Charter Communications Q3 2025 Earnings Call: Contradictions in Competition, Churn, and Video Strategy Spark Investor Concerns

Date of Call: None provided

Financials Results

• Revenue: Consolidated Q3 revenue down 0.9% year-over-year (grew 0.4% when excluding advertising and streaming-app allocations)

Guidance:

• 2025 full-year adjusted EBITDA expected to be flat or marginally positive year-over-year; Q4 EBITDA will be pressured by tough political ad comparisons and sales mix.
• Total 2025 capital expenditures expected to be approximately $11.5 billion (down from prior $12B outlook); some network evolution spend pushed into 2026; 2025 intended to be peak CapEx.
• Full-year cash tax payments expected to be approximately $1.0 billion; Q3 cash taxes were $53 million.
• Expect ~450,000 subsidized rural passings growth in 2025; awarded ~84,000 passings; ~$230M net capital to build awarded passings.
• Net debt / LTM adjusted EBITDA 4.15x (4.23x pro forma Liberty); plan to be at or slightly under 4.25x during Cox pendency; post-close target leverage 3.5–4x, expected to delever to midpoint in 2–3 years.
• Expect rapid free cash flow and free cash flow per share growth as CapEx declines.

Business Commentary:

• Mobile Growth and Internet Challenges:
• Charter added nearly 500,000 Spectrum Mobile lines in Q3 and 2 million lines over the last 12 months.
• Video customer losses improved to 70,000, down from 294,000 the previous year, driven by product improvements.

• Internet customer losses were in line with the previous year, affected by high competition, low move rates, and mobile substitution.

• Cost Management and AI Investments:

• Third-quarter EBITDA declined by 1.5% year-over-year, with an operating environment impacting new sales.
• Charter is improving cost efficiency by reducing service calls and truck rolls, with AI and machine learning tools.

• The company is focusing on agentic AI to enhance customer service and reduce costs, with significant savings expected from AI tools.

• Marketing and Product Strategy:

• New pricing and packaging launched in September 2022 increased gig attach rates and mobile lines per customer.
• Charter is emphasizing the value of bundling products, offering seamless connectivity and entertainment, to reduce churn.

• The company is exploring innovative marketing expressions to attract specific customer segments, such as free internet with multiple mobile lines.

• Cox Acquisition and Video Product Enhancements:

• The acquisition of Cox Communications is expected to close in mid-2026, aiming to expand Charter's footprint and offer lower pricing.
• Video product improvements have led to increased customer engagement and reduced churn, with significant app activation.
• Charter's video strategy focuses on creating utility for connectivity services, leveraging partnerships with programmers for seamless entertainment.

Sentiment Analysis:

Overall Tone: Neutral

• Management highlighted near-term revenue/EBITDA pressure (Q3 revenue down ~0.9% YoY; Q3 adjusted EBITDA down 1.5% YoY, flat excluding advertising) but emphasized product improvements, mobile/convergence benefits, AI-driven cost reductions and a view that falling CapEx will drive substantial FCF growth over the coming years.

Q&A:

• Question from Craig Moffett (Moffett Nathanson): Where broadband is improving and why we should be optimistic about better broadband results?
  Response: Convergence (mobile + video) meaningfully reduces churn; current internet net losses are driven by muted housing/move rates, mobile substitution and new fiber/fixed‑wireless competition (notably AT&T); management expects growth to resume as those external pressures ease and from improved offers and marketing.

• Question from Ben Swinburne (Morgan Stanley): Why is Q4 EBITDA looking worse than earlier guidance and does recent competitor commentary on pricing change your pricing outlook?
  Response: Q4 pressure stems from a few third‑quarter promotional offers that depressed ARPU and sales mix (these offers were pulled in early November); Charter retains pricing headroom versus peers but will remain disciplined and pass through cost increases where required while leveraging packaging to preserve household economics.

• Question from Vikas Harloka (New Street Research): Are recent promotions (video marketed as app bundles, broadband free with four mobile lines) the next evolution in marketing?
  Response: These are targeted offer expressions to raise ARPU and margin without harming household economics; the four‑line mobile + free internet promo targets a small but high‑LTV, very low‑churn cohort and is incremental rather than volume shifting.

• Question from Jessica Wright‑Erlich (Bank of America): Update on Cox acquisition timing/preparations and detail on recent video product performance (conversion/retention/app engagement)?
  Response: Cox timeline unchanged (mid‑next year); primary focus is regulatory engagement and pre‑close integration planning; video initiatives are increasing sales and reducing churn—app activations materially improve retention though adoption and activation flows remain a work in progress.

• Question from Michael Rollins (Citi): Size of future cost savings from AI/automation and any non‑linear monetization opportunities from network assets?
  Response: Agentic AI and unified data infrastructure can materially reduce the ~$8B cost‑to‑serve over time while improving service quality (benefits likely over 12–24 months); management is exploring B2B/edge/monetization use cases (data offload, edge CDN, authentication services) but none are material today.

