Charter adds 105K broadband subs, defends asymmetrical DOCSIS plan

Charter Communications beat out its big four rivals with the most broadband subscriber gains in Q4 2022. But executives still found themselves on the defensive during an earnings call, as analysts questioned the operator’s decision to pursue asymmetrical network upgrades in the face of symmetrical multi-gig fiber competition.

The operator added 105,000 internet subscribers in the quarter. While that figure was down year on year from 190,000, Charter’s fixed broadband net add number was better than those posted by Frontier (75,000 net adds), Verizon (37,000, not counting fixed wireless), Comcast (26,000 loss) and AT&T (43,000 loss).

During an earnings call, CEO Chris Winfrey said lower market activity continues to impact gross additions,. However, he added Charter is performing well against overbuilders and expects its rural builds will be a growth tailwind over time.

CFO Jessica Fischer noted that Charter expects to build to around 300,000 subsidized rural locations in 2023, marking an increase from the 200,000 or so it passed in 2022. She added it anticipates a net cost per passing of around $3,000 for these projects and penetration rates of around 40% after six months. These subsidized builds will be incremental to its other expansion projects.

But Winfrey and Fischer faced questions about Charter long-term prospects given its decision to pursue asymmetrical network upgrades when Comcast is pushing toward symmetrical speeds to match claims from fiber rivals. In December, Charter unveiled plans to cover 15% of its footprint with speeds of 2 Gbps downstream and 1 Gbps upstream, 50% of its footprint with 5X1 Gbps capabilities and 35% with 10X1 Gbps speeds using high-split upgrades and DOCSIS 4.0 technology.

Winfrey argued Charter’s plan will allow it to flexibly allocate bandwidth, meaning it could offer a 5 Gbps symmetrical service if it wanted to depending on where it sets the split. He added it will also be deploying a fiber drop as a remote OLT inside its nodes which will allow it to deliver 25G or faster fiber connectivity where there is demand for it.

While both of these options remain on the table, though, Winfrey said “it’s our view right now that the upstream demand today is much more of a marketing campaign as opposed to a real product demand.”

“We have a lot of flexibility, that’s what I think we really like this plan,” he concluded. “We can go fast, we can do it at a low cost, we can reset the up and downstream and we can pivot where we need to go.”

Q4 results

Consolidated revenue of $13.7 billion was up 3.5% year on year, driven primarily by growth in Charter’s mobile, advertising sales, commercial and internet divisions. Internet revenue specifically was up 3.9% to $5.6 billion. However, net income attributable to Charter shareholders plunged 25.7% to $1.2 billion. Charter attributed the drop primarily to higher income tax expense, higher interest expense and the change in other income.

Charter spent $2.9 billion on capital expenditures in Q4, up from $2.1 billion in the year-ago quarter. Of that, $928 million went to line extensions and the remaining $2 billion went to investments in the operator’s network evolution and higher CPE costs for advanced Wi-Fi kit.