Charter’s capital expenditure
Charter (CHTR) has been consistently investing in capital expenditure (or capex) to improve its network. In 4Q17, the telecom company spent $2.6 billion on capex, including $202.0 million on transition-related expenses.
However, Charter spent just under $1.9 billion on capex in 4Q16, including $187.0 million on transition-related expenses. The growth in its capex has mostly been due to higher spending on CPE (customer-premise equipment), support capital, and scalable infrastructure. Its higher CPE spending has been driven by the launch of its Spectrum pricing and packaging in legacy Time Warner Cable and legacy Bright House markets.
During the Morgan Stanley Tech, Media & Telecom Conference on February 27, 2018, Christopher L. Winfrey, Charter’s executive vice president and chief financial officer, talked about Charter’s capex going forward. Winfrey highlighted that the company expects its capex to ramp up in 2018. It’s restarted its all-digital projects in the remaining Bright House and Time Warner Cable markets that aren’t yet all-digital, and it’s also started the deployment of 1 Gbps (gigabit per second) speeds via DOCSIS 3.1 technology across its footprint. Winfrey added, “The dollars of CapEx inside 2018 isn’t going to be lower than 2017, but the capital intensity will be.”
Expected capex in 2018
Charter hasn’t provided a capex guidance range for 2018. Meanwhile, Frontier (FTR) expects its capex to come in at $1.0 billion–$1.2 billion in 2018. Windstream (WIN) is expected to spend ~$0.80 billion on capex in the year. Integrated US telecom companies Verizon (VZ) and AT&T (T) expect to spend ~$17.8 billion and ~$25.0 billion, respectively, on capex during the same period.
In 4Q17, Charter reported free cash flow of $1.2 billion compared to $1.9 billion in the previous year’s period.