Charter financials are looking good – for now and for at least the near-term future, said financial analysts at Moffett Nathanson in a research note issued on Friday. Charter broadband buildouts are contributing to that success, as are improving economics for the company’s mobile business, the researchers observed.
The number of homes to which Charter has made service available increased by two million or 2.2% over the last two years, which as the researchers note, is “far in excess” of national household formation rates and which marks the fastest footprint growth of any company covered by Moffett Nathanson Media & Telecom.
Charter broadband buildouts have favored what Moffett Nathanson calls “rural-ish” markets in which “terrestrial broadband is all but non-existent, suggesting that high penetration rates are likely.”
As Telecompetitor previously reported, Charter CEO Tom Rutledge told investors in December that 30% of the company’s recent buildouts were in rural areas. He also noted that new customers in these areas tend to take video as well as broadband service.
Charter Broadband Buildouts
Charter’s “homes passed” metrics are poised to see continued growth, as the company was the largest winning bidder in the recent Rural Digital Opportunity Fund (RDOF) auction. The RDOF auction was a reverse auction that awarded money to cover some of the costs of bringing broadband to unserved rural areas, with funding going to the company that committed to deploying service in an area for the lowest level of support.
Charter was provisionally awarded over $1 billion to bring broadband to 1 million locations. The company plans to invest an additional $3.8 billion in the buildouts, assuming the company’s long-form application is approved by the FCC, enabling Charter RDOF broadband buildouts to commence.
Other positive trends that should contribute to strong Charter financials, according to MoffettNathanson, include:
- Federal stimulus funding for consumers will boost subscriber rates and decrease bad debt.
- Charter’s mobile service Spectrum Mobile is “emerging as a much more material contributor to growth” and while the service initially wasn’t profitable (measured on a standalone basis), that is likely to change. The researchers note that Comcast, which launched a mobile service one year before Charter, already has reached the breakeven point on its service. And as Charter builds out the spectrum that it won in the CBRS auction rather than relying on a wholesale agreement with Verizon, its margins should improve further.
- The company also will benefit from the overall trend toward higher margins as a greater percentage of cable company revenue comes from higher-margin broadband services rather than lower-margin video services.