The government funding that Charter has received for rural broadband deployments generates revenue opportunities for the company beyond the funded areas, Charter CEO Chris Winfrey told investors today.
Winfrey noted that while the company has cited rural internal rates of return (IRR) in the mid to high teens, “what’s not included in that return is a bunch of other opportunities.”
He added that “Now you have the option to extend your footprint even further with new passings” and referred to this phenomenon as “a machine of continuous return.”
He noted, for example, that Charter made service available to 145,000 locations in New York state through a funded program, but eventually brought service to close to 180,000 locations, including neighboring areas.
Of rural builds in general, he said, “These are faster growing systems by definition with lower operating costs and higher penetration.”
From a company perspective, he said, “you now have a higher perpetuity growth rate,” adding that “I don’t think anybody has thought about the fact that you have a higher perpetuity growth rate and what that means from an overall valuation perspective.”
Winfrey also noted that rural buildouts offer “a rare opportunity for cable to look good.”
Elaborating, he said, “We’re doing all the right things and we’re a good operator. We’re good to consumers and we’re good in our communities.”
Charter precipitated major changes in how cable companies thought about government funding when it won over $1 billion in the Rural Digital Opportunity Fund program to cover some of the costs of deploying broadband to unserved rural areas.
Since then, Charter and other cable companies have been pursuing funding that individual states are making available for broadband and have been winning a considerable amount of funding.
Winfrey made his comments today at the Morgan Stanley Technology, Media & Telecom Conference. A replay will be available at this link.