Charter Aktie

For those of you that I haven't met, I'm Mike Rollins. I cover communication services and infrastructure for Citi. Very pleased to welcome Jessica Fischer, Chief Financial Officer of Charter. Thank you so much for being with us today. It's great to see you.

Great to be here. Thanks.

So maybe to get us started, first, congratulations on your upcoming role. Last week, you announced your intention to leave Spectrum. Can you tell us a little bit about your decision and the opportunity in front of Charter?

Sure. So first off, I just have to express my gratitude to my teams at Spectrum, to Chris who was a sponsor and mentor through a big chunk of my career, to the Board who has been very supportive. Look, I think we've done the right things for the future of the business, right? We've made some great investments across the business that I think will carry it into the future. We took a stand in video that has changed the trajectory of the video business, which ultimately is good for broadband and will grow the broadband side of the business. And we stuck to the strategy, right, which is that we're selling high-quality products at a value to customers and doing that, coupled with high-quality customer service.

When you put that together, the industry has been really challenging, but we've been one of the most successful teams in the industry against that very challenging backdrop. That was what enabled us to close the Cox transaction and the Liberty Broadband transaction in the last couple of weeks, and it set the company up quite well to continue to grow its cash flow over the next few years. There's a lot of exciting stuff still to come at Charter.

That being the case, for me, it was a good time to go take on a new challenge. And so I've accepted a role at Crux AI, which is a partnership between Google and Blackstone. We'll be building AI infrastructure, which, as we were just talking is sort of being a different piece in the chain here, building what will create demand on the network going forward. It's an exciting space. I'm excited to go do it. But I wish the team well, and I think that -- I think there's still a lot more to come here at Charter as well.

Okay. Well, let's dig into that. It's great to have you here to be able to talk about this. So you mentioned the big news of the last few weeks was closing the Cox transaction. And so can you discuss the opportunity to take your playbook, the Charter playbook, and the converged connectivity strategy now across a larger footprint?

Yes. So the total footprint coming out of this, we have more than 70 million passings, only around 37 million customers. So the opportunity that's there is around almost 35 million homes and businesses that we can go sell to. And the way that we're going to do that, look, on the Cox side, the lever that we have is the ability to bundle products much better than what they've done before. So their video penetration is a little under 10%. Their mobile penetration is very low. Their broadband ARPUs are high.

And so what we will go do and we've already sort of started to go do is we're going to go sell using our pricing and packaging strategy, which has performed better than theirs, to drive lower pricing at acquisition and lower pricing actually sort of throughout the life cycle of the customer from a broadband perspective, but to couple that with video and mobile such that we do what we've always done across our footprint, which is to maximize the amount of cash flow that you can get per household.

And when you look at where customer ARPUs are on the Cox side versus on our side, they're -- excluding the seamless entertainment allocation, they're not that different. And so there's really a clear opportunity to be able to sort of migrate the base in a way that will be good for the customer because it will make customers churn less because we'll be delivering more value and will be good for the business because I think that we can generate unit growth over time related to sort of creating that better package for customers.

And you bring that together with like it's -- so you have what you need to do on the revenue side, but a lot of real opportunity on the other side as well. There are some good things inside of the business, whether it's AI tools or what they're doing on the B2B side where we can take things that they do well and bring them to our business. There are things that we do well where we can push them into their business, some opportunities in advertising and some spaces like that. The confidence that we have in the synergies that will come from the transaction, I'd say, has increased dramatically as we've sort of dug in further. And so we've raised our synergy target to more than $1 billion.

And so overall, there's a lot of work to do. And we're excited. I didn't mention it, but in the pricing and packaging, actually, I think in the next 1 week, 1.5 weeks that we'll be rolling that out over their footprint sort of at full scale. So lots of exciting work to do on that side, but I think we're really confident in our ability to sort of bend the trajectory that they've been on to put that business in a better place and to create value for the company in doing so.

So you mentioned the over $1 billion in synergy now. Is there a view on speed of travel to get there?

Yes. So I actually think that there's a big chunk of the synergies that come very quickly. So you get to a run rate like something on the order of half, probably in a very, very short time frame. And then I think the trajectory from there is a little more that you have to do to go get to the other pieces. But look, there's a lot of opportunity, whether it's around things like organizational structure and overhead or whether it's around just sort of the bread and butter contracts and operating efficiencies that we'll get implementing across the business. So I think you can get to a good amount of it quickly.

Great. Maybe zooming out, just broadband competition broadly. Can you just give us an update on what's going on in the competitive environment for your broadband business?

Yes. The market is still very competitive. And I think you might have heard one of our peers talk about it yesterday. But I think our point of view, it was very competitive in Q1. It was very competitive in Q2. It continues to be very competitive in Q3. There are ebbs and flows as to which competitor is out there being more competitive and who has sort of backed off of offers. But the overall space, it hasn't changed, but it continues to be a competitive space.

How are you seeing the threats both near term and long term from fiber, FWA and now the LEOs like Starlink?

Yes. So if I think about the needs, so the need that AI is driving an overall data growth or data usage growth is driving, ultimately, you're going to need high-speed, highly reliable, low latency networks and those networks are wired networks primarily today, right? So the key competitor that we have across markets is going to be the wired network in those markets, which is fiber.

On the fixed wireless side, are there customers who are satisfied with fixed wireless today? Yes. But does it have the same speed or the same reliability of a wired connection? It doesn't. And will it be capacity constrained at some point in the future? I think it probably will. It doesn't mean that you can't discount them as a competitor. But I think that ultimately sort of the wired networks prevail. And it's kind of interesting.

So if you think about satellite, satellite has been really good in rural spaces where they couldn't get connectivity before. And we've talked about the impact that, that's had in terms of getting those RDOF markets that we've gotten to a bit later that it is harder to sort of pull customers away from satellite as an incumbent than it was to pull them away from some of the previous iterations, which were very bad in service for those areas.

But if I look at the product, and I say, on fixed wireless, we have an idea of what happened, which was ease of installation with fixed wireless was much easier than waiting a few days for a cable tech to come and install your service. And so we've done a lot to actually sort of change and to be able to be there same day, if what you call before 5:00 or next day to be competitive with that aspect of fixed wireless, which was a place that we had a blind spot and we had to adjust to them coming into the market.

In satellite, the product is more expensive. It requires a more difficult installation. The reliability data that we see today is not better. The speeds are not better. And so you look at it and you say, "Okay, will they win on brand alone?" Like that typically doesn't carry you all the way to the end of the day. And so I don't discount someone who is well funded and has a lot of really smart people working for them. And so we continue to monitor the situation with satellite. But ultimately, from a technology perspective, it certainly feels like the right technology to prevail is wired technology.

While we're talking on the subject of Starlink, can you add any perspective to the press reports on a possible relationship between Charter and Starlink and SpaceX?

Look, I think the right thing to do in any market is to be out there talking to people about ways that you can lower your costs, ways that you can utilize your network in a better way or improve the quality of service you can provide to customers, ways that you can create new products that don't exist today that might create revenue streams. We have those conversations with lots of different people all the time. And sometimes they come to fruition and something that you can announce and sometimes they don't. And I don't have anything to talk about. So -- but I think, ultimately, the fact that those conversations happen with peers and competitors across the industry shouldn't be a surprise to anyone.

Coming back to just the broadband dynamics. It feels like if I think about the broadband category, just across fiber, cable, the whole thing, ARPUs were a bit softer this year. And the question is whether or not we're hitting some kind of resistance point in terms of what customers are willing to pay? Is there something more secular going on? Or is this just the dynamics of things being a little bit more heated on competition and convergence? What can you share with us with what's happening with ARPUs?

I don't think that we've hit a ceiling, if you will. I think on our side, as I said, we don't always look at broadband ARPU on its own. And so one of the things in the dynamic that's happened is just in how we think about pricing inside of the bundle and there are scenarios where if you go with a lower broadband price that you add more products, like we see that as a win. And so we don't focus as much on broadband ARPU on its own.

That being said, I think across the broadband market that there still is some space for pricing. I think it has to come in many cases for customers with additional value that you're providing. And so we did a cost pass-through in July, August time frame. And we did a speed uplift associated with it that for those customers, it was people in older pricing and packaging plans might have lower speeds. That was significant.

We see things like our Invincible WiFi product, which adds in a cellular backup as something that provides additional value to the customer and therefore, is a good opportunity to go do something on pricing. And the market, I think, continues to bear some sort of additional pricing over time.

I think that there are some folks out there who were pushing their ARPUs up rapidly. And so you see less of that, which is probably more healthy for everyone. But I think that there is still capacity for ARPUs to grow. It's just a question of where exactly you are.

So if you keep it like slow and low in terms of the increases, it's just more -- it's easier and with value.

And with value, yes. I think that's right. But if somebody is pushing really hard, then you end up in one of those scenarios where you're working through the resetting process and the resetting process creates some drag. But I think that there's continued capacity for inflation-like or maybe, I don't know, target inflation-like movement across pricing over time.

And I know it's not the sole focus, but I think on the 2Q earnings call, it was discussed that these price actions can help the ARPUs improve for broadband, specifically 3Q, 4Q. Is that still the track?

Certainly, so with the couple of things that you see. So the price adjustments, which ran sort of mid-July to mid-August, so you get about 2 months of that inside of Q3. And then in addition to that, we talked about sort of what had been happening with retention offers, which were quite hot sort of early in the year and then came down in their intensity over the course of the second quarter and were mostly normalized by the time you get to June. Because of that, I think you get sequential positive movement as you go into Q3. And then there's always sort of lots of factors in ARPU as you get further on after that, but a good sequential movement.

Helpful. And so one other question that we've been just trying to think through is when I think about the Spectrum broadband strategy, it's been under the single brand, on a retail basis to the customer. And given just the pickup in competition across the category, is Charter thinking through the possibility of using what I think is commonly called like flanker brands, right, to create different segmentation for the market might give you different ways of going after different value propositions?

And there's another side to this, which is would you only do it on a retail basis? Or could you see a world in which you might say, "You know what, there's other players out there, let's wholesale our broadband to someone." And now you have a much larger distribution engine selling on your platform.

Look, never say never. There are sort of lots of interesting ideas out there. But I think our focus right now from a brand perspective is really on improving our go-to-market and improving sort of customer satisfaction in the mainstay Spectrum brand. And so I suspect that where you'll see our focus in the short term is on the work that we're doing around improving in that respect.

One of the big focal points has been your focus and leadership on convergence. And it's not just on the mobile side, it's also on the seamless video and seamless entertainment side. So how is that going in terms of conveying that value proposition to customers?

So I think if you look at the couple of sets of sort of big new offer sets that we've done over the past few years, like Spectrum One was really effective going and driving mobile. The sort of Life Unlimited launch in those new pricing and packaging has been effective at keeping that mobile momentum. Actually, we've been generally continuing to grow gross adds in mobile on a year-over-year basis, which against our growing base allows us to continue to grow at rapid rate. And also really stabilizing the video product, along with the changes that we made to the product set there. And so both of those things, I'd say, they don't get all -- they don't get a great amount of credit in the market.

Look, slowing video losses and increasing mobile uptake from a financial perspective is like sort of an unmitigated good in terms of where we've been from a financial perspective. And then it carries into and you say, "Okay, well, what do you get from it in broadband?" Because ultimately, even when we talked about like why do what we're doing around video? Well, we're doing it because you got to have an impact on broadband. And why do what we're doing in mobile? You're you doing it in part because there's good financial advantages, but also because ultimately, it's got to have an impact on broadband. We're seeing a big piece of that impact, right?

So a customer who takes our video product churns at a rate that's about 40% less than a customer who's broadband only. And when they then go activate seamless entertainment apps, so then go activate streaming apps associated with that video product, that churn actually goes even lower. And at this point, about 55% of our customers who have access to those seamless entertainment apps have activated them. And so we're getting good uptake there, which is having good churn impact.

Similarly, on the mobile side, a customer who takes Internet and mobile churns about 40% less than a customer who hasn't taken the mobile product. That gets better when they take more mobile lines. And today, mobile penetration of Internet customers is only about 20%. So we still have a lot of opportunity to grow the mobile business. We have opportunity to continue, and we've been effective at adding mobile lines inside of the base in order to increase that impact.

And then you might say, "Okay, well, where does that go? And why don't we see it in net adds?" And the issue in net adds has been a gross additions problem. So then we go back to the prior question, and I say the focus that we have is on our go-to-market and not improving customer satisfaction because we think that's what we need on the gross addition side. We're actually doing really well on the things that are impacting churn, which is helpful, but we ought to go crack the nut on gross additions to get to the right answer.

So does that mean as you think about what you get to see internally that we don't necessarily get to see in the outside world that by having significantly better churn from these converged bundles, the reason people leave you might just be compressing to moves, which is like almost unavoidable, right? If someone moves, they can't take their broadband with them such that like you're seeing that benefit and the lifetime value of your customers get better, and it's really just a function, as you mentioned, of improving the front end.

So moves have -- so overall churn was on a huge downward trajectory during COVID and then we thought that it was going to come back up. And like it has stayed low and moves have stayed low and gone even lower. There's always -- look, there's always a mix of voluntary and nonpay and moves in the overall churn component. But it's been quite low. It does have a hefty and great impact on customer lifetime value. But we got to go out and use go-to-market and use brands to go acquire customers.

So speaking of that, I think Nick Jeffery may have just arrived at Charter.

Yes. I think he's been here a week.

A week. Okay. A week. So any early indications on how Charter is looking to enhance that go-to-market execution and customer acquisition engine?

So I don't want to promise anything on Nick's behalf yet. But I think he's been really successful in other businesses with that improvement in go-to-market, with the improvement in customer satisfaction. I do see already the focus that he has around those things. And I think that, that ultimately will be really good for the business. I'm excited about having him on the team. I'm excited to see what he does.

I can't speak to it yet, but I think that -- look, I have a lot of confidence that he's going to do great things for the business. And I think we know that we have room for improvement. We've talked about it. And so looking forward to see what that is.

How is the increasing emphasis on upstream traffic, including with what's happening with AI changing the way you think about Charter's network differentiation and the investment in network modernization?

Yes. So with the growth in demand for data and what it will take to serve AI, I think you need speed, I think you need reliability, and I think you need low latency. And all of those things are things that we've already made a bunch of investment in our network evolution to be able to deliver on our network. So I think that, that piece is it positions us well for what will be sort of the competitive marketplace of the future.

We already see the increasing data needs happening. So upstream data usage is up around 20% in the year-over-year. A lot of that driven by things like self-driving cars, uploading lots more data. But as we get additional devices sort of using those kinds of -- at a mass scale using those kinds of models, I think we expect that's going to increase traffic a lot, which puts more pressure on more capacity-constrained networks, which should be helpful for us.

The other side of that is we'll also be able to use AI inside of our own business in ways that will benefit us, right? So we -- if I think about the network itself, we've been, over the course of network evolution, adding telemetry, which is like sensors essentially to all of the active components of the network. And so previously, you might have said, "Oh, well, having more actives in your network is actually detrimental." But in this case, because everywhere where we have an active component, we're going to get data back from that active component on the functioning of the network and how well the network is working.

It means that we can be very targeted then in improving service and in making changes to the network that need to be made, knowing where we have an issue, targeting, fixing that issue very quickly and getting it done before the customer sees that they have a problem, which actually, ultimately, could end up advantaging hybrid networks versus a more passive network just because of the amount of data that we'll have and what we can do with that in terms of cost efficiency and customer service going forward.

There's one other element as I try to think about just TAM expansion for Charter and cable, there's the edge data centers that you effectively have with all of your local presence. And as AI workloads potentially become increasingly distributed. Like what does that mean in terms of the monetization opportunity for Charter?

Yes, it's absolutely an untapped revenue opportunity. When we get through with our network evolution, we'll have 250 megawatts of capacity that is already fiber connected, that has power and backup power already there and that has cooling because these were effectively data centers for us, and we've just shrunk our footprint inside of them. I think, particularly, as AI moves in the direction of inference AI, that placement that is a bunch of small data centers at the edge of the network but very close to the customer, will make that a really unique asset in terms of its capacity for monetization. And so I think it's an exciting opportunity, and we're trying to figure out what the right way is to sort of get to the point of that monetization.

You've already given us some examples on how AI can really improve efficiency. As you look out over the next few years, whether it's AI or other aspects of driving efficiency, what are the ways that Charter can generate measurable cost savings or even revenue enhancements?

Yes. So the things that we're doing right now, right? We've implemented AI and other sort of digitization tools that are allowing us to contain many, many more calls and digital channels in the call flow. That's advantageous from a cost perspective. It's also actually improving customer experience and improving the experience for the folks in the call center doing the work because their tools are better. And it enabled us, as we closed the Cox transaction, to have extra capacity to be able to bring in quickly some of those Cox workloads and sort of -- so our integration is also speeding up because of what we've been able to do with AI, bringing them inside of that space. So that one, I think, is exciting and it's kind of immediate.

There's also some things, and it's kind of fun even on the -- we had folks. These tools sort of democratize the ability to fix the problem that you're dealing with. And so inside of our field ops organization, we had someone who developed a tool that then has already been sort of now scaled to the broader organization that helps maintenance technicians prioritize their work better, right, and get to the right place more quickly and ultimately will generate cost savings and going to make them dramatically more efficient. So some super exciting things kind of happening in real time.

Look, I think there also continue to be opportunities on the cost side where we can go do some things to really make ourselves more efficient. And I think that we see the need to go get after some of those things. You saw us do some things even that will have an impact between now and the end of the year that are continuing to be -- maybe not bread and butter, but doing the right thing for the organization around whether it's centralization of some spaces where that's the right thing to do or benchmarking our benefit structure against others and making sure that we're aligned in ways that are beneficial from a cost perspective. And so we'll see benefits from that in the second half of the year. But I think there continues to be a lot more to do on that front in addition to the synergies that we'll get from Cox. And so there's exciting stuff to drive financial outcomes going forward as well.

So on 2Q earnings call, Charter talked about stand-alone EBITDA being better in the second half of the year. Is that still tracking? And is it really more just about the political ad benefit? Or is it more about in terms of delivering that stand-alone better EBITDA really to some of these cost opportunities that you just shared?

It's definitely a good amount of both. So you do have the benefit of political advertising in the second half of the year. You also have the rate adjustment that we did inside of the July, August time frame, and you have the things that I just talked about that we did on the cost side around some organization enhancements as well as some of the things that we did around overhead costs and normalizing those costs to the marketplace. So the combination of those things, I think, gets you to that sort of better performance from an EBITDA perspective in the second half along with political advertising.

I do want to point out just from a reporting perspective that you won't actually see Charter stand-alone EBITDA in the reporting for the second half of the year inside of Q3 and Q4. We will do stand-alone reporting for Cox and Charter pro forma revenue and KPIs, so customer metrics. But on the cost side, because things integrate so quickly in some of the ways that I was talking about where you're having Cox workloads that are moving to a Charter call center, where you have people, organizations on the overhead side that are already sort of largely collapsing together. And so because of that, trying to pull that back apart into what belongs to which company is very difficult. So we won't provide it in that way.

And maybe just taking another step back and I want to hit a little bit more on just some of the financial opportunities. But do you see further opportunities for large-scale consolidation within the cable and broadband category? And how do you think Charter's role will play out in that context?

Look, we like cable businesses, and we think we're good stewards of cable businesses and where it makes sense from a shareholder accretion perspective and from an industrial logic perspective, which I think combinations of cable businesses do, we'll look at M&A. I think today, the standard for increasing your leverage in one of those transactions is very, very high. And so it would be a surprise to me to see us do a transaction that did that.

But look, we want to do the right thing to drive shareholder value. In doing that, we want to be sort of good stewards of capital from an investment perspective. We want to be financially prudent across the business. And ultimately, I think that drives the best outcomes for the company. And so that's how we would approach on the M&A side.

Is there any other advice that you have for investors as people are thinking about how to incorporate all these financial contributions from Cox? Just in terms of not just obviously just bringing in the subs and the revenue, but you mentioned earlier that some of the management that you're going to have to do around the ARPU side, the risk that certain ARPUs come down as you're trying to get growth in the converged packages. So are there some timing issues, some revenue headwinds, repricing that people should just be mindful of?

Yes. So first, I'm going to take another minute on reporting. So mid-October, we will give you a trending schedule that has pro forma for both legacy companies as well as the combined to help from a modeling perspective. The one metric that will not be inside of the pro forma for Cox is on the business side, business passings and business customers. Their definitions are enough different from ours and that we don't think it makes sense to report them at this time. So they won't be in there.

And then from an overall reporting perspective, I anticipate that with the transaction closing in the quarter, we may report slightly later than our normal reporting schedule, which has sort of long been contemplated as a possibility. And so we'll let folks know when that date might be.

In terms of how you think about then going and doing the modeling, I think on the revenue side, recognize that, as I said earlier, their customer ARPU isn't that different from ours. And there's not sort of immediate repricing of the base. So what will happen is in acquisition, we'll be bringing people into better acquisition pricing. And then for Cox customers who call in and are looking for different pricing, you'll see them also migrating on to new pricing paths. But that looks a lot like what we did in Time Warner Cable and in Bresnan and actually did with our own base with the Life Unlimited packages.

And I think that it can be -- maybe not perfectly linear, but what you should see is potentially their component of broadband ARPU like sort of comes down over time to get people into more competitive broadband pricing, but at the same time that, that revenue comes back on the other side in the form of mobile and video.

From a synergies perspective, we talked about, I think there's a big chunk that comes early, something on the order of half and then that after that, you have a good blend into getting to our synergy target where we have a lot of confidence.

And on the capital side, we gave some very rough thoughts on that inside of the proxy materials. We talked about that there might be a little bit of mix sort of what's OpEx versus CapEx from an integration cost perspective. But over time, what was in that model and what we believe to be the case is that their capital should trend to something that looks much more like legacy Charter's capital from a capital intensity perspective, not today, but in the forward look that we've given you where that capital intensity trends down to a level that I think is fully sustainable in terms of the investments being made in the business, but creates a very healthy and large free cash flow going forward.

And how is Charter balancing now return of capital to shareholders? And how do you think about that relative to just reducing the net debt leverage? And what I wonder about is just given where valuation is, should you just keep chipping away and lowering the leverage if you're not getting any credit for the buybacks?

Yes. So -- look, we just lowered our leverage target to 3.5x, which we -- I think that we'll get to over the course of 3 years. In doing that, we were trying to sort of thread a needle between different sets of investor and debt holder priorities. We certainly had heard many of our capital holders who saw delevering as a priority, and we've created the path to get there. I think that we've done that while leaving space in terms of the amount of free cash flow that there is to continue to be able to buy back equity at what we believe to be very sort of valuable prices, right? But where we'll create value for shareholders by doing that.

And so as I said before, look, ultimately, we're trying to be good stewards of capital and to allocate both back into the business and investments in the right way, but then also be financially prudent in a way that drives value for shareholders. And if we can thread the needle around this point in a way that gets at both of those categories, we feel like that will be a good outcome for shareholders and debt holders alike?

Very lastly, just anything that you want to leave us with that as you see on the inside of Charter that you just feel is being missed or underappreciated by the market?

Sure. Look, the valuation would tell you that people think that cable businesses are in for a very like long and detrimental road. And that is not what it looks like from the inside, right? I think we have some work to do around what I said in go-to-market and in customer satisfaction. But actually, I think we have all of the tools to go do that. I think we have work to do around the cost side as well. We have all of the tools to go do that.

And in fact, sort of the way that we're able to compete in front of customers, we compete quite well and that we have the right technology to be able -- the right network to be able to drive and to be one of the winners in the long-term business going forward. And so I really think it is that. It's that cable, I think, continues to compete well in the very long term because we have the right capacity, the right networks and the right strategy to be able to deliver to customers. And so I think the picture is a lot rosier than people have priced in at least. And so I look forward to seeing what that looks like in the future.

Thanks so much for being with us today. Thank you.

Thanks.

Good afternoon, everybody. Welcome to the Charter fireside chat at the Goldman Sachs Communacopia + Technology Conference. My name is Mike Ng, and I cover media, cable, telecom here at the firm. And I have the wonderful privilege of introducing Chris Winfrey, who's the CEO of Charter.

First and foremost, thank you so much for being here this afternoon and for participating in our conference, Chris. It's a pleasure.

Good as always.

Awesome. To start things out, I was just wondering if we could talk a little bit about Cox and the overall strategy. The transaction recently closed. So maybe you can walk through the broader opportunity for Charter at a high level.

Sure. The combination now makes spectrum the leading Internet and video provider in the country and the fastest mobile operator in our footprint with the fastest growth inside of our footprint. And we get the privilege of doing that over 70 million passings, meaning residential and business passings, 45 different states and doing that with a network that is, in all respects, ubiquitously deployed and vastly superior to the majority of the competition in the marketplace, also, not only because it's gigabit capable everywhere and it's now increasingly symmetric and multi-gig capable but also because we have the benefit of wireline and wireless convergence everywhere we operate.

And so you combine that with the commitment and a guarantee to save customers over $1,000 when they take 2 mobile lines together with our Internet. I think the best video product in the industry today through Zumo, together with our seamless entertainment and you end up with something that's a really compelling opportunity, best network, best products, save customers lots of money, 24/7 U.S.-based service.

It doesn't mean that we're not without challenges. We got new competition. We've got low mover rates and low new build rates. And I think we have opportunities short term to really improve our -- both our go-to-market and our Net Promoter Score, our service reputation. But long term, I do think we win in the marketplace because of the assets that we have and our ability to service those 70 million passings. Only -- there's 37 million of those customers. The opportunity to your question is really nearly 35 million passings that don't take a service from us today, and we still think that's the real opportunity here.

Great. Wonderful. Maybe you can expand a little bit around the opportunity related to the new Cox asset specifically. What does that integration look like? How does the go-to-market strategy within the Cox footprint change? Any thoughts on the time line that you could share with us?

Sure. We closed a couple of weeks ago. We started introducing our new -- our Spectrum Internet stand-alone pricing pre-mobile line offer. That's really preliminary out of the gate. In about a week's time, we'll rebrand the entire former Cox markets into Spectrum. We'll launch new pricing and packaging with our products and a guarantee to save $1,000 when you take our products. And so having our products, pricing and packaging in the marketplace for both residential and business services, so far, the integration has gone very well, and we expect to have success doing that.

Over time, we'll onshore the offshore call center activity into the U.S. We've already started hiring for over 1,000 employees for different sales positions that did not exist in the former Cox markets to begin with. And we'll normalize the overall operations over time, but it's really significant. I think the upside that we'll get with Cox and upside for the legacy Spectrum footprint with the new B2B assets that we're acquiring inside of Cox as well.

Right. So continuing to execute and invest in the asset. And one of the notable new executives is Nick Jefferies, unrelated to Cox, but he started at Charter last week. So how does Nick fit into the overall goals and plans?

Nick has a lot of great qualities, but if you take a look at his track record, a couple of things really stand out in terms of what he was able to do, is walk into businesses and significantly improve both their go-to-market capability as well as their Net Promoter Score and their service reputation in the marketplace and has experience across B2B, wireless and Vodafone and then most recently, Frontier, where he was a fiber over builder. And so being able to take those businesses with the assets that they had versus what I think is a much stronger set of assets that we have today and really somebody coming from the outside of the cable industry with the view and the ability to go make a pretty significant change in the 2 areas that we need the most right now, which is an improved go-to-market strategy and an improvement in our service reputation and Net Promoter Score.

It really was opportune and so I think it's a great fit. Now it's a week in. So he's still finding his way around the building and whatnot. But he's going to move fairly quickly, and we're open-minded to doing things differently, and I think we need to. We could have sat back and just said rest on our laurels, know that the level of new competition will subside. It's not competition, but the level of new competition and that we do have the best networks, products you can save customers money. But I don't -- we're impatient and that's good, and we want to do better now. And so the opportunity to bring somebody like Nick in was great for us. So I'm excited. He joined us as Chief Operating Officer September 1.

Great. On that topic of competition, maybe specifically on broadband, cable broadband is certainly facing competition at the high end from fiber, the value side from fixed wireless. Obviously, satellite is also coming into the picture in a more meaningful way. I was just wondering if you could mark to market, talk to us about what the competitive dynamics look like in the market for cable broadband right now and maybe just hit some of those key competitor cohorts.

Look, I think we compete really well against any one of those in a regular environment where there's less new forms of competition taking place. If you think about fiber, people talk about it as the high end. I look at it and say we've got a competitive speeds and capability, but with wireless combined in a way that nobody else can do. And so we have the opportunity to go to market and save customers lots of money with market-leading speed on broadband and the fastest mobile product in the marketplace because of our convergence.

When I look at fixed wireless access, it's a faster, more reliable product. And even though they will tell you that they're saving money because of a low price point, the reality is if you take a look at how they sell it, it's together generally with mobile together with fixed wireless access. And when you look at it that way, we're in much better value. We save customers money. It goes back a little bit to we need to improve our messaging on value and utility. But I think we win in that space long term because of quality and value as well.

And then finally, on the satellite. We're certainly keeping a close eye on it. There's a lot of smart people doing satellite with pretty significant capital allocation capabilities. It's not lost on us. And so we're keeping a close eye on it. Right now, it really is much more reserved for the rural space. And I think it's a great product in that environment.

We are keeping a close eye on it. Could it be complementary to us? Yes, maybe. But so far, our product has faster speeds. It has better reliability. It's got a better installation process, and it's more ubiquitously available. And it has video, and it has mobile to the extent you want those. So I think we're pretty well situated for the long term.

Great. And then relatedly, I think what's been top of mind for a lot of people is just what's happening in the broadband industry as it relates to pricing and promotion. The telco carriers, obviously, aggressively marketing converged offerings. Some of that materializes in the form of fiber pricing. One of your peers talked about aggressive fiber pricing in the quarter. Maybe you could just share your thoughts around promotional intensity, pricing on broadband in the industry right now.

Look, it was very competitive in Q1. It was very competitive in Q2, and it continues to be competitive in Q3. And you see ebbs and flows of who's getting more competitive, who's backing off who's doing it with the convergence bundle, who's doing it single play. There's a lot of ebbs and flows, but it's been competitive. It remains competitive, and it doesn't change anything that I just talked about either for the long term or what we can do in the short term and do better ourselves instead of focusing externally and say what can we do better to lower churn, improve sales by having a better service reputation and doing a better job of articulating our value and utility.

Great. And then for Charter specifically, sticking with the theme on pricing, I think Charter expects overall connectivity ARPU to expand this year. What are the primary drivers here? How important is pricing that I think was implemented in July through August in achieving some of that ARPU growth?

We think about ARPU in terms of ARPU per passing, ARPU per customer relationship and then the third one is connectivity ARPU, which you asked about, and the ability to sustain connectivity ARPU, a healthy connectivity ARPU comes about mobile line growth is significant. It's untapped for us still, even more so in COGS. The ability to have up-tiering of our existing services on higher speeds like gig, we're very low penetrated on gig. And we didn't really start to push that until probably 1.5 years, 2 years ago. So we got a long runway for higher tier speeds.

Now with the introduction of the Invincible WiFi, which is a value-added service, and it's gone very well. And then promotional roll-offs and we recently had a legacy cost pass-through in broadband as well. So we have a lot of different levers all at work to be able to help us maintain a healthy connectivity ARPU and be competitive in the marketplace.

Great. You mentioned at the onset that Cox Internet customers who don't subscribe to Cox Mobile now can get a free wireless line from Charter. How do the converged penetration rates at Cox compare to what you're seeing at Charter's legacy footprint? And then more broadly, how would you define success for the free line promotional strategy? What are you seeing in some of those free-to-pay conversions to date?

Yes. Look, the mobile penetration to Internet at Cox is tiny. It's almost nonexistent so the opportunity there is big. It's 20% at legacy spectrum, and that's untapped. When you think about the fastest mobile product in terms of speeds, combined with the best pricing in the marketplace, you would ask and say, well, why isn't it that every Internet customer has at least a couple of mobile lines attached, and I would agree. And that same opportunity exists for Cox.

The free mobile line, something we put in place years ago together with Spectrum One, which is the combination of high-speed Internet, together with WiFi and mobile, 5G mobile working together in a converged way across our entire footprint and across the XFINITY and the legacy Cox footprint as well. That opportunity is significant. And when we offer the free mobile line, it sticks.

We found that 1.5 years, 2 years ago, and I think it caught people by surprise, but it's because it's such a good product because even when it rolls off, it rolls off at a price point that you can't match in the marketplace. And so of course, it sticks. It's great value.

So we've started doing the same thing at Cox. No surprise. I think it's well known the level of net losses for Internet and video and the levels were much higher at Cox, even from -- so coming into that, even from day 1 at close, we started introducing the free mobile line, better Internet pricing. And so late in the quarter, so don't take this for more than it is. But already, you can see a sales uplift. And that's prior to Spectrum Day, which takes place really next week, where we launch the full set of products and our pricing and packaging. And I expect us to sell more, and I expect us to have lower churn as a result of those products and pricing being in the marketplace.

Great. Continuing with the bundling theme, maybe we could talk about video, where broadband customers who also have video have 40% lower churn. And your video subscriber losses have shown a notable improvement. I think what you've done in terms of the streaming inclusion is very impressive, and there clearly is a lot of value for customers. So maybe you can talk about the video outlook, the opportunity within Cox.

Yes. Look, I think we've created -- I think we've got the best video product in the country. We have the #1 rated Spectrum TV app. It is the most used virtual MVPD, if you want to call it that, across the entire country. And it creates incredible value for customers by having $130 worth of programmer apps included. And we've done the unthinkable, which we stabilized it at the current spectrum. We stabled the video base.

But I want to be clear, our goal is not about video net adds. It's not about stabilization. I tell this to the programmers all the time. The only reason that we've continued to invest in the video business is to the extent it can help our broadband business, either at the point of acquisition point of retention. Yes, we still have gross margin in video but not a whole lot. And so the real value here is to use video similar to what we do with mobile, which actually has a much better margin on a stand-alone basis, is to use video in a way that drives Internet acquisition and retention.

