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Behind Charter’s Big Long-Term Growth Drivers

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Part 4
Behind Charter’s Big Long-Term Growth Drivers PART 4 OF 7

What Charter Expects for Its Future Capex

Charter’s capital expenditure

In 2Q17, Charter Communications (CHTR) spent $2.15 billion on capital expenditure or capex, including $86 million on transition-related expenses. The carrier spent around $2.07 billion on capex in 2Q16.

The increase in capex was due to higher spending on CPE (customer-premises equipment) driven by the launch of the company’s spectrum pricing and packaging in legacy Time Warner Cable and legacy Bright House. However, this spending was offset by lower scalable infrastructure driven by the timing of the spending.

What Charter Expects for Its Future Capex

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Charter’s merger with Bright House and Time Warner Cable has added significant scale to its business. However, Charter’s management has forewarned that upgrading the Time Warner Cable and Bright House systems to all-digital will take several years.

At the same time, the integration of newly acquired and legacy systems will also take several years. This integration will require significant capital spending and higher operating costs.

Expected capex investments in 2017

Charter’s management has not provided any capital expenditure guidance for fiscal 2017. But the carrier anticipates that its capex will ramp up for the rest of 2017 as it has restarted its all-digital projects in the remaining 60% of Bright House operations and 40% of Time Warner Cable operations that are not yet all-digital. Charter anticipates that this conversion and integration process could last through early 2019.

In 2017, Frontier Communications (FTR) anticipates that its capex will be in the range of $1.1 billion–$1.2 billion. Meanwhile, Windstream (WIN) and CenturyLink (CTL) are expected to spend nearly $0.84 billion and $2.6 billion respectively, on capex in 2017. However, Verizon Communications (VZ) and AT&T (T), both integrated US telecom carriers, anticipate spending ~$17.5 billion and ~$22.0 billion, respectively, on capex in 2017.

In 2Q17, Charter reported FCF (free cash flow) of $1.1 billion, compared with $0.5 billion in 2Q16.

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