Bullish outlooks from Charter, Rogers

Feb. 6, 2018
Much like with Comcast (NASDAQ:CMCSA) last week, during its financial outcome conference call Charter Communications (NASDAQ:CHTR) stressed the positive outlook of the recent tax reform legislation and ...

Much like with Comcast (NASDAQ:CMCSA) last week, during its financial outcome conference call Charter Communications (NASDAQ:CHTR) stressed the positive outlook of the recent tax reform legislation and the elimination of the Title II framework. The company said it has committed to paying every employee at Spectrum at least $15 per hour, in addition to medical and retirement benefits the company has already increased for employees.

Charter also said that it would hire 20,000 American workers and invest more than $25 billion in the United States over a four-year period. CEO Thomas Rutledge noted that in 2017 the company increased its U.S.-based workforce "significantly" and increased cap expenditures by 15% to $8.7 billion.

"Those statistics increased throughout 2017 as we grew more confident that tax reform and FCC actions to promote net neutrality for all market players would be enacted," Rutledge said.

"Lower taxes and higher regulatory certainty also create better incentives for new construction and more rural broadband deployment, which will utilize our deep fiber and anticipated wireless capabilities," said Chris Winfrey, CFO and EVP, Charter.

As for services, Charter is getting ready to launch wireless services mid-year under its MVNO agreement with Verizon (NYSE:VZ), with one goal being the creation and retention of more cable customers. Rutledge said 5G wireless tests and 6G tests are going well. The latter are based on Charter's pre-spec definition of the integration of small cell architecture using unlicensed and licensed spectrum working with its advanced DOCSIS roadmap.

More than 50% of former Time Warner Cable and Bright House residential customers are now subscribing to Spectrum pricing and packaging. Charter is offering 100 Mbps in 99% of its footprint, which is up from 50% in June.

Charter also restarted its all-digital project last June. By the end of the year, 30% of legacy TWC and 50% of legacy Bright House customers still carried full analog video lineups.

"Those regions will be fully digitized by the end of this year as we deploy fully functioning two-way digital set-top boxes on the remaining analog TV appliances that we serve," Rutledge said.

In September, Charter began offering gigabit speed offerings in several markets using DOCSIS 3.1 technology. There are now eight markets with gigabit options, including 9 million passings.

Turning to Rogers Communications (TSX:RCI.A), Joe Natale, president and CEO, said that his company delivered the best subscriber and financial performance seen in many years, and noted that "we've set a solid foundation for sustained growth as you will see in our 2018 outlook."

During 2017, total service revenue grew by 4%, driven largely by wireless, which had a 7% growth in service revenue. This is the best wireless financial results since 2009. Rogers also experienced 354,000 net additions and a churn rate of 1.2%.

"These are the best subscriber metrics we have seen since 2010," Natale said.

In cable, Natale said he continues to be impressed with the power of DOCSIS. Node segmentation continues as does driving fiber deeper into the access network. 2018 will see the beginning of migration to a passive network architecture.

"This next-gen DOCSIS passive hybrid fiber and coax network will future-proof our business. This transition is not a big bang effort. It is an evolutionary, node-by-node and success-based investment," Natale said. The first focus will be on neighborhoods that have the largest data demands combined with opportunities for cost efficiencies.

Ignite TV, Rogers' IPTV service licensed from Comcast, is in full employee trial, with hundreds using it. "Ignite TV will deliver a high-value premium service with the most advanced features in video experience and a robust product roadmap," Natale said.

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