And at Cox, the former Cox footprint, soon to be the new Spectrum footprint, the video penetration is around 10%. And so not that that's the objective, but just because so much tremendous values in Spectrum TV app, combination with Zumo, the streaming apps all included, we're -- I predict we're going to grow video for a period of time in the former Cox market simply because of the value and utility that's there and the low penetration that exists today.

But again, we're not in it for some pure victory to go pound our chest on growing video. It's really about making sure that we and the programmers can do everything we can to support the ecosystem so that we can support our broadband ecosystem.

If I could just follow up around the comment you made around the discussions with the programmers, I think there's a long-held belief that TV networks always get an increase in rate per subscriber. And I think there's a justification in the sense that programming costs for them go up, whether that's contractually because of sports or otherwise. But as you rightfully pointed out, right, it's not as strategic as it once was for Charter. So what's the right way to think about programming cost per sub increases on your side? Is it more about packaging?

No. I think, look, we have flexibility to be able to offer different packages for different audiences. The one that we typically focus on is the traditional expanded basic, which does have all of these apps included. I think it's the best value but because it includes sports and it includes retrans, by definition, it's the most expensive. So we're not going to take the video package and force it upon customers. It's going to be for those customers who are going to take that type of package anyway and can get a lot of value and save money as a result. So it's going to be helping our broadband relationship as opposed to creating a liability.

I think the rate increases that come through from programmers, not helpful to their ecosystem. I also understand where they're coming from with an increase in sports right cost. But it's going to become a more expensive product for the programmers and for our customers, but it's also a much more expensive cost for individual subscribers who are trying to piecemeal it all together. When you start to take now sporting and Netflix, Amazon Prime, and you take a look at all the different DTC apps, we actually provide all of general news, entertainment, broadcast and sports in a way that if that's what you want to have in a typical family household, it's a lot of value and it's a lot of utility because you actually have it in one single place inside Zumo with unified search and discovery.

But I think a long time ago, we crossed the rubicon of saying this is going to be for everybody. It's for the household that wants it. And for us, it's about driving broadband relationships.

Great. Moving over and just talking about cost savings and synergies. For Cox, the company has guided to at least $800 million of synergies, but you've certainly also noted that there's an upward bias to those numbers, right, and it could trend closer to $1 billion. What's driving that potential upside now that you've got the company officially folded in. Do you feel more confident about achieving those upside numbers?

Yes. Look, it will be over $1 billion of transaction, OpEx synergies. It's pretty clear to us now. And I feel comfortable saying that it comes through a combination of procurement and overhead, deep duplication of resources and the larger scale that we have and the different vendor contracts that existed at Spectrum today.

I will also tell you that the transaction synergies, they're a onetime permanent step-up in a cost structure or a step down in a cost structure and a permanent step-up in margin. It is not the reason to do M&A. The reason is for the operating synergies, the ability to grow the company faster, to have a different operating model that sits on top and to grow in residential and in the B2B segment where Cox brings some real benefit to us along the way as well.

So we're really confident around the transaction OpEx synergies. Certainly, it's helpful. It will be higher than we initially estimated, but that alone isn't really the reason to go do a transaction.

And maybe just on that point, as you think about the B2B opportunity, maybe you can just expand a little bit on that. Could you elaborate a little bit on the opportunities from the addition of Segra, which is Cox' fiber-based provider serving commercial enterprises and carriers and rapid scale, which is its cloud-based service provider, alongside everything else that they're doing in B2B?

This is one of those areas of a combination where it actually is very complementary. It's not just scale and certainly scale in the B2B space, having a near national footprint helps. But the things that we do really well are areas that could be improved at Cox in areas that Cox did really well are areas that certainly we were lacking. And pound for pound, Cox was -- is the largest cable provider with B2B services, more than XFINITY, more than Spectrum. And -- but the different segments, if you think about it, small business, Spectrum is much higher penetrated than Cox. So that's a real opportunity in the Cox footprint.

It's driven predominantly based on our pricing and packaging, which will go into the market starting next week. On the other hand, if you think about Segra, which you asked about, Segra is a fiber-based provider who operates actually in a lot of these legacy spectrum markets. So as a separate brand and a separate clientele Segra now has the ability to go sell on-net inside of the Spectrum footprint, some of which they had before, now can do it at a lower cost, avoiding type 2 circuits for existing and new customers and some of it because they're getting into markets that they didn't exist before because they're now able to sell on footprint.

So I think Segra is very attractive, rapid scale, managed services, managed cloud services products that we don't have today. And so from the rapid scale team, our goal is to make sure that we preserve them as a somewhat autonomous group that's a little more agile but has the existing customer relationships that exist at Spectrum to be able sell into and upsell to.

And then another piece that I think Cox has done really well is if you think about hospitality. Think about stadiums and hotels, in particular, have a great track record. Their customer relationships are fantastic. And now if you think about the hospitality space, I'm going to pick a market, they do really well in Las Vegas, great hospitality market. But taking those products and taking those relationships and expanding that into Orlando, Los Angeles, New York, I mean, the entire spectrum footprint, but those markets, you think of Orlando, it's the top hospitality network or hospitality place in the country. And so I'm really excited about what the B2B team combined between former Cox markets and Spectrum into.

Great. Maybe we can talk a little bit about the impacts of AI, first, on how that changes the demands on the network. What does that mean for the opportunities around data center connectivity, your service capabilities, the potential utilization of edge data centers? Maybe you can talk through some of those respective opportunities and size them to the extent that they're far along enough that you can actually size them?

There's a lot in that statement. But I think the biggest opportunity for us is the amount of traffic demand that's going to come about because of AI, not just on the download, but you're seeing it on the upload as well. And it's significant. You can already see it. That puts us in a position to be able to have not just a network that's capable and a network that's followed today for that type of data and bandwidth increase but gives us a clear competitive advantage for a product that customers are increasingly using. And so the revenue opportunity for us is really about subscription growth and retention as it relates to network demand.

The second piece that you mentioned is network connectivity for data centers. That's another area that Segra and the rest of Cox has done a really good job. I think we're a little bit behind as Spectrum. And so the opportunity for Segra and the Cox team to really drive their relationships into the Spectrum footprint, we're doing it. It's just not as -- it's a little bit behind where Cox was, so we get a chance to accelerate there.

The third piece you mentioned, maybe a little bit further out, but you're hearing people both our competitors and our peers, some of which makes a whole lot of sense to go partner with. But at Spectrum, we now have over 1,200 local edge data centers, former hubs and head ends that have -- now that we've virtualized a lot of the equipment that was in there to software, have space, have cooling, have fiber, have backup power. And there's, just today, without any additional investment, there's 250 megawatts of fallow capacity that's sitting across about 600 of those data centers. And we're looking -- thinking about what is the right way to partner with other people to be able to, for lack of a better term, occupy that space in a way that's the best ROI for the assets that we have.

The other piece that you mentioned on the cost side for AI, we're very focused on using AI to improve the network reliability that we have. It's a really amazing tool that exists, combined with the fact that through the upgrade, the network evolution that we're doing, we now have transponders going in as part of the upgrade to all the actives in the network. When you combine that with power, I think that hybrid network of having power actives that have telemetry gives us a unique advantage when combined with AI to be able to provide better maintenance and better network reliability into the network.

And then on the other side, as you think about the call center environment or from a field tech perspective, the ability to take a look at all the data that we have across these 70 million passings and to look at all the data through an active network in the home, a customer premise equipment, previous transactions and the ability for an agent to know where -- exactly where the problem is or the field tech or maintenance tech to know exactly where to go, if you asked our field techs or agents that are using AI, they might tell you no. But the reality is, behind the scenes, their tools have gotten much, much better, much more precise and it's enabled them to do a better job and to be happier employees by using AI in that context.

And so I think there's a tremendous quality improvement opportunity through AI, which will reduce service transactions, which reduces churn, which then turns into a significant, both cost and revenue opportunity for us by using it. But that's how we're approaching it is really what works for the customer and what works for our frontline employee to go create value.

Great. If I could ask a little bit about the financials, Charter had stand-alone EBITDA guidance for a 1% decline this year. Is that still on track? What will we know come for [indiscernible]?

Yes. I mean we now include Cox. So in some sense, we'll be reporting a combined and using pro forma financial state. But there's been no change in terms of the trajectory of the financial outlook, capital allocation, return of capital, any of that type of stuff that we said on our last earnings call, none of that's changed.

Great. And then one of the things that I think a lot of people are excited about is the inflection in free cash flow that's expected to happen as a result of meaningful reduction in CapEx over the years. Could you just talk a little bit about that? What are the key drivers of that CapEx reduction? And is that all on track?

The CapEx reduction isn't a lack of investment, right? The CapEx reduction is the conclusion of 2 very successful onetime investment programs, the first being subsidized rural expansion, which we, by the end of this year, will be essentially done. So it just goes away. It's not a systemic part of our natural capital expenditure. The other one is our network evolution, which is the upgrade to symmetrical and multi-gig speeds and providing some of these reliability characteristics that I talked about before, and that will be largely done at the end of next year.

But the biggest piece of that is the rural, and there's a pretty substantial immediate step down in the capital expenditure that we'll have at legacy Spectrum, which is where we've given the outlook, and the trends will be the same, including Cox. We talked about going from mid-$11 billion of CapEx down to a run rate that's under $8 billion in a very short period of time. And all of that flows to free cash flow.

But if you look at that, it's still as a percentage of revenue of the legacy Spectrum. It's still a really healthy amount of capital expenditure. So we are not taking our foot off the gas in terms of investing in customer premise equipment, liability. All of that is still intact. It's just the conclusion of onetime programs that allow us to get there. Some people look and say, well, how do we know you're going to do it. And I look and say, well, what else would we be doing. And with the network expansion that's complete and the network evolution that will be complete, what you're really looking at is a much larger network, a fully upgraded network with all this fallow capacity and the opportunity to grow revenue without additional capital intensity.

And I think that's the opportunity for us and for shareholders. Taking a look at that and saying, what does that do on a free cash flow per share basis, it's pretty amazing.

There were some news last week with your CFO leaving for an external opportunity. It does feel like Charter is at an inflection point of its story, certainly a new chapter. Could you talk a little bit about the departure, if there's anything that you'd like to share but also the executive and the type of the executive that you're looking to potentially replace her?

Sure. A little bit of background. I've worked with Jessica since I joined Spectrum in 2010. I actively recruited or for about 6 years. Got her to come to the company in 2016, and she became CFO in 2021, which was a high standard that I held for that position and always thought that she'd be really capable and she's run it and fantastic. And we're disappointed that she'll be moving on. She and her family will be moving out of the Northeast for another opportunity.

On one hand, I'm excited for somebody I've worked with that long. On the other hand, disappointed that somebody that I've been that close to. But the reality is that when you think a couple of things. One is we haven't changed our capital allocation or outlook or any of that. There's no -- and we said that publicly. She's actually going to be speaking at another conference tomorrow, so you get to hear from her. She'll be with us through the middle of October.

The interim CFO that's stepping in was the interim CFO when I got to Charter back in 2010. So it's a team that I know really well. When you think about all the transactions that they've been through, we're in say hands there. We have a really sophisticated capital markets operation, a very seasoned investor relations function and some of the world class from a cable prospective business planning. So functionally, we're in good shape.

I've either worked with or hired all of those individuals. So we'll have stability. It's also a premier CFO job in the country. This is an amazing opportunity, an amazing balance sheet and a great industry and a great team. And so I think we'll have the best talent available in front of us. We've got great talent inside the company already as well.

The focus for us will be making sure that we get somebody who's really capable from a capital markets perspective, understands the broader finance function, has top-notch communication skills because that matters in this competitive environment and frankly, somebody that everybody enjoys working with, which is what we all look for as part of the team, and that's a big, big important piece to the puzzle.

That's how you gel and be productive together. So I'm disappointed, but excited for Jessica, and we'll be in great shape and moving forward.

Great. In the last few minutes that we have here, I was just wondering if you could talk a little bit about some of the key execution priorities, milestones that you'll be looking for the company to achieve over the next 1 to 2 years.

We've got to return to growth. Everything that we do is really about prioritizing broadband growth. And yes, there are areas that we can develop new revenue streams. That's always been the history of these networks, is the lo and behold you turn and there's a new product set. And certainly, we have some focus on business development on that side. But the core focus of the company is to return to broadband growth. It's not a North Star. It is exactly what we have to do. And looking at prioritization through that lens is something together with Nick, Jeronimo and the rest of the team that we're going to be very much focused on going and doing.

And recognizing that you have that and it will take place, you've got the best network, the best products. You've got the ability to have 100% U.S.-based 24/7 service, which is a competitive advantage, save customers lots of money and -- but we're not going to rest and wait until all that becomes apparent to customers with the additional passings and growth and a reduction in the intensity of new competition, we're going to go after it today.

Great. Well, Chris, thank you so much for participating in our conference. It's been an absolute privilege to have you on stage here.

Great to be back and good to see you. Thank you.

Thank you, Chris.

Hello, and welcome to Charter Communications Second Quarter 2026 Investor Conference Call. [Operator Instructions] Also as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

I will now turn the call over to Stefan Anninger.

Thanks, operator, and welcome, everyone. The presentation that accompanies this call can be found on our website, ir.charter.com. I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, and we encourage you to read them carefully. Various remarks that we make on this call concerning expectations, predictions, plans and prospects constitute forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results.

Any forward-looking statements reflect management's current view only, and Charter undertakes no obligation to revise or update such statements. As a reminder, all growth rates noted on this call and in the presentation are calculated on a year-over-year basis, unless otherwise specified.

On today's call, we have Chris Winfrey, our President and CEO; and Jessica Fischer, our CFO. With that, let's turn the call over to Chris.

Thanks, Stefan. During the second quarter, we added over 400,000 Spectrum Mobile lines, making that 1.7 million lines over the last 12 months for growth of 16%. We now have over 12.5 million mobile lines and remain the fastest-growing mobile provider in our footprint. Our video customer losses continue to improve with our 21,000 video customer loss significantly better than last year. We now have the best video product and value in the marketplace.

In Internet, we have a fully deployed and fully converged gigabit-plus network across our entire footprint, but competition for new customers from expanded competitive footprint remains high. Our second quarter Internet customer loss of 172,000 was higher than a year ago, similar to what we saw in the first quarter.

Revenue was down 1.7% year-over-year, driven by lower residential revenue. Second quarter EBITDA, excluding Cox transition expenses, declined by 3.2%.

Softer gross additions remains the primary driver of our Internet customer growth weakness, while churn remained largely unchanged. And while Internet customer growth is taking longer to reverse, the growth of new competition will subside, we expect to stabilize and return to broadband growth over time with our better converged connectivity product and pricing, higher demand for speed, data and reliability and as our NPS scores improve, benefiting both churn and sales.

The timing of all that is hard to predict, but our cash flow growth is not, and we have full confidence in the significant free cash flow ramp we're about to see. Our outlook for a significant reduction in capital expenditures has not changed. We also expect second half EBITDA for standalone Charter to benefit from a previously discussed cost pass-through on Internet this summer and political advertising.

AI service and cost benefits are also beginning to ramp, and we're implementing a series of additional cost management measures. Jessica will circle back on our free cash flow profile and outlook in a moment. So let me highlight what we're doing right now day-to-day to win in the marketplace.

A recent change to our marketing and sales channel focus has been the redoubling of our efforts to improve our Internet funnel and yield by focusing first on the Internet sale with a growing focus on mobile and video upgrades thereafter. And that bundling, of course, drives significant value and churn benefits. Internet customers that also purchase our mobile product churn nearly 40% less than Internet customers who don't have mobile. And the more lines per account, the greater the churn reduction.

Today, our mobile customer penetration of Internet is about 20% with an average of just below 2 lines per mobile customer. So significant upside remains for mobile penetration and lines and broadband churn reduction. Internet customers that purchase our video product similarly churn over 40% less and activation of our programmer app inclusion offer further reduces churn across all broadband relationship tenures. Currently, 55% of our eligible video customers have activated at least one of our inclusion apps with over 4 apps activated on average.

We're also focused on improving customer satisfaction and resulting NPS. Good prices and saving customers money is a key driver of NPS, and that starts with Internet pricing with available price locks when including our mobile and video services, including our $1,000 savings guarantee for new and existing customers with mobile.

Service and reliability are the other top drivers of NPS. We believe our service capabilities are unique, anchored by a 100% U.S.-based sales and service team, and that provides a significant upside. Our digital service capabilities are set to meet customers where and how they want to be serviced. And when automated, we're ensuring that channel delivers the same quality as the top 10% of our agents.

When on-site service is needed, we guarantee same-day service or we provide a credit. The reality is we're now often arriving within 2 hours of calls. And we see tangible examples of where we increasingly delight customers with our service. At the same time, we have real opportunities for improvement in reliability, how we communicate with customers and what I call paper cuts in the service experience.

At Charter, we've already made the investment in the service infrastructure, our employees and capabilities, and we'll turn that into -- that investment into a better service reputation. Changing perception takes time, but the organization is increasingly focused on customer satisfaction, and we're incentivized around NPS. And we're doing the right things from a resource allocation, customer mindset and organizational perspective to make that happen. That includes adding complementary talent from Cox. And on September 1, Nick Jeffery will join as Chief Operating Officer alongside the talented team we have today.

Turning to the Cox transaction. We're now hoping to close in mid- to late August. Our operating strategy of product investment and innovation, saving customers money and onshoring our service capabilities has allowed us to be successful in M&A. Recently, investors have been asking us about what might come next. But the reality is we have a large transaction right in front of us now, which creates significant value.

We have a fully developed integration plan for Cox, and we have confidence in our ability to execute well and at a faster pace than previous integrations, and we expect to grow the asset. Shortly after close, we'll launch our Spectrum pricing and packaging within the Cox footprint. We expect to drive better Internet customer performance and unit growth acceleration with very underpenetrated mobile and video. A lower product pricing, including our $1,000 savings guarantee for new and existing customers when taking mobile will help drive higher household product penetration, maintaining healthy Cox household ARPU. That's despite their higher individual product prices today.

We expect our pricing and packaging to drive lower churn, higher customer satisfaction and better NPS. The bundling and migration approach we'll deploy at Cox is the same we successfully used with Bresnan in 2013, TWC and Bright House in 2016 and with ourselves really over the past 2 years. We also expect significant B2B upside by leveraging what each company does well with a long runway for growth and acceleration. The addition of Cox's hospitality capabilities, Segra, RapidScale and a long-standing investment in its B2B infrastructure will benefit the broader Spectrum.

We still expect run rate transaction expense synergies of at least $800 million per year. And while we'll update that estimate after close, I think it will grow to $1 billion. As a reminder, transaction synergies do not include any benefit from operating or capital expenditure synergies.

Separate from those synergies in procurement and overhead, there will also be a significant number of new frontline hires. We're now recruiting well over 1,000 new residential and business sales jobs in Cox territories, which will drive higher sales. We couldn't hire these jobs until we had better visibility on a likely closing date with California.

Across sales, retention and customer service over the next year, we'll onshore and in-source all call center activity, moving the platform to 24/7 coverage for service in Cox markets. This will bring work back to the U.S. and in-source work that is currently handled by a significant number of offshore contractors. We expect to absorb most, if not all, of this offshore volume from Cox through existing spectrum operating efficiencies and digital capabilities.

Following the closing of the Cox transaction, I want to frame what we'll represent as an industry partner for innovation. We'll have roughly 1.3 million miles of network with over 70 million passings with a fully converged multi-gig Internet and mobile offering available to all of those passings. We'll have approximately 37 million customers, meaning a selling opportunity of nearly 35 million passings without a relationship today. Together, we'll generate approximately $67 billion in revenue and approximately $28 billion in EBITDA.

Spectrum will operate under 2 MVNOs with the best mobile networks in the country and the only fully converged capability in our footprint. Today, there are approximately 164 million mobile lines in our footprint and only 13 million of those will be Spectrum Mobile, 8% penetration with a faster, lower-cost mobile product. So while we're growing mobile quickly, there's still a very large growth opportunity in front of us.

Turning to capital structure. Jessica and I listened to feedback, and we heard both equity and debt investor preference for lower leverage despite our significant free cash flow and continued capital return. So today, we're moving our post-transaction leverage target to a flat 3.5x, which we expect to achieve within 3 years following the close of the Cox and Liberty Broadband transactions. And we're taking a multifaceted approach to delevering, which Jessica will discuss in a few minutes. But the plan is to both delever earlier and further, but not forgo the buyback opportunity at what is a historically low valuation. All of which provides a robust backdrop to a broad segment of shareholders and bondholders who benefit from our free cash flow growth and capital allocation.

Stepping back from maintaining an optimal capital structure, the biggest value driver opportunity for us going forward is returning to growth. And our recipe for winning in the marketplace is simple, deliver the best connectivity at the best overall value with the best service. Our network is a unique and strategic asset, which can't be replicated. It offers converged service in 100% of our footprint with gigabit speeds and low latency everywhere. And our speed and reliability are set to improve dramatically over the next few years as we complete our network evolution.

When you look at both our wireline and converged network and the traffic we already deliver today, it's clear we're more than just America's connectivity company. We provide a mission-critical AI infrastructure that will ultimately demand our superior speed, reliability and low latency capabilities. We expect to be a significant beneficiary of AI through network demand, data center connectivity, our own service capabilities and cost structure and the potential utilization of our edge data centers, which have fiber, primary and backup power and cooling and space.

As we complete our network evolution, we'll have over 250 megawatts of available capacity without additional investment and capacity for much more at a very low cost with future potential partners. And while our focus is squarely on broadband, we also have separate resources focused on developing new revenue streams and ensuring we can develop network capabilities and products that others cannot replicate.

With that, I'll hand it over to Jessica.

Thanks, Chris. Please note that any forward-looking financial or customer information that we provide in today's discussion or presentation does not include Cox or any transition costs related to Cox integration planning, unless otherwise noted.

Now let's please turn to our customer results on Slide 7. Including residential and small business, we lost 172,000 Internet customers in the second quarter, driven by lower connects year-over-year, while churn was essentially flat. As Chris has said before, we have been facing top-of-the-funnel softness. We continue to see expanded fixed wireless competition versus a year ago, including lower sales from low-income consumers, ongoing mobile substitution and fiber overlap growth at a rate similar to prior quarters with aggressive promotions by certain competitors. Though I would point out that we continue to lead the market in converged connectivity pricing at connect and have higher market share than our fiber competitors even in our mature fiber overlap. As it relates to satellite, so far, we haven't observed meaningful share loss to Starlink, including in our subsidized rural footprint, but we continue to monitor it closely and take it seriously.

In mobile, we added 406,000 lines with higher gross additions year-over-year, offset by higher disconnects. Video customers declined by 21,000 versus a loss of 80,000 in 2Q '25, with the improvement primarily driven by lower video downgrades, lower customer churn and higher upgrades year-over-year, resulting from our seamless entertainment product improvements, including our programmer app inclusion packaging and the new pricing and packaging we launched in late 2024. New connects to our fully featured video package with apps were also better year-over-year with some benefit from the World Cup.

In rural, we continue to see strong customer relationship growth, generating 47,000 net customer additions in our subsidized rural footprint in the quarter. Subsidized rural passings grew by 127,000 in the second quarter and by 487,000 over the last 12 months, which is in addition to our continued nonrural construction and fill-in activity.

Moving to second quarter revenue results on Slide 8. Over the last year, residential customers declined by 1.8%. Residential revenue per customer relationship declined by 1.8% year-over-year, but was essentially flat when excluding the programmer app allocation headwind of $251 million this quarter versus $67 million in the prior year period. There were other puts and takes, including pricing and packaging mix within our customer base and a decline in video customers during the last year, offset by the growth of Spectrum Mobile lines. As Slide 8 shows, in total, residential revenue declined by 3.5% and was down by 1.8% when excluding costs allocated to streaming apps and netted within video revenue in both periods.

From a pure Internet revenue perspective, we are balancing rate actions in an inflationary environment and retention activities, where our more aggressive retention offers in the first quarter largely normalized over the course of 2Q. As Chris mentioned, we are making some pricing adjustments, which also include meaningful speed upgrades for the vast majority of affected customers. Those adjustments didn't impact 2Q, but will drive better residential revenue in the back half of the year.

Turning to commercial. Total commercial revenue grew by 1.5% year-over-year, with mid-market and large business revenue growth of 2.8%. And when excluding all wholesale revenue, mid-market and large business revenue grew by 3.5%. Small business revenue grew by 0.7%, reflecting year-over-year growth in revenue per small business customer of 1.5%, partly offset by year-over-year decline in small business customers of 0.8%.

Second quarter advertising revenue grew by 12.3%, given higher political revenue year-over-year. Excluding political, advertising revenue declined 4.6% year-over-year. Other revenue grew by 7.1%, driven by higher mobile device sales, partly offset by a $45 million onetime benefit in the prior year period. In total, consolidated second quarter revenue was down by 1.7% year-over-year, but decreased 0.8% when excluding advertising revenue and programmer app allocation.

Moving to operating expenses and adjusted EBITDA on Slide 9. In the second quarter, total operating expenses were virtually flat year-over-year. Programming costs declined by 9.7% due to $251 million of costs allocated to programmer streaming apps and netted within video revenue versus $67 million in the prior period, a higher mix of lighter video packages and a 0.8% decline in video customers year-over-year, partly offset by higher programming rates.

Other cost of revenue increased by 11.3%, primarily driven by higher mobile device sales, mobile service direct costs and higher advertising sales costs given higher political revenue and a higher mix of third-party impressions. Cost to service customers, which combines field and technology operations and customer operations grew 1.4% year-over-year, primarily due to higher fuel and medical costs.

Marketing and residential sales expense declined by 3.1% year-over-year due to lower marketing expenses from procurement initiatives, but our volume of impressions in our marketing activity generally was much higher year-over-year.

Transition expenses related to the pending Cox transaction totaled $65 million in the quarter, driven by systems disentanglement from Cox Enterprises and systems integration with Cox Communications. Transition expenses have been coming in a bit higher than expected. Some of that is closing delay and some is from a change in the expected mix of operating costs versus capital expenditures. But we still expect the sum of our Cox transition costs and capital expenditures to be at or better than what we anticipated. Finally, other expense declined by 2.5%, primarily driven by lower professional service expense.

Adjusted EBITDA declined by 4.3% year-over-year in the quarter and declined by 3.2% when excluding transition expenses. Currently, for the full year 2026, we expect standalone Charter EBITDA, excluding the impact of transition costs to decline around 1% year-over-year. The back half of this year will benefit from political advertising, cost pass-throughs and efficiency initiatives, and we're working on a number of additional initiatives to improve the full year trajectory.

Turning to net income. We generated $1.3 billion of net income attributable to Charter shareholders in the second quarter, essentially flat with the prior year period with lower year-over-year adjusted EBITDA, offset by a gain on extinguishment of debt related to open market debt repurchases in 2Q '26, which I will discuss in a moment.

Turning to Slide 10. Second quarter capital expenditures totaled $2.9 billion, virtually flat with last year's second quarter with lower line extension spending, offset by higher network evolution spend, which lands in upgrade rebuild spend. For standalone Charter, we continue to expect total 2026 capital expenditures to reach approximately $11.4 billion. And as we've said before, looking beyond 2026, we expect total capital spending in dollar terms to be on a meaningful downward trajectory.

And after our evolution and expansion initiatives conclude, our run rate capital expenditures for standalone Charter would be below $8 billion per year. That reduction in capital expenditures on its own from approximately $12.1 billion over the last 12 months to less than $8 billion in 2028, is equivalent to over $30 of free cash flow per share based on our June 30 share count. If we take consensus, 2026 free cash flow for standalone Charter and substitute our expected 2028 CapEx for 2026 CapEx, our current stock price would imply a free cash flow multiple of a bit over 2x and a free cash flow yield of nearly 50%.

Turning to second quarter free cash flow on Slide 12. Second quarter free cash totaled $1 billion, about $75 million lower than last year given lower EBITDA and a less favorable change in working capital, partly offset by lower cash paid for taxes.

Turning to cash taxes. Second quarter cash taxes totaled $101 million. We continue to expect that our calendar year 2026 cash tax payments will total between $500 million and $800 million. We finished the second quarter with $94 billion in debt principal. The weighted average life of our debt is 11.7 years. Our weighted average cost of debt remains at an attractive 5.2% and our current run rate annualized cash interest totals $4.9 billion.

During the quarter, we repurchased 4 million Charter shares totaling $838 million at an average price of $210 per share. As of the end of the second quarter, our ratio of net debt to last 12-month adjusted EBITDA was 4.18x and stood at 4.21x pro forma for the pending Liberty Broadband transaction.

Cable industry growth has been pressured by the pace of new competition growth combined with a challenging housing growth and move environment. Those factors have reduced our customer and EBITDA growth and our trading multiple. We've always regularly evaluated our balance sheet to maintain our financial strength and strategic flexibility and to be responsive to our debt and equity holders.

As a result, today, we are lowering our post-transaction leverage target to a flat 3.5x, which we expect to achieve with consistent progress along the way within 3 years of the close of the Cox and Liberty Broadband transactions. We've already begun executing a multi-pronged strategy to achieve that goal.

During the second quarter, we repurchased over $1.2 billion of our own debt in the open market for $1 billion in cash, reducing our total leverage by capturing approximately $250 million of discount. We also plan to reduce our total debt through liability management. Last night, we announced the launch of a capped exchange offer, targeting $20 billion of par value of our investment grade rated debt that trades at a discount to par. Participating bondholders will receive new par bonds in applicable 12- or 15-year maturities and, in some cases, cash and equivalent value to the current discounted trading value of the exchanged bonds plus a premium. If successful, this exchange will reduce our total debt principal and accelerate deleveraging.

As of the end of the third quarter, including the impact of the Cox and Liberty Broadband transactions and including the impact of our second quarter debt repurchases and assuming the success of the exchange offer announced yesterday evening, we expect our ratio of net debt to last 12-month adjusted EBITDA to be just above 3.9x.

Paying down debt, including the opportunity to repay secured maturities as they come due, will be part of our effort to reach our long-term leverage target and we expect there to be continuing opportunities for liability management approaches to support deleveraging. Our leverage target is not aspirational. We have high confidence in the strength of our business and its ability to generate substantial cash flow to achieve our targets.

Given the pending Cox closing and its financing, and our focus on liability management, we have paused our share repurchases through the end of the third quarter. We expect share repurchases to restart in the fourth quarter and we expect to be in a position to repurchase shares throughout the deleveraging process to 3.5x. We expect our deleveraging efforts to create value for all providers of capital, including shareholders and debt holders and we remain committed to maintaining an investment-grade rating on our secured debt.

Before turning the call over to Q&A, I want to make a few comments regarding our pending Cox transaction and our reporting plans, some of which I mentioned last quarter. Our first post-close quarterly results, which we expect will be our third quarter results will reflect a full quarter for legacy Charter plus a stub period for legacy Cox. So year-over-year actual comparisons won't be helpful, but we intend to present Charter's quarterly trending schedule with pro forma data along the lines of what you receive today.

Going forward, we will report similar customer PSU and revenue data for both legacy entities for several quarters following close, both separately and on a consolidated basis. We will not show expenses or capital expenditures by legacy entity. That's not possible given the shared nature of key large items like programming, overhead and significant centralized capital spend. We will also continue to report transition expense and capital related to the integration, and we'll provide updates on certain items, including estimates for the synergies we've realized so that you can better isolate the organic growth of the business.

Our balance sheet and P&L will also be impacted by purchase accounting. Part of that will be fair market value step-up of Cox assets, reflecting the fair market value of the consideration we paid for Cox assets as of the closing date. Taken at today's Charter share price, the current implied transaction enterprise value for the Cox business is $27 billion, which is roughly 5x EBITDA on transaction EBITDA and a 4.4x multiple when including $800 million of transaction synergies, which we now view as conservative.

As of the end of the second quarter and pro forma for the Cox and Liberty Broadband transactions, our net debt totaled approximately $110 billion and consisted of Legacy Charter net debt of approximately $93 billion. The net debt we are assuming from Liberty Broadband of about $1 billion, the approximately $4 billion of debt we will issue to fund our cash payment to Cox Enterprises, and legacy Cox principal of about $12 billion. Note that for balance sheet purposes, the Cox debt we will assume will be fair valued in an amount less than the face value based on current market prices.

A few other items to keep in mind. After close and on a quarterly basis, we will expense a charge of approximately $103 million of preferred coupon for Cox's ownership of preferred partnership units. That charge will be reported in our P&L as part of net income attributable to noncontrolling interests, similar to how we reported the Advance/Newhouse preferred interest following our transactions in 2016.

We will also have some below the EBITDA line charges, including additional transaction advisory expenses, which are contingent and payable at closing. We also expect restructuring and separation expenses through the integration process that will post below EBITDA as well. Interest expense will increase for the combined company, given the debt assumed from Cox, the new Charter debt issued for the cash portion of the purchase price and the accretion of the discount on assumed Cox debt.

As I mentioned last quarter, our outstanding share count will increase as we issued the equivalent of just over 46 million Charter shares to Cox Enterprises, comprised of common and preferred partnership units, partly offset by a net Charter share reduction of about 4.7 million shares associated with the Liberty Broadband transaction. That 4.7 million figure is lower now than when we announced the Liberty Broadband transaction, primarily due to our ongoing share repurchases from Liberty Broadband. Based on our June 30 standalone share count at close and on an as-converted as-exchanged basis, we expect our total shares to be about 177 million.

And with that, I'll turn it over to the operator for Q&A.

[Operator Instructions] Our first question will come from Craig Moffett with MoffettNathanson.

I'm going to see if I can squeeze in 2, if I can. First, Jessica, a while back, you said -- I think it was 2 quarters ago, you guided to positive broadband ARPU for the year. I wonder if you could just update us on your outlook for broadband ARPU for the year?

