads will pick up again. We're confident in that. Our recipe for broadband growth has always been about being competitive and price competitive in the marketplace. And we've had new entrants and overbuilt, you know, for many, many years. So when you ask the question about ARPU, I assume it relates a little bit to competitive. And I don't see a major change there in terms of our strategy and how we go to market or how we need to go to market. In fact, I would argue because of the mobile product and the converged mobile product that Tom was talking about and the ability to put these together and that we can save customers money. significant dollars, that has both good volume and our peer impacts for broadband over time. So, I think the outlook is still very, very strong.

Thanks.

That's helpful.

Thanks, Craig. Operator, we'll take our next question, please.

Thank you. Our next question will come from Doug Mitchelson with Credit Suisse. Your line is now open.

Oh, thanks so much. A couple questions. One, just curious, based on your comment about the test on DOCSIS 4.0, what percentage of your footprint is covered at plus four? And when do you think that equipment will be ready for prime time? And then I guess, you know, Tom, but maybe this is a jump ball. I'm just curious when you think about stressing the consumer, whether inflation impacts their waltz or ultimately, you know, Fed interest rate increases, impact of the economy and overall consumer spending, you know, where would you expect to see any pressures from the consumer in your business first? Do you see anything so far, and where would you expect to see it? And I'm just curious, if you reflect back, do you think about the Great Recession and consumer wallets got tighter, and there was some readdressing of pay TV spending and tiering? Do you see across your businesses any risk of tiering down, and how would you manage against that? So I know, not a fun question, but I'm just curious how you think about that, given your history.

Our doom and gloom question? Well... Okay, in terms of DOCSIS 4.0, it hasn't been deployed. Our footprint right now is DOCSIS 3.1 fully, so we have one gig everywhere. The DOCSIS 3.1 upgrade opportunity is still significant, meaning we haven't gotten everything out of DOCSIS 3.1 by any means in terms of its full capacity. It can give us multi-gigabit speeds downstream and gigabit symmetrical speeds upstream. And so it's a quite robust infrastructure that's already been deployed. And the CPE for that's already been deployed. DOCSIS 4.0 is a complete new electronic drop-in and a whole new modulation scheme. And so it requires new CPE and it is not being deployed yet, but it's in the lab, and the specs have been written, and it's another technology upgrade that will allow us to get to very high speeds without having to replace our network, which means that you can do that in a really capital-efficient way, which means that ultimately you have pricing opportunities that others don't. And that's the value of DOCSIS 4.0. With regard to inflation and its impact on macroeconomic forces on us, look, I think we have access to capital and at good prices. I think that inflation in some ways, particularly if it's temporary, has some market advantages for us. As consumers are stressed, the value of our products become more clear in the consumer's mind. If you look at how much consumers are spending on telecom products and our share of those telecom products and what we can do with pricing For those telecom products, I think a stressed consumer will find our products even more attractive. So, I mean, yes, we'll have to deal with costs. But it's interesting, when you look at our overall business and look at our cost structures, we're getting more efficient. And our opportunity to serve and our cost to serve continues to improve. And if we drive more customers, that actually improves on a per-customer basis. So, you know, we can operate in a difficult economic environment and make our products valuable to consumers. So, you know, I'd rather operate in a normal environment, but I think we have pretty good assets and pretty good opportunities to be successful.

Yep. The thing that I would add to that, we've been big proponents on the affordability side, and as part of that, we are a larger participant in the affordable connectivity program than many of the other, well, to the best of our knowledge, all of the other wireline providers. And we've done a lot to try to push the program to our existing subscribers, so not as an acquisition program, but as a way to alleviate some of the stress on the consumer wallets in our customer base. And I think that that also puts us in a better position than we would have been in 2008 to retain customers and to do so by providing value to them in a more challenged environment or where the wallet's more challenged.

I do think video would be more challenged in a downturn or an inflationary environment. than other products, but the margins are relatively, have become smaller in that part of our business. So the net of it all is, I think it's somewhat of a market opportunity, but it's, you know, there will be stress on video.