• Question from Peter Supino (Wolf Research): What would make Charter start paying down debt earlier and how should we think about deleveraging given slower growth?
  Response: Leverage targets are continually reassessed; plan to be at or slightly under 4.25x pro forma during the Cox pendency, with a post‑close target of 3.5–4x and an expectation to delever to the midpoint in 2–3 years, funded by rising free cash flow as CapEx declines while retaining capacity for shareholder returns.

Contradiction Point 1

Impact of Competition and Churn

It highlights differing perspectives on the impact of competition, particularly from mobile internet providers, on churn and customer retention, which are critical for growth and market share.

Where is broadband improving to drive better results? Are improvements evident after high splits or in market share retention? - Craig Moffett(Moffett Nathanson)

2025Q3: Churn is improved with a mobile relationship and video attachment. The challenge is the operating environment: muted housing environment, slow household formation, and low move rates. New competition from cell phone internet providers is impacting gross ads, particularly in the low-income segment. - Chris Winfrey(CEO)

Can you explain the non-pay churn factors affecting Internet customer losses and provide more details on the tax reform benefits? - John Christopher Hodulik(UBS Investment Bank)

2025Q2: Nonpay churn is at historical lows but has increased year-over-year due to former ACP customers and new customers not eligible for ACP, impacting net adds in a challenging market environment. - Christopher L. Winfrey(CEO)

Contradiction Point 2

Broadband Churn and Competition Impact

It involves differing views on the impact of competition and churn on the broadband business, which directly affects customer retention and revenue.

Can you explain where broadband is driving improvements? Are there gains in areas with high splits or market share retention data? - Craig Moffett(Moffett Nathanson)

2025Q3: Churn is improved with a mobile relationship and video attachment. The challenge is the operating environment: muted housing environment, slow household formation, and low move rates. New competition from cell phone internet providers is impacting gross ads, particularly in the low-income segment. - Chris Winfrey(CEO)

Can broadband results improve in 2025 without ACP impacts? Why are video subscriber numbers outperforming broadband metrics? - Benjamin Swinburne(Morgan Stanley)

2024Q4: Without ACP losses, we have a better visibility into broadband growth. The peak impact of cell phone Internet seems to have stabilized. - Chris Winfrey(CEO)

Contradiction Point 3

Video Product Strategy and Churn

It involves differing explanations of the video product strategy and its impact on churn, which are essential for maintaining customer satisfaction and retention.

Do recent marketing promotions signal a shift in marketing strategy, such as offering free video content via streaming services? - Vikas Harloka(New Street Research)

2025Q3: The video strategy aims to meet market needs and enhance broadband and mobile sales. Sales are up across new and existing customers. The focus is on improving broadband churn with high-quality video, leveraging Xumo for content discovery. - Christopher L. Winfrey(CEO)

Can you detail video subscriber growth and changes in video packaging strategies? - Bryan D. Kraft(Deutsche Bank)

2025Q2: Video improvements are due to higher sales, lower churn, and better upgrades. The new packaging allows for value addition and promotion of more expensive packages, supported by title and guide enhancements. - Christopher L. Winfrey(CEO)

Contradiction Point 4

Impact of New Competition

It highlights differing perspectives on the impact of new competition, particularly from cell phone internet providers, which could affect Charter's market share and growth strategy.

Where is broadband improving to drive better results? Are there improvements in high-split areas or market share retention? - Craig Moffett(Moffett Nathanson)

2025Q3: New competition from cell phone internet providers is impacting gross ads, particularly in the low-income segment. - Chris Winfrey(CEO)

How are converged households with wireless impacting your business? What's the current attach rate, and will wireless drive growth in broadband? How will tariffs affect capital spending and equipment procurement? - Craig Moffett(MoffettNathanson)

2025Q1: We also have a largely customer-owned broadband network with over 6 million miles of fiber plant versus some others that continue to rent phone company owned fiber on a wholesale basis. - Chris Winfrey(CEO)

Contradiction Point 5

Impact of Video Product Changes

It shows differing views on the impact of video product changes, which could impact customer retention and satisfaction.

Can you update us on the Cox acquisition and the video product changes' impact? - Jessica Wright-Erlich(Bank of America)

2025Q3: Video product improvements have led to increased sales, reduced churn, and accelerated app activations. - Jessica Fischer(CFO)

Can you update us on the rollout of seamless entertainment and its expected impact on KPIs such as video or broadband? - John Hodulik(UBS)

2025Q1: The rollout of seamless entertainment is progressing with direct-to-consumer apps now integrated for easy access. A digital store will launch later this year for seamless integration, benefiting customers with affordable plans. - Chris Winfrey(CEO)