And then I wanted to ask a question about wireless. Comcast yesterday said that 90% of all their traffic is now offloaded onto WiFi or perhaps some of that over CBRS. Can you give a comparable number for Charter and how do you see that progressing?

Sure. So Craig, I'll start with ARPU. Broadband ARPU will improve sequentially in Q3. The use of more aggressive retention offers, as I said, lessened through 2Q and largely normalized in June. We're still feeling the impact from some of those more aggressive offers in 2Q, and we will over the course of the rest of the year, but the impact isn't building in the same way at this point. And we'll have a tailwind from the rate for the cost pass-through that's hitting in late July and early August.

I understand the sensitivity and the rationale for the focus around broadband ARPU. But I remind people, we don't manage the business for product level ARPUs. Our focus is on penetration as well as connectivity ARPU and overall customer relationship ARPU excluding the programmer app allocation, both of which I think will grow in FY '26.

Maybe I'll just tag on to that a little bit. The pressure that we had inside of Q1, which carried through Q2 really was a bet at the time that you can get a substantial lift through putting in that retention. And it had some impact, but not enough to really merit what we did. So we pulled back. I own that. It took a bit to pull back. And when we did it, it had a cascading impact to carry forward on the ARPU through the retention. So that was the driver inside of Q2. And as Jessica mentioned, you're going to have lift coming from that going away and in addition to that, the rate increase pass-through.

The other thing, when you take a look at a full year perspective, leaving aside Cox integration, leaving aside what Jessica said about managing for total customer relationship ARPU, which is a full suite of products that we include. We have Nick Jeffery coming on board on September 1. And the last thing I want to do when he's coming on board, with really a stated focus from our perspective of enhancing our go-to-market capabilities and our Net Promoter Score, and really hopefully being a big catalyst for those 2 categories and returning us to growth is some [ tail to ] hamstring, the ability of the company to go do some things to accelerate our growth. And so I don't think it's wise for us to focus on product ARPU generally. We've always said that. But particularly in this environment, we're focused on creating shareholder value, and I don't think it makes sense to kind of hamstring us that way.

The second question you asked, Craig, was around wireless. I hadn't seen that Comcast has reported up at 90%. We've been at 88%, and we're kind of moving -- we were kind of moving up to 89% through exactly the same reasons, which was the continued offload that we have through WiFi, through seamless authentication, not only in our footprint, but in Comcast and also in the Cox footprint as well across the 3 major cable operators. And in addition to that, the continued rollout of CBRS.

What we did inside the quarter is we effectively moved the type of speed pass-through for our products to make sure that we had better service above certain caps that were in place. And so as a result, which ended up with a bit more 5G usage than we've had before because of the product changes we made to improve the customer experience, the customer service. So that actually pushed us back down to 87%, which is where we've been previously, not because there was less offload, but because there was actually more 5G traffic usage, which was a positive thing from a consumer perspective.

So that was kind of what should be a onetime push down as we modified the product capability in a good way. And then we'll expect to be moving back up as the continued WiFi offload and continued CBRS deployment takes place over time. So slightly different for that reason, but on the same trajectory would be my estimate.

Your next question will come from Vikash Harlalka with New Street Research.

Two, if I could. You've changed your goal for EBITDA for the year. I just wanted to ask what changed in the first 6 months for you to lower your target for EBITDA.

And then second, there were some press reports mentioning that Starlink may look to partner with Charter. Any comment on that?

Sure. So on the EBITDA side, I think some of what changed, and Chris described a bit of it was expectations around broadband subscribers and ARPU over the course of the year based on some of those things that we had done around offers that we thought might work, but that didn't work out as well.

There's also a little bit of pressure in some controllable expenses, things like fuel and medical, where we haven't been able to sort of make adjustments against those in the same way as you can some others. We do have the ability and we've done quite a bit to think about expenses for the second half of the year and how we can be in a better place.

And so as Chris said, we've made some changes around moving price adjustments through. We are doing some work around driving down expenses across the business and in some cases, we're making some changes to benefit plans to bring them more in line with market and to doing some simplification on the overhead side that I think makes a lot of sense and that's rolling through now. So we continue to have levers and we'll continue to push to be in a better place than that trajectory as we get through the year.

I want to be clear, what Jessica said is what we're providing as an outlook as an update to what was previously provided. But we're actually targeting to do better for all the reasons that Jessica gave.

And the question on Starlink. Look, it's natural for us. We talk to many industry players. Anytime that we think that we can enhance our own product capabilities or do things that are innovative in the marketplace or we can lower cost for customers, those are the type of conversations that we have with many industry players. We do that all the time. I don't think it makes any sense to get into the detail of any of those conversations other than to say you should expect us to continue to do that across the board. And when there's something to announce or talk about, we'll do that, and that certainly is not the case today.

Our next question will come from Steven Cahall with Wells Fargo.

First, I wanted to maybe piggyback on Craig's question about your wireless offload as well as the last question on Starlink. It's possible we could see SpaceX or Starlink try to build the fourth wireless network. You've taken an asset-light approach to wireless, which you're able to do all this offload.

I was wondering if you think there's the potential for Charter to partner with potential builders over time and use the architecture that you have along with what someone else might do in wireless and if there are partnership opportunities that could create value. So I'd love to understand that better.

And then I was wondering if you could just touch a little bit on how Cox Internet trends have sort of transitioned versus your Internet trends. And do you think the trends that they're seeing in the market are the same, better or worse than yours? And is there any change to the playbook since it sounds like competition has picked up once you close the acquisition?

Sure. Look, let me take a more global approach to your first question around our willingness to use our network for offloading. Our principal focus as a company has always been about retail in the consumer segment and the B2B segment. And sometimes that means that we've foregone appropriately or sometimes maybe we should have had a different point of view on the wholesale opportunities that exist with the capabilities of our network.

I'll start -- I'll give you an example, just as a parallel, on the B2B side, we've done a lot of work around cell tower backhaul years ago, which was a good business. It's a great ROI. It's not as good as it used to be, but what we did there made a lot of sense similarly. You can talk about the data center business that exists today for fiber connectivity. And I think Cox has done a really good job of being aggressive in getting after that. And because we're so retail focused, I think we're getting into it now, we'll have a great opportunity. But maybe we didn't focus on it as much as we should have.

You can then, to get to your question, use that as a parallel with our -- just our seamless authentication capabilities across WiFi and CBRS. And should we be using that in a wholesale environment versus our current retail approach that we have. And I think the answer is it depends. It depends on what's the long-term path that we're doing? How does it impact us from our main objective on the retail side.

But we are doing offload today. If you think about the Amazon deal that we did with their fleet, which is public, where we have seamless authentication for Amazon drivers and the trucks to be able to offload to us at a more attractive rate than what they typically pay for cellular services. I could see us being -- and we have had those discussions for electric vehicle companies, think about the tremendous amount of offload that they have to do from all the cameras that are operating during the course of the day and need to upstream where our network is uniquely capable of doing that and being able to monetize it for us, but to save customers, in that case, the wholesale customer, lots of money.

So we have those capabilities. We've set up a platform called Bryte IQ that enables all of that to take place seamlessly. It works very well. And to the extent that we can be innovative around that, create additional revenue streams, if it's going to be material, it's certainly something we would think about. But I think the -- between one partner or another, the answer is it just depends, and we'll think it through at the right time.

By the way, we could do that for even mobile operators as well in terms of being able to offload for them in a different way than they already do today, private SSIDs. And we can -- I'm not sure that's somewhere we'll go, but it's another potential business opportunity that's out there.

Thanks, Steven.

He asked a question about -- sorry to come back, Cox trends. Nothing new or major to report. Cox's trends on both subscribers and revenue has been a couple of clicks lower than here at Spectrum, and that continues to be the case. So I wouldn't say there's been any dramatic change of what we've seen relative to our own performance at the time of signing up the transaction. No change to the playbook. Cox has been a very well invested asset over the years. It's prided itself on good service and having a great reputation in the market and the communities that they serve.

But I do think when you look at our products, which include speed for Internet, the convergence with mobile, our video product for sure and its ability to have seamless entertainment with the Xumo deployment and the pricing of all that, both on a standalone basis, in particular, when it's put together, I don't want to get over our skis but we're going to come into the Cox markets with a brand-new name, which is the Spectrum name. And always, when you're a "new entrant," you have an opportunity to be something new and alternative at better pricing with better products. That's a real opportunity for lift across all of those products. And that's always been the strategy. It's still the case.

Given the fact that the closing has been delayed as much as it has been, and we were ready to go really in March and April. But we've been working through the process with California. We're glad that where we are with that process. But we're more ready now as a result to go faster in deploying that product pricing and packaging into the Cox markets. And we're really excited about getting this done and getting going for the benefit of employees, customers and a real, I think, growth opportunity that's there.

[Operator Instructions] And our next question will come from Walter Piecyk with LightShed Partners.

Chris, I just want to go back to the last question because I think what he was asking about wasn't necessarily about just wholesaling the hotspots, but also whether closing out like that last 12%, meaning like joining in a network build, whether it's SpaceX or someone else, whether that might be something that makes sense to put some dollars behind?

Yes. Let me start with probably the hottest topic of the day, and I want to be really clear. We don't have any plans to do anything different as it relates to our CapEx trajectory so given where we are and...

And if we had -- if there were opportunities, I think that there are ways that we could look at them from an off-balance sheet sort of not part of our own capital perspective, not in the specific one, but our capital trajectory in terms of what we've laid out in the multiyear capital plan is set.

Yes. So I don't think we -- there's no specific plans that we have today to do anything around what you described. I would step back and say, we're in a capital-light approach that we're really enamored with as it relates to going for mobility and the ability to deliver converged retail services.

We have great partners, Verizon, now principally on the residential side, who's been a great partner, a great network. And we've recently launched on the B2B side, incrementally going forward with T-Mobile, also obviously, a fantastic network in a capital-light approach for us that makes a lot of sense. But we're also able to add in some additional features and product features into the business side that we didn't have before as well as the ability to sell a lot more lines and move upstream into that space. And they've been great partners as well, pretty seamless in terms of launch and working very well with both of those partners, and we're pleased.

So there's no driving need for us to "build a network of any type" because we have it. I mean, the other way to think about it, I've always said, not to be provocative, but we're the largest facilities-based wireless provider in the country, which is a little counterintuitive. But the reason I say that is not only do we offload 87% to 88% of our own traffic, but we -- the cable operators and WiFi generally, WiFi is the workhorse of Spectrum and data delivery across the entire footprint. And it's WiFi that delivers probably 75%, 80% of the traffic for the MNOs for their wireless telcos.

And so that's our wireline and WiFi facilities that's delivering not only wireless offload for us but also for the major telcos as well. And so I don't think it's that provocative. We are the largest wireless facilities provider in the country, particularly when we close Cox. So maybe today, it's Comcast and tomorrow, and it's us as #2. But we're going to be the largest wireless-based facilities provider in the country. Now I don't think there's a real need for us to feel like we have to go after that last 12%, given the partnerships that we have and the economic setup that we have today.

Yes.

Yes. And when you look at the offload that you have, could you give us any sense of the mix between the extra SSID from someone's home modem versus the hotspots that you may have deployed on wires or in communities and things like that? Like what's the relative split there? And is it changing as you maybe invest a little bit in CBRS?

Yes, it is changing. When we first -- I'm trying to think of the best way to answer your question. When we first came out with Spectrum Mobile, we were closer to 84%, 85%. And we had publicly said that we thought that we could get into, essentially, into the low 90s. And that point of view hasn't changed.

Now you've got a lot of other things going on in terms of overall traffic volume and where traffic occurs and people's usage. But I think for the most part, that still holds. So you can see where we've moved up the chain going beyond just our own network of WiFi authentication, but then when that got extended to out of footprint with Comcast and then Cox and continues to move up, and then CBRS, which is still early days. So we're across a vast number of markets, but we're well on our way on the increment to just continue to penetrate more deeply on an ROI-based approach based on where there's density and traffic that justifies the investment.

The payback we get in that is well under a year. So it's -- and that, just to be clear, that's always been included in our capital expenditure outlook. So I think we'll continue to move upstream. But as you saw even in this past quarter, when I answered the question for Craig, there are things that will bump you back down a little bit as we do things with the product. But I think our original outlook is still the same. And I think the mix is, first and foremost, it's our own WiFi.

The second is out of footprint when a New York customer goes to Philadelphia, for example. But increasingly, to your point, it's the CBRS as that gets more fully deployed, not just for us, but as it gets more fully deployed in the Comcast footprint into Cox footprint, which soon enough will be Spectrum, that CBRS deployment that each of us makes benefits the other because we have the same capabilities there as we do with WiFi.

Thanks, Walter, and thanks to everyone else. That concludes our call. Leila, back to you.

Thank you, everyone, for joining. This concludes today's call, and you may now disconnect.

Good morning, everyone. I'm Sebastiano Petti, and I cover the cable, telecom and satellite space for JPMorgan. I want to introduce Jessica Fischer, CFO of Charter Communications. Jessica, thanks for joining us today.

Happy to be here. Thanks.

Great. Just to start, maybe we can zoom out a bit. You have the Cox integration ahead of you, a subsidized rural build and a network evolution project nearing completion and also a competitive environment that continues to evolve. But free cash flow, a free cash flow inflection on the horizon. Can you walk us through where you are and where you and the management team are spending most of your time today and what you see as the key priorities for the next 12 to 18 months?

Sure. So our top priority continues to be to grow the connectivity business. And we're doing that through customer focus through things like improving our customer service, making the customer commitment, improving NPS scores through a focus on our messaging around utility and value inside the marketplace and through product differentiation and things like our mobile product, on Invincible WiFi, the seamless entertainment where customers receive access to programmer streaming apps with their video product and really pulling all of those things together to continue to create growth in connectivity services.

The second piece was on your list, thinking about our investment initiatives. So the 2 most important of those that we're working through now on the network evolution side, we expect to be 50% complete with the plant upgrades in our network by the end of the year. And with those, to be able to offer multi-gig speeds in the downstream and a gig in the upstream on a go-forward basis, which we think enhances the competitiveness of our network going forward.

And the rural initiative, which actually we started on this all the way back in 2020, really bidding on RDOF and finally, we'll bring it to an end inside of this year. An important piece of that is that the rural initiative has really been one of the very large users of capital. And so when you think about the higher capital spending that we've had as a result of our investment initiatives, completing that one is a big piece of the puzzle and then moving that capital spending out and creating the additional free cash flow that we will create as we end those initiatives.

If I sort of take that free cash flow point forward, then the third one is really around creating operational efficiency across the business, which we're doing through, I would say, bread and butter work around expenses but also then real investments in digitization and automation that are improving tools for agents, improving telemetry on the network. And through doing that, we think, can drive down transactions, ultimately create a better customer experience and also a more efficient expense path.

And then finally, there is that last thing on the list, which was the Cox transaction. Look, we look forward to incorporating the Cox assets with that transaction, assuming that it closes. And what we do there, so first step, I think, is really around what is it that you do in the business? It's about applying our operating strategy, which is about being able to roll higher-quality products to their customers, being able to roll them at a value the way that we do in our existing footprint and using that to generate sort of operating synergies inside of the business. In addition to that, we'll have transactional synergies and we go after those as well. But when you put all of those things together, yes, there's a lot on the plate, but we're excited about where things are headed and the ability to continue to generate value for investors.

Great. A lot to come back to there. But maybe let's start with the second quarter and maybe update on the competitive environment. Has anything changed competitively since the first quarter call, whether in promotional intensity, pace of fiber build or FWA expansion or even the macro environment? And as we think about the second quarter, should we still assume typical seasonality will hold for broadband adds? Or are there other factors that could cause this to deviate maybe one way or another?

There's not anything that's significant that's changed. It continues to be very competitive out there in the broadband market. I do think that there is probably seasonality inside of Q2 as we would typically see.

Okay. Great. And so maybe we can start with the top of the funnel. Chris has framed the broadband subscriber challenge as primarily a top of the funnel issue, with yields and churn are strong, but customer consideration remains pressured. He's also acknowledged that Charter hasn't yet earned the service reputation that matches its investments in part due to some legacy perception of cable. So how much of this is structural inertia that the cable industry faces versus Charter specific? And beyond continued messaging around value, what concretely changes this dynamic? Is it simply time and word of mouth? Or are there other levers you can pull to accelerate brand consideration?

Yes. So obviously, cable as a whole does have a brand or a perception issue. But I think that among the cable providers over time, there have been providers that have distinguished themselves as a head above others on customer service and on their products. And that's what we seek to do and to continue to improve. And so when I think about the ways that we do that, it starts with pricing and packaging, making sure that we're not just sort of pushing rate at customers, but that we're earning that rate by adding additional value to the packages, which is what we've done through things like having a mobile product that works better because it's on our network, through having a video product with seamless entertainment included that really delivers extra value to the customer and with not sort of pushing broadband pricing as the first place to go.

The second piece is about delivering on the customer service side, which is about, in our case, the customer commitment where we have really changed our level of responsiveness to customers over the last 1.5 years to 2 years. The commitment itself is that if you call in by 5:00 p.m. that we'll be there same day. Often now, instead of that being same day, it's actually much faster than that, and we continue to push ourselves there to really sort of delight the customer and the responsiveness that we can deliver.

And then it goes beyond those couple of things as we're thinking about and the management team is now actually incentivized on NPS, there are intangibles as well. Are you telling the customer when they encounter a sales or service person that, that person is in-sourced, that they're an employee of the company, which matters to a lot of customers. And are you sort of giving people the incentive to go above and beyond to make sure that they address an issue that might not naturally be easy to address inside of our systems that they take ownership of that and address it inside of that call to really excel in the customer experience.

And so all of those things, as you said, like, brand reputation does not change overnight. We have been making changes and improving. We will continue to make changes and continue to improve to drive that better reputation with customers, which we think ultimately makes them stickier. And it eventually enhances sales as we get better sort of word-of-mouth reputation over time.

Great. And just following up, I think Chris noted on the call that NPS scores are moving up, you just touched on that. Are those still -- are those trends still moving in the right direction? And have you seen a correlation between NPS and subscriber results or churn benefits?

So our NPS over time has been improving, and it's through those sort of changes that you have in the service metrics, as Chris said, not as fast as he would like but moving in the right direction. Q1, there's a little bit of a hiccup around that because we have seasonal price adjustments that we've pushed through largely in video related to programmer expense pass-through, and those do have an impact. But overall, I think the changes that we're making, we think, move us in the right direction, and we're confident in our ability to get there over time. And we do see the benefits on the churn side of having those service improvements and what it does to our ability to retain customers who otherwise might switch.

Okay. Great. And then just switching gears here to proactive base management efforts. You've migrated -- you've been migrating customers on legacy pricing and packaging to newer bundles that deliver more value, higher speeds, mobile and video product attached for roughly the same price. And I think Chris noted on the call that about 45% of your residential customers are now on that framework that you guys launched in late 2024. So where are we in the migration today? And how quickly do you expect to move through the remaining base? And is this exercise of proactive base management, is it beginning to yield measurable improvements in churn and subscriber growth? Or is it -- or should we think about it as primarily more defensive, trying to prevent further sub losses?

So we expect to be about 60% of the way through the base and moving to the new pricing and packaging by the end of the year. I think what we see as we've rolled it out is that by having the structure that we have, we tend to get more customers into bundles of products and that those bundles do increase customer longevity. And so we're confident in the benefit that it has from the churn side. As I've talked about, we continue to work through sort of what's the right messaging and what are the right steps to get customers into those packages. And so we'll continue to work that. But ultimately, I think it's about sort of meeting the moment with pricing and packaging that we think works well for consumers. I think the economic model is still the same and that we can ultimately sort of do well by generating higher customer lifetime value by bringing customers into stickier packages, which is what we've been doing.

So just sticking with that for a second here and the proactive base management. I think on the call, Jessica, you noted that broadband ARPU growth for the year would be "close either way to flat," a step back from prior expectations for modest growth due in part to the proactive base management and retention efforts that you just touched on. So with 45% of the base migrated on your way to 60% by year-end, is it still too early to know which side of 0 the residential broadband ARPU growth will land for the year? And I guess, again, help us think about or how do we weigh the near-term ARPU trade-off against the customer lifetime value benefits?

Yes. So, first, I just want to say that we've never managed the business for product level ARPUs. We're focused on how much total revenue or total cash flow can you generate from the customer, which involves, in many cases, bundling additional products and using that to generate additional value rather than focusing solely on broadband ARPU. So while I know that it is important to investors, and I answer the question, a guide around that isn't exactly consistent with the way that we manage our business.

That being said, I think there's no change to what we've said around our expectations on ARPU. I would, though, put with that, I think many of you heard Chris say last week that we expect to pass through cost increases to consumers along with some additional value in our packages later this year. And in spite of what I just said, we do recognize the importance that the market puts on broadband ARPU growth. And so it's part of our -- we're conscientious of it as we make decisions across the business.

But what we think about often is what you described in the next step of the question, which is how do you generate the most customer lifetime value from the network. And so we've been pretty confident as we've rolled changes to pricing and packaging and as we look at sort of changes to offers that are there to either generate additional top of funnel or to generate reduced churn that we're comfortable that we're generating good positive customer lifetime value with those offers. If we don't get the results that we want, we pull them back and try something different. But I think that we ultimately end up getting to the right place in terms of doing what we intend to do, which is ultimately to drive overall value in the business by selling the most products that we can to the most customers.

And the last piece that I would say there is I think that we believe, while we've never intended to grow our business by growing broadband ARPU or even just to grow it by growing ARPU just generally for products, we do think that the markets that we operate in continue to be rational. And so I think that we believe that over time that the pricing structures in those markets will be conducive to generating financial growth across the business.

And as we think about Life Unlimited that you introduced in late 2024, which has price locks of 2 to 3 years, depending upon the bundle depth, this also, I think, has maybe contributed to some of the -- again, I know you're not focused on ARPU, so I don't mean to keep hammering away here. But focused on some of the -- maybe it's weighed on ARPU growth somewhat. But as more and more of the base migrates to these locked-in price points, I mean, how should we think about the duration and magnitude of this life unlimited ARPU dynamic? And is this something, a pressure point, that should persist into 2027 because you just -- again, as the base goes from 45% to 60% and higher, it seems like, again, you're just going to have less and less of the base stepping up to a promo roll.

Yes. So the way that I think about the ARPU impact from price locks is that the pressure from not having customer roll-off lasts for as long as the price lock is from the beginning of the time when you start having that as your primary offer set. So if I put that in context, then, in our Life Unlimited packages where customers took 2 products, that's a 2-year price lock. Those start sunsetting in Q4 of this year and the pressure on ARPU from those lifts at that time. And for the 3 product packages, it's a 3-year price lock and the pressure on ARPU from those then starts to lift in Q4 of next year. I would say, while that's a factor in sort of the set of things that are influencing what's happening with ARPU overall, it is not the only factor, right? The level of your offers, what you're doing in retention, what you do in pricing adjustments and what you do with value-added services like things like Life Unlimited all have an impact -- or sorry, not Life Unlimited, Invincible WiFi, all have an impact.

And so putting those things together, it's actually also the reason why trying to get to an exact ARPU, like this is where we will land is difficult is because there are a lot of factors that play into it along with bundling and how much bundled product you have. But I think -- so the question was about -- so I think the pressure from the price locks lifts. I think what you have to think about underneath it is that sort of big set of other factors that also continue to have an impact.

Okay. And then lastly, I think, given the competitive environment, we got this question from -- a big focus from the investment community. But given the competitive environment, ongoing repricing and tuning efforts, should investors conclude that pricing power has structurally diminished across the ecosystem? Or is this perhaps a little bit more cyclical and again, tied to where we stand today in the competitive environment?

Yes. So the biggest thing that happened that sort of changed the conversation inside of Q1, in particular, is that we didn't take a price adjustment on broadband in Q1 that was similar to what we had in the prior year. And there are a lot of reasons not to take a price adjustment at a particular point in time on a particular product. Some of those are competitive, some of them are not. But if I sort of look out at the competitive environment and say, well, what's going on and what would influence that right now, Chris and I have both talked about the level of new competition matters.

And so the level of sort of opening up of additional fixed wireless passings that you had with AT&T coming in over the last few quarters, the pacing of fiber overbuild tends to matter to what's happening to the level of competitiveness in the market. And the intensity of that competition is strongest when the competitors are new. I think, as I said before, we continue to believe that in the market structures that we function in based on the competitors that we know are out there that those markets will be rational over time. And so once -- while we don't intend to grow the business sort of based on price, I think that we do believe that in the medium and long term, there's certainly the opportunity to have sort of a rational pricing structure over time.

Okay. And then on the call, you reiterated plans to grow EBITDA slightly this year, excluding transition costs related to Cox transaction but caution that the tuning exercise will impact how close to the line we are on EBITDA growth. Is that still the right framing or the right way to think about? And as we think about the path to organic EBITDA growth in 2026, ex political advertising, what levers remain to be pulled specifically? You talked about cost to service customers being down slightly, marketing expense growth meaningfully slowing. Is there other room or further room to pull back on these lines or other areas that don't impact your service investments?

Yes. So as a starting point, there's no change to what we've said about EBITDA for the year. I do think that there continues to be space for us to do work on the cost side, both continuing to do sort of changes that we think will not impact the sales and service levels, but can make our business more operationally efficient. And probably the more impactful one really going after that digitization and automation that ultimately drives down the number of customer transactions, drives -- makes you more efficient in dealing with those customer transactions and ultimately then results in better service for the customer as well as sort of greater operating leverage.

And sticking with that, you've deployed AI across sales, service and field operations. You previously noted that some of the benefits from -- to the P&L from the use of AI. Chris also emphasized that improved service leads to fewer transactions, which we've touched on. As we think about Charter stand-alone over the next several years, I guess, you touched on digitization, automation. Is there other runway and other areas from AI that maybe haven't unpacked? Or is that, again, the automation side? is there network improvement efforts?

There are. So I sort of put things into a set of categories. There's sort of what can you do on tools, tools for agents to make them more efficient at addressing calls and tools for technicians to make them more efficient. And then there's telemetry. And when we talk about telemetry, what that is, is what data can you pull in from the network to learn about where you're having issues so that you can solve them before the customer identifies the issue or so that you can have sort of self-mending inside of the network. And that actually interestingly is enhanced. A lot of what we're doing in network evolution puts more telemetry inside of the network. So we're adding sensors, inside -- I'll use [indiscernible] sensors inside of things like amplifiers where we'll be able to see deep into the network, a lot of data around the performance of the network itself, which will help us to diagnose and correct issues more quickly.

And the combination of those things, I think, is really focused around getting that data in, using the right tools to analyze it, dispatching the problem to the right area of the organization or in some cases, using tools that are able to self-heal the network as part of the tool itself.

Okay. And big focus this week has been on convergence and competitive intensity but also LEO satellite. On the call, you noted that Charter has not yet seen meaningful share loss to satellite broadband but acknowledge that satellite has had more of an impact on some of your rural subsidized penetration curves. So I guess can you elaborate on 2 fronts? First, are you seeing emerging LEO broadband competition today in your less densely populated areas, maybe some of the secondary and tertiary cities that you operate in just beyond pure rural? And then -- and secondarily, and to what extent has LEO -- has the availability of LEO satellite options, again, impacted those RDOF penetration curves either through lower gross adds, higher churn just relative to your, I guess, assumptions that you underwrote at the beginning of that program?

On the first question around what we see in terms of LEO satellite impact, we -- it's very difficult right now to discern what impact is from LEO in any individual market. It's very dispersed. And so while I don't discount it as a competitor, it's difficult for us to say right now sort of what impact that's having outside of rural. Inside of rural, if I think about the RDOF build and our other subsidized rural build, the change that we've seen is it's about pacing early on. So early on in our rural build projects, we had very, very high penetration super early post build, and it was because there was very little alternative available and the customers kind of came all at once.

We're still seeing very good penetrations across those markets but it takes longer to displace customers from a satellite provider -- from the LEO satellite providers than it did from sort of the prior competitive options in those spaces. And so even with those somewhat slower penetration curves, when I look at it versus like as I said, back in 2020 when we were bidding on many of those passings, we have a much more significant mobile business today than we had then. We have sold more of our bundled products in those markets, I think, than we expected to sell, particularly when I think about something like landline voice, which because of cellular coverage in those markets actually is higher than you would think. But when you pull that all together and look at so what's the total return that you get off of the builds themselves, we continue to be quite happy with the return that we're getting on the builds in those markets.

Great. Just touching on the Cox deal. I guess maybe let's start with -- you're trending towards a summer close, I think Chris said on the call. Can you walk us through the integration game plan? What happens in the first 30, 60, 90 days? What's the expected time line to roll out the Spectrum brand pricing and packaging and other kind of work streams that are maybe top priority as you kind of hopefully get approval and close the transaction?

So the #1 priority is being able to deliver our high-value products, which includes our mobile and video product. and to do that in our pricing and packaging structure and with the brand, right? So I sort of package all of those together and say that you should expect us to roll all of those things in a pretty short window post close. We've been able to do a lot to get ready for that. And so we're excited about that. And I think it's important to really deploying our operating model in the footprint, which is a big way -- a big piece of how we think we derive value from those assets.

And so maybe a big theme over the last couple of quarters has been just a lot of focus on cable consolidation. And Chris has been clear that Charter likes cable as an investment and would pursue additional acquisitions at the right price. Just given your commitment to deleverage to the low end of the 3.5 to 3.75 target within 3 years of closing, -- and with shares trading at 3x free cash flow, how do you think about Charter's balance sheet capacity and equity currency perhaps as potential constraints or enablers of further M&A from here? And how do you view -- how do you weigh the strategic benefits of additional scale against the near-term financial cost of a transaction at current valuation?

Look, the way that we think about deploying capital hasn't changed, which is you deploy first to organic ROI investments and then we think about accretive M&A and then we manage leverage and then think about share buybacks. In that piece around accretive M&A, we continue to like cable assets. We have what we think is a very successful operating strategy to deploy against cable assets. A deal that you do, though, has to be accretive to shareholders, which encompasses a lot of what you said around how value of the shares today influences. And then in this market and given where valuations are, I think that the bar to increase leverage on the business today is very high. And so with all of those things in mind, as I said, we continue to like cable businesses. But how you think about transactions really around accretion and understanding that the bar for additional leverage is high.

Okay. And then within that context, the leverage target of 3.5 to 3.75 within 3 years, just maybe help us think about -- I don't want to give us forward guidance on buybacks or anything like that, but help us think about your approach to share repurchases and why within -- we've talked about this in the past, but like why 3 years, why not sooner? And do you see an opportunity to maybe accelerate buybacks? Or how do you weigh that against slowing buybacks? And just help us think about the team's, I guess, mindset in regard to that.

Yes. So as I said, so in the list of things, it's first managing to our leverage target and then having sort of the residual cash flow that goes to buybacks. And as I think about sort of how you manage to that leverage target over 2 to 3 years, the first piece of it is that the Cox transaction itself actually will delever the business. And so you get a good portion of the way there just in the transaction. In addition to that, I think that there's sort of multiple components. One is that you end up sort of paying down debt over that period of time. The next is that you have synergies from the transaction that generate positive EBITDA growth that causes you to delever over time and you have organic EBITDA growth as well.

And so the combination of those things kind of gets you to the point of your leverage target over time. And we believe that with those things, the sort of automatic delevering from the Cox transaction and then the debt paydown plus EBITDA growth that there continues to be pretty substantial cash available for share buybacks. And so from a timing perspective, obviously, you're sort of weighing. Certainly, with the shares price where they are today, we believe that we can generate a lot of additional value for shareholders. And we think about that with the substantial free cash flow growth that's coming with the Cox acquisition, where you have the ability to generate these synergies and with the continuing potential for success from the operating model.

But we recognize the value of all of our providers of capital, where we continue to be committed to the investment-grade rating at the CCO level. And so we will do the things that we think that we need to do in the meantime to manage leverage of the business in an appropriate way and that puts us on the right trajectory to get where we need to go.

So following up on leverage and some of the benefits that are coming out of the transaction there. So you raised the Cox OpEx synergy estimate to $800 million from $500 million on the 1Q call. And part of that was programming, procurement savings. But you also suggested there's maybe room to grow that further. But what we hear from some investors. You look at some of the Cox's financials that have been made public, it seems like some costs are already coming out. So I guess what gives you the confidence that Charter can deliver the $800 million or more on top of maybe what Cox has already done?

So we've been pretty close to their financials at this point. And the way that I think about a lot of that is sort of translating those financials into what they look like with a Charter operating model, a spectrum operating model going forward. And with that sort of baselining off of the 2025 financials, which is what we used as a starting point, I'm very confident in our ability to deliver at least the $800 million that we talked about. And I think if you -- as you mentioned, if you rolled that back to say, okay, well, when you actually did the deal, had you baselined off of those financials, it is actually even more dramatic than that, right, in terms of the synergies that you would generate.

Okay. So confidence in that?

Yes.

And then the other question is, so Cox, I guess their mid-split upgrade is nearly complete. So that positions them well for an eventual evolution to DOCSIS 4.0. But I think help us remind me, I think in the merger proxy, you guys put $1 billion of CapEx synergies in there, but before transition costs. So I guess, how do you -- how are you comfortable, I guess, with that level of, I guess, magnitude of reduction on the CapEx side, given they still have that 4.0 upgrade path still somewhat ahead of them?

So I think if you look at what's there, we took their capital down to a CapEx to revenue ratio that more closely matched ours, right? And if I think about the components of that, on one side, there actually should -- like as a business that you're sort of marginally adding to our existing business, their CapEx ratio should be lower because there are things, if you think about R&D across the business that you probably in a scaled scenario, only do once. On the other side of it, they're a little heavier in commercial than we are and commercial is a more capital-heavy business. And so when I offset those things against each other, we got pretty comfortable that, that's the right range for the sort of amount of capital that you have to spend on that set of additional assets. That's what you have to believe to get the $1 billion of synergies on capital itself.