Yeah, thank you across all that. Just a final clarification, Tom, at four amplifiers for DOCSIS 4.0, I get that it'll be a while before it arrives. Would that cover the vast majority of your network, or would you be interested in seeing six amplifiers?

You know, Doug, I think the point of the example around the four amplifiers is that the technology can work in an amplifier cascade that would allow it to cover a large portion of our network without having to move the nodes closer to the customers necessarily. So I think performance in that environment in the lab at this point is a strong example of how it is that we can make it capital efficient when we deploy it down the road. Yeah, it could get better. It could get better, yeah.

And it probably will. That would be our expectation and our experience with these kind of platforms.

Yeah. Perfect. Thank you. Thanks, Doug. Operator, we'll take our next question, please.

Thank you. Our next question will come from Jonathan Chaplin with Newstreet. Your line is now open.

Thanks, guys. Two quick ones, if I may. First, it seems like wireless is becoming an increasingly important piece of the business, and one of the pieces that maybe investors don't understand so well is how it contributes to EBITDA, because on an aggregate basis, it's still a drag. Can you give us some idea of what the incremental margin is on a wireless sub or what the contribution to EBITDA per sub is from wireless once you've acquired a sub. And then on broadband, can you give us a sense of sort of how you saw trends progress as you came out of June into July? Thanks.

So Jonathan, I'll take this one on the wireless. The It is increasingly important, and I don't think it's well understood by the marketplace. It has a reported EBITDA loss right now, but that's entirely driven by subscriber acquisition costs for sales and marketing. The EBITDA for wireless passed the positive point really some time ago. I don't remember what quarter, but it's probably a year plus. So it's an attractive product, and we're growing it fast, and we're not going to get into margin analysis or forecast, but I will tell you that everything that I've ever looked at that people publish on the topic grossly underestimates our margin that's inherent inside that business and what we can do with it to drive the business overall, including broadband net addition. So it's powerful. I don't think it's very well understood, and that's okay for now. The second question was what was on volume?

June, July. On volume.

Yes. Yeah, look, that's a tough question because you've got, you know, a seasonal disconnect period that goes through June and July. You know, you heard me mention earlier that we have had a more return to seasonal disconnects in our college markets, which actually bodes well for August and September, assuming that comes back. You know, I would say that our medium and long-term confidence is very high. We'll be back, market will return with net activity. Short-term, it's just difficult to see with volume and July is a very difficult month to go ask that question, so we'll see.

And just one other comment on wireless and its impact. We are a wireless company, and we have 450 million wireless devices connected to our network. So you think about our new video strategy, our new joint venture with Zumo, and our ability to connect video customers in the future wirelessly. All of our products will be wirelessly delivered.

Thanks, Jonathan. Thanks, Jonathan. Operator, we'll take our next question, please.

Thank you. Our next question will come from Brian Craft with Dolce Bank. Your line is now open.

Hi, good morning. I was wondering if I could ask you how you're thinking these days about potential acquisitions in the cable business or even other types of assets, whether it's business services or wireless, and maybe in cable specifically, if you could talk about just how you would evaluate a potential deal today. Thank you.

Well, we've always said we love cable, which is why we've been buying our own stock back, because we haven't been able to buy cable. And that it's a great business, and we think that the future of what these assets can do is significant and a huge opportunity.

So nothing about our view on M&A has changed. Okay, thank you. Go ahead, Jessica, sorry.

No, I mean, I will add to that that, you know, obviously it has to be cable at attractive prices. That'll be accretive to the shareholders in the long term. So we're always out there looking for and looking at cable assets, whether they be small cable assets or others. But ultimately, we do think it has to bring value to the shareholders. And so we'll be prudent.

Thank you very much.

Thanks, Brian. Operator, next question, please.

Thank you. Our next question will come from Phil Cusick with JP Morgan. Your line is now open.

