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How Charter Expects to Lower Its Capex

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Investments in operational efficiency paying off

Charter Communications (CHTR) is expecting its capex to be lower this year than last year. The company expects its 2019 capex to be ~$7.0 billion compared to $8.9 billion in 2018. Comcast (CMCSA), Verizon (VZ), and AT&T (T) spent $9.8 billion, $16.7 billion, and $21.3 billion, respectively, on capex in 2018.

Charter expects its annual capex to continue to fall beyond 2019. The fall in capex at Charter can be viewed as one of the benefits of the company’s efforts to bring more efficiency into its operations. According to Charter, the capex decline will be driven by the improved reliability of plants and networks becoming more cloud-based. The company also expects lower spending on customer premises equipment to contribute to its capex fall.

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Cable providers trying to diversify

For Charter, lower capex means it can preserve more cash resources, and its savings can be reinvested for more growth or returned to shareholders. Charter put $5.0 billion back in the pockets of its shareholders through share repurchases in 2018. Amid cord cutting, cable providers are looking elsewhere to drive growth, which has raised the need for more cash to finance new growth projects.

Charter is one of the big cable companies that have diversified into the wireless space via mobile phone services. The other big cable company in the mobile business is Comcast. Altice USA (ATUS) is expected to join them this year with its own mobile service.

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