And then inside of the transition capital that we put inside of the proxy, we had in mind that there would be some pieces of a network evolution type project that you might need to do, and we sort of incorporated some expectations around that. But I think because of what they've done already, look, the Cox assets are not under-invested by any stretch of the imagination. And so I think that we feel like even with the mid-split upgrades that they're in a pretty good place. And so we can take some time to evaluate what's really necessary and to make decisions around that and deploy at an appropriate pace, that recognizes the cost of capital in the market. And so I think we can get there. It'll be good.

Well, great. Thank you again, Jessica, for joining us.

Good morning, everybody. Good morning to those of you who are joining us on the web and welcome to our conversation with Charter Communications and Chris Winfrey. Chris, good to have you back. I think we've had Charter every year at our conference and you just about every time.

Let's -- we have to start with the elephant in the room, which is, your stock price fell 25% when you reported first quarter earnings and has continued to fall even further since then. We attributed the drop not just to the year-over-year increase in broadband sub losses, but also to the discussion of, I don't want to call it guidance precisely, but let's call it guidance, about broadband ARPU growth.

And in particular, the wording you used on the call with respect to broadband ARPU was that it will be "close to -- or close either way" in terms of where we end up with growth, meaning it's about flat. First, is your diagnosis of what the market's reaction to your earnings results were the same as mine, that it was not just the net adds, but people were surprised and concerned about the ARPU story? Or is it something different?

Yes. I think the net adds variance wasn't big relative to consensus. And so clearly, the market reaction was centered very much around broadband ARPU. On one hand, disappointing to see that kind of market reaction significantly. But I also don't think that more than 1/4 of the value of the company was destroyed by an in-year ARPU outlook.

I think more importantly, if you think about how we've always managed the business, we've never managed it for short-term ARPU, much less product ARPU. And it's not something that we've typically guided about. I think Jessica answered a question about it based on -- and she answered it honestly at the time. But clearly, that had a pretty significant impact.

But we manage the business, as you know, fixed network of passings to try to drive the highest terminal penetration of customer relationships, the highest amount of products in the household, and as a result of that, having the highest revenue and margin at the household level. And by doing that, you lower the operating cost per household or per customer, and you lower the capital expense that's associated with that customer.

We have the highest penetrations in the marketplace, as a result of that strategy working well. And depending on how you allocate the revenue inside the bundle, your single-play product ARPU is going to be all over the place from time to time, particularly as you're trying new things and going to market and you're [ retaining ] inside the quarter.

So yes, I think in the end, I think that was the -- clearly, the market reaction. It was disappointing, but we're very much focused on customer lifetime value, maximizing penetration on the network, and using all the tools and assets we have with other products to go drive value into the system.

Part of the reaction, I suspect, though, was probably this tension between, is this an intentional -- we're doing this in order to achieve this outcome? Or was that we just don't have the visibility right now to be able to say that we can grow ARPU? And -- because I think those are two very different messages.

Yes. Look, Again, I don't think it's a great metric to be giving guidance. So what I will tell you is that converged ARPU is more relevant than a single product Internet ARPU, and that is growing. And when it comes to broadband and you think about broadband, there's so many different things happening inside of the quarter. And we have a multiproduct selling strategy. There's price locks that are taking place inside there. Inside of a quarter, we also have different levels of retention activity that's taking place, which we talked about a little bit on the call.

And then perhaps one of the bigger ones was that inside the first quarter, we didn't take the level of cost pass through that we had done in previous periods inside of the first quarter for a variety of different reasons. And we will do that towards the end of the summer. And so there'll be some of that cost pass-through. We're not just going to take it and push it through. We're going to do it attached to some value increase along the way.

But I think all those things drove a single-play product ARPU output that wasn't representative of the long-term growth potential of the company. And so we focus much more on converged ARPU, and we think about manage the business from a customer lifetime value. So I don't think it's productive or helpful to get in an environment where you're forecasting or guiding to a single-play product ARPU.

So we'll get to all the details. Usually, I wrap up with a question about the overall growth picture. But let's go to that first. Give investors a reason for confidence that you can be back to being a sort of normalized levels of growth in revenue and EBITDA? And what are those normalized levels?

Sure. Look, let's start with what we know is we're operating in a highly competitive moment in time. Our issue hasn't been necessarily the level of competition because we compete very well against fiber and we have for more than a decade. It's the level of new competition that's taking place in the market, combined with one of the lowest market move rates that we've seen, which reduces your selling opportunities. So that's putting significant pressure on the short-term growth.

But in the end, if you step back and take a look and say, do you have the best network, do you have the best products, do you have the best pricing and save customers money and can you provide the best service? And the answer is yes to all that. We are ubiquitously deployed symmetrical soon and multi-gig network converged. We have the fastest products in the marketplace, Internet and Mobile, the video product. It's not the most sexy thing today, but it is the best product inside the marketplace.

And for those that are interested together with Mobile and our Internet pricing, we can save customers hundreds and thousands of dollars every year. And the service investment has already been made. Does that mean that we should sit back and do nothing? Absolutely not. We have areas for opportunity, areas of improvement. The two biggest ones that I've talked about are go-to-market, finding a way to articulate that savings and quality to customers in a way that resonates and creates traffic. And then the second one is reaping the benefit of the investments in service that we've made.

I mean, for example, if you call us today, probably half the time, we're on your doorstep within 2 hours. Nobody can do that. 100% U.S.-based in-house sales and service, 24/7 and a response rate that beats just about -- beats anybody. And so all that says, in the end, I think our products and our capabilities win, but we've got higher new competition along the way, and we've got opportunities that I think we can do better than we're doing today with our go-to-market and NPS.

If none of that resonates, right, which I think it should. But if none of that resonates, I still don't think you can ignore the free cash flow that exists today, the free cash flow takeoff that's coming from a rarely provided by us multiyear CapEx guidance, which we will deliver and the free cash flow yield that implies? And then when you couple that with the fact that this infrastructure asset is unique. It's not something that can be replicated, the amount of traffic that we carry for ourselves, but also for the entire rest of the industry is mobile offload is something that's very valuable and it can't be replicated.

So that's what I would say in terms of our ability to return to revenue and EBITDA growth, our free cash flow profile and the underlying value that is our asset.

So I want to -- there's a lot to unpack there, and we'll come back to some of those things.

You prompted it first, so.

But I want to go back to just the sort of the competitive dynamics of the broadband market, and we'll come back to convergence in a second.

But with respect to broadband, do you think of FWA as a product or a market segment? That is -- is it -- is there a certain segment of the market that says cheap and cheerful at 100 megabits per second was all I was looking for anyway. And at $50, that's where they're going to go. And -- or is there something about the product that says they're doing this something different that we need to learn from?

I think that market exists, and has existed, and we compete really well with it from a product set. I mean we have an Internet advantage product that's $30. We have low income products that are much lower cost than that at similar speeds to what you're describing. And then you couple that with the ability to add Mobile at a $30 per line, as opposed to $60 or $70 per line, and I would say, yes, that market exists, but we've always served that market, too.

We don't heavily market it. We target market that to the right type of audience. So I don't think there's anything that they're doing that's unique there other than representing it as a cheap product when, in fact, the only way you can get that price is by overpaying significantly on your mobile service. That's the -- really the only one way you...

And so selling convergence is the answer to compete?

I think selling convergence is the answer to compete for us, but also being careful. We've created that marketplace almost single-handedly. And so making sure that we don't forgo the opportunity to have an Internet sale because we're trying to shove Mobile down somebody's throat either. Because even unattached to Mobile or Video, our Internet product is better. It's faster and it's very competitive on price. And so those are the type of things that we're working through as well.

There are things -- you asked about other things that FWA has done. Their installation setup is pretty easy. It's pretty straightforward. And we took that as a challenge to go time the installation on FWA and time our own installation that we were behind them, and we're now much faster than them. And so we put a lot of effort behind the NPS, not because we're chasing a metric, but the customer perception is significantly impacted by the point of sale and the point of install. And we've gotten much, much better on that front. And so I do think competition makes you a better operator. And we tear down everything that everybody is doing and try to learn from it. And if we need to mimic it, we will, but generally, we want to try to beat it.

So you were the first person that described to me once that your -- what was then the Spectrum One free line offer was not a promotional plan. It was a new product category. The convergence and selling connectivity everywhere is about educating the customer to think differently about the bundle of comm services. How is that going?

You saw the early results and what it did for Mobile. We've created the marketplace, I think, for convergence. Now everybody is talking about it and everybody is saying that they have it. And as you know, and you regularly point out, there's only a small fraction of the network of Verizon or AT&T that will ever be able to do convergence. And as much as T-Mobile says they don't believe in convergence, they're doing it every day. They're just doing it on the back of the same network.

The difference with us is that we have a fully deployed ubiquitous network that has wireline and wireless. So nobody else can provide it the way that we do. And we already offload all that mobile traffic anyway. And so the only thing that we're doing is say, look, we're already offloading your mobile traffic. We might as well have a service relationship with you, earn a great margin on it and lower your cost as a consumer to provide more value to the holistic relationship that we provide inside the household.

So convergence works, it's helpful for saving money. It's helpful for reducing churn. We are taking a look and making sure by creating the marketplace that we lean so heavily that let's not -- let's make sure we haven't created speed bumps to actual Internet acquisition. But no, I think if your question is, does it work? It does. And everybody wants to have it, whether they say it or not.

And if you think about the logical end game, and I'll ask the same question that I asked before about FWA. Is convergence a market segment or a product? That is, is there 20% of the market that wants to buy their services that way and maybe that will grow, but 80% is still single product? Or is it just no, this is actually where the market is going...

Some of it depends on how you build it into the household. But at the end of the day, Mobile today is an extension of our broadband service. The dirty secret when you hear a lot of the telcos talking about need for Spectrum is 75%, 80% of their traffic goes over our network to begin with. And so it is just the mobile product is just an extension of our broadband product, and I think we can save customers a lot of money with it.

And I don't know, in terms of where people ultimately go, but I think inside of our footprint and with us because we can uniquely provide it, I think it becomes more and more the way that people take it from us.

You know my favorite topic is always the economics of fiber overbuilding and fiber deployment.

Yes.

When we were on the stage a year ago, you ventured that the capital being deployed in fiber was probably already earning a negative return. We're obviously seeing lower density, and we're seeing lower ARPU, all of which would say it can't be getting better. And yet we're expecting as many as 2 million or 3 million more passings this year than we saw last year if -- for the next 5 years, if that's feasible. Is it? And what do you think happens from here?

I mean you know this as well as I do. I think if you look back the past 5 years, the projection of what was going to be built ended up being less than what was actually built. And so we're -- in our footprint, it's all I can speak to. We're seeing a steady pace of build. I think it should be coming down because I don't think they're going to make any money off of it.

And the number of fiber miles has to grow a lot...

Yes, and the density is going down dramatically. And so the costs are going up, and it is more competitive because of us, because of FWA. So I don't think there's a return there to begin with. I do think the amount of passings are that are announced of what people want to do, by definition, is duplicative. And I think that's part of the reason that the forecast is always higher than what's being actually done in actuality is because it doesn't make sense to go in there to begin with. It certainly doesn't make to go in there at the same time as another fiber overbuild.

And so I think you'll see more and more of that. The thing that I think it's interesting to watch for me is if you think about the existing fiber operators, there's been a lot of sales. And so a lot of the smart money is exiting, or has already exited. And I think that should tell you something because some of the people that were in it, they timed it right, they got out. I think there's something to be said for that.

I was really interested in some data that OpenVault released in the fourth quarter of last year, that showed that the average fiber customer is actually getting significantly slower speeds than the average cable customer. That's not because fiber is not capable of offering higher speeds. It's because people who are choosing fiber are opting into lower speed tiers, which would suggest that the real selling proposition for fiber isn't, we're better. It's, we're cheaper. Is that what you're seeing?

At least in our footprint, that's not what we're seeing. If you look, we compete well against fiber at every single speed and price point, and we'll go where the customer wants to take us. In fact, our penetration of gig and multi-gig services today is only about 25% so much lower than the number that you had. And it was actually, dramatically lower just 2 years ago. Because we let customers -- we'll advertise a gig, or we'll advertise 2 gig, and soon we'll be advertising 5 and more. But customers are solving for the speed they need and the price point they're looking for. We compete really well against all of that.

The reason our gig plus speeds have taken off so much isn't because that's what we're putting in a single-play environment. It's because of our bundling strategy, which says if you take video or if you take mobile lines with us, we'll kick in the gig for free, and we'll put that inside of your service as a way to create more value inside of that bundle. And so we're driving it in that way, but not from a competitive pricing or speed need. It's just about packing more value into the bundle.

And we do that at point of sale. We do that with migration, and we do that inside of retention. And yet it's still for gig and multi-gig, it's still only 25% of our total footprint. And we compete really well against fiber. We are -- just as a reminder, inside of our footprint, generally, when we compete against fiber, we're still the market share leader inside of our footprint. And so I don't think it's about speed selection or price, we compete well across both.

One of the overarching themes of this conference has been the expected arrival of more competition from satellite in every part of the business of connectivity. What are you seeing with respect to Starlink and eventually Amazon Leo? Are they a direct competitor existing subscribers? Are they just carving up the more rural and low-density markets potentially before you get there. Talk about what you're seeing from satellite?

So I think in a low-density rural environment particularly when there's not another alternative, it's a fantastic product. It works really well at low density. And we have seen in some of our more recent rural builds, where we get in and Starlink has got a pretty good penetration in these rural environments. And we're having to -- instead of being the greenfield and welcomed, we're having to convert those subscribers.

And so we're still hitting our penetration targets in the most recent rural builds, but it's taking a little bit more time than it was early on. And the big driver that I think probably is Starlink. So in a rural low-density environment, I think it works really well. In a suburban or urban environment, as you know, there's capacity constraints, although you can see how they price competitively in certain markets where they do have extra capacity.

So, do I think it will be the competitive solution for those? No. But I also understand they are very well capitalized today and tomorrow. They're incredibly technologically savvy. They have a tremendous amount of governmental support, and we don't take that for granted. And so we're watching it very closely and try to keep a close eye and make sure we stay a step ahead of it.

Does that -- do you think that satellite ultimately competes for the same segment as FWA? Or are they layered competition that they each take their own share and the market gets smaller as a result?

I don't know that it segments out separately. In the rural community, I think it's probably more of a substitution that exists because they both have capacity.

And WISPs never get counted by most people. There's a lot...

Correct. So I think it's interchangeable in that environment. And I think you're then coming down to the ease of an FWA installation versus putting a satellite dish on the outside of your home, versus branding and things like that, versus the fiber provider, which is us in these rural environments together with Mobile, that actually provides a better product, better price, saves you a lot of money. So I think it's very much competitive in that environment.

I don't think they're fishing in the same space as you get into suburban or urban. But we'll see. I'm not here to forecast their business other than tell you, we're watching it very closely. And I think there may be more opportunities to cooperate with some of these providers than direct head-to-head competition.

Okay. Let's talk about Cox. First, just the logistics. California is the last hurdle remaining. You've reached settlements with Cal Advocates and CETF. Are there any substantial objections left? And you've requested a decision by August 13. Is that the likely deadline? Or -- I mean, it's not obvious to me why it should take that long?

Yes. But look, as you mentioned, we've reached settlements with two of the key intervenors. All of the other states in the federal government were complete inside of March. And this transaction brings significant benefits to consumers and to employees across the entire country. I would not underestimate the uncertainty that, that creates for employees at both companies, but particularly Cox. And so we're hopeful that we can get out of there with California as quickly as possible.

And beyond that, I'll just say that we very much respect the process. It's an important state to us. And so I'm going to not say more about it just to respect the process that they -- and we have to go through.

One of the benefits that you've obviously made the case to California about is that your pricing is lower and you're going to offer customers lower prices. Take us through the mechanics after the deal closes, of how you roll out lower prices because I think there's a lot of anxiety about the fact that Cox is broadband ARPU. I know it's a stand-alone ARPU, but broadband ARPU is just too high and it's going to have to come down.

Look, it's true. The broadband ARPU is too high, and it's going to have to come down. I think the way that investors are going to have to measure us is as follows. One is customer growth. Two is PSU growth. And three, is total customer ARPU. I said what I said upfront, just to be a little bit provocative. But the total customer ARPU today is about the same, and they're way underpenetrated to us on video, and they have essentially no Mobile penetration whatsoever.

So our strategy here is going to be to have lower pricing across all products, with better quality of product, and to have a better customer ARPU at the household level, but most importantly is to have a higher penetration across the passings so that you can generate the most long-term terminal value of the network. So watch the customer ARPU, watch the converged ARPU.

First and foremost, watch subscriber growth, then customer ARPU. Converged ARPU, although that may take at least a year because of the free mobile line Spectrum One offer. So for that to kick in. The good news is there's a lot of history around that so people know exactly how that's going to pan out, and there were doubts about that at the time, and it's proved out to be very good.

And I assume you'll be reporting those separately?

Yes, just like we did with TWC and Bright House. We're going to provide transparency everywhere we can. Capital and OpEx, once you scramble the egg, it's hard to pull apart. But subscribers and revenue, certainly, we'll be providing that type of insight to shareholders. It's important to see how the respective cohorts are developing along the way.

But we're going to -- the thing I want to make clear, we're going to grow. We're going to grow Cox just because the video penetration is low. The mobile penetration is non-existent. The quality of the product is better, and that is going to contribute to Internet. And so, yes, there may be some single product ARPU volatility along the way. But...

They released some high-level financials for the third quarter of 2025. We haven't seen any sub counts since -- what, 6 months before that. Have they started to do any of that on their own in anticipation of changing their go-to-market strategy in a way that we can't see?

Not that I'm aware of. They're an independent company today, so I can't get in there and talk about explicitly their results or their financials without their explicit permission. So I won't. But the facts haven't changed. Their subscriber losses are higher than exist at Spectrum and their ARPU is higher, as you've already highlighted. And all of those things are the pieces that we're going to go address head on.

I want to be clear. Managing this transition isn't something new. We did this with Bresnan. We did it with Time Warner Cable. We did it with Bright House. And we've actually, over the past 1.5 years, we've done it to ourselves with the Spectrum pricing and packaging rollout that we did in whatever, September, October '24, in a way that you as investors really didn't notice that amount of total ARPU change, but it accelerated growth for TWC, Bright House and Bresnan, the goal is to go do the same on Cox.

And you've hinted or maybe teased, I suppose, that video attach rate is so low at Charter that it's not -- I mean, at Cox, but it's not unreasonable to imagine that you actually get nominal growth in video out of Cox. Is that still your expectation...

It's a forward-looking statement, and I'll use one -- we will grow video. It's hard to come off the floor. And I don't mean that it's an insult to Cox. They didn't have the economics and they didn't have the scale, and that's the whole reason that we're doing this transaction. But actually very different from the current spectrum markets.

When you think about the video product that we're going to roll out, and the same applies to Mobile. When we rolled out Spectrum TV app inside of Spectrum's footprint and at the Xumo Box, and the seamless entertainment and the activation of the apps. They all came out really good, but they needed significant improvement along the way to actually be really honed in, and to work, and to hang together. And in the Cox markets, we'll launch a Spectrum, a brand-new name that people don't know, but it's a new competitor in the marketplace.

With a Spectrum TV app, with Xumo, with seamless entertainment, all that works at its peak capabilities today. And the customers aren't going to have to endure some of the improvements that we've made along to those products because they already exist. So we're going to come out with a, I think, a really good reception from a fantastic product on video and attaching. It's not for everybody, but for those who can afford that product because of where the programmers have been, it's going to be great. We're going to grow video.

And the Mobile product, similarly, it's at a higher quality level through the Verizon agreement that we have. I'm not going to say much about their contract or economics, but we have good margins on what we deliver. And we're going to aggressively -- as a result of all that, we're going to market it very aggressively as part of our Spectrum One play, so.

I was always struck by on the video side, when we did see the financials, their video ARPU was really high again. But their video margins were really low, which tells you their costs were just much, much less attractive than yours. Is that a big driver? You took the run rate operating expense synergies up to $800 million from $500 million that you had originally said. I imagine video is a piece of that.

It's a piece of it, but because the penetration is so low, it's not as much as you might think. And so really, as we started to look at how the two organizations come together, the locations of different groups and facilities. And most importantly, the non-programming procurement opportunities that exist, that was really the drivers for the increase.

And I think there's more. We're being intentionally careful about how we articulate until we know the time line and the scope. But there's, I think, more goodness that's going to come...

So what are the big upside opportunities that...

I think they're all, call it, 20, 30 different items. Most of it centers around procurement as we get in and find things that are either being duplicated or better rates. A good example would be B2B circuits, and that one hasn't been fully priced in yet. I don't know how big it will be, but it's just a good example of areas where we know that there's going to be significant overlap and expenditure that can be reduced.

Let's go back to wireless and wireless convergence for a second, zoom out. You just passed 12 million lines. Once you talked about this kind of converged product. I was saying to Steve Croney from Comcast in the last session. You're -- based on what we might guess your churn rate is, your share of gross adds in the wireless market is now close to 20% of the market. Your market share is still single digits. What do you think the long-term runway is for wireless, and your sort of fair share of the wireless market?

I don't think there's a specific target that we have in mind other than why wouldn't it be every single cable relationship that we have. And the reason I say that is because the product is faster. It actually works better because of seamless connectivity, and it is a much lower price point. And so you give a product that gets speed boost to a gigabit everywhere it connects to our network. It has seamless connectivity. It's the fastest mobile service, and it's the lowest cost for that type of quality in the marketplace by a mile. And so why wouldn't every single customer that we have taken multiple lines of this product? And so I think it will be for everybody.

Now there's friction in the marketplace, and there's things that others do, and that takes a long time to make happen. But economically, there's no reason it shouldn't be everybody. So I don't know that I want to put an artificial target out there in terms of where we can...

Just based on your attach rates and the number of subscribers you have, it's pretty clear you have fewer lines per account than your competitors do. What's the strategy for bringing whole families over and getting the line count up?

Yes. I think you first -- when you think about the way that Spectrum One worked early on, really was about that free mobile line to get you started. And then after we convinced you that even after a year, it's a $30, the product works better than anybody else's in the marketplace, it's a faster product. Then you gain the confidence from the customer to convert over additional lines.

We have a heavy program in place that we go back to customers and try to get them to up the number of lines in the household. And over time, as the brand reputations improved, and the word of mouth exists, and customers' experience with the product gets better, that's moved up, as you can see in the numbers. But we still have a long way to go, not just on penetration per household, which is now penetration to Internet is just over 20%. But in addition to that, instead of being 2 lines per household, the national average is what, 3?

Above 2.5.

Right. So let's call it above 2.5. There's huge headroom on both the penetration of Internet and the lines per household that we can go get. And you see us doing that with pricing and packaging and trying to identify when another phone inside the household is up for an EIP renewal, for example. And that's the friction that exists is you can have a household that has multiple lines in place that has multiple EIPs on cascading time lines. And so you've got to dig each one of these out at a different point in time. And that's what we do.

Can you update us on your wireless offload? You've taken your number of wireless access points. It's really -- it's sort of doubled from 2022 to today. Some of them with the dual SSID modems, and that sort of thing. Talk about where wireless offload is and where it can eventually get to?

Yes. So it's 88%, 89% today. I don't remember where we started, it was around 85%, yes, something like that. We now have about 65% of our Internet customers have...

Which by the way, if -- that doesn't sound like a lot. That's about a 30% reduction in what you're sending out to the...

And we're only at 65% of our Internet customers who have the advanced Wi-Fi, that's capable of the dual SSID. Just for those who don't know if you're -- as a Spectrum Mobile customer, if I walk around the neighborhood here, I'm probably not going to be on the Verizon 5G signal and probably going to be on Spectrum Mobile signal due to somebody else's dual SSID. And chances are I'm getting boosted to a gigabit for a second. That provides not just cost savings to us, but it provides a better quality service.

And the software dictates which is going to be the better connection that they get. So we don't do it at the sacrifice of quality. So if we got to 65% of our Internet customers that have that advanced Wi-Fi capability, and that's got us to 88%, 89%, how much further -- there's probably a couple of points left that we can do just on Wi-Fi. And then as you know, we're rolling out CBRS to really push even harder.

We're always going to need access to the 5G network. Think about the most obvious examples, you're driving up and down I-95, watching Peacock, hopefully, that's a passenger and not the driver.

Give it time.

But yes, I agree. In Tesla, it matters. So that's the environment. It doesn't make any sense for us to go invest in macro cell towers, and that's the beauty of the strategic relationship we have with Verizon on residential, and T-Mobile and B2B, the ability to piggyback there and provide that service.

All right. Let's jump to the topic that's on every Charter investor's mind. And that is, I get constantly the -- okay. I know you're going to reduce your leverage ratio a little bit for the Cox deal. But is it time to reduce it more and the tension between -- but your stock price is so low, you could lean into buying it back. And how are you thinking about it right now? And what's your North Star in terms of leverage?

Look, I think there's multiple ways to look at it. And thankfully, the deal we did with Cox kind of solves a lot of that and takes the debate off the table.

First, I would tell you that from a personal perspective, you can see what a bunch of Board members did when the stock price sold off the way that it did, not just this time but even last year, and voted with their feet or voted with their wallet, so to speak. So the natural personal tendency is to be aggressive and to lean in. The countervailing thoughts to that are really twofold.

One is we have an investment-grade structure that we're going to protect. And it's very important to us that we maintain the IG status. And so we're not going to do anything that runs the risk of priming other investors along the way. So we've got to balance that. And the third piece to that is the -- there is a technical argument that because of where the enterprise value is that the thin layer of equity trading value is actually working against us and creating volatility in a way that's not helpful to any of us as shareholders. And that would -- versus what I said at the beginning, that would offer the alternative purchase.

Now you've got to create temporarily, you've got to create a little more headroom here. So you take out the volatility and you don't make yourself a target along the way.

And by the way, when it's down a layer, buying back -- paying down debt looks an awful lot like buying back equity because of the valuation...

We could get into a whole corporate finance debate around that. But yes, I understand what you're saying. The good news is that because the Cox deal is deleveraging right out of the gate so we're going to automatically deleverage at the point of close. We're going to have a boatload of synergies to benefit from. We're going to get growth inside that footprint. We've committed to over a 3-year period to bring that into the 3.5 range. And...

Is there a conversation about no, maybe given the competitive environment, it ought to be 3 or below?

Our confidence in our ability to grow and the free cash flow that we throw off says that at this point in time, there's no reason to really think about that and have that conversation. We don't have our head in the sand. So we'll go do the right thing at all times. The good news for everybody to know is that we're incentivized as much as you can be with the success of shareholders. And so we have our head on straight, but that's not a topic of conversation for us today, and I don't think it needs to be.

You've got Nick Jeffery joining in -- I think it's September if I...

Yes, September 1.

He obviously brings a tremendous amount to the table. What do you think his role is going to be? And what are you going to have him focus on when he gets started?

So thrilled with the hiring of Nick. It's a first for us to really go from the outside. And that's because we've got such a strong bench of talent that existed at Charter and that exist at Cox. But I really thought Nick brought something unique to the table. So he's going to be the Chief Operating Officer for Charter, a position that essentially I've done both of those for the past 3 years, and we didn't backfill it when I moved into the CEO role.

So excited about him doing that. He'll have marketing, sales, field operations, customer operations. And that will give him the full remit to go focus on the two big areas that I think us and the industry could really benefit from, which is go to market, and improvement of our service reputation measured by our Net Promoter Score. And if you take a look at Nick's background, he did a lot of things really well at Frontier and we hated that as a competitor. But he also did a lot of good things at Vodafone in the U.K. and then globally from a B2B perspective as well. So Nick will have all of what I described for both residential and for business.

So it really acts as an accelerant to the team for all the things that we're doing anyway with the ability to take a little bit, maybe even a radical approach to really getting faster in the marketplace with the go-to-market and with improving our Net Promoter Score so I'm excited to have him join. But that's what I'll do.

In this short period of time we have left, let's go back to where we started. Give us some confidence that Charter can be a growth company again?

Yes. It really kind of ties back to what you asked earlier on in the conversation, which is we have the best network, fully deployed, ubiquitous convergence, symmetrical multi-gig service and that applies to not just the wireline and Wi-Fi service but also to our Mobile. Our products are the fastest in the marketplace. We save customers thousands of dollars a year between Mobile and Video when it's put on top of our Internet product. We're making significant improvements in our go-to-market and Net Promoter Score in the meantime.

And if -- and the biggest issue that we face right now is the level of new competition and market growth rate, which I still think will return to a normal environment. But in the meantime, the things -- the changes we're making can put us on a different trajectory. And if none of that like I said before, really convinces you just go take a look at the free cash flow today, take a look at the free cash flow for the next 2 years and beyond, the yield that, that produces. And the underlying asset here is the workhorse of the entire industry, not just for our wireline and wireless services, but for the wireless services of the rest of the industry as well.

And so we're sitting on a very important infrastructure asset that is valuable that is -- that can't be replicated. And we don't want to rest on our laurels. So the things I said before about the ways that we're going to win customers one at a time, still prevail. But I think we've got a bright future. I'm confident in our ability to return to growth. And we sit on an amazing asset and free cash flow profile as well.

It's a great way to end it. Thank you, Chris. I appreciate you being here.

Good.

Hello, and welcome to Charter Communications First Quarter 2026 Investor Conference Call.

[Operator Instructions]

Also as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

I will now turn the call over to Stefan Anninger.

Thanks, operator, and welcome, everyone. The presentation that accompanies this call can be found on our website, ir.charter.com. I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, and we encourage you to read them carefully. Various remarks that we make on this call concerning expectations, predictions, plans and prospects constitute forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results.

Any forward-looking statements reflect management's current view only, and Charter undertakes no obligation to revise or update such statements. As a reminder, all growth rates noted on this call and in the presentation are calculated on a year-over-year basis, unless otherwise specified.

On today's call, we have Chris Winfrey, our President and CEO; and and Jessica Fischer, our CFO.

With that, let's turn the call over to Chris.

Thanks, Stefan. During the first quarter, Spectrum Mobile remained the fastest-growing mobile provider in our footprint, and we now have over 12 million mobile lines, including an increase of 370,000 Spectrum Mobile lines in the quarter. That's 1.8 million new lines over the last 12 months for growth over 17%. We're pleased with that growth given the continued intensity of mobile subsidies from the 3 big telcos.

In addition, our video customer losses continued to improve year-over-year. 60,000 loss was less than 1/3 of last year's first quarter loss, driven by significant product improvements over the past couple of years. In Internet, competition for new customers remains high. In our first quarter, Internet customer loss totaled 120,000. Revenue was down 1% year-over-year, primarily driven by lower residential video revenue, while residential connectivity revenue grew 0.9% year-over-year.

First quarter EBITDA, excluding transition expenses for the Cox transaction, declined by 1.8%, primarily due to a prior year benefits. Cable industry Internet growth has been pressured for several years now given new competition, a challenging housing environment and other factors like mobile substitution. But we remain confident about our ability to win in the marketplace and grow over the longer term. Ultimately, that confidence in our future success is founded on 3 building blocks. Our powerful advanced network, our core operating strategy around products and pricing, and our focus on improving customer satisfaction.

Starting with customer satisfaction. Our customers remain the central focus when we make decisions for any product or service and how we allocate our resources. We have an integrated and detailed approach that starts at the highest levels of the organization. Our customer focus is not just cultural, it's also core to our incentives. Beyond the obvious share price incentives, NPS scores and other service-related metrics now drive a meaningful part of our overall annual incentive structure.

Relentless improvement is also a key component of our approach and that applies to our network capability and reliability, products that we offer, and to our service. We're constantly working to improve each of these, with examples including new product innovations like our Invincible WiFi, and our Anytime Upgrade feature for mobile, and the dramatic decline we've seen in service in trouble calls per customer.

We've also deployed new AI tools now used by our service agents, driving higher customer satisfaction and reducing call times with higher job satisfaction for employees as well. We have a seasoned very competitive team here at Charter fully aligned with our shareholders, and that team will only get better with the addition of top-flight talent from the Cox team, and Nick Jeffrey who joined in September.

Moving to our Advanced Network. Our high-capacity network is an unrivaled asset. It offers gigabit speeds and low latency everywhere we operate. Those capabilities matter long term as customer data usage continues to increase, including in the upstream, where we're seeing 20% annual growth driven by things like self-driving cars, significantly increasing upload. By the end of this year, about 50% of the current spectrum network will be upgraded to symmetrical and multi-gig service, with significant work on the remaining 50% already in flight.

By deploying remote OLTs and Mora WAN transponders, we will have fiber on-demand capabilities, and fully active telemetry in the vast majority of our footprint, giving us cost and service advantages.

Our network is both wired and wireless in 100% of our footprint. It can get mobile from us wherever we offer our gigabit speeds and vice versa. And with our expanding hybrid MNO capabilities using CBRS and WiFi in conjunction with the Verizon mobile network, we are driving our seamless connectivity advantage. That is the basis for Spectrum Mobile's fastest overall mobile speeds. In addition, our network is both fiber-based and powered to its edge, which means it can uniquely provide enhanced wireless opportunities that we haven't pursued yet.

If you think about our ubiquitous deployment of multi-gig unique seamless connectivity capabilities with low latency, edge compute, and the potential for fiber-powered DAZ, nobody has the set of assets that we do. You see us demonstrating those capabilities with early deployments, immersive content with Spectrum front row, authenticated offload for AWS and likely extending that to increasingly autonomous vehicles. We're also deploying other B2B products with Edge Cash and GPU as a service.

Our network and data assets really lend themselves to future B2B and B2C applications, which require proximity and low latency under 10 milliseconds, which we now provide. Our industry has always excelled at finding new products and customers for our key assets. Our core operating strategy remains unchanged, offering great products at the best value with continuously improving service, and that service is uniquely delivered by our 100% U.S.-based employees, 24/7, with the customer commitment supported by money back guarantees.