Hi, guys. Thank you. I wonder if we can go back and talk about the progression of broadband through the quarter. And forgive me if this is just too much. In May, we talked about green shoots. And in mid-June, it looked like broadband would be slightly positive. I assume it's fair to say that June was worse than expected and that July is probably not trending well. I'm curious if June being worse is bigger seasonality in that type of market, or was it worse in the other markets or the underlying business? And then second, if I can, sort of a big picture question, how much do you take competitive response into account when you price a product like wireless? As you price wireless at $30, Verizon responds with $25 broadband, and it seems to be cycling down. Is this really the situation you want to create, and do you think you have an advantage in that over time? Thank you.

You know, Phil, I'll start on that one. I think what you heard us in May and June talking about green shoots, we were talking about additional activity, which – which wasn't necessarily additional additions at that point. And in June, we did still at that point expect to report total positive internet ads, even with the headwind that was associated with the EVB to ACP transition. I don't think that there was a large deterioration in market conditions or performance in June after that time. You know, on a quarterly basis, net ads is an aggregate of more than a million connects offset by disconnects. And a very small movement in either side of that equation can lead to sort of small changes in what the ultimate outcome is in net ads, which ultimately to 20 or 25,000 subscribers is. So I think that our position on where activity has been through the quarter, it's not that different now from where it was before.

I'll start off on the pricing and then I suspect Tom will chime in as well. Bill, the question on competitive pricing, of course, we think about not only the moves that we're making, but the secondary moves and the market responses. You know, our pricing for mobile is $29.99 when you take two lines or more. It's very simple. There's no taxes and fees. And it's so long as you have or take broadband of really any kind together with that product. Some of the other offers out in the marketplace mean that on a wireless product, you've got to go spend $10, $20 more, and then you can get discounted prices on broadband. So when you put the all-in package together, our all-in package of broadband plus wireless service is dramatically cheaper, taxes and fees included, and no upcharge on the core service required. It's really attractive. So I think even with some of those responses in the marketplace, which may or may not be related to us, You know, we can be very attractive and save customers thousands of dollars a year with a better product integrated as a converged broadband product for years to come. The other big benefit is that we have the ability to offer mobile in 100% of our footprint. So we have 54 million passings. We have gigabit service everywhere we operate. We did not redline. We're fully upgraded. We have a path to multi-gig symmetrical services. And in addition to that, we have mobile everywhere we operate at a price point that is very, very competitive with a product that's actually not only the fastest growing mobile, but the fastest mobile service in the country. You put all that together and feel pretty good about our competitive positioning long term.

Yeah, and to your broader question, yeah, we think about what it does to how competitors might price against us and our view is that we can do the pricing we're doing and still be, create an extremely good value for customers and at the same time create an extremely good value for us. And, you know, the macro situation with regard to us is that we're under-penetrated. We have four or five percent of the mobile dollars in our marketplace and When you just add up all the telecom spend, we have a very small piece of it. And so our opportunity is volume.

You saw that even in the second quarter. So second quarter, seasonal quarter, low volume in the cable side across the entire market. And yet we still had 344,000 net ads on mobile in a very low cable environment. I think that illustrates the opportunity. When the market comes back, internet sales will go back up along with the market activity. But mobile, in a strange way right now, from a lines net ads perspective, it's depressed compared to what it could or should be in a normalized market. So we'll continue to grow.

Thanks very much, Vince.

Thanks, Phil. Operator, we'll take our next question, please.

Thank you. Our next question will come from Peter Cepino with Wolf Research. Your line is now open.

Hi, thank you. two questions on pricing across two different products. First on mobile, Chris, I particularly appreciated your comments on the cost structure. And I'm aware that mobile has not historically sold at high rates to new broadband subscribers. And in context of a business with flagging gross ads, I wondered if there's an opportunity in the future to attach more mobile to gross ads and use it as a way to stimulate overall sales of your converged connectivity product. And then In parallel, on broadband pricing, I'd love to know your views on retail price increases at this point. Thank you.

