Charter adds 63k subscribers in Q3, eyes more rural builds

Charter continued to add broadband subscribers in the third quarter through its existing and subsidized rural footprint, though new rural markets were a brighter spot for the operator.

CEO Chris Winfrey said that “given the greater subsidized rural passings and construction opportunity,” Charter may even look to partially fund those new markets by “very modestly slowing our network evolution plan” — which includes upgrades to its hybrid fiber-coaxial footprint.

In total, the company added 63,000 internet customers in the third quarter.

Net adds in new markets hit 31,000 in the third quarter, accelerating from 26,000 last quarter. A note from New Street Research said the company passed fewer homes in new markets than expected, “and so the pace of penetration growth is tracking ahead of expectations.”

Winfrey said Charter expects to add approximately 300,000 new subsidized rural passings in 2023 and to accelerate that pace in 2024. In the third quarter, 78,000 rural passings were activated.

Notably, he said that Charter is ahead with its Rural Digital Opportunity Fund (RDOF) builds and "will end up with more passings than originally expected."

However, NSR said Charter's results in core markets were “disappointing,” with adds of 47,000 way below their estimate of 79,000.

While NSR expected stabilization in pressure from fixed wireless access (FWA), Charter continues to see some impact from FWA competitors in the lower usage and price sensitive customer segments of its residential and SMB businesses.

Winfrey also noted that Charter will fall short of its year-over-year net subscriber growth goal.

He said on the earnings call that while Charter’s goal has been to increase net subscriber adds year over year, the company will be “hard pressed” to hit that target due to some turbulence in the third quarter.

For one, the company attributed approximately 15,000 third quarter internet disconnects to the temporary loss of ESPN in September.

Disney had pulled the channels it owned from Charter’s Spectrum TV system in August, including ESPN, ABC, National Geographic and FX, before the two companies resolved their dispute in September. Although, Charter CFO Jessica Fischer claimed that despite the Disney fight, “third quarter residential internet churn was at a new record low for third quarter.”

Whether Charter finishes its network evolution initiative by the end of 2025 or mid 2026 will depend on “the supply chain for distributed access architecture components, and managing annual capital spend given the larger customer growth opportunity and construction speed of RDOF where we're ahead of the build requirements,” said Winfrey.

He also reiterated Charter will not participate in states where Broadband Equity Access and Deployment (BEAD) program rules are “not conducive to private investment." Namely, he said states that adopt the NTIA’s proposed guidelines on things such as internet tiers, pricing, labor practices, “just won't be attractive” locations for the company to bid in.

Q3 results

Charter’s third-quarter revenue of $13.6 billion grew by 0.2% year-over-year, driven by residential internet revenue growth of 3.7%, residential mobile service revenue growth of 33.8% and other revenue growth of 28.8%, mostly driven by higher mobile device sales.

Free cash flow of $1.1 billion decreased from $1.5 billion in the prior year, due to higher capital expenditures, mostly driven by Charter's network evolution and expansion initiatives.

Third quarter adjusted EBITDA of $5.4 billion grew by 0.7% year-over-year.

As of September, Charter had a total of 32.2 million residential and SMB customer relationships, excluding mobile-only relationships.