That core operating strategy has served us well. It fueled our organic and inorganic growth from Legacy Charter in 2013, with just 5 million customer relationships, to Charter today with nearly 32 million customers. And now pro forma for the Cox transaction with over 70 million passings. We take the responsibility that we have to our local communities personally, and it's reflected in our operating strategy.

With those 3 building blocks in place, we're going to turn to what we're doing day to day right now to win in an increasingly converged market. Our competitors are all talking conversions, but we uniquely provide it now and in the future. Slide 5 of today's presentation clearly shows they offer more for less than our competitors. Our results don't yet reflect that reality given the legacy reputation of cable. So we remain focused on clearly messaging and delivering our superior value, utility and service to both new and existing customers. And we're doing that in different ways.

We launched our $1,000 savings guarantee in February, which demonstrates the value we deliver in a very clear way. If you sign up for Spectrum Internet and switch to more mobile lines from Verizon, AT&T or T-Mobile, we guarantee $1,000 of savings in your first year, or we'll cover the difference. We also recently launched a new Digital Buy Flow for online channel, it better demonstrates our bundled value and savings versus competitors, and the new Buy Flow is achieving better yield. We're also actively migrating our existing base of customers to our newer pricing and packaging, giving them more product, including Internet speed increases and mobile, for the same price or slightly more than they're paying so they get more value, creating higher satisfaction and reducing their propensity to churn. Roughly 45% of our residential customers are now in the pricing and packaging launched in late 2024.

With respect to providing superior utility, over 50% of our expanded basic video customers have activated at least one of our included streaming apps, with those activating, taking nearly 4 streaming apps on average. Customer churn for expanded basic customers for activate is 1/3 lower, and it is meaningfully lower across all customer tenure. Keep in mind that nearly all video customers are also broadband customers. So that's a big help.

We also launched our new Invincible WiFi router in February, which effectively guarantees connectivity. When a home or business loses power Invincible WiFi's battery unit keeps the router running. It also comes with the back of 5G cellular connection keeping customers online without interruption if a network disruption occurs. The upgrade and attach rate was much higher than expected, and we've had to prioritize our supply to a smaller audience until we get the right level of supply. So a little frustrating short-term. But Invincible WiFi is a great way to add utility to our service, which improves quality, lower churn and earns more revenue. It's a great example of an innovation that provides better utility to our customers.

In Mobile, we have the most value rich plans in our footprint. A market-leading Anytime Upgrade program, the most valuable repair and insurance plans and the best international service plans are out. And in Service, I'll simply highlight what we've talked about previously, our continuous service improvements through telemetry improvements with our network upgrades, the use of AI in the network and frontline employee tools, same-day service and installation guarantees, often we're at your doorstep in an hour, and the commitment to a U.S.-based service agent. We are America's connectivity company.

Before I turn things over to Jessica, I just wanted to provide a brief update on where we are with the Cox transaction. We've now received all the necessary federal and state approvals that we need to close, except from California, and we're working with the California Public Utilities commission towards the summer close. Within a couple of months of closing, we will launch the Spectrum brand and our pricing and packaging within the legacy Cox footprint. Our focus is always will be on product penetration and customer ARPU not single product ARPU and, of course, growing free cash flow per pass.

Cox's low mobile and video penetration rates are major opportunities. And that's what's going to assist us in migrating the customer base to our pricing and packaging in an efficient manner. That's something we've done successfully several times before, including the Time Warner Cable, Bright House and Bresnan and Charter in both 2013 and the last 18 months really. In addition to benefiting from better mobile and video products, the Cox communities will benefit from lower promotional and retail pricing, sales channel expansion, including field sales and stores, and our very complementary B2B capabilities, which will help accelerate growth in both Cox and Spectrum business.

As part of the acquisition, we're picking up talent, which we expected and unexpected capabilities in B2B and network AI. And we're stepping into a very high-quality network asset. The Cox network has been very well maintained with robust investment through the years. Cox's mid-split process is nearly complete, and it gives us plenty of competitive runway to implement high split in DOCSIS 4.0 after we finish those projects within current Spectrum footprint. We can then make that move at lower cost and at faster speed, it's what was included in our original plan, although we don't have to rush it. So we're looking forward to the completion of our multiyear investment programs, the near-term actions to win in our current footprint, and the pending Cox closing and driving growth in that footprint.

With that, now I'll pass it over to Jessica.

Thanks, Chris. Please note that any forward-looking financial or customer information that we provide in today's discussion or presentation does not include Cox or any transition costs related to Cox integration planning. Let's please turn to our customer results on Slide 8.

Including residential and small business, we lost 120,000 Internet customers in the first quarter, driven by lower connects year-over-year, partly offset by slightly lower churn. The operating environment for new sales, in particular, Internet continues to be competitive. We continue to see expanded fixed wireless competition and higher mobile substitution as well as ongoing fiber overlap growth at a rate similar to prior quarters. Though I would point out that we also continue to have higher market share than our competitors, even in mature fiber markets. Collectively, that drove first quarter Internet sales lower year-over-year. Churn improved year-over-year, and Internet churn, including non-pay churn remains at very low levels.

In Mobile, we added 368,000 lines, with higher gross additions year-over-year, more than offset by higher disconnects. Net adds in the quarter were lower due to heavy device subsidy activity by the big telco competitors, including the iPhone 17. Video customers declined by 60,000 versus a loss of 181,000 in 1Q, '25, with the improvement primarily driven by much lower video downgrades and customer churn year-over-year, resulting from the new pricing and packaging we launched in late 2024, Xumo and the Seamless Entertainment product improvements, including our programmer streaming app inclusion packaging. New connects and upgrades to our fully featured video package with apps were up year-over-year. Wireline voice customers declined by 174,000, with the year-over-year improvement primarily driven by lower churn.

In Rural we continue to see strong customer relationship growth, generating 41,000 net customer additions in our subsidized rural footprint in the quarter. Subsidized rural passings grew by 89,000 in the first quarter, and by over 483,000 over the last 12 months, which is in addition to our continued nonrural construction and filling activity.

Moving to first quarter revenue results on Slide 9. Over the last year, residential customers declined by 1.5%, while residential revenue per customer relationship declined by 1.4% year-over-year. Given the growth of low-priced video packages within our base, $218 million of costs allocated to programmer streaming apps and netted within video revenue, versus $47 million in the prior year period, and a decline in video customers during the last year. Those factors were partly offset by promotional rate step-ups, rate adjustments and the growth of Spectrum Mobile lines. Excluding the Programmer Streaming app allocation headwinds to residential revenue, residential revenue per customer relationship grew by 0.3% year-over-year. As Slide 9 shows, in total, residential revenue declined by 2.7%, and it was down by 1.1% when excluding costs allocated to streaming apps embedded within video revenue in both periods.

Turning to commercial. Total commercial revenue grew by 1% year-over-year with mid-market and large business revenue growth of 2.1%, and when including all wholesale revenue, mid-market and large business revenue grew by 2.8%. Small business revenue grew by 0.2%, reflecting year-over-year growth in revenue per small business customer of 0.9%, mostly offset by a year-over-year decline in small business customers of 0.7%.

First quarter advertising revenue grew by 5.3% given higher political revenue year-over-year. Excluding political, advertising revenue declined 3.4% year-over-year. Other revenue grew by 14.2%, driven by higher Mobile sales -- Mobile device sales, and in total, consolidated first quarter revenue was down 1% year-over-year, but increased 0.1% when excluding advertising revenue and Programmer app allocation.

Moving to operating expenses and adjusted EBITDA on Slide 10. In the first quarter, total operating expenses decreased by 0.2% year-over-year. Programming costs declined by 9.3% due to $218 million of costs allocated to Programmer Streaming apps and netted within video revenue, versus $47 million in the prior period. A higher mix of lighter video packages and a 1.3% decline in video customers year-over-year, which was partly offset by higher programming rates. Other cost of revenue increased by 11.4%, primarily driven by mobile service direct costs, higher mobile device sales and higher advertising sales costs given higher political revenue.

Cost to service customers, which combines field and technology operations and customer operations decreased 1.4% year-over-year, primarily due to lower labor costs. Marketing and residential sales expense declined by 3.2% year-over-year due to lower marketing expenses and labor expense. Transition expenses relating to the pending Cox transaction totaled $24 million in the quarter. Finally, other expense grew by 5.3%, primarily driven by onetime benefits of $75 million in 1Q, '25.

Adjusted EBITDA declined by 2.2% year-over-year in the quarter, and declined by 1.8% when excluding transition expenses.

Turning to net income. We generated a bit under $1.2 billion of net income attributable to Charter shareholders in the first quarter compared to a bit over $1.2 billion in the prior year period, primarily driven by lower adjusted EBITDA year-over-year, partly offset by lower other operating expense. Given our noncash L.A. Laker RSN balance sheet write-down in the prior year.

Turning to Slide 11. First quarter capital expenditures totaled $2.9 billion, $456 million higher than last year's first quarter, driven by timing of spend with higher network evolution spend, which lands in upgrade rebuild spend, and higher CPE, driven by new WiFi 7 routers and our new Invincible WiFi unit. We continue to expect total 2026 capital expenditures to reach approximately $11.4 billion. Looking beyond 2026, we expect total capital spending in dollar terms to be on a meaningful downward trajectory. And after our evolution and expansion capital initiatives conclude, our run rate capital expenditures should be below $8 billion per year.

Just to highlight that reduction in capital expenditures, on its own, from approximately $11.7 billion in 2025 to less than $8 billion in 2028, is equivalent to over $28 of free cash flow per share based on today's share count. If we take consensus 2026 free cash flow and substitute our expected 2028 CapEx for 2026 CapEx, our current stock price would imply a free cash flow multiple of only about 3.8x, and a free cash flow yield of over 25%.

Turning to first quarter free cash flow on Slide 12. First quarter free cash totaled $1.4 billion, about $200 million lower than last year, given accelerated timing of capital expenditures in the year, lower EBITDA and higher cash paid for interest year-over-year, partly offset by a less unfavorable change in cable working capital.

Turning to cash taxes. First quarter cash taxes totaled $64 million. We continue to expect that our calendar year 2026 cash tax payments will total between $500 million and $800 million. We finished the first quarter with $94 billion in debt principal. Our weighted average cost of debt remains at an attractive 5.2%, and our current run rate annualized cash interest is $4.9 billion. During the quarter, we repurchased 4.3 million Charter shares, totaling $963 million at an average price of $225 per share. As of the end of the first quarter, our ratio of net debt to last 12-month adjusted EBITDA remained at 4.15x, and stood at 4.22x pro forma for the pending Liberty Broadband transaction.

During the pendency of the Cox deal, we plan to be at or slightly under 4.25x leverage pro forma for the Liberty transaction. Following the close of those transactions, we will target the low end of the 3.5 to 3.75x range, which we expect to achieve within 3 years following close. Even with this de-levering, we continue to expect significant ongoing capital returns to shareholders.

Before turning the call over to Q&A, I want to make a few comments regarding our pending Cox transaction. We now estimate transaction synergies, or run rate operating expense synergies of at least $800 million, and are likely to grow that further. Those estimates do not include the benefits of applying Charter's operating strategy to create revenue and operating cost synergies over time or CapEx savings. We believe those operating synergies will also be significant.

Turning to our reporting plans. I wanted to give you a brief preview on how we expect to report, and to mention a few things to better navigate our post-close results. Our first post-close results will reflect a full quarter for legacy Charter, plus a stub period for legacy Cox. So year-over-year actual comparisons won't be helpful. But we intend to present Charter's quarterly trending schedule with pro forma data along the lines of what you receive today. Going forward, we will report similar customer PSU and revenue data for both legacy entities for several quarters following close, both separately and on a consolidated basis. This approach will allow you to track the development of both legacy Charter and legacy Cox.

We will not show expenses or capital expenditures by legacy entity. That's not really practical, given the shared nature of key large items like programming, overhead and significant centralized capital spend. We will also continue to report transition expense and capital related to the integration, and we'll provide updates on certain items, including estimates for the synergies we have realized, so that you can better isolate the organic growth of the business.

At close, our outstanding share count will increase as we will issue the equivalent of just over 46 million Charter shares to Cox Enterprises, comprised of common and preferred partnership units, partly offset by net charter share reduction of about 6.8 million shares associated with the Liberty Broadband transaction. That 6.8 million figure is lower now than when we announced the Liberty Broadband transaction, primarily due to our ongoing share repurchases from Liberty Broadband. If we had closed on March 31, our stand-alone share count at close, on an as-converted as-exchanged basis, would have been about $179 million. We will provide additional post-close reporting updates as we get closer to close.

And with that, I'll turn it over to the operator for Q&A.

[Operator Instructions]

Our first question will come from Sean Diffley with Morgan Stanley.

So clearly, the focus is on getting the Cox deal done, and thank you for the updates on synergies and timing with California PUC. But I was curious your assessment on the potential for further cable M&A from a regulatory standpoint. Obviously, the FCC when reviewing the Cox deal mentioned increasing competition from the likes of fixed wireless and satellite. So I'm curious how you're framing your ability and willingness to do more meaningful consolidation from here in the cable sector?

Sure. Look, first and foremost, and make it clear, I'm not commenting on any particular company or assets. But I think as everybody knows, we like cable as an investment, I think it's a great business. We'd like to acquire more cable assets if it can be done in an appropriate price, conditions and the size of the transaction depends on -- will drive higher synergies. When you hear Jessica talked about the synergies inside of Cox, you can kind of flex that up and down based on the size.

I think when you step back and take a look at the environment from a regulatory perspective, and each deal is unique, and you have to brush in its own way. But at the end, we're just regional competitors with other cable -- each of the cable companies is a regional competitor. We don't have overlap and all of us are competing against national and global competitors. That's never been the case more than it is today. When you think about fiber overbuild, when you think about national telcos with both wireless, mobile, wireless fixed wireless access, fiber overbuild themselves in many cases. If we think about the video space, which is really global competition, and each element of the space that we operate in, it's much more competitive than it was 5 or certainly 10 years ago.

I think the Charter operating strategy when you think about the benefits that we provide in transactions like Cox or with Time Warner Cable Bright House, the operating strategy has been good for customers, and it's been good for employees, and we've demonstrated that. It's not just a something that we say at the time of an acquisition. It's actually been delivered 100% U.S.-based, lower pricing for retail and promotional pricing, and with innovative new products. We've used that scale to improve the quality of the service and the products. So it's helped us to be a better competitor and a better service provider against national and global competitors. And I think there's a significant rationale, but there's nothing that we're looking at today, or doing today other than just finishing the Cox transaction, but I think the opportunity is there to do more over time, and we'll evaluate it when it's available.

Your next question will come from Craig Moffett with MoffettNathanson.

So let's stay with the Cox transaction for a second. Once you close, you're now running in your own stand-alone business about flat year-over-year broadband ARPU. There's been a lot made of the fact that Cox's broadband prices and therefore, its broadband ARPU is significantly higher than yours. How do you think about the trajectory of how quickly you can move those customers onto Spectrum pricing. And so what does that look like as you give those generally more attractive offers to Cox customers?

Sure. Look, you're right, the broadband ARPU is higher than ours. You can see that. But also the customer ARPU is actually not that different. And so I think that's the place to focus on is what's the customer ARPU going to do overtime and the margin at a household level. So clearly, the broadband stand-alone pricing, which is part of the rationale for getting the deal done is broadband pricing is going to be lower, both at promotional and retail and the broadband reported ARPU for Cox is going to go down.

Our goal is to use video and mobile, given the super low penetration that exists to those products that Cox to make sure that customer ARPU is intact and can potentially likely increase over time and to drive margin in there. And so as a result, what you'll end up with is a financial profile and its trajectory that's being preserved based on providing more value into the household.

The churn rate at Cox is higher than ours. So I think we have a real opportunity to drive benefits there. I think entering into the market, Craig, with a -- it doesn't -- the Cox is great. Spectrum, I think, is a great name. It's not one over the other. It's that you will have a new name in the marketplace in these markets with lower broadband pricing and retail and promotion with a free mobile line for a year that doesn't exist today with the fastest mobile product in the country, at the lowest price really for anything of that scale. And a video product that is fully developed.

Meaning in the Spectrum footprint, we came out with Spectrum TV app, it's improved over time. It didn't have pause live TV. It didn't have Cloud DVR at the beginning, all that exists today. It exists with seamless entertainment in a way that's now easy to activate, which wasn't the case before. So in the Spectrum footprint, those products, including mobile and video, just continue to get better. And here, we're going to enter into Cox footprint with a big bang. New name, great way to save money, both at retail and promotion for broadband, excellent mobile and video products that are fully developed and brand new in the marketplace. And I think we're going to make a splash because we're new.

Now that doesn't go on forever. Your service reputation has to earn that. So is that a 2-year tailwind where you're going to have much higher sales because you are new and because you're providing all this additional product and pricing and value. That will be the case. We're going to have a field sales force that don't exist today. We're going to have service hours that don't exist today. We're going to develop the in-sourcing capabilities in U.S.-based workforce that can do same-day installs and same-day service in a way that doesn't exist today. And we have the opportunity to earn a brand-new service reputation in that market and have long-term growth.

All of which to go back to your question means that you can have higher sales of broadband. You can have lower churn of broadband. You can have a significantly higher attach rate for mobile and video that preserves your overall customer ARPU and margin. And have more operating and CapEx cost synergies along the way that allow you to fund that growth. So I think it's going to be a unique footprint even relative to the stand-alone Charter that you're looking at today. And pace of migration for the broadband base similar to what we've done inside the Charter stand-alone footprint many times in what we did with Time Warner Cable and Bright House. You can pace the migration based on your marketing efforts to your existing customers and how quickly do you put them into loyalty offers and see what's working. And in terms of additional product attached to offset some of the lower pricing that we're introducing into the market.

So I feel really good about where we're going to go. And we're just waiting to be able to bring that type of benefit in those savings into -- not just California. California is about 1/5 of the overall Cox customers. But we have 4/5 of the footprint that is patiently awaiting. We're excited to get going and bring those benefits to the California customers and to the customers across the rest of the country.

I'd add one more, just a miracle item to that, Craig, as you're thinking about it. I mean, Chris said that the average revenue per customer is not that different from where we sit. The other interesting thing is that the EBITDA margin is also not that different from where we sit today, even though broadband makes up a much larger portion of their revenue than it does of ours, which might have linked itself to a different cost profile. So we have some space if we move the operating cost structure to look more like ours over time and in particular, as you move it that way, recognizing that it's a marginal additional business rather than an entire business that you have to fully replicate an overhead structure for. There's plenty of space to then create room for that change that you make in the revenue stream over time as well.

Yes. I'm going in a different direction, everything that we just talked about based on the residential side, but I mentioned it in the prepared remarks. I think one of the real pleasant surprises -- we've had many pleasant surprises in evaluating the Cox assets and getting to know the team, you can better. But the B2B capabilities are entirely complementary.

If you think about from Cox has best-in-class hospitality capabilities. They have the longest service reputation in B2B across the country for cable operators. They have products that, in some cases, with rapid scale that we don't have and the hope is that we can deploy that across our existing base. And we have scale in Spectrum business that can benefit the Cox footprint, but also can apply the things that they do really well and apply that across a much broader footprint even in hospitality. If you think about what they do in Las Vegas, and applying that across New York, L.A., Orlando and Dallas, all of our major markets.

We're -- I'm pretty excited, and we're going to have a big nucleus of the Cox team that's really helping and driving that part of the business to higher growth for both Spectrum business and Cox's what exists today. So not our biggest portion of our overall revenue base, but I think it's going to be a big revenue contributor for both of the current operations.

Your next question will come from Vikash Harlalka with New Street Research.

I have a 2-parter on pricing and ARPU. Chris, you were ahead of the curve on pricing strategy when we compare it with your peers. But do you think you've pulled all the levers on pricing strategy? Or are there more pricing changes to come? So as an example, like a 5-year price lock that Comcast and Optimum have been be amended? And then on ARPU, broadband ARPU was flattish in 1Q. Should we expect an acceleration from here?

Sure. Look, we're always -- we like our pricing and packaging strategy. It works. And clearly, we'd like to be having more sales on the front end. And so that are used for really thinking through are there other ways to go to market and get a better response rate from customers. And so we're constantly evaluating that. So there's no pride if we see things that are working elsewhere, we'd be happy to adopt it. So we spend time looking at it and thinking about it?

When we've run some trials around 5-year guarantees or 5-year price logs that we try different things, we haven't seen the necessary lift ourselves. But maybe that's because we didn't do it at scale. So -- we also want to think about not just the promotional price, but what are the roll-off and what's the retail rates. And so it's an entire package of where you end up over time. So all of which to say, we continue to evaluate and look at things. We're very focused on returning to broadband growth. But right now, we don't see any reason to change what we're doing and continue to focus on that. It doesn't mean that we're not trying things left and right to make sure that we can get a better response rate and consideration from new customers.

And from an ARPU growth perspective across the year, I think that you've heard Chris just say that one of the things that we do in the market constantly is to tune offers to make sure that we're driving the right, sort of, total customer lifetime value for the business, but also being cognizant of what happens then inside of the year with ARPU and EBITDA. And as we do those things and look at pricing overall, there are a number of factors can drive up or down there.

I think on ARPU growth for the year, it'll be close either way in terms of whether we end up with net growth. As you noted, it was pretty flat in the first quarter. But it will depend on a number of factors in how we sort of address the marketplace.

Operationally, just so you have a sense of how that works is I talked earlier when Craig asked the question, the pace of your loyalty migrations for existing customer base, how aggressive you're leaning in that has a high customer lifetime value impact. But it can have a short-term broadband impact. So the pace of proactive and reactive migration of your existing base, and some of the -- to a lesser extent some of the offers that we try at the outset for new acquisitions.

And so you have to trade off the customer lifetime value and the ROI of some of those efforts versus the short-term impact to ARPU and things that all of us like to see from an ARPU development. And that's an active -- I wouldn't say daily, but it's a monthly practice of just coming and taking a look at where we're at and making sure we're doing the right thing for the long-term health of the business, and for the customer relationship and at the same time, meet our financial commitments along the way as well.

Your next question will come from John Hodulik with UBS.

Maybe just -- can we get some color on sort of the competitive environment? I think Chris or Jessica, you guys sort of laid out what you're seeing in sort of each of the segments. But from a -- are you seeing more pressure on fixed wireless with AT&T's efforts in that area?

And then on the fiber side, it seems like there's an aggressive promotional environment, especially around converged offerings. Just wondering if that's having an impact?

And then lastly, on the satellite side, obviously, a lot of focus on these LEO constellations. Are you seeing any pressure in rural markets? Or do you expect that to intensify over the next couple of years?

Goodness, John, there's a lot in there. So let me try to start from the very top, about the operating environment and competitive environment.

You've heard a little bit in our commentary. The -- our issue right now really is top of funnel issue. So what do I mean about that? Our yield at the point of sale is as strong as ever. Our churn remains at historical lows, and that's really supported by the value of the products and everything that we're doing to bundle in, which is driving churn lower. The external factors on top of that funnel, which I'll come back to some of the specifics that you asked in just a second. But the top of the funnel, external factors, they're really the same, which is that we have new competition, and any form of new competition has impact. So yes, we see the continued footprint expansion from cell phone Internet where AT&T has taken the place and others have slowed down. But A&T has filled that gap with a fixed wireless access product that originally they said they didn't think made a lot of sense.

On the other hand, the pace of gigabit overbuild growth, it continues at the same pace it's been. And so there's nothing really new there. Our share in those fiber overlap areas, as Jessica mentioned, including particularly mature fiber overlap areas, that remains above the competition generally across our footprint. And the promotional activity, I guess, is the big question there, too, is, it did it there? Yes, throughout the quarter. It was up and down and varied by competitor and during the course of the quarter. But there's not a fundamental change in the level of promotional activity.

And on the external side, we have a continued muted housing environment, the slow household formation. And as we talked about before, low move rates and mobile substitution growth, it's still there, but it seems to be slowing a little bit, hopefully. So what does that all mean?

If you step back, our yield across all channels, it's good and improving. Churn is low. And issues about considering more consideration of sales traffic at the top of the funnel. And that really comes down to, I think, continued improvement in our service reputation, our marketing, our offer expressions and the way that we're using mobile and video really to drive broadband. And so we're fully focused on those areas. I'm not going to tell you we're sitting here waiting on a better housing environment, which I do think will happen. But in the meantime, we're focused on what we can do. And there's an opportunity to be an even better operator here along the way. And through both the external conditions and our own efforts, I think we can get back to broadband growth. That was your first big question.

The second was on AT&T and fixed wireless access entry, which they are filling the gap that -- with lower growth from others to subside -- or the growth that rates are subsiding. So I think that answers that. The converged offer that we're seeing from other providers?

Look, there's a bit of flattery that's going on there because everything that we do seems to be copied. And so even the branding of our Spectrum One, I think, has been mimicked and -- but its capabilities are limited in terms of footprint, where we have the ability to provide convergence in 100% of the footprint. You've seen multiple competitors come out and try to talk about a savings guarantee. They don't do that against us. We do a savings guarantee against AT&T, T-Mobile and Verizon. We guarantee $1,000 of savings. So you saw that, kind of copied.

Even on the service commitment, if you take a look at the fine print on others who copied our service commitment, it's not the same. We actually provide a guarantee. And that means that we'll actually pick up the phone, not just call it back when we don't, and we'll show up on same day if you have a service or an installation. So I think the quality of what we're doing is higher, and you are seeing some people trying to mimic some of the convergence. And I think it's talking up our advantages.

If you take a look at some of the slides we've shown investors in the past, our capabilities there are better. Our ability to save customers' money is higher. And the quality of our service as America's connectivity company with 100% U.S.-based sales and service. We've made that investment. And I think we're set up to deliver. We need to -- it doesn't mean that we're perfect. We have a lot of room for improvement to execute better, but we've made that investment. And so that sets us up pretty well to do that.

On satellite, I would just say we don't underestimate any competitor, particularly one that is as well capitalized as they are, and as innovative as -- all, not just Starlink, but also Amazon and others. But so far, our tracking in data doesn't suggest a significant customer share loss to satellite. It might be -- we do see evidence that in some of the subsidized rural footprint, we're hitting all of our targets in subsidized rural footprint. I think we would be doing even better there if some of that market had not been preceded with satellite, which in certain markets with low density I think long term, it's actually a great product. I think if the density is low enough, it can serve enough capacity and enough customers. I think it's ideal from a full broadband coverage to the country where really fiber-based solutions can't, and probably shouldn't go.

I also think from a satellite perspective, there's probably more areas there to cooperate, then to think of it as a direct competitor to in a suburban and urban environment. So if you take one way of doing that as a -- we've already done a 5G as our backup service through Invincible WiFi. There are other ways to attach satellite and to become a seller of that product to the extent that they were willing to have us as a reseller to bundle that together with our broadband service. I think there's some merit to looking at that as well, and we're thinking through all those things.

So I go back to -- on satellite where I started. We don't underestimate the capabilities either from innovation or from a capital perspective, but we're keeping a close eye and so far, we don't see a major impact, and it could be more friend than foe.

Your next question will come from Sebastiano Petti with JPMorgan.

Just wanted to see if you could circle back on prior expectations for -- to grow EBITDA, ex the transition cost. Is that still the plan for the year? So that's my first question.

And then thinking about, I guess, in terms of broadband ARPU. You did see a little bit of a slowdown there. But could you help us think about the expectations for the balance of the year? I mean, I think, Chris, you talked about trade-offs, near-term trade offs for the longer-term kind of health of the business. Should we anticipate your pricing strategy or the annual cadence of price increases within those comments? Is that something that we should probably contemplate maybe broadband pricing increase later this year is maybe not necessarily something we should expect as you kind of try to maybe help the CLVs in the long term, trying to keep turned down?

I'll start on the EBITDA side. We do continue to plan to grow EBITDA slightly this year with the benefit of the tailwind from political advertising. And as you point out, excluding transition costs. As we go through the year, we talked about the tuning exercise around offers, and changes in that tuning are going to have an impact on how close to the line we are on EBITDA growth. But that continues to be our plan. And...

On broadband ARPU, Jessica can reiterate it, but I don't want to say in a different way and then somehow create daylight after the fact on broadband ARPU other than to say, the piece that you asked on pricing increase, we haven't made any determination on that yet. For obvious reasons, it's always been our strategy to try to keep prices as low as we can so that we can have enhanced competitiveness. That's been part of our philosophy. It was our philosophy and when it wasn't popular. And it allows you to have better acquisition and better retention.

That's still the case. And so we try to minimize that, but also recognize that we're still in -- certain parts of the business have an inflationary environment. So we think through those real time as the year goes on. And there's a multifactor consideration that Jessica talked about, and I talked about before -- going that. So we haven't made any decisions on that front yet.

Yes. And I think because of that, from an overall Internet ARPU growth perspective, it will be close either way in terms of where we land on overall Internet ARPU growth for the year, but it will depend on a number of those factors that Chris talked about, and the tuning around offers as well, and it is what you do with the overall pricing profile across all of our products.

And then just...

Okay. Go ahead with your question. We'll let you cheat, go fire away. Stefan's upset, but you can go.

Sorry. Yes. I appreciate that. Just quickly, any context, just if you could provide around the upside to the synergies at Cox? I mean, just kind of given the upgrade here today, I mean, sources of that? And then just kind of how we're thinking about that?

Yes. There's -- so moving from $500 million to $800 million, there's a portion of that related to procurement synergies, including programming, as well as we just have a better sort of picture and visibility into the financials. And so base-lining some of those costs that we see at a more detailed level against what we expect based on how we operate. It's certainly how we get them place to place. And as I said, I think there's a space for us to continue to find more there.

Yes, I think there will be.

Your next question comes from Steve Cahall with Wells Fargo.

Chris, yesterday, Comcast reported a pretty strong inflection in their subscriber trends. It came on the back of a huge quarter for event marketing, and they've been pretty aggressive lately on ARPU and price locks as well. I know you all have been very, very active and proactive in the market with the way you've done pricing and packaging. You also talked about a lot of the competition.

Do you feel like at this point, you need to get even more aggressive on either the marketing or the packaging front to kind of cut through this competitive noise? Or do you feel like if you just kind of continue on kind of doing what you're doing, that things will start to improve here as we get through some of this kind of competitive hump?

And then just one on churn and gross adds. Traditionally, you all have done really well with jump balls when we've seen activity. It does sound like from what you said your gross add environment looks a little different now with the top of the funnel than it did historically. Any way to think about how if we do start to see a pickup in move activity you think that can drive the business forward?

Sure. So look, first off, you should note that we were pleased, great to see the change in trajectory for Comcast and their Internet and their success in mobile as we talked about before, we don't have any overlap with Comcast, and we partnered with them on all kinds of different fronts from a technology and platform perspective. So we're cheering them on. I think it's good for everybody.

They may be coming from a different place and timing going to your question related to pricing and packaging. But of course, our team immediately as of yesterday, has already started to see, is there anything -- any good nuggets there that we can get that we could see that might work for us and copy them to the extent there's something there. So far, we haven't seen that. But we know that they've been complementary of us. We want to done things around Spectrum Mobile. And we'll just take a look and see if there's anything there that's consistent with our kind of long-term competitive and financial objectives. As you mentioned, there might have been some onetime benefits and they may be coming from a different place. But it's no pride here in terms of adopting something that works. So we'll take a look. We're really pleased to see what they did.

Are we going to stand still and just hold tight? No, we're not. Our head is not in the sand. I do think that our issue here is less about not that we -- we're open-minded to offer expression, but we've tried a lot of different things. I don't think that's our underlying issue. I think our ability to cut through and message to customers around our value and utility is actually the thing that's creating pain for us. Some of that ties to service reputation that we spend, feeds back in.

And if you think about our willingness to think out of the box, the hiring of Nick Jeffrey as our Chief Operating Officer, really ties into those two things. And I think that could be obviously good for us, but I think it could be good for the industry as well as having somebody new to the team who has dealt with a highly competitive market, wireless market in the U.K., a global B2B business with Vodafone. And then as an over-builder an attacker successful one, frankly, here in the U.S., I think adding that skill set to an already pretty talented team that operates and executes really well. I think it's going to be good for us. But for all the reasons I talked about before, I think it could be good for the industry just because we don't compete with each other, we can watch for each other during -- learn from what we do. I think we do a pretty good job.

The other question you asked is around jump balls and gross adds. The thing I would tell you is the gross adds was the variance year-over-year our churn did better. The vast majority of that came from the low income segment. And so I think we -- as we dug more into that, realize there's probably some offers that we've had in the market before that weren't as prevalent and we need to go back and reevaluate some stuff that we had that's worked. And so I think that's probably a decent size driver of the variance we had year-over-year in sales. And so we're working through that as well.

So I -- again, just to come back, I don't think it's offer expression. It may be a little bit of offer availability in the low income. I think the bigger -- and that's kind of at the margin year-over-year. The bigger picture is how do you get back to full-time growth across all segments. And that really comes to doing a better job of messaging our valuing utility, and earning the service reputation that we have invested in already. So it's not about additional money. I don't think we need to spend anything more in marketing. Some sense, you may say that we're spreading too thin, maybe there's opportunities to cut back if we can simplify the message along the way, and we're thinking through all that.

One more thing I'd add on to the end there because you did talk about movers, and you hear us sometimes talk about movers. And given where the environment is, that does create confusion in some cases, actually do really well, in particular, with the mover cohort and it has to do with the scale of our footprint and what we can do with transitioning customers from one location to another. And so even when you look at sort of what's happening in overall market share shift and you might say, well, wouldn't more movement be problematic for you.

