Charter Communications has frequently talked up the pace of its rural deployments, most recently announcing it reached 68,000 subsidized rural passings in Q2.
CFO Jessica Fischer said on Wednesday Charter has a “tremendous opportunity” to expand its footprint to rural areas, noting the effort is akin to creating “a separate cable company.” Thinking of the buildout that way helps the company paint a better picture of the business’ total value.
“It’s almost like you need to separate the valuation, right? So today we have our existing footprint and the cash flow and EBITDA that we generate from our footprint, sort of excluding what [Charter is] doing in rural builds,” she said at a Bank of America investor event.
Whereas with rural deployments, Fischer explained Charter is essentially “buying a brand-new cable asset that’s starting at 0% penetration and growing extraordinarily fast,” giving that footprint a “separate valuation model.”
“I think if you take the two components and value them separately and put them back together, then you actually get a much better picture of what the total value is that we’re driving from the business,” she said.
RDOF progress
Charter was one of the largest winners in the Rural Digital Opportunity Fund (RDOF) auction, and Fischer noted progress in those builds “has been going quite well” in terms of pace and penetration.
The operator has said RDOF builds typically reach 40% penetration six months after they are completed. However, some areas are seeing higher penetration rates, said Fischer.
“We have a cohort now that has been built for more than 12 months, and in that 12-month cohort we’re hitting 50% in terms of penetration,” she said, adding Charter is also seeing “very high” penetrations from customers who are bundling broadband with video, mobile and landline voice services.
Cost is still impacting deployments, as Fischer pointed out inflation has increased since Charter won its RDOF bids in 2020.
“When we mapped out the RDOF passings, we didn’t fully understand all the homes that you would have to pass just in order to do the build that we were planning on,” she said. “So while our costs for some of that build have increased versus the original plan, the passings that we’re getting as part of it have increased as well,” meaning the total cost per passing is “actually still coming in line with our original expectations.”
As for funding, Charter just scored around $116 million in grants to expand broadband in Kentucky, and it’s won money in states like Michigan, Nebraska and Wisconsin.
Fischer said Charter is “disciplined” in the way it bids for broadband subsidies, not only from an economic perspective but also “in terms of the regulatory framework” for the Broadband Equity, Access and Deployment (BEAD) program.
“We’re really working closely with states who are developing our frameworks to make sure that the regulatory framework for the BEAD builds [is] consistent with investment from private capital,” she said.