So, nothing to announce today, Peter, but clearly we think a lot about mobile and its ability not only to attach to existing Internet customers, which has been the predominant path so far, but as the market understands better our product, the fact that it is the fastest mobile product in the country, and that it's real, that it really does save customers a lot of money, no contracts, no taxes, no fees. I do think there's a really powerful case that we can use to have mobile actually drive significant internet net ads, and particularly in a market with low volume, to be able to kickstart some volume in the marketplace by using mobile to do just that. So we're constantly testing different concepts in the marketplace. Economically, it's a no-brainer, and it makes a lot of sense. But it is a new package structure for educating customers to get them to think about buying a household service and an individual service together so that they can get those savings and they can get that better product. And that may take a little bit of time for us to find the right connection as well as to educate the marketplace. And then the second question, I should have made a note, the second question was on retail pricing for broadband. Our goal has always been to have the best pricing in the marketplace, and to the extent that we can withstand some of the inflationary pressures and save customers lots of money with that converged product, which includes both internet as well as mobile, that's going to be our path. It doesn't mean that we're dogmatic about never taking rate increases when we need to, and so that issue is always available, but our preference has always been to be competitive in value value leader in the marketplace.

Really helpful answers. Thank you.

Thanks, Peter. Operator, we'll take our final question, please.

Thank you. Our final question will come from Kutgan Miral with RBC Capital Markets. Your line is now open.

Good morning. I can start taking the question. A big picture one on broadband. The magnitude of the slowdown in subscriber growth has been fairly meaningful. A lot of the factors like low market activity, comping the pandemic pull forward, and competition are pretty well understood at this point. I know there's been the expectation that we'll get some normalization or stabilization with at least some of these issues, but it's just taking a bit longer than we would have hoped for. So I guess with that, is there a sense of greater urgency to reaccelerate that subscriber growth? And based on an answer earlier, it seems like you're satisfied with the current retail playbook, but is there a desire to rethink things like accelerating network investments, the rural build, leaning even more into mobile or anything else? Or is the view that the long-term opportunity remains intact and we just need to stay the course and cycle through the current dynamics? Thanks.

I think both of those statements are correct, which is the long-term remains intact. And in theory, you know, we could just wait it out. But I think you heard, you know, and I actually like the way that you described the entire situation. So long-term outlook is very good. We could wait it out. That's not what we're doing. We're accelerating everywhere we can on rural build-out to add to the growth. We're taking a look at mobile opportunities, which I just mentioned on the prior question to Peter. And, you know, we're serious about putting multi-gig symmetrical everywhere we operate. And so I think both barbells of what you described are actually true.

And there's some execution opportunity, too. You know, the pandemic created... employment issues for us and operational issues for us that have an impact on our ability to generate orders as well. And so we're aggressively trying to improve our ability to execute.

Yes, if you think about the long term, it ties to that too. So we have the ability, Craig asked about broadband and ARPU and ARDOF, and I talked about that. We talked about mobile convergence and how that could kickstart The thing that we haven't talked about is the digitization of our service platform really creates a long-term path to not only enhance customer satisfaction the way they interact with us, but to reduce our cost to serve per customer relationship in a very material way. And as good as that's been over the past few years, it's really the very tip of the iceberg in terms of what we can do with that over time, which has a double impact of increasing customer satisfaction, letting them deal with us the way that they want to, reducing the number of interactions and service issues, getting in front of impairments before the customer even knows they exist. And when they interact with us the way they want, oftentimes that's without a physical transaction, which has benefits on both sides, both to the customer as well as to our P&L.

That's great. Thank you both.

Thank you. There are no further questions at this time. I'll now turn the call back over to Stephan Aniger. Please go ahead.

Thanks, everyone, and we will see you next quarter.

Thank you, ladies and gentlemen. This concludes today's event. You may now disconnect.