Actually movement in the form of people moving from one household to the other continues to be something that we see as a net benefit to us. And so movement between homes in the marketplace, and more movers actually is an overall benefit to the extent that there is sort of recovery in the housing space. And I think as we think about joining our footprint together with the Cox footprint that will improve in that respect as well. And as we can cooperate with some of our peers, we actually try to do everything that we can to take good advantage of those good customer relationships where we have them, which is in a lot of spaces.

Jessica kind of alluded to, not only from the Cox footprint, actually help both footprints in terms of off-footprint move retention. But I think there's a lot more that we can do within the industry. We've had some efforts in the past it's not as successful as it could and should be. And so we're actively working together with some of our partners there to do even better on that front.

Thanks, Steve. That concludes our call. Operator, back to you.

Thank you for joining. This concludes today's call, and you may now disconnect.

Good morning, everyone. I am delighted to introduce Jessica Fischer, CFO of Charter Communications. Jessica, thank you for being here.

Happy to be here.

All right. Let's just dive into it. So can you tell us about your key priorities for 2026 and the things that you're focused on that's going to set the company up for long-term sustainable growth?

Yes. I think we've said it that our #1 priority is getting broadband back to growth. And when you think about that, really continuing to grow the converged connectivity business. We're doing that on a number of fronts. So first off, relentless focus on the customer. So how is it that we deliver our value and utility messaging to customers to really work with the marketing side when we're delivering the best products to get the best reactions from those. And then in addition to that, continuing to focus on improving customer service and doing that, utilizing the investments that we've made in our employees and in tools across the business over the last several years.

The second piece of that, I think about the network and what we're doing, so first off, to finish up our expansion initiative over the course of this year. And then in addition to that, continuing to work on our network evolution project, where we expect to be about 50% complete by the end of the year this year and driving through that the ability to continue to deliver the best products to consumers. And we couple that wired network with what is a really powerful WiFi network on top of it and utilizing that WiFi network to continue to drive products that we can deliver to customers across the business.

As we bring those together, it really is about differentiated products, right? So you think about what we can do with converged connectivity all across our footprint, coupling that with a video product where we've injected value back into the product to be able to deliver better to the consumer and drive value to the total package of products that we provide to customers.

And adding to that value-added services, things like our Invincible WiFi product where we can deliver additional value to the consumer, use that to drive some help on the ARPU side while also sort of creating a better experience for the customer.

And then inside of this year, we put on top of that efficiency, like how is it that we continue to drive financial results from the business even in what has been a more competitive broadband market. We're doing that by continuing to drive digitization and automation across the business and by continuing to work on the cost side in a way that doesn't impact our sales and service activity. That's it.

Thank you for that. So we're almost at the end of first quarter. Can you provide us an update on broadband trends for the first quarter?

I'm not going to provide a sub number here today. But what I can tell you is the market continues to be competitive. And so that continues to be a trend.

And so what are you seeing in terms of competition from fixed wireless?

I don't think that the overall tension that we see from fixed wireless is significantly different from where it's been previously. We've seen AT&T build out several additional markets or put online additional markets from a fixed wireless perspective over the last few quarters. But the overall tension across the product set, I think, is not different significantly from where it was before.

Got it. So we track some of the Opensignal data. And based on that, it seems like your share in mature fiber markets have been slipping. What can you tell investors that you can do to change that slope of the curve?

Yes. So first, I would say when you look at that data, your definition of maturity matters. When we look at mature markets today, first, I would say we continue to have a market share that's greater than our fiber competitors in mature markets where we compete against fiber. And we're able to do that because we have a converged product all across the footprint, because we have more incumbency advantage that they do because of the size of our footprint, because we continue to deliver those differentiated products in the form of things like our video product that adds value and because of the focus that we've had around continuing to improve on the customer service side.

And so I think when there's been some impact from fixed wireless in those spaces. So I won't say that what you're seeing is inaccurate and that I think there are still sort of -- there's new competition in those markets that wasn't there before. But when it comes to the way that we compete against fiber in those markets, I think we continue to compete very well.

Got it. There's a lot of angst amongst investors about Starlink. What have you seen in terms of competition from Starlink? Any impact on your trends?

There's not a discernible impact from Starlink on trends right now. But obviously, we see what you all see, and we're continuing to watch it very closely.

Got it. Switching topics to your appointment of Nick Jeffery as Chief Operating Officer. I think it's a great move, but I would like to hear from you what do you expect from him?

So if we go back to your opening question and say, well, our goal and what we're working on is figuring out how to get back to broadband growth. And the first tenet of that is this relentless customer focus around how do we message the value proposition and utility proposition to customers and how do we focus on customer service. And if I look at where Nick has been really successful over his past couple of roles, it's on exactly those things, right?

And so when we -- when I look at sort of bringing him into the team, we're bringing someone who has great experience doing the things that we are trying to do right now. I'm super excited to have him join the team and to be able to take advantage of that experience as we continue to try to push those things for our team and in the market.

You guys were probably like the first operator out there to focus very heavily on customer care. You onboarded, onshored all your customer care executives. Your NPS scores have improved over the years, but it's still well below your peers. Why is that? And what can you do to change that?

So I think that we're still followed by cable's historical reputation with consumers. We've done, as you said, the big things to change that, right? So if I think about the pricing and packaging that we rolled out 1.5 years ago that has longer price locks that has lower roll-offs when you get to the end of those price locks. We're trying to do the right thing for the customer on that front, which is impactful to NPS.

We also have been sort of driving at customer service overall. And the things that you talked about, in-sourcing, upskilling our employees, trying to provide them the right tools, to be able to deal with those customer service issues well. Both of those things, I think, take time to sink into the market.

The other thing we recognize is that there are 100 different ways that you interact with the customer every day. And across all of those small things, there's an opportunity for paper cuts, right? And in a market that is as competitive as the market that we compete in today, you have to be mindful of all of those paper cuts. And so across the business, we're really thinking about like where do you find the paper cuts today? How do we solve those for consumers because we know -- and you might hear Chris say it, it's a game of inches. And so you've got to be good across all fronts. And so we recognize that we're focused on it. We're continuing to find ways to improve that customer service interaction to try to solve for exactly what you point out.

Got it. You mentioned pricing. So there's a lot of focus on pricing among investors. I think you were quite clear on the last earnings call that you expect to grow broadband ARPU this year. Can you just help us understand like what's driving broadband ARPU growth this year?

Yes. And it's aligned with the things that I just talked about. We want to grow broadband ARPU by driving value into customer packages ultimately, right? So the main tailwinds that we have are actually things that are not just price. It's selling more gig products or where we have them available because of network evolution, more 2x by 1 products into consumers. And our sell-in rates for those products are dramatically higher than they've been in the past. It's selling additional value-added services, things like the Invincible WiFi product that I talked about and continuing to package our products in multiproduct sets with consumers, continued bundling that helps drive overall value to the consumer. Ultimately, with this set of those things, that's how I think that we get there in the ARPU equation. It's being able to pull those things in.

And when I think about where our peers had gone over the last several years, we were much slower in getting to some of those higher value sell-ins than some of our peers were. So I think we have more space to gain ground there than maybe some of our peers have had.

Got it. You launched the Life Unlimited pricing last year. On the surface, it doesn't seem like it's impacted subscriber trends much. Like are you satisfied with the Life Unlimited pricing? Or should we expect some major changes in the near future?

So we're not satisfied with where we are in broadband trends, right? And -- but that wasn't the only thing that the Life Unlimited product was about. So the things that it's doing really well is we're selling more products in per consumer. That additional -- those additional products, we think, make customers stickier in the medium and longer term. And so I think there are advantages we get from that, that don't come at the point of sale necessarily.

There's also the piece that I talked about having those rate locks and those lower roll-offs as people roll off of the Life Unlimited -- or roll through their promotional periods on the Life Unlimited plans. And I think we expect over time to see things like improved NPS scores as a result of having put ourselves in a better position with those customers, which ultimately should be positively impactful to the business. Obviously, from an overall pricing and packaging perspective, we test all kinds of things all the time to try to see what will move consumers.

But I think that with those things that we wanted Life Unlimited to do with driving better bundling and driving a better overall offer structure for consumers that we're happy with how it's performing.

Got it. I want to switch to wireless. Competition seems to have picked up in the last quarter. We saw your net adds slow down a touch in 4Q. What's your take on that?

Look, there's a lot of promotionality out there from a mobile phone perspective right now to a point that I would say, like some of it, I think, is probably irrational. But we continue to grow well despite not having followed down that path. And so I think to the extent that we can continue to do that to continue to have good growth year-over-year increases in our gross line additions in spite of not sort of following down that path, so still having kind of economically rational offers in the market. It's really a testament to the overall value that we can create for consumers with our product and to our continuing ability to grow that business and to grow it in a way that creates good financial returns for the company in spite of what's happening in the broader competitive space there.

Got it. You recently announced savings of -- guaranteed savings of $1,000 for each customer that switches from the big 3 wireless carriers. Your volumes were already doing quite good. So was this a response to the increased competitive intensity?

I think of it as just a restatement of what we've been trying to message to consumers around value and utility already. If you look at our -- at the slide that we put in our quarterly investor deck over the last couple of -- several quarters, it's always been true that we've been able to save customers a dramatic amount of money when they bundle broadband and mobile products and buy converged connectivity from us. And this is just another way to state it to them to try to create that activity in the market. We're really confident that we can continue to do it, which is why the offer ultimately works from an economic perspective.

Got it. You recently renewed your MVNO agreement with Verizon. You signed a new MVNO agreement with T-Mobile for business customers. Do you think you have all the pieces for your wireless business to work?

I think we already have the key piece of the wireless business working, which is that we have a WiFi and CBRS network or a wireless network of our own that delivers now 88% of the data that we deliver to mobile phones on our network. In addition to that, we have great partners in Verizon and T-Mobile. I think that we are well positioned with them and with the network that we already have to continue to drive a leading mobile product that works better for consumers because of being on our network and a place where we can drive good growth in the business going forward.

Got it. Last one on wireless. So your mobile service margins, excluding SAC, have been growing pretty healthy -- at a pretty healthy rate. It was 34% in 3Q '25. Where do you think that goes in the long term?

We can continue to grow our mobile service margin from where we are -- that mobile service, excluding SAC, from where we are right now. I think we haven't yet reached full scale efficiencies. And so we're continuing to gain scale efficiencies as we add mobile lines to the network. In addition to that, the work that we've been doing around digitization and automation across our customer service function will continue to drive efficiencies into that business as well. And with the combination of those, I think there's an opportunity. I fully expect that we'll meaningfully grow that sort of margin, excluding SAC for the next several years.

Got it. Switching to video. So typically, I wouldn't even talk about video because it has generally not mattered much for investors. But your results in 4Q were probably beyond anyone's expectations. I don't suppose you expect that to continue in the future?

The video business is still challenged, right? And that's particularly the case in a quarter like this quarter where we have rate increases from programmers that we then have to pass on to customers in order to maintain a reasonable margin in the product. So even with that, though, I guess, if I go back and look and say, what do we learn from 4Q? We learned that adding value back into the product really does matter. So having $125 worth of programmer streaming apps available with the video product actually does drive value to consumers, and it's made the product stickier.

I would couple with it, so not only did we have a positive number, we, for the first time, started seeing an increasing number of customers come back into fully provisioned video products. And for me, that's important because when you think about, well, what kind of video products drives the stickiest customer, it's the video product that actually has all of those apps inside of it, and we're actually being successful in selling that product to customers. So I'm excited about it on that front.

As you mentioned, it hasn't mattered that much from a financial perspective. I think there are a couple of things to think about there. One is that the compression of video margin is real. And to the extent that we can be successful at just limiting the compression of video margin, that is really helpful and then allowing on the other side of it, broadband and mobile growth from a financial perspective to stand out.

And the other piece is that the real value of the video product is the value that it can add to the broadband subscription, right? And so to the extent that we can continue to be successful inside of that business, I think it continues to drive then better outcomes for the broadband business because of how we differentiate the product.

Got it. your business services revenue has been almost flattish at this point. Like when will it take -- what will it take to reaccelerate growth in that business?

Yes. So in business services, I'll divide the world in 2. On the small business side, think we continue to have a good right to win in that space. We have a great product and packaging set. We are not an incumbent in a lot of that space. And so there's a bigger market opportunity for us to go after. Small business has been challenged by the same fixed wireless pressure that the residential market has been challenged by. But I actually think inside of small business, the portion of the market that you can address with a fixed wireless product is actually smaller. And so ultimately, our -- my expectation is that sort of once we get past that sort of window of pressure from fixed wireless that we should be able to continue to grow in that space.

In mid-market and large, we've actually continued to grow pretty well and that in spite of continued pressure from the wholesale business. But in that space, what I'm excited about is what we will get in the Cox acquisition, assuming that it closes. When you think about where they have been from a hospitality business perspective from their investment in Segra, from their investment in things like RapidScale and some of the sort of underlying product set, I think that there are a lot of things that we should be able to bring out of the Cox business and bring it to the broader footprint and actually create some accelerated growth by pulling those 2 businesses together.

Got it. You've set a goal to grow EBITDA this year. Can you just give us some of the key puts and takes on how we get there?

Yes. So first piece, it's a political advertising year. So we'll have political advertising, which I think grows over the course of the year. You have the mobile business, we're continuing to grow quite well and we continue to have expansion in mobile revenue over the year. There are obviously puts and takes in broadband. So you got to think about the customer compression, but on the other side of that the ARPU growth that we talked about. And video, although we're losing fewer customers, there is still margin pressure inside of that business. We offset those things with what I think we can do on the efficiency side, which is really to drive automation and tools that across the business, I think, drive down the cost of transaction volume and in some cases, drive transaction volume out of the business. And I think we can be really successful there. And so when you put it all together, that's how you get to an EBITDA growth plan.

Got it. Investors are nervous about your long-term EBITDA growth. When I look at the valuation of your stock, it implies like a perpetual negative EBITDA growth. What gives you the confidence that you can continue to grow EBITDA in 2027 and beyond? I mean I'm not looking for specific guidance, but any color that you can add there would be helpful.

So the things that I put together, first off, I think we have the right strategic and tactical approach to running our network assets, which is focused on in the long term, having as many customers as we can have attached to that network by driving value to those customers. The second piece then is we have a network that actually has all of the capabilities it needs to be able to win with customers in the long term. Our network today and the delivery to a customer is 99 -- more than 99% fiber. That last mile actually has advantages in that it is powered. It has significant edge components that will allow us to deliver the next generation of products to consumers in a really powerful way.

And so I think that we are well positioned to be the kind of product that consumers need on a go-forward basis. You combine with that then, I think we can continue to drive efficiency from a cost perspective over time as well. And when you pull that together, I think you can get to EBITDA growth.

Maybe the other piece, when you think about the market itself, I think everybody recognizes that at some point, fixed wireless ends up being capacity constrained. I think that you have -- similarly on the fiber side, folks generally recognize that at some point, we're going to reach the end of what it's economically viable to build. And I think what's left there is a market that can be rational from a long-term perspective because you have capacity limits on fixed wireless and a competitive marketplace, but one that can be a rational competitive marketplace in the long term. You put that together, I think you can get to EBITDA growth.

I think also in the short to medium term, we have really significant free cash flow growth. If you put on the back end of that, some sustainable growth in the business going forward, we have the right leverage profile for the moment in terms of being in a place where there is a lot of value that can be generated. And so ultimately, for equity holders, I think that the stock where it is today actually works quite well.

Got it. Switching to CapEx and free cash flow. Your CapEx has been elevated for the past 4 years at this point through rural build network upgrades. You've guided to CapEx falling to under $8 billion in 2028 and beyond. There remains some skepticism among investors that your CapEx will actually come down. What gives you the confidence in the long-term guidance there?

So the thing that took our CapEx from the below $8 billion level to where we are today is our investment initiatives, particularly around expansion and network evolution. And so the thing we have to do to get back to where we were before is just to complete those initiatives. As I said earlier, as we were talking, the expansion initiative for practical purposes is essentially complete this year. The network evolution initiative then substantially complete by the end of 2027. Just pulling that capital out of the plan is enough to get us back to that run rate below $8 billion. And so we're quite confident in our ability to get there.

Got it. I want to talk about Cox for a second. So your proposed acquisition has received the SEC approval. What remains for you to close the transaction?

So as you know, we have our federal as well as all of the state approvals, except for California. We are working with California to do what we can to accelerate the process there. And so we look forward to working through that with them.

Do you have a time line that you can share with us?

So the original time line that we set was midyear this year. I don't have a move away from that.

What do you see as the biggest opportunity with the acquisition of the Cox asset?

So the biggest opportunity is to take our operating strategy and apply it against the assets, right? If I think about -- we have great pricing and packaging and value and utility that we can bring to their customers. We're excited to roll that out to all of the Cox customers and really to all consumers across the Cox footprint. When we do that, if you look today, their mobile penetration and their video penetration are both very low. I think we'll drive more mobile and probably more video penetration into the Cox footprint just by sort of rolling out our strategy over the assets.

You combine that with some things that maybe get less attention, but the technology in the advertising side of our business, if we roll it out across the Cox footprint, I think actually, there's some great things that we can drive on the advertising side as we pull the businesses together. We already talked about B2B and where I think it goes the other direction. I think there are actually some great things that they've done on their side that by expanding them across the existing Charter footprint, we'll be able to deliver better for customers. And so there's a lot to like there. I think we're excited when the transaction closes about getting going to drive some additional value out of the Cox assets.

Got it. I want to close with talking about M&A. Once you're done with the Cox acquisition, what's your appetite for further M&A? Do you need to complete the Cox integration before you start to look at other assets? Or would you be actively looking for other opportunities out there?

Look, we like cable businesses. We like cable assets. We believe that we have the right strategic and tactical approach to running those assets. I think when we look at opportunities, what matters is, is it at the right price point that reflects the growth potential for those assets? And through that, does it bring accretive value to shareholders? And so I think we will continue to look where there are those opportunities for sets of assets that we think could bring value to shareholders.

And from a Cox integration perspective, I don't think that, that should be limiting in terms of our ability to go and take advantage of ultimately, the value that we talked about of deploying our operating strategy against sets of assets where that can deliver great value.

That was helpful. Any last word for investors?

I don't think so. Thank you very much.

Thank you. We'll wrap it there.

Good morning. I'm Ben Swinburne, Morgan Stanley's Media and Telecom analyst. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. I'm really excited to welcome back to the conference, Chris Winfrey, President and CEO of Charter Communications. Chris, thanks for being here.

It's good to be back.

Absolutely. Why don't we level set for the audience here and talk to us about Charter's focus for 2026 to drive customer growth and ultimately sustainable EBITDA and free cash flow growth.

Look, no surprise. Our priority 1, 2 and 3 is to return the company to broadband growth over time. And in 2026, we're really on the cusp of nearly finishing some generational long-term investment programs. The rural build and extension of the footprint will be largely complete at the end of this year. The network evolution will be done about 50% with the remaining very much in flight to be completed next year. So those investments really set us up for the long term of protecting the superior assets, products and infrastructure that we have today.

In the meantime, in 2026, our real focus is on two things. One is improving our message around value and utility. And the second is earning the service reputation that we've really invested in from a quality of service perspective. And the thinking is that those are the two missing pieces. We have the best network. We have the best product. We have the best pricing, but really getting our messaging to flow through and getting the service reputation that we've invested for, those are the things that are going to put us back on track.

On your earnings call back in January, Chris, you framed Spectrum as America's connectivity company.

We did.

And you are into branding. What does that mean? What does that tell us about the product set and sort of the go-to-market that the company has to try to really drive a better customer relationship customer profile?

I think it picks up on the fact that we're 100% U.S. based sales and service. That's unique. None of our competitors have that. But it was really focused on 3 different commitments. We guarantee your service, which is your Internet reliability, your product reliability. And if we're not perfect, we stand behind it with credits. We guarantee your service, and we'll be there the same day if you call us for a professional install or service. And then we guarantee you savings, $1,000 if you take Internet plus 2 mobile lines.

And our biggest challenge really has been around messaging that. And it comes about from the cable industry of not having the best service reputation. And so for the entire industry, I think our focus is finding new ways to communicate that and deliver on that service proposition in a way. And I think being America's connectivity company is because we are, and we can provide these things in a way that our competitors can't. And so finding new ways to not only communicate but deliver on the service that we're committed to.

Great. Maybe one other kind of high-level question, and we'll get more into the business. You just recently announced the hiring of a new COO, Nick Jeffery, who folks certainly in the telecom and cable space know from Frontier. Talk about this hire and sort of what investors should take from bringing Nick onto the team.

So I'm looking forward to Nick starting with us in September. I think the hiring of Nick as our Chief Operating Officer represented a unique opportunity. We have a tremendous amount of talent. We have a deep bench, both at Spectrum as well as at Cox, but there was a unique opportunity to go get talent from the outside in Nick that had operated in a highly competitive wireless space in the U.K., had run global B2B for Vodafone and in addition to that, had been in a competitive overbuilder situation and bring some of those skill sets from the outside into Spectrum.

The two things that Nick, from my perspective that I saw that was really unique was he has a proven track record on both sides of the pond and the ability to cut through on messaging value and utility in the marketplace. And then secondly, a radical transformation of the Net Promoter Score, both at Vodafone U.K. as well as at Frontier. And if you think about it, that's a perfect fit for us because those are the areas that we're making significant progress today. And you can see it in all of our Net Promoter Scores are moving up, but it's -- they could go faster, and I think Nick will be a great fit for the team and can be an accelerant for the things that matter to us most in returning the company to broadband growth.

Great. Let's talk about convergence. It is the best theme in the sector. We've had a lot of your competitors, and we had Comcast here at the conference yesterday.

We're a peer, not a competitor.

Right. So I broke them out separately. So tell us about Charter's value prop today to consumers, how you stack it up versus the competitive set? And what do you need to do to drive better results from the product offerings you have in the market?

Yes. Look, the conversation around convergence and our capabilities, we have convergence in 100% of our footprint everywhere we operate. We have the fastest speeds and the fastest mobile service everywhere we operate because of our wireline network and because of convergence. And we save customers hundreds, even thousands of dollars, and we stand behind that commitment. And unlike our competitor, we're competitors, we're America's connectivity company, and we have 100% U.S.-based sales and service. None of our competitors can make those claims.

The downside for us is that because of the historical reputation of cable, we haven't earned the service reputation that we've invested in. And that's unfortunate. But the good news is the money has already been spent. I don't think it's a question of more marketing or more service investment. It's about doing things better and having a different approach towards customers. And so that's really the focus for us, as I mentioned before, is to go get those things right, and we can turn the knob hopefully quickly.

And Chris, when you think about competing in the marketplace in broadband anyway, how do you look at fixed wireless relative to cyber when you think about sort of the long-term competitive set? And do you look at those as requiring different approaches competitively?

Of course, we have different packages for everybody's needs and budget while still trying to be simple. But in the end, we treat those competitors the same way, which is better, faster and lower cost, meaning higher value. And that's what we provide against fiber, and that's what we provide against fixed wireless access. Now from a fiber standpoint, we've competed well against fiber for years. And even inside of mature fiber markets where they have overlap today, we still have higher penetration in mature fiber markets.

The new element that's come about here really is new competition, particularly in the form of fixed wireless access, where even though it's slower, less reliable and all in actually cost more money, it's a new competitor in the marketplace, and it's taking a place at a point in time where you have a low move rate, new household start rate. And so unfortunately -- unfortunate timing for us, new competition at the same time, macro environment has slowed down a bit.

Yes. I was going to actually ask you about housing. I know you're not one for excuses, but how much is the lack of housing movement impacting the business? Certainly, it impacts the stock because it's a game of inches when it comes to net adds.

It is. So look, our biggest focus right now is control, what we can control, and that's being a better competitor, and we have new competition. But I would not underestimate the impact of the macro environment. It's huge. Lower housing new starts, less movers producing selling opportunities, interest rates that have been higher that's also impacting new starts and moves has played and wireless substitution has all played a significant factor.

The two things -- I don't think that continues on forever. I think people start to move again. I think people start to build houses again. I don't have a crystal ball, and it's not what we do. So I can't tell you when. But in the meantime, if you think about the rural footprint that we have, that's going to produce a leg of growth for many years to come because you have new plants out there that continues to have higher penetration take-up. The other thing that we can do is a better job amongst the cable operators in terms of capturing or recapturing the move opportunity that's out there. We do some of that today, but I think we have an opportunity to really do a better job together with us, together with Comcast and work on that. And this market environment, the macro environment and competitive environment, it is making us much better service operators along the way.

Sticking with the sort of branding comment earlier, you also talked about Invincible WiFi, which did came to market, I believe, last month. Tell us about what that product offering entails? Why is it important? And can it move the needle?

So Invincible WiFi is using a WiFi 7 router together with a 5G cellular backup as a backup product and a battery backup as well. So in the event of a storm or an outage or power outage that your Internet service stays connected on the same SSID. So you're not having to reconnect devices throughout the home. In fact, as a consumer, you would see your speed go down because it's going to 5G, basically fixed wireless access as a backup. But other than that, you wouldn't know the difference. And so for a small incremental value of $10, that's a pretty good value.

I think the bigger opportunity is it's another way to help improve our service reputation by having always on Invincible WiFi. We launched it a couple of weeks ago. It actually went so fast that we had to pull back in certain sales channels because of a supply standpoint. And so it's not doing everything that it could today just because we're ramping up back up supply. So we had to slow it down a little bit just from availability. But I think the opportunity for Invincible WiFi is to have an operational improvement, less trouble calls, improve our service reputation and of course, has a financial benefit to ARPU along the way as well.

Yes. So customers clearly value that peace of mind.

Yes. I think would you pay for it? Of course, you would be great.

You guys also launched a $1,000 annual savings guarantee for customers that take your converged offer, including some bill credits if you guys have a misstep from a service point of view. How should investors, shareholders think about this approach and whether this is sort of a step towards, I don't know, lower CLVs or how you compete with your...

What's the lower COB?

Customer lifetime value, sorry.

CLV, okay. I thought it is COB. Yes. No, look, I think the interesting thing about the $1,000 guarantee is we're providing it because we can. We're providing it because it's true. Those of who -- investors have been watching know that we've used this as an investor slide for over a year now that shows against the 3 major telcos, how we genuinely save you over $1,000 a year. We put it on our website probably 6 months ago. And we came to the conclusion and said, well, we know that we're doing this nearly 100% of the time, we can stand behind it. Why wouldn't we guarantee it?

The opportunity there, I hope, is the opportunity to break through on messaging the value and utility that I was talking about before. I don't think there's going to be a lot of credits attached to this simply because if you look at the math, it's almost every single time. But if many of our investors are based in New York City and L.A. put us to the test. If we can't save you the money, we'll put the credit on the bill happily, but I guarantee you, we're going to save you the money.

Okay. I know we've been talking about convergence, and that's how you think about going to market. But just on the wireless business, you've been growing that business quite nicely over the last couple of years from a volume point of view and revenue as well. Where are you in terms of sort of the growth outlook from here? And what are the pieces of the puzzle, whether it's distribution, customer service, et cetera, that you think really delivers on sort of the mobile opportunity in spectrum?

I think the growth rate is significant and it's going to be with us for a very long point in time. It's going to throttle a little bit based on the level of subsidies that are taking place with handsets out there in the marketplace. So that moves around a bit. But if you think back to what we have, we have 2 very strategic MVNOs. And we have a WiFi service that provides us a superior set of economics and connectivity for customers, and we're rolling out CBRS across our entire footprint.

And so we already have the fastest mobile speeds in the country because of that seamless connectivity, because we boost through WiFi and through CBRS. And because the WiFi capabilities will continue to get better and we'll have more offload, I think we have the opportunity, and we still have a 5G umbrella protective cover through a good relationship, a strategic relationship that we have with Verizon. I think our speeds can continue to be faster into perpetuity with a product that has better seamless connectivity, better speeds and better economics. And so I think we're positioned for growth for a really long time.

You guys announced amended or modernized MVNO, I think was the word that everyone is using.

We have a modernized MVNO. And we have a strategic partner who actually has been a pleasure to deal with. And I think there's -- it bodes well for what we can do together over time.

I guess my question is in terms of the profitability of the wireless business, how much does that -- I think it's an 88% of your mobile traffic is being offloaded onto your own network, which gives you better economics. Is that meaningful from a profitability point of view? Can you move that up as you roll out more technology?

We can move it up through all the things that I talked about is additional WiFi 7, more CBRS rollout. The goal isn't to hit a metric. The goal is actually to make sure that we have better seamless connectivity than any of our competitors, which we do and to have better speeds, which we do not through -- not only the seamless connectivity, but also through the WiFi speed boost that we provide. Of course, as an output of that, when you do more offload, you have to rent less of the macro cell tower network. And so you have savings associated with that by using our existing infrastructure.

I know there's been people who've said, well, you're not a facilities-based wireless provider. I say that's garbage. We're more of a facilities-based wireless provider than anybody in the country. And the reason for that is even the cellular companies, they -- 75% of their traffic goes over our WiFi. So 25% of their traffic is going over the macro cell towers. 88%, 89% of our traffic is going over our network. And so we are the facilities-based wireless provider really for the entire country when you include us in Comcast. And so I think we have an economic advantage. We're going to continue to use it and we're underpenetrated relative to our existing broadband footprint. It's having a huge impact on our churn for our broadband customers. And I think it can do the same for us in acquisition over time.

Our biggest issue is brand awareness that you could actually get your mobile product through Spectrum. So you asked about the things we have and don't earlier, and I should have mentioned that. We have full distribution throughout our footprint. Our service works well. Pricing and packaging is great. What we really need is more brand awareness along the way. And a lot of that is just going to take place with word of mouth, savings guarantee, the speeds actually work and people talking and promoting it themselves to their friends and family.

Great. Why don't we shift gears to a topic I'm not sure I've asked you about in a few years, which is the video business. But it's back, at least at Charter. It's been a bright spot. You guys have really worked hard to change that product, innovate. I'm a customer, I have Xumo. Talk a little bit about what you've done and if you think that the rebound in that business is sort of sustainable over time?

Well, our reason for being in the video business, first and foremost is to support broadband connectivity, both at acquisition and in retention. The margins aren't as good as it used to be in video. But if we can add value to the broadband relationship that it's worth it. We have made a pretty significant turnaround in video, and that comes about through value and utility that we've provided into the product and into the relationship, which is really where this all started. So today, we have increased flexibility in packaging. We have -- we're upgrading customers from broadband only to video, upgrading customers from skinny packages to full video. And we have direct-to-consumer apps that have $125 of additional value that's included for free. I know you have activated several of those. I hope you enjoy.

But it makes sure that the customer, even though the price is high because of the programming cost that is put upon us, that the value is there and something that we're happy to sell and attach to the bill for a broadband customer. In terms of growth, it's not our objective in video. It's just to provide value. In fact, we had small growth inside of Q4. We made sure it was clear people knew what we were doing. sure enough, we have to pass through programming rate increases inside of Q1, and we're going to be dramatically better than we've been over the past few years. But it's hard to imagine we'll be in a positive quarter for Q1 on video just because of having to pass through the programming rate increase.

You're selling it in the call centers now, right? I mean is it...

Yes, we never stopped. We never stopped selling it in the call centers, but we did start to have -- start second-guessing ourselves 3 years ago and said, if the price has gotten so high, and we're having to pass through so many rate increases essentially to our broadband customers, if there's not a value there and there's not utility, then should we be selling this product? And the value comes about through all the things I just described, including the apps as part of your service. But the utility comes about -- you mentioned Xumo. The ability to have unified search and discovery with voice remote, it's a unique product. There's not another platform out there that does what Xumo does. And so we're pretty pleased that at least we have something that we can be proud of on the bill.

Yes. Great. I did want to touch -- I know it's not a huge part of the P&L, but still relevant, which is the commercial business space, some of the challenges you've seen on the residential side, at least in broadband. What are you guys doing to try to reaccelerate small business and also push the enterprise opportunity as well?

Yes. The small business suffers from some of the same new competition issues that we've seen in residential. I think Invincible WiFi in the business space can be really compelling. The opportunity for a very low fee to be able to have fixed wireless access is just a backup, which I think is a great backup. Competitively, I think, is ideal. So I think we can reaccelerate a bit with that. The enterprise space, we continue to do well. We're gaining credibility in the marketplace with more advanced products, larger customers. And so they call it logos, we're attaching more logos that a couple of years ago, we wouldn't have had a right to win in that space.

Having mobile added in, I don't know that it's going to change the trajectory, but it's a nice addition to be able to go to these large accounts with mobile as well. And then finally, Cox, this is a really great combination. They have complementary assets and capabilities to us and vice versa. And so I think the Cox transaction, it was a bit of an unforeseen synergy, not just from the scale of having a larger B2B business, but they have things like hospitality, managed services that we don't have in our enterprise footprint actually has some advanced products they don't have plus the additional scale that we have. So I'm optimistic that we'll see some upside there.

Since you brought up Cox, I know it hasn't fully closed yet. Just talk a little bit about the kind of top integration priorities once you do get this closed. What are the work streams that matter the most to making sure you guys capture all the value ahead?

Priority #1 is to get spectrum pricing and packaging into the marketplace, a more competitive Internet pricing, at the same time, reintroducing video, Spectrum video. And they're very -- have low penetration at this point in mobile. So getting those additional products into the marketplace and putting that all together in pricing and packaging so that you can take -- you can have a lower Internet price and have more revenue per household, have more margin per household by providing better value and service to the customer. And so we're very much focused on getting that put in place.

Commercial, I mentioned, I think, is going to be an upside. And in addition to selling more, they're starting from 13% or so penetration on video and very low -- much lower penetration on mobile, we'll do well there. I think we'll end up growing video for a period of time just because of where the starting point is and what we can bring in. That will help lift things like advertising when you think about that space. So I'm excited about getting the transaction closed. I think it's great for consumers, great for employees. We're excited to get going. And I think it's underestimated how much value this is going to bring to Charter.

And where are you in the process on the transaction?

