Charter Communications Inc. CEO Tom Rutledge said the company is on track to launch a mobile offering "in the middle of this year," and to roll out 1 Gbps speeds across all of its markets by year-end.
"The goal is to create and retain more cable customers," Rutledge said during a Feb. 2 earnings conference call. During the fourth quarter of 2017, Charter added roughly 2,000 net residential video subscribers, as compared to a loss of 51,000 subscribers in the prior-year period. Charter also added 263,000 net residential internet customers, as compared to a net add of 357,000 in the year-ago period.
Much like Comcast Corp.'s Xfinity Mobile, Charter's wireless offering will leverage a mobile virtual network operator agreement with Verizon Communications Inc., as well as Charter's own existing Wi-Fi network. Charter has also been experimenting with next-generation 5G technology, and Rutledge said those tests are "going well." The CEO reiterated his belief that Charter will ultimately be able to offer something superior to the coming 5G technology through "the integration of a small cell architecture using unlicensed and licensed spectrum working together interchangeably with our advanced DOCSIS roadmap." Data Over Cable Service Interface Specification, or DOCSIS, is a telecommunications standard used to provide internet access via a cable modem.
Presently, Charter is using DOCSIS 3.1 technology to offer its Spectrum Internet Gig service, which technically offers speeds of 940 Mbps, in a number of markets, reaching about 9 million passings across Charter's footprint. Additional launches are scheduled for 2018. "By year-end, we will offer gigabit services in virtually everywhere we serve, all 50 million passings," Rutledge said.
Rutledge noted that the combination of Charter's existing cable and Wi-Fi network with either licensed or unlicensed 5G spectrum is separate from the 2018 mobile offering launch and will not result in a near-term product offering in either 2018 or 2019.
In terms of the impact of the 2018 launch, Charter CFO Christopher Winfrey said that upfront launch and acquisition activities will likely create somewhat of an initial drag on the company's financial results. "The more wireless customer growth we generate early on, the more EBITDA cash flow drag we experience in the early days," he said.
Over time, though, Winfrey said Charter expects its wireless service to generate positive EBITDA on a stand-alone basis with broader growth benefits to Charter's core cable services.
Overall, for the fourth quarter of 2017, Charter reported net income attributable to shareholders of $9.55 billion, or $34.56 per share, up from net income of $454 million, or $1.67 per share, in the year-ago period. The company recorded a noncash GAAP tax benefit of $9.3 billion from a reduction in the deferred tax liability as a result of the enactment of the U.S. Tax Cuts and Jobs Act.
The S&P Capital IQ consensus estimate for the quarter was 82 cents on a GAAP basis and 87 cents on a normalized basis.
For the full year, net income attributable to Charter shareholders totaled $9.9 billion, or $38.55 per share, compared to $1.1 billion on a pro forma basis, or $3.97 per share, in 2016. Pro forma results treat Charter's May 2016 acquisitions of Time Warner and Bright House as if they had closed on Jan. 1, 2015.
Revenue for the fourth quarter of 2017 was $10.60 billion, up 3.2% year over year from $10.28 billion. For the full year, revenue totaled $41.58 billion, up from $40.02 billion on a pro forma basis in 2016.