We have FCC approval. DOJ was complete essentially in September, FCC approval last Friday. No secret, we're working through California is the big state that remains open. And we hope to have a productive conversation with them and those around the CPUC to accelerate the closing really for the benefit of consumers and for the employees as well.

Got it. I'm not telling you anything you don't know, but there's a lot of focus on EBITDA growth in 2026. You guys expect to grow EBITDA this year. Can you talk a little bit on the cost side, Chris? What are the things that we should be thinking about or that you're focused on in expenses to sort of deliver on that expectation?

Yes, it's more of the same. When you have better service, you have less transactions, less transactions, less cost. There isn't anything that is -- I think I mentioned to you yesterday, there's nothing unholy that needs to be done in order to meet that objective. It's more of doing what we're saying, managing the cost structure effectively and making sure along the way, Rule #1 is you don't do anything that impacts sales or service. We're very much focused on long-term growth rate of the company. And so yes, we'll be efficient with our expenditures, but we're not going to do anything that compromises sales or service.

Yes. You've got tens of millions of customers, millions and millions of transactions and customer interactions every year. How are you guys integrating AI across sales, your call centers, field ops? And is this something that is a real benefit to the business and maybe even the P&L this year? Where are you in that process?

I think already, we've seen benefit to the P&L from the use of AI. We certainly see the benefit of AI usage in providing a better customer experience. Why? Because it's focused on making the job for our employees easier and more efficient. And if we can do that, then we're going to have a better service, which really is the #1 goal. But if you think about applications that are deployed today from an AI perspective, we have conversational IVR, which is AI-based. Significant number of our calls are handled that way. It's a triage those and get them, in many cases, solved right upfront with simple transactions.

From our agents' perspective across service, sales and retention, the employee may not know it, but these calls are now guided calls by AI, where you have suggestions, previous service history, telemetry, all of which is being proactively presented to the employees so they can have a more higher quality conversation with the customer with more empathy because they're not banging on 10 different systems. It's being presented to them. And then in the case of service to provide next best action, which is using LLM and all of the data that we have about the customer to recommend and say these are the next step to go solve the customer's problem. It's still the agent. The employee has the ability to dictate where they take the conversation, but there's support along the way because there's real-time transcription that's feeding into LLMs that allows the agent to be supported.

The same thing exists for sales and retention with what we call next best offer. So there's not 50 best offers for this customer based on everything we know about them and all the data that we have, here are the 3 or 4 different best options that are going to get you to that. From a field tech perspective, already today, again, they may not realize that it's AI, but that service call that takes place is being -- not only do we have a transcript that's feeding in LLM for the service call, but it's being summarized by AI so that when the field technician gets to the door of the customer, they can tell the customer, my understanding is I'm here to address this, this and this, may not be the person at the door who made the phone call.

So that's a much higher quality experience for the employee instead of saying, why am I here or for the customer to say, I don't know why you're here because my spouse is the one who actually called in. So now that the employee is empowered to know all the details of the service history and why they're there, better experience for the employee, better experience for the customer.

Now all of that means, if you think about everything I just described, it means you have less transactions, you have lower average handle time, you have less repeats, you have higher customer satisfaction, which produces less churn. So there are huge financial benefits along the way. But the way we approach it is if it cannot improve -- if AI can't match the quality that we provide with our best employees, we're not going to introduce it because that's Rule #1. We're willing to invest in service and spend more money. We always have benefit produces a better service transaction, and that's still the case today.

Okay. Speaking of spending money, you guys are at an elevated level of CapEx right now. You've broken with past history and provided long-term guidance in CapEx. With CapEx expected to come down towards kind of an $8 billion run rate by 2028, capital intensity coming down, free cash flow ramping. What gives you -- what should give the market confidence that, that glide path makes sense and that there isn't another CapEx cycle on the other side of this since us old timers have seen that.

So we outlined a capital expenditure that would come to less than $8 billion, which means less than $8 billion and capital expenditure as a percentage of revenue in the 13% to 14% range. Why should people have confidence in that? One, because we don't typically don't make those type of long-range commitments. And when we say it, we mean it. Two, if you think about what we've been spending on, we've made two major generational investments. We've done the largest expansion of the cable network that's taken place since the 1980s and the largest physical upgrade of the network that's taken place since the 1990s. It's hard to recreate that back to back. Even if you didn't believe us, the reality is that the money has been spent, and it sets us up to make sure that we maintain our network and product superiority for a prolonged period of time.

And the capital that we're going to have going forward really is a success-based capital that's on the back of those investments that -- those generational investments that have already been made. So we always, in the past, have preferred not to give an outlook so that you could be more nimble and flexible in the marketplace. But given the amount of outside spend that we've had for great initiatives, we thought it was really important for shareholders to know that this is where we're heading, and we intend to keep that pace.

You're working your way through the network evolution or upgrading speeds to symmetric gigabit speeds. Is that proving -- where you've rolled that out? And has that proven to be a differentiator for the business competitively yet?

We'll be at 50% at the end of this year with much more of the actual physical work complete beyond just that 50%. But today, when you think about where we've lit up the symmetrical and multi-gig speeds, it's only in about 15% of the footprint. So until we get to critical scale, we've been quiet. We haven't been actively marketing just because we wanted to get to critical scale before we start becoming loud. So other than a dramatic drop off, essentially, at that point, no node splits because you have really complete fallow capacity that exists inside the network, which we want other people to go fill. Other than that, I can't sit here and tell you about a great benefit just yet, but there will be.

Okay. I know it doesn't get talked about as much anymore, but the rural expansion you referenced earlier, it's a huge project, huge investment for the company. How should we think about the returns on that spend as that project matures? Because I think you're not too far away from kind of the end of that build.

No. Look, we did RDOF deferred. We did RDOF, we did ARPU. We did state grants. Now we got a little bit of BEAD. The fact that our rate of returns for the RDOF and the other projects are at or above where we set out is pretty impressive. Now a lot of variables changed along the way. But despite even things like fixed wireless access being available in some rural markets, our penetrations on broadband are really high. The thing that we probably didn't anticipate is how high our video, mobile and even wireline phone in a rural environment, our penetrations for those would be. So the returns have been great.

The plant is now in front of customers who really have -- don't have anything remotely similar to this option in terms of quality and in terms of price. So the growth and the penetration will continue for years to come. The capital is going to drop off dramatically. It's going to go away, and the revenue will continue to grow. So there's a long way to go in terms of that generate. The piece that I don't think was not in our returns analysis and may not be well appreciated is a lot of this build was taking place in places like Florida, the Carolinas and Texas. So what is rural today in those markets will end up being suburban. And so in addition to the penetration growth that will take many years to really fill out, you have serviceability extensions at a really low-cost success-based capital when rural environments turn into neighborhoods in these places. So we're going to be really pleased with what we did for a decade, 15 years. And it produces the next opportunity to extend beyond at the right time.

Maybe, Chris, just as we wrap up here, I wanted to ask you about your balance sheet and sort of the leverage framework. So you guys recently reduced your long-term leverage target. So this is kind of post the Cox transaction, targeting 3.5x to 3.75x with a plan to reach it within 3 years after close. So talk about what drove that decision, why you think that's a positive and how it impacts, if at all, return of capital?

Yes. Look, I have to admit, I wasn't a big fan of it at the outset in terms of lowering your leverage. Why? Because we fully believe in the growth rate that we're going to achieve with the company. Having said that, I think it was important for us to let everybody know, we do listen to shareholders and one. And two, our investment-grade rating and how we treat our debt investors matters greatly to us and it matters greatly to equity investors as well. And so we wanted to make sure that we were responsive to shareholders along the way. By doing so, I think you open the door for additional types of shareholders who could come in who might have been reticent to do that before. Theoretically, when you go back to business school, your weighted average cost of capital should come down. That should be good for shareholders as well.

Is the company really valued on that? I don't know, but it's academically true. But I think being responsive to shareholders and recognizing that's a goal over 3 years. So in the short term, there wasn't a big difference. This is not a big change in our target leverage. We were 3.75x to 4x before, and now we said the lower end of 3.5x to 3.75x. It's not a huge shift. And given that it's taken place over 3 years, I don't think it's going to have a material impact in the amount of stock that we buy back, particularly upfront where it's at a really low price today.

Yes. Well, great. We're all out of time. Chris, anything you want to wrap up with before we close it out?

Yes. Look, we're -- sitting here, it should be very clear. We're very motivated. We're excited about the opportunity to return broadband to growth. We do have the best network. We've got the best products. We've got the best pricing. We can guarantee that to customers. We've got some work to do in the areas that I talked about. But it's not about additional investment. The investment has been made. It's about earning back the service reputation, which also will help us in terms of how we message utility and value uniquely in the marketplace.

Great. Chris, great to see you.

Ben, you've probably heard this from a few people by now. But I just -- together with the audience here and those on the webcast, I know these are your last days. I don't know how many of these that we've done together and how many dinners, breakfast, whatnot that we've had. I just wanted to say thanks to Ben. Really from an industry perspective, he's -- I don't know what you -- statute is probably the wrong word, but he's an institution inside the TMT space and in cable in particular. And as he goes off to be a programmer, we'll see you on the other side. We'll partner with you in every way. But I wanted to say on behalf of Charter, behalf of Spectrum, thank you very much for what he's done for the industry.

Thank you very much, Chris.

Appreciate it.

Hello, and welcome to Charter Communications Fourth Quarter 2025 Investor Conference Call. [Operator Instructions] Also as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

I will now turn the call over to Stefan Anninger.

Thanks, operator, and welcome, everyone. The presentation that accompanies this call can be found on our website, ir.charter.com. I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings and we encourage you to read them carefully. Various remarks that we make on this call concerning expectations, predictions, plans and prospects constitute forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements reflect management's current view only, and Charter undertakes no obligation to revise or update such statements.

As a reminder, all growth rates noted on this call and in the presentation are calculated on a year-over-year basis unless otherwise specified.

On today's call, we have Chris Winfrey, our President and CEO; and Jessica Fischer, our CFO.

With that, let's turn the call over to Chris.

Thanks, Stefan. In 2025, we continue to compete for customers by delivering great products at great prices with continuously improving service. We added nearly 2 million mobile lines for growth of 19%. And we remains the fastest-growing mobile provider in the United States. In video, we dramatically reduced our video losses. And in the fourth quarter, we grew our video customers despite well-known headwinds. The video product improvements we've made over the past 2 years, which improved connectivity relationships, are having an impact.

In Internet, competition for new customers remains high, but customer losses improved year-over-year. Our revenue was down about 0.5% in 2025 driven by customer losses and challenging political advertising comparison, while EBITDA grew by about 0.5%.

The operating environment for new sales, in particular, Internet, continues to reflect low move rates and higher mobile substitution, along with both expanded cellphone Internet competition and fiber overlap growth, similar to earlier in the year. Collectively, that drove fourth quarter Internet sales slightly lower year-over-year.

Churn improved year-over-year, as expected given the late -- given last year's ACP-related impacts. And Internet churn, including nonpay churn, remains at low levels.

With 2026 in full swing, our shareholders should know that we are a highly competitive group and we intend to win in the residential and business connectivity marketplace. In this environment, getting back to positive net additions is a game of inches. We're incredibly focused on: one, more clearly messaging our superior value and utility; and two, providing the best-quality service in the market in a way that is recognized by our customers and our service is a competitive advantage.

Let me go through how I believe we'll win. Assuming regulatory approval of Cox, Spectrum will cover over 70 million households, which gives us additional scale to develop new products and services, serve more business customers and save customers significant money. In 2026, we'll nearly complete our rural build-out, providing us with over 1.7 million new subsidized rural passings with growth for years to come, as well as upside from the densification of higher-growth areas in places like Texas, Florida and the Carolinas.

We're gig-capable everywhere. And by the end of this year, 50% of the current Spectrum network will be upgraded to symmetrical and multi-gig service, with significant work on the remaining 50% in flight and moving to completion in 2027. Those capabilities matter long term as customer data usage continues to increase. And we're working with content owners in Silicon Valley to create applications and next-generation products like Spectrum Front Row. That's immersive content with Apple and the NBA that makes full use of our ubiquitously deployed, largely [ fallow ] fiber-based network.

Bandwidth-rich products have always followed our network capabilities. And think of the last few hundred feet of our fiber-powered network is 1.8 gigahertz of continuous spectrum delivered at full capacity to each individual home and business, with the ability to play cellular radios nearly everywhere along the way, [ fiber deep, power ] and right of way. We already have a fully converged connectivity service in 100% of our footprint, now with expanding hybrid [ MVNO ] capabilities through CBRS and WiFi to drive our seamless connectivity advantage at gigabit speeds wherever you go. So data usage will continue to increase for both wired and wireless networks, and customers don't know or care which network they're on as they move about. It just has to work. That is the service we uniquely provide.

In mobile, we have a structural and strategic mobile reselling agreement with Verizon for current and future services, and we'll launch an additional MVNO for business with T-Mobile in the next 6 months. Nearly 90% of Spectrum Mobile traffic goes over our network already at higher speeds, making us the fastest mobile operator with the best prices. Mobile is profitable, it will continue to grow and improves broadband churn meaningfully with the opportunity to drive more Internet sales.

Our network carries more mobile traffic than any operator in our footprint. So we are a facilities-based provider of mobile services, with 5G macro cell towers as backup. Our owners' economics of a differentiated network create long-term advantage, which means we can save customers over $1,000 in a single year with Internet and mobile.

And now we can do the same with video. Our video product and platform is now a killer app. When our video customers activate their included ups, video and broadband churn improvement is meaningful. Our video product can become another unique selling tool. Seamless entertainment with all the key programmer apps included as part of our service, over $125 [indiscernible] per month.

And finally, customers have a plan in Zumo that brings unified search and discovery for all your live TV and apps: utility and value.

At Spectrum, we've made huge investments in our 100% U.S.-based sales and service over the past 5 years with our own employees whose tenure and skill improve each month, supported by market-leading pay and benefits. That investment is already made, and it is a competitive advantage. And we continue to invest in technology, including AI, to increase customer satisfaction through self-service where customers want and enhancing our employee service capabilities. That's across sales, call center services, field operations and the network itself.

In 2026, for the first time, [ granule ] incentives will include Net Promoter Scores. We have competitive advantage with our service capabilities and we're going to make sure we earn credit, the reputation that reflects that significant investment from our customers one by one. And we're going to guarantee all of it. We'll guarantee Internet service through a new Invincible WiFi product will launch in February, symmetrical and multi-gigabit service with a WiFi 7 router and battery backup and backup 5G service, seamlessly switched on the same SSID for storms or outage, as well as WiFi 7 extenders for larger homes. Invincible WiFi is a market-first product combining WiFi 7 with 5G and battery backup.

Over a year ago, we deployed the nation's first wireline and wireless service commitment, guaranteeing transparency, reliability and same-day installation and service. Internally, we're now moving that service window target to 2 hours, 1 hour for business, at your doorstep from the time you call. None of our competitors match our service here.

In addition to backing our customer service guarantee with credits, beginning in February, we'll now guarantee you $1,000 of savings per year when you take Internet and 2 lines of mobile from Spectrum. If we can't save you $1,000 or more when compared to the big 3 telco carriers, we'll credit the difference on your build during the first year. Guaranteed connectivity, guaranteed service and guaranteed savings, with the best products in the U.S. uniquely serviced by U.S. employees 24/7.

We want to be America's Connectivity Company, with hyper local service delivered by your neighbors or our local employees and with community investment, including unbiased hyperlocal Spectrum news.

All of this will expand to Cox following closing, assuming regulatory approvals. Our plan there is to introduce Spectrum pricing and packaging, rapidly grow mobile, similarly return to Internet growth. And given Cox's low video penetration in our capabilities, we expect to grow video in the Cox footprint for a period of time as well. I also believe the combination of our very complementary B2B capabilities will create growth synergies we didn't anticipate when we did the deal.

[ Winning ] connectivity relationships in a cyclical and newly competitive environment is a game of inches. I'm not projecting broadband relationship growth this year, but we expect to see an improved trajectory from the investments we've made over the past 3 years. The recipe for winning here is simple: best connectivity, best overall value with the best service. And we aren't perfect and we own our mistakes with customers, but we are improving the way we communicate our value, utility and quality service across our footprint. But I do believe we're the best positioned company in the connectivity industry, and we will get better.

From a financial perspective, we expect our operating plan to deliver EBITDA growth this year. And the investments we've made to lower service transactions and our efficiency programs, including early benefits from customer and employee-focused AI tools, will continue to provide a tailwind for many years to come.

2025 was our peak year of capital expenditure, and capital expenditures after this year will decline significantly. Free cash flow will take off from an already significant amount. We expect our capital intensity to return to 13% to 14% of revenue by 2028 at Charter stand-alone. And we can probably do the same even with the Cox integration.

One of the bigger debates around Charter has been about the best way to deploy our significant free cash flow. And that cash flow is meaningful and it's about to become much larger. Debating how to allocate that cash flow is a first-class problem to have in my mind, and Jessica will provide an update on our balance sheet strategy and capital return priorities in a moment. But the key focus for me and real driver the team and for value creation of our company is to make sure we deliver long-term customer, EBITDA and cash flow growth, and demonstrate that long-term growth rate for investors along the way. If we do that, the rest will take care of itself.

Now I'll pass it over to Jessica.

Thanks, Chris. Before covering our results, I [ want to mention ] that we made several reporting changes to our customer and financial data this quarter, which are detailed in the footnotes to the trending schedule we issued today. To better reflect the converged and integrated nature of our business and operations, we now present our customer relationship statistics inclusive of all mobile customers, including mobile-only customers. We've also added a total connectivity customer section to the trending schedule, which represents all customers receiving our Internet or mobile connectivity services. We've also revised our mobile lines reporting methodology to better align with how we report our other services.

Please also note that any forward-looking financial or customer information that we provide in today's discussion or presentation does not include Cox or any transition costs related to Cox integration planning, consistent with how we reported during the TWC, BHN transactions.

Now let's please turn to our customer results on Slide 9. Including residential and small business, we lost 119,000 Internet customers in the fourth quarter, better than last year's fourth quarter, with lower connects year-over-year, more than offset by lower disconnects driven by last year's ACP-related disconnects. In mobile, we added 428,000 lines with higher gross additions year-over-year and higher disconnects on a larger base. Net adds in the quarter were lower due to heavy device subsidy activity by the big telco competitors, including the new iPhone 17 through the holiday sales cycle.

Video customers grew by 44,000, versus a loss of 123,000 in 4Q '24, with the improvement primarily driven by lower churn year-over-year resulting from the new pricing and packaging we launched last fall, Zumo and seamless entertainment product improvements, including our Programmer App inclusion packaging. New connects and upgrades to our fully featured video package with apps were up year-over-year. Our video customer results also include a small benefit related to YouTube TV Disney dispute.

Wireline voice customers declined by 140,000 with year-over-year improvement, primarily driven by lower churn.

In rural, we continue to see a strong customer relationship growth. We generated 46,000 net customer additions in our subsidized rural footprint in the quarter. And in the fourth quarter, we grew our subsidized rural passings by 147,000 and by over 483,000 over the last 12 months, above our 450,000 target. We expect subsidized rural passings growth of approximately 450,000 in 2026, our last large build year, in addition to continued nonrural construction and fill-in activity.

Moving to fourth quarter revenue on Slide 10. Over the last year, residential customers declined by 1.2%. And residential revenue per customer relationship also declined by 1.2% year-over-year, given the growth of lower priced video packages within our base, a decline in video customers during the last year, $165 million of costs allocated to programmer streaming apps and netted within video revenue versus $37 million in the prior year period and our 3 months promotion for new residential customers that we mentioned on our last call and which is no longer in the market. Those factors were partly offset by promotional rate step-ups, rate adjustments, the growth of Spectrum Mobile lines and $34 million of hurricane-related residential customer credits in the prior year period.

By the way, the streaming app [ GAAP ] allocation headwind to residential revenue that I mentioned a moment ago should continue to grow over time as more customers authenticate into our streaming app offers. It could be as much as $1 billion for the full year 2026. And as a reminder, the GAAP adjustment is ultimately neutral to EBITDA as an equal and offsetting benefit is applied to our programming expense line every quarter.

As Slide 10 shows, in total, residential revenue declined by 2.4% and was down by 1.2% when excluding costs allocated to streaming apps and netted within video revenue in both periods.

Turning to commercial. Total commercial revenue grew by 0.3% year-over-year, with mid-market and large business revenue growth of 2.6%. And when excluding all wholesale revenue, mid-market and large business revenue grew by 3%. Small business revenue declined by 1.3%, reflecting modest year-over-year declines in small business customers and in revenue per small business customer.

Fourth quarter advertising revenue declined by 26%, including the impact of less political revenue. Excluding political, advertising revenue was essentially flat year-over-year. Other revenue grew by 7.3%, driven by higher mobile device sales. And in total, consolidated fourth quarter revenue was down 2.3% year-over-year and down 0.4% when excluding advertising revenue and Programmer App allocation.

Moving to operating expenses and adjusted EBITDA on Slide 11. In the fourth quarter, total operating expenses decreased by 3.1% year-over-year. Programming costs declined by 8.4% due to a higher mix of [ lighter ] video packages, a 2.2% decline in video customers year-over-year and $165 million of cost allocated to programmer streaming apps and netted within video revenue versus $37 million in the prior period, partly offset by higher programming rates. Other cost of revenue increased by 2.4%, primarily driven by higher mobile service direct costs and mobile devices, partly offset by lower advertising sales costs given lower political revenue and lower franchise and regulatory fees.

Cost to service customers, which combines field and technology operations and customer operations, decreased 3.9% year-over-year, primarily due to lower labor costs and lower bad debt expense. Excluding bad debt, cost to service customers declined 3.2%. Marketing and residential sales expense was essentially flat year-over-year due to lower labor expense, offset by a change in sales mix to higher cost sales channels. Transition expenses related to the pending Cox transaction totaled $15 million in the quarter. And finally, other expense declined by 3.1%, primarily due to lower labor expense.

Adjusted EBITDA declined by 1.2% year-over-year in the quarter. And for the full year 2025, EBITDA grew by 0.6%. For the full year 2026, we are planning for slight EBITDA growth, excluding the impact of transition costs. Note that first half 2026 EBITDA will be more challenged than second half EBITDA given the onetime benefits we saw in 1Q last year and the benefit of political advertising that we expect in the second half of 2026.

Turning to net income, we generated $1.3 billion of net income attributable to Charter shareholders in the fourth quarter, compared to $1.5 billion in the prior year period, given lower adjusted EBITDA and higher income tax expense.

Turning to Slide 12, fourth quarter capital expenditures totaled $3.3 billion, $23 million higher than last year's fourth quarter, primarily due to 2 multiyear software agreements that were accrued in the quarter and higher network evolution spend, which lands in upgrade rebuild spend. 2025 capital expenditures totaled $11.66 billion, slightly above our recent expectation for $11.5 billion, given the new software agreements I just mentioned, which will drive other benefits across the business. We expect total 2026 capital expenditures to reach $11.4 billion.

On Slide 13, we have provided our current expectations for capital spending through the year 2029, and now including line extension spending associated with the BEAD program, which totals about $230 million and is mostly in 2027 to 2029. For the years 2025 through 2028, the outlook you see on Slide 13 is in line with what we have provided in January 2025, with the inclusion of BEAD, some modified timing across the years and slight changes across category. As I mentioned, we have added 2029 to our outlook and expect it to exhibit about the same amount of spend as we expected for 2028.

Looking beyond 2026, we expect total capital spending in dollar terms to be on a meaningful downward trajectory. And after our evolution and expansion capital initiatives conclude, our run rate capital expenditures should be below $8 billion per year. Just to highlight, that reduction in capital expenditures on its own from approximately $11.7 billion in 2025 to less than $8 billion in 2028 is equivalent to $28 of free cash flow per share based on today's share count.

Turning to free cash flow on Slide 14, fourth quarter free cash flow totaled $773 million, about $200 million lower than last year given a less favorable change in working capital and higher CapEx, partly offset by lower cash taxes due to the One Big Beautiful Bill Act and cash paid for interest.

Turning to cash taxes. Fourth quarter cash taxes totaled $139 million, and while full year 2025 cash tax payments totaled just under $900 million. We currently expect that our calendar year 2026 cash tax payments will total between $500 million and $800 million.

We finished the fourth quarter with $95 billion in debt principal. Our weighted average cost of debt remains at an attractive 5.2% and our current run rate annualized cash interest is $4.9 billion. During the quarter, we repurchased 2.9 million Charter shares totaling $760 million at an average price of $259 per share. As of the end of the fourth quarter, our ratio of net debt to last 12-month adjusted EBITDA remains at 4.15x and stood at 4.21x pro forma for the pending Liberty Broadband transaction. During the pendency of the Cox deal, we plan to be at or slightly under 4.25x leverage pro forma for the Liberty transaction.

As you may recall, when we announced the Cox transaction, we committed to move our target leverage to the midpoint of a 3.5 to 4x range. We're very comfortable with our balance sheet and our ability to pivot rapidly given our significant free cash flow generation, which provides flexibility to reduce leverage by up to 0.5 turn annually over the next several years. But we have also heard our shareholders' preference for less leverage during a lower-growth period. So today, we are moving our post-transaction target leverage to the low end of a new 3.5 to 3.75x range, which we expect to achieve within 3 years following close.

Even with this delevering, we continue to expect significant ongoing capital returns to shareholders. Lower leverage will drive some impact to our weighted average cost of capital which should, in turn, positively affect valuation. It should attract a broader constituency of holders to the stock and open the potential for improved debt ratings, including an investment-grade corporate family rating, although that is not an explicit goal.

We will continue to generate very meaningful and growing levels of free cash flow. And while we always reinvest in the business as our top capital allocation priority, there are no large-scale projects like RDOF or network evolution on the horizon. We expect to revert to normalized CapEx in the range of $7.5 billion to $8 billion per year by 2028. We will have significant additional capital available to return to shareholders. And following our normal course review of accretive uses of cash flow with our Board and consistent feedback from shareholders, we plan to continue to return that capital through our share repurchase program.

We have significant free cash flow growth in front of us, but ultimately, to overcome the perception of negative perpetuity growth implied in our valuation today, we need to win in the marketplace. And as Chris outlined, that's where we are focused and where we believe we can drive value going forward.

With that, I'll turn it over to the operator for Q&A.

[Operator Instructions] Our first question will come from Craig Moffett with MoffettNathanson.

Let me start with wireless. First, you signed a new agreement that both Comcast and Verizon have talked about. I wonder if you could just say anything about what that new agreement looks like and whether it has any impact on your [indiscernible] and offload strategy. And then on that point, Chris, you said that you're close to 90% offload. I think you had previously said 85% a couple of quarters ago and then, last quarter, I think, said 88%. That already is a 20% reduction in how much you're sending over the wholesale network that you're leasing from Verizon. Is the 90% just a reference to that similar to 88%? Or has it gotten even -- has the offload gotten even better since then?

Sure. Look, for obvious reasons, we'll stay consistent with what Comcast and Verizon have said as well. But that's, for the most part, we've amended and modernized our long-term MVNO agreement with Verizon and continue to support profitable growth for both Charter and Verizon. It is a very good deal for them and a relationship for both. As you know, it's long term and the market evolves over time. And so it's just natural that you have partners inside of a deal take a look and want clarity on certain things. So I'd look at it more in that context as opposed to anything else. We have a structural and long-term agreement that underpins everything that we're doing here and that hasn't changed.

On the 90%, I think it's around 89% or something like that, it's bumping in that area. So it's moved up a bit, but it's on a steady climb. And as we've always talked about before, the reality is that we have a very attractive structure and partnership with Verizon, and so we can be opportunistic here. But because of the favorable economics that we've always had with Verizon and continue to have, there's a balance there in terms of the pace of CBRS rollout, and we're focusing that on positive ROI areas.

I'll mention, we did roll out to the 23 markets last year that we talked about for CBRS, probably do, I think, maybe 20 or so more. But we'll be in all the states where we have CBRS [ power ] licenses within this year. So we continue to roll out there at an opportunistic pace.

Your next question from Ben Swinburne with Morgan Stanley.

Chris, you guys have been competing in the market with a converged strategy for a number of years now. I'm wondering if you could maybe assess the position of Spectrum Mobile, in particular, in the market with consumers. You guys have been marketing the product for a long time at very attractive price points. But you've been building a new product and new brand for some time. Where do you think that sits with consumers today? Is there more work to do? And maybe tie in how the sales force is executing in your mind on selling that into base into new customers. Obviously, it's core to the long-term growth of the company.

It is. So the convergence strategy is working. You can see that in our results. On one hand, you was looking and said, well, the net add rate ticked down a little bit, but it ticked down in the an environment with a tremendous amount of flooding the market with subsidies that we didn't match and yet we continue to grow, which I think shows and demonstrates the value of the product that customers perceive that we have. I don't think that customers are ultimately, at the end of the day, fooled. They can be entertained with an offer at one point in time, but at the end of the day, you look at the total amount that's on your bill, and if you compare that of our competitors to what our bill looks like, you can buy a lot of advanced telephones, cellular devices with that savings that we provide. So we're the all-in best product for both speed as well as savings.

Now your question about market perception, Spectrum Mobile is still a relatively new brand in the marketplace and getting that product from your cable providers and still relatively new concept. So our brand awareness continues to go up every year. The reputation of the product continues to improve and settle in. The savings recognition and the word of mouth, I think, is improving. But it will take time for that to continue to develop.

And if you think back to some of the things that we did around video, there are other products: broadband, video, even phone, can both be an asset as well as it can be a liability to the mobile reputation in a particular moment in time. And so when we have programming-related rate increases that go through on the cable bill and impacts the Spectrum customer there [indiscernible] through a little bit to mobile. So that's a piece that we try to manage and think through as well.

But I think the -- do I think there's more that we can do? Of course. But we're on a steady path to increasing brand awareness. I think the increasing capabilities, the convergence, is recognized. Most customers still today haven't picked up on the fact that as you're moving around across the country, both inside our markets as well as other MSO cable operator markets, that you're actually connecting to faster speeds through WiFi. For those of our investors who live in, for example, New York City or L.A., I just encourage you as a Spectrum Mobile customer, drive around and walk around, and what you'll notice is that you're actually attached not to a 5G network, but you're attached to Spectrum Mobile at a vastly superior speed than you would have gotten with 5G.

And we haven't -- in my mind, we have work to do to really show and demonstrate that product capability in the way that we go to market. And I think that's upside for us, because it is better speeds, it's at a better price. So eventually, word of mouth gets around that it is a great product, it's better than anything else out there and it saves you money. So I'm positive. And the fact that we can do that in an environment that had so much, as I said, flooding the market with subsidy, I think, gives us a lot of confidence.

Your next question will come from Vikash Harlalka with New Street Research.

I have one quick one for Jessica. Chris, could you provide us any details on how your market share has trended in markets where you've competed against fiber operators for a few years now? And how do you see that evolve over time? And then one for Jessica. Jessica, you said you expect EBITDA growth to be slightly positive this year. By our estimate, political advertising adds about a percentage point to EBITDA growth. Could you grow EBITDA higher than 1% this year?

Sure. So I'll take the first question related to fiber competition. We've competed well against fiber for many years. We expect to continue to do so. The reality is that's been going on for 15 years, so we have a lot of experience and we have a lot of data and runs there. We have greater penetration than our fiber competitors, even in mature fiber markets. And when it happens, overbuild impact tends to be limited to a few percentage points of Internet penetration during the first year [indiscernible] a new overbuilding vintage, where, as it were, coming online. It's not ideal for us, but the pace of that's tied to the pace of overbuild and that's been fairly consistent. And in the meantime, as a result of all that, we really don't see overbuilders reaching their ROI goals within our footprint now or in the future.

The piece that I would add to that is -- and I know you've done some analysis around this. Obviously, the introduction of fixed wireless access has impacts on everyone's penetration. I think that needs to be factored in as well. But inside of our footprint where we have a lot of experience, a lot of years of fiber overlap, as I mentioned in the prepared remarks, that's not new. And while it is new competition, and that in itself presents some challenges, it's one that we've dealt with over time. The bigger issue over the past 3 years is the macro environment in terms of housing, [ low ] moves and the introduction of, even though it's an inferior product, is a brand-new competitor in the marketplace with expanding footprint through self-funded Internet or fixed wireless access.

So on your second question, which I think is will we grow EBITDA when excluding advertising, I think the answers maybe. It's certainly our goal, like EBITDA growth is challenged in 2026 given the headwind from broadband subscriber declines. But we think we can overcome that with the combination of mobile growth, changing mix of Internet driving positive ARPU growth, continued operational improvements and attentive expense management, in addition to what we see from the political advertising space.

Your next question will come from Jessica Reif Erlich with BofA.

I guess 2 questions. Of course, I'm going to ask on video. Chris, what do you think the sustainability of the video sub gains are? And is there any color that you can provide on first quarter trends? And then just to follow up with your comments, just [indiscernible] really quickly, but Silicon Valley, can you give a color on what you're doing, what the endeavors are, what's the goal and what's the timing of maybe some products coming out?

Sure. Look, for video, I want to be really clear. Our North Star here, our goal is not to have net gain of video just for net gain stakes. Our goal is to have a video product that supports broadband acquisition and broadband retention. And I think it's a powerful tool to do that if we provide value and utility for customers. .

I do, and I know you spend a lot of time in this space, I do think it's good for the ecosystem, everything that we've done. And of course, we're pleased about that. But that's not what our shareholders ask us to do, and so it's a nice side benefit. But in getting there, I think it does help broadband.

I think it's important to thank the programmers here and particularly some of the key execs, I'm not going to name them out, but it's a handful and they know who they are. They leaned in and they continue to lean in to help us. I think they believed in what we were doing. It wasn't easy to get there, but eventually did believe what we're doing. And the reason is because, again, with the viewpoint of solving for our broadband customers, we're really solving for customers first and providing that value. And we're unique in the relationship with the programmers because we bring a broadband distribution capability that most others don't have. And that means that we can serve all of these customers with the programmer's product, whether that's a skinny bundle, whether that's full expanded product with apps. We get to put in ad-free upgrades that benefits the customer at a much lower incremental cost as well as the programmer. And then from their perspective, the direct-to-consumer apps that we sell a la carte to our 30 million customers now, and that's going to be an increasing component.

And so what we've been able to do with video is create the best economics and choice for the customer, which means that we're actually -- I think we're the best channel distribution path to maximize the opportunity for the programmer as well. And so back to your question about video growth, I mean the ecosystem is still really challenged. Programming costs continue to go up, in particular, retrans is a real problem. But around that, I think you'll see us continue to innovate. We do have some new product ideas. We'll talk to the programmers about that in the course of this year. But the key for us is to go back to connectivity, acquisition and churn.

So on your net gain question, it's not the goal. You're on the razor's edge. If you use that parallel, there's -- and you said, well, what happened in Q4? Q4 was really no different than Q3. There's a slight difference between Q3 and Q4 that went from net loss to net gain. So you can just as easily flip back into the net loss category and it's -- the net gain isn't our goal. I think the parallel there is when you're on the edge and you have a high amount of gross adds and a high amount of gross disconnects, it's a dangerous place to be in terms of volatility. I think there's some parallel there to Internet in the way that we need to get ourselves out of that space. And when I talk about game of inches, that really applies to all subscription businesses. And if you can get a more commanding lead through the things I talked about ways I think we win, I think that helps us in Internet, which really is the goal here together with mobile.

Silicon Valley, the big overarching thing that we're trying to do there is communicate to the people who develop products and software that they should stop developing to the least common denominator in terms of network capabilities. That because the cable ecosystem covers nearly in the entire country, unlike fiber overbuilders who do a lot of cherry picking, red lining, we upgrade everywhere, we have -- already, we have a gigabit everywhere we operate. We're upgrading to symmetrical and multi-gig speeds effectively nationwide. And that's the platform, with low latency, by the way, and that's the platform that software developers and product developers should be developing to. They have unfettered access to that network, convergence, multi-gig. And the product capabilities that come about as a result of that, I think they're significant, and our networks put us in a new place to go deliver that.

And so the product that we supported, Apple and the NBA with Spectrum Front Row. Do we need to own those rights? Do we need to own that product? No, absolutely not. In fact, what we're just trying to do is show the way that a ubiquitously deployed network in the U.S. exists that can carry that type of 8K or 16K product that provides an immersive experience, that can actually have caching at the local edge in a way that hasn't been thought of before. And given the fact that just at Charter alone, we have 1,000 hubs or localized data centers that provide local edge compute. And so we have a lot of assets that aren't being used today. Our experience has been, once people understand that these networks exist and their capabilities there, that they'll develop products to go do that.

And so our time out in Silicon Valley has really been spent around making sure people understand that this platform has been built for them. There are things that we can do with it. If you take a look at what we've done with Amazon in terms of convergence and offloading, if you think about the things that we could do in the electrical vehicle market in terms of offloading in a way that's attracted for them and really make use of the tools that we have. So that's the major goal. The biggest one is we've, internally, we've called it the fill-the-pipe tour, and to go really explain to people that this network is available there for them and they should develop to it.

Operator, we'll take our next question.

Your next question will come from Michael Ng with Goldman Sachs.

I wanted to ask about operating expense growth next year and investment opportunities. You guys are obviously seeing really good momentum on the video side and streaming app conclusions and obviously also with convergence and Spectrum Mobile. So how are you balancing the commitments to EBITDA growth with the potential to invest to drive these opportunities a little bit faster? And how do you balance that with efficiencies that you could potentially realize?

I think Jess can chime in for a second. But strategically, if you step back, we've made the investments. So if you think about the place we're coming from, we've made the investment by keeping our pricing low. We've made the investment by having a fully U.S.-based in-source sales and service capability across the country. We've made the investment in our technology platforms. And so that gives us the ability to have increasing efficiency through the business and still be able to innovate and develop new products along the way and to be able to manage both your foot on the gas and foot on the brake at the same time.

Yes, I think that's right. And if you think about how that translates into something like cost to service customers, like ultimately, I expect that cost to service customers to be slightly down over the year, in the year versus last year. But a big chunk of that is related to improvements in operating efficiency and in the way that we utilize technology to make our services more efficient.

I guess on top of that, in marketing and resi sales, last year, we had seen some pretty substantial growth in the year-over-year. I expect that to be meaningfully slower this year than what we saw last year, largely related to sort of investment we already made sort of bringing the expense rate up and then changes that we've made that I think Chris talked quite a bit about inside of last quarter to really try to find the right way to drive our message into the marketplace and to do so efficiently. And so I think with those, we believe in our ability to generate EBITDA growth while still doing the right things for the business to drive medium and long-term growth, which ultimately has always been sort of the strategic goal of the management team.

Operator, we'll take our next question, please.

Your next question will come from Michael Rollins with Citi.

There's been a bit of discussion lately around pricing strategies for these services and whether companies should move to everyday value pricing versus that lower, higher promotional stack. And just curious, Charter's latest views on how you're approaching pricing in that strategy, the sustainability for what you've been employing now for quite some time.

Sure. You know this, but by way of background for everybody else, in September of 2024, we introduced new pricing and packaging. And really what that pricing and packaging did was lower our promotional price for Internet as well as our retail price for Internet, [ that's ] all tiers, and both a stand-alone and bundled and to provide a pricing lock for up to 2 to 3 years depending on how many products you bundled at those lower prices. And despite that, we've been able to maintain relatively consistent ARPU, in many cases, growing.

And in parallel, use that to first reactively and then proactively migrate good portions of the existing base to lower product pricing. But in the meantime, maintain or actually grown customer relationship or through that process, absent some of the video tier mix that is well known, because people are taking more products for household. And so that's been a long-held strategy at Charter, that you can change your product pricing [indiscernible] and you can have higher customer relationship ARPU by getting higher product penetration. And that was the goal of that pricing packaging.

At the end of 2025, about 40% of our footprint had that new pricing and packaging, we'll probably be at 60% at the end of this year. And so we've been able to manage an environment where you are really lowering your broadband pricing promotion and at retail both in stand-alone, but more importantly, in bundled pricing and packaging, in a way that creates significant savings for customers, and whether that's mobile where we can save you over $1,000 a year, or it's in video where actually now we can also save here over $1,000 a year because of the inclusion of the apps, we're using these tools that we have that are really unique in the marketplace. We can offer mobile everywhere, we can offer video everywhere.

And I know you didn't ask it, but -- so I was thinking about Mobile Everywhere, I know one of our large competitors the other day mentioned that in their wireline footprint, which is limited to where they offer mobile, they thought they could get normal penetration to 75% to 80%. I thought that was interesting because, if that's true, and it was said by one of our large competitors, I mean, the implications for Charter and Comcast are, I think, dramatic, if you can get 75% to 80% penetration on our broadband footprints. And that's sustainable. Well, maybe to the earlier point, we don't have the brand to go do that, but a structural advantage without the same macro cell tower and spectrum investments that's required out of the big telcos, and 90% of our traffic goes on a much faster multi-gig network.

So we have a product advantage and we have the ability to offer those products ubiquitously to cover all of our DMAs essentially. And so that provides a marketing and service advantage. And then we can save customers a lot of money with the pricing strategies that we have, back to your original question. So we're pleased with where we're heading. It's -- this is a -- it's a tough migration path to manage, but we've got a lot of experience doing it and we've done it many times, and we'll actually end up doing the same thing with Cox and look forward to doing that assuming we get regulatory approval there.

Maybe it would helpful there and translate a little bit of that into the financials as well, because I know folks are focused on sort of what does that mean for ARPU across the business. And we don't often talk about product [ but I want to ] go there because I think it's helpful in this context as we're sort of doing the pricing migration. Ultimately, I think we expect Internet ARPU to grow this year, though more slowly than it has in prior years as we drive Spectrum pricing and packaging through the footprint.

I think mobile ARPU has been declining as more customers take our gig product, which includes unlimited plus at unlimited pricing, and as we see some contra revenue from phone balance [indiscernible] plan. I think that we're at a low point there and so there might be additional mobile ARPU declines in the year-over-year going forward. But sequentially, I think that we've bottomed out on that front.

And then there are multiple headwinds that impact video ARPU that make that one difficult. You've got programmer streaming app allocation, which continues to accelerate. You have some more unfavorable bundled revenue allocation and you have a higher mix of skinnier video tiers. If you think about that together with programming and programming cost per video sub, I expect that programmer cost per video sub will be up in low single digits when you exclude that program or streaming app allocation. And we did pass through some programmer costs in our video pricing at the beginning of this year.

So ultimately, what happens then, think of it in margin instead of individual costs, so you might have video ARPU continuing to decline, but it's really based on those impacts.

Your next question will come from Steven Cahall with Wells Fargo.

First, Chris, just going back to fiber, you said you don't expect the fiber overbuilders to reach their ROI goals. And we haven't necessarily seen that pressure translate into a slowdown, especially from the telcos. I don't know if that's due to lower cash taxes or something else. But I was wondering if you could just speak to how you expect the competitive environment to play out when we might actually see a slowdown in that activity that could lessen some of the competitive pressure.

And then also just on the promotional environment. I thought Slide 5 was interesting with maybe a $40 gig offer in the market. I was just wondering if you see a really attractive opportunity to be more promotional this year or if I'm misreading that slide. But if you are, what you think that could do to subscriber trends as we move through the year?

Yes. So let me start with that one first. The $40 gig is when bundled with either 2 mobile lines or video. That's been in the market since September of 2024. So that's our every day pricing that's out there that's been in the market. And clearly, it's had a big impact on the percentage of gig uptake in -- amongst acquisition. So it's not new and we think it's positive.

The ROI question, I mean I've said this for 25 years, that when we take a look at ROI, we think about classic IRR, cash-on-cash payback, years for that return to take place. And I guess the danger is always that other people's ROI may be based on a going concern as opposed to a real financial ROI, that I'm not sure that you should be investing for going concern ROI because I think most shareholders would say we'd rather have that capital back as opposed to deploying it in a more return way. But that's not new. I mean that's existed in -- with the telcos for at least, I've been in here for almost 30 years and it's always been the case. So that makes it dangerous when your competitor isn't focused on traditional financial returns and shareholders are either confused or willing to look the other way and not insist on understanding what those ROIs are. I think that's -- and that's not me complaining. That's just saying I think that's what the case is. I don't think it's going to change, and we have to be able to compete irrespective of that. And we do. And we've been doing that for a really long time.

So given what I just said, I don't know when the competitive slowdown occurs. I do know that as you get deeper into the market, the density gets lower and the cost per passing ultimately has to increase when the density gets lower. And so there's a natural throttling mechanism that exists there relative to what they've done in the past, whether it's taxes or interest rates that put an additional lever on that, I'm not sure. But we're -- that's not our job. And so our job is to go compete against whatever is being brought to us, and that's what we've been doing since fiber has been doing overlaps with overbuilds for the past 15 years or so.

Operator, we will take our last question, please.

Your last question will come from Frank Louthan with Raymond James.

Great. When you -- looking forward here, as far as some of the promotional activity that you have, how long do you see the need for price locks? And what are sort of your thoughts on that as a long-term solution? And then how quickly could you think you can get the Charter -- the Cox customers up to levels of wireless penetration that you experience in your base footprint?

Look, we don't have any change -- plans to change our pricing strategy. I think the price locks is both a good competitive reaction on our part and it's something that gives customers a lot of comfort and the ability to switch. And so I think that's here to stay. Could you see over time that we evolve that further into a next evolution? Yes. But we're not at that stage today. We actually think what we have is working and will work. But we'll always continue to modernize our pricing strategies. So I don't see any big change today.

On the wireless or the mobile penetration at Cox, I think you should take a look at maybe not our early days of Spectrum Mobile penetration because we were still putting the product together, getting larger brand awareness. But I think you can take a look at the Spectrum Mobile penetration and Charter curve, I think that's a good indication. I would expect the earlier days to be much faster. And that's simply because we're a better operator in that space than we were, whatever it is, 6, 7 years ago. In terms of our platforms, our sales channel, our marketing, our national brand awareness, it's all in a much better place. But I think an improvement to that original curve, it's probably a good starting point for people to think about how we can get into the market there.

Operator, I'll pass it back to you to close out. Thank you.

Thank you for joining today's call. You may now disconnect.

Thank you all.

Okay. I'm John Hodulik, Media and Telecom analyst here at UBS. I'm very pleased to introduce Chris Winfrey, the President and CEO of Charter. Chris, thanks for being here.

Good to be here.

So we've got 35 minutes for some Q&A. And if anybody has any questions, please log them in through the app, and I can filter into the conversation. As we do every year, Chris, maybe we could start by setting the table by giving us a sense for the company's priorities as we look out into 2026.

Sure. Look, priority #1 is to position the company to return to broadband growth. And that starts fundamentally with doing a better job of articulating the utility and the value that we bring in seamless connectivity as well as seamless entertainment. I think the reality is that ubiquitously deployed, we do have the best products and we save customers a tremendous amount of money, but we have to do a better job of articulating the the value of the utility that's there. The second piece, I would say, is repositioning ourselves from a service provider perspective. We've made that investment with the 100% onshore U.S.-based sales and service.

But positioning the company to really delight the customer and to execute on the investments that we've already made that investment has already been completed. But to put ourselves in a position to deliver on the customer commitment, the very public customer commitment that we've made as well as moving towards a much better Net Promoter Score over time. And then I think in terms of priorities, I think about the ongoing investments that we have, network expansion, which is nearing its completion network evolution, which includes convergence, and that's working well.

The video transformation, which is designed to support the connectivity services, and that's going well. And then really, as of late, more than just traditional AI, but moving towards agentic AI to fundamentally assist in that higher quality service, but also to potentially radically change our cost structure underneath. And so you have the completion of these large capital programs which is going to deliver a significant amount of free cash flow growth, but at the same time, returning to broadband growth, putting a priority on service excellence into our service and then the opportunity to radically transform the cost structure as well and position the company for long-term growth.

Right. That's a great overview. And I think we're going to touch on a lot of those topics. But let's -- as you did, let's start with the broadband market. And first with fixed wireless, could you talk a little bit about sort of the impact you're seeing, especially from AT&T's entry and then just given the payload, it's eventually going to run into some headwinds, but but we just don't know when. So maybe first talk about what you're seeing now and maybe how you see this playing out?

I think let's start with the longer term. I think the fundamental hypothesis is still correct that it will be capacity constrained, but it's also true that it's gone on longer than we thought. And so it's incumbent on us to do all the things I just mentioned in terms of positioning ourselves despite that. But I think in the end, the capacity is better used towards mobile, which has many, many times multiple of dollars per gig asset utilization. In terms of the short term, if you take a look at the combination of Verizon's 5G home internet as well as T-Mobile, it was actually a slight step down year-over-year and had it not been for AT&T, that would have been the trend.

The good news is I actually take AT&T at their word, which is the they've been very clear that they intend to use their spectrum with the best and most efficient use of the asset over time. And in their case, that's for copper replacement as well as appreciating where they're going to go with fiber and recognizing that the best and most efficient use of that asset continues to be towards mobile. So I think to the extent that's true, and I take them at their word, I think that's true for the entire industry, which goes back to the long-term point.

Right. Right. And has it been a meaningful sort of change with the AT&T's entry and AT&T has a big footprint in the business market, and they're definitely more focused on sort of getting that business right because it's been a big drag for them for years. I mean, any impact on the business side?

On the business side, we've actually seen an improvement. So up until really the past 4, 5 months, I would say that the small business sector really looked a lot like the residential space in terms of competitive opportunity set. And then we saw a pretty decent improvement in return to growth in the small business segment, not a ton, but a reversal of the trend inside of small business. For us, it's difficult to see how much of the fixed wireless access lines or cell phone Internet lines into business or really just a secondary line or a backup line.

Because the reality is we saw that service too. Business, It's a highly successful reservice providers called wireless internet backup. We provide that, we don't report it as a separate subscriber and we're about to launch a wireless internet backup as a residential product as well, seamless connectivity with the same SSID, battery and 5G backup. And that's not going to be a separate line but it is a service that we do provide new business. We're going to provide the residential.

And so parsing that out is difficult to see. Now that's on the small business side. The enterprise, the medium and large business segment less of an impact on that front. In fact, we continue to have very good growth on the medium and large enterprise growth. And we think about Cox and a complementary set of assets that we have there, it's really -- it's not just additional scale that we're going to get together with Cox on the B2B side. But really, the set of products that we both have are really complementary and more time goes up by, I get more and more excited about that one.

And Cox is always the leader in the business side. I remember that a lot of people on the team, this is going back at least a decade, were sort of hired by Comcast to build that business.

Yes. I think there's a tremendous amount of stuff that we can learn from Cox on the B2B side. So I think there's things that we bring that they don't have, first and foremost, being scale. But that business is going to be in the combined company, nearly $11 billion business. at some point, you're talking about real money. And the ability to have a larger footprint with products that they have rapid scale, they do really, really well in the hospitality segment. And when you think about.

Orlando, L.A. and New York that Spectrum brings to the table with that hospitality segment as well as Segra that was a B2B provider that they've acquired. There's a really interesting set of tools and scale that we have to, I think, accelerate the growth in commercial in a way that hasn't been done for a while.

And does the new MVNO to that does that -- I mean do you -- is that a part of the sort of...

Yes, we were limited in terms of how far upscale we could go into the B2B sector with mobile. And so having an additional tool for acquisition and for retention, I think opens up a brand-new market for us. Subject to getting regulatory approval on a larger footprint. So we're excited about that. Arguably, that -- we should have been able to do that with Verizon, but we have a good partner in T-Mobile, and I'm excited about getting that launch. That probably won't be happening until the middle of 2026. But we're excited to get going on that.

Right. Can you just talk about competition from fiber-to-the-home. We had my cabin earlier today, who talked a little bit about seeing some more promotional pressure or promotional activity on the fiber side, say around the holidays. But just anything sort of update both in terms of reach and sort of promotional activity from those competitors?

Look, it continues to be highly competitive in the marketplace. I would say that there are ebbs and flows by operator in terms of who's getting a little bit more aggressive versus backing off. And so from that perspective, it's been consistent. Of course, in the holidays, you have different promotions that take place, that's also fairly normal. The level of fiber overbuild has remained relatively consistent. And so there's not a big acceleration that's taken place there. But it continues to be competitive across the board.

Remember a couple of quarters ago, you guys announced or sort of laid out the $100 1 gig Internet and 2 and with plus 2 mobile online promotions. Has that helped drive for all certainly $100, it's sort of effectively 1 gig for $60, which is very attractive. Yes. Just what impact has that had on the...

Actually 1 gig for $40.

Sorry, you're right. Right.

One gig for $40 plus 2 mobile lines at $30 each -- and so it's $100 with tremendous value. It goes back to the first point. I don't think there's any seamless connectivity. It connects everywhere you go. So if I'm here in New York City, my phone is attaching to Spectrum Mobile, even if I'm in a car driving slowly down the road, I'm connecting at faster gigabit-enabled speed. And at the same time, this $40 gig plus 2 lines at $30 each, it's huge value. So the question is, has it made a big impact. We've certainly seen a whole lot more gig upsell which drives customer satisfaction.

We've seen a higher number of lines per connect. In terms of total acquisition level, Hard for me to say because there's so much else going on in the macroeconomic environment and the competitive environment. But the mix that we're getting is a higher quality mix and that's better for customers because it means there's more retentive value inside that package as well.

Great. also, less Comcast, they've announced when we talked about their presentation that they're not taking a price increase in the first half. Can you talk about -- Charter has always historically had lower prices. But just talk about your sort of pricing strategy and whether or not you still -- with these competitive dynamics that you laid out, do you still have pricing power in the broadband market?

Look, our pricing historically has always been less than our peers and generally less than our competitors. And the idea that taking up rates, and at the same time, you can have higher acquisition and less churn is -- goes against every grain of economics. And so our goal is to remain competitive to minimize the amount of price increases that we can take on broadband. That's always been our strategy, and that hasn't really changed. We're going to stay competitive. We do have -- because of the larger video base that we have, we have programming rate increases that, unfortunately, the programmers have taken, and we'll be passing that through to customers.

We can't afford not to. And we need to do that. The timing of that is a little unfortunate because we've got so much momentum in the video space. But we're not in a position where we can avoid passing through the rate increases that programmers have taken. So you'll see when we do what we do in 26, it will be much more focused on the video space than the broadband space as we try to maintain our competitiveness in broadband and not let programmer rate increases somehow impact our ability to grow inside of broadband.

Now because we're doing that, I know it's come up amongst others. We see ourselves going to grow EBITDA in 2026, that's our operating plan. And I'm sure we'll get into more later. But that's assisted by some of that just passing through as opposed to eating the rate increases.

Right. Maybe we'll talk a little bit about wireless conversion then touch on video. Obviously, you've been selling wireless and broadband bundles for several years, our fastest-growing wireless companies in the U.S., and the carriers are now sort of seemingly much more focused than they certainly were 12 months ago. Do you expect...

Focused on us?

Focus on selling converged bundles wireless.

Yes. yes. yes.

Do you think that, that has any impact on the competitive market, maybe even on the broadband or the wireless?

Yes. We have seen an increasing focus of selling home Internet services together with mobile. The reality is that -- the big difference is that we can do it everywhere we operate. So we provide gigabit broadband Internet plus mobile and 100% of the homes that we service. And as a result, in not being an incumbent in mobile, we have the ability to price it very attractively, which you just highlighted. So the ability to save customers hundreds or thousands of dollars, I think, sets us apart in terms of convergence capability, the ability to go do it everywhere means that if I wanted to be an optimist, I'd say somebody is actually doing the marketing for us and telling customers really the benefit of convergence when the reality is 80% of their footprint, they can't and probably won't be able to provide that level of service. All else equal, probably rather it didn't take place, but if somebody is going to market for us and we can do it in 100% of our footprint, we'll take it right?

And I think cable in general sort of started out more of one-line accounts, 2 lines of accounts. Can you just talk about sort of how that's evolving and efforts to move upmarket?

Yes. So we started out with customers wanting to take 1 line or 2 line why? Because they're trapped inside of device financing contracts or they wanted to give us a try or there's a new line coming inside the household, and we gave free mobile line for free, which is really stuck now when we've moved into an environment where we're trying to get 4 lines, and so we've had the phone balance buyout, the ability to take customers out of their existing contract.

And even new ways to innovatively price and package getting 4 mobile lines at the time of acquisition, and we'll give you a baseline of Internet service for free forever. And so somebody looks at them and says, "Oh my goodness, what is that?" The reality is the ARPU and the margin on that product set is higher than what we typically sell today even without adding in higher speed upgrades, or having unlimited plus built into it. So it's just another way to go to the market and to sell and save customers significant amounts of money and to drive both broadband and mobile into the footprint, and it's working. So we're getting more -- as we get more mature and as customers have additional lines come off financing or at the time of acquisition, we're increasing our lines per account.

And maybe talk about the overall sort of economics of the wireless business and maybe tie that into the the MVNO with Verizon. I mean, how is the relationship there? And do you expect things to change if and when that contract were made.

Look, the Verizon contract and the relationship is rock solid. And they've been a great partner. I wish we could have done a little bit more on the B2B side, but they've been a great partner. They've got a great network. It's been highly successful for us. And I know it's very important to them as well. And so I think that relationship has been and continues to be very strategic. In terms of the profitability, we put out a slide last quarter on their earnings call that I'm not sure got full attention, but we continue to have much higher EBITDA margin increases, and it's a really profitable business for us.

It's growing and it's contributing to the bottom line in Charter, even as a stand-alone product. And without including the benefits that you get through churn, and it has a meaningful improvement on churn to internet broadband relationships.

And you mentioned the MVNO on the business side with T-Mobile. That was a bit of a surprise to me when that was announced. So was that just an effort to sort of dual source your sort of brand connectivity? Or was it just...

The biggest driver for that was really trying to address a piece of the market that we hadn't been able to sell into. And if you think about everything I've said before, we really like having ubiquitous service capabilities across our entire footprint. Gigabit everywhere, now symmetrical, multi-gig everywhere, DMA complete when we upgrade the network, we take it everywhere. We have products we want to be able to deliver to all parts of the marketplace. So it was really moving into the larger business segment, medium and large-size business segment with the ability to sell the same products as opposed to anything else.

Makes sense. Okay. So let's pivot to the video side. I enjoyed seeing the product at the demo you guys did about a month, 1.5 months ago. You've got all the major media B2C services included and the Spectrum app store, what's been the uptake? What can you tell us about the sort of receptivity of the product?

For those customers who have access to those direct-to-consumer inclusion apps for free, the uptick's now is close to 50%. And on average, they take well over 3 apps included -- activated into their service. On one hand, you could say, well, that's pretty good, and that's pretty rapid given that we just started to market this fully when we had the digital video store, the video app store as well as the activation process really smoothed out.

On the other hand, you would say at over $100 of value of Peacock, Paramount Plus, Disney+, Hulu, ESPN, HBO Max, ViX, Tennis Channel and now we'll be adding Discovery Plus and BET, it's a huge -- I'm sure I forgot somebody there, which I apologize to a program or that I left out. Huge amount of value. So why wouldn't it be 100% and there in comes the rub, which is, customers have become so accustomed to a promotional offer or for lack of a better word, a temporary gimmicky type offer, that getting them to understand and buy in that this is permanently included as part of your subscription is included for free, has required the help programmers going out to customers and convincing them that it isn't a gimmick, that it isn't a promotion, it is included as part of your service.

You have seamless entertainment inside and outside the home with tremendous value. We've positioned -- you've probably seen some of the marketing to actually saying over $100 or $120 of apps at a discount and your live video is for free. For a younger audience, that's going to resonate a little bit differently than people of our age.

For my house, we have YouTube TV and then all the apps. It would be a massive savings.

Think how much we could save you. We're just down the road from your service, right?

And then the 3 apps that have been adopted, so that means people that have access to 10 apps only take 3?

It's just the beginning. And so as they tend to -- once the first app is activated, they tend to pretty quickly start moving up the chain because they see, one, it's pretty easy to activate. Two, it is for free. It's not a gimmick. And so I think you'll see that go up over time. And I think to the extent we have the continued partnership and support of the programmers who can bring their IP, who can bring their talent to bear and to convince customers that it is real, I think this is going to continue to be a big success.

And is there any -- I guess the next logical question is, have these sort of seamless entertainment bundles had an impact on -- it appears to be what's driving the video business because the video trends have obviously improved. But what about high-speed data? And then over time, as the -- I would imagine the more apps that people have and the more they're using it, it's going to be lower churn.

The churn you can already see across all different tenures. It's a pretty big benefit. At first, I thought it was self-selection. But the reality is when you take a look at a customer who's been with us for 20 years, 10 years or 0 to 6 months, that's a pretty dramatic churn reduction across the board. And so that argues that is not just self-selection. And because the vast majority -- nearly all of our video customers are also Internet customers, it means that it's helpful to Internet as well. So I think from a churn perspective, to the connectivity business, big benefit.

On the acquisition side, it hasn't gone viral yet.

You just need people in the neighborhood telling other people you get everything for free.

I agree. And I think it's a combination of just waiting and being patient, which isn't really my personal strength of doing that. On the other hand, also continuing to beat the drum on the attractiveness of the value of the utility that's in semis entertainment as well as seamless connectivity. I would argue that Spectrum Mobile and Spectrum One, we've done a good job there. But I think the ability to use seamless entertainment and seamless connectivity is a way not just to have churn improvement, but to drive acquisition. We haven't yet seen that. And I think that's the real opportunity.

All right. Let's turn to the cost structure. You talked about it a little bit in your sort of opening comments, but can you discuss the investments you've made over the last several years in terms of training systems and what you're doing on AI?

Sure. The investment is largely complete. I mean we've been 100% U.S.-based service and sales in-house for many, many years. But that's expensive. Also, we've taken minimum wages over $20 in any market. And in a market like New York or L.A., the minimum wage is actually higher than that. Investing in our benefits, investing in our training systems, using AI, all of our employees and the service find sales functions, whether they know it or not have AI supporting them along the way. Many times it's seamless, they don't even know that it is AI that's helping make the job easier. Why would we do that, all these investments?

Because we want people who have great craft who have passion for what they do because they're committed to the company, they get a paycheck from the company that have career progression with the company. And they care about the customers as a result. And if the technology using AI is better and it makes the job easier than I'm a happier agent. And it's pretty clear that a happier agent and a more qualified agent leads to happier customers and longer customer lifetime value. And so the investment is worth it. But the investment's now all been made. It's kind of built into the base. it's really upon us now to start really go harvest to get the value of what we've done. And it's a unique competitive advantage. 24/7 call centers. That's -- nobody else does that.

The customer commitment we have. It was the first across wireline and Mobile, nobody else goes and does that. The ability to tell you that if you call us today before 5:00 and you have a services issue, I'm going to have a truck there. We're now internally focusing on for residential customers within 2 hours. Forget about same-day commitment. We want to make a new internal commitment we'll be there within 2 hours. And that's a product of a competitive environment being pushed to what we're doing and maybe doing a better job on the softer side as well so that we can actually be perceived and get that into our Net Promoter Scores.

I would just say you started off mentioning them in the Net Promoter Scores. I mean, when do you -- I mean, how I'm not sure there's an answer to this, but how long does it take to sort of turn that perception? It seems like you're doing everything...

A customer at a time. And so you've got to delight every single customer. You know the rules for every customer that you make mad, there's 8 that talk bad about you and everyone that you please, it's only 1 or 2. And so that's the math that we fight through. It's the basis for NPS as well. And so we got to win them over one at a time and be committed to that.

You got -- it seems like you -- the customer service side, you guys are very focused on it. The product side, you're obviously very focused both on broadband and wireless and video just going to take time to sort of come together.

And doing a better job of articulating those messages that we do have the better products. We can save you all this money that we are 24x7 U.S.-based service and you can depend on us. And we're more reliable, faster, cheaper product altogether.

Great. Maybe quickly on the Cox acquisition. Just any sort of update in terms of the process? And then we don't -- we're not privy to sort of what's happening at Cox, but how have the fundamentals held up and is similar to what we're seeing in the rest of the cable?

Yes. Look, we're well into the process, answering all kinds of questions from the regulators, and we're committed to getting them comfortable as quickly as we can, both in federal and at a state level, so the process is going well. We still expect mid next year to be in a position where we could close -- and really, as time goes on, more and more excited about the upside opportunity that exists. If you think about Cox, given where they're coming from and the scale that we bring, the opportunity to drive mobile in a pretty significant way. Video, very low penetration today and the ability for us to bring the product that we just talked about into the Cox footprint.

The B2B side, before I go there, advertising, I know that doesn't sound like much, but because of a potentially growing video environment and because of the technology that we have for addressable advertising, and the IPTV environment that we have with addressability and monetization of long-tail inventory and connected TV CPMs, there's real upside that's there. And then we talked a little bit before, you talked about the commercial or the B2B space. I -- the more time that we spend looking at this, I think there's a real opportunity to accelerate the growth rate of B2B for both of the companies when put together and be more competitive for that space, too. I think that's what you asked.

Yes. Yes, exactly. I guess beyond that, we're...

I got so excited that I forgot what you even asked.

I think beyond the cost, do you expect more there's not much left, frankly, but do you expect more consolidation within cable or maybe even between wireless and cable and just sort of given all this convergence theme and.

Ask me next year. We've got our hands full right now, and we're very focused on doing that. But it's not a crazy question or thought. It's a competitive space out there right now, and we're competing as regional cable operators. We're competing against national and global competitors and so I think the opportunity to have additional scale is not a crazy question, but today, we're really just focused on what we're doing and properly close, make sure we address all the regulatory questions, close on Cox and integrate that.

Now a few questions on network evolution and expansion. High splits are largely done in step 1 markets. Can you talk about the the services you're able to provide in these areas?

So the step 1 markets are about 15% of the footprint. We're offering 2 gig by 1 -- 2 gig down 1 gig up. The other markets will go 5 by 1 and 10 by 1, and we're well on our way to delivering those markets. Inside the 15% that was step 1 markets, we're not actively advertising the symmetrical and multi-gig speeds until we get further along with the broader footprint. So it's a little too early to tell you the impacts. Although even though we're relatively passive in making it just available online, for example, the take-up of 2 by 1.

It's been higher than what I would have expected, just given the people opting into taking that service. I think the real benefit won't even be about what we're doing in high split -- the real benefit is I spent some time going out to Silicon Valley and trying to articulate the quality of the network that's in front of software developers and app developers because I think the real opportunity for us is to actually just make use of the existing speed that's fully deployed across the footprint. -- and to really convince developers to not develop to the least common denominator.

And by that, I mean to fixed wireless access or to DSL and to understand that today already today, you have a gigabit fully deployed network across the entire country through cable plus the fiber overbuilders, and so let's stop building products that are spec-ed out to 100 megabits per second and start doing it to 1 gig and take us at our word that between Comcast, Charter, Cox, cable industry, we're going multi-gig and symmetrical across the entire footprint. And that allows the opportunity to have products that people aren't even thinking about today because they think they're constrained by their network. And I don't -- you saw the lakers were awesome. Did you see it?

Yes.

Okay.

I mean is there more stuff like that? We need that...

That's what we're trying to promote. And for the benefit of others, we have the regional sports network with the Lakers and the Dodgers. We've done a partnership with the NBA and Apple and obviously, the Lakers to do a court side, film in 16k but only 8k delivery per eye to the Apple Vision Pro, and we're going to distribute a number of different games live this season. And do it over the Apple Vision Pro, but that could be portable to just about any other device over time. And are we doing that because we want to be the owner of immersive content or were enamored with RSNs? Not exactly. But I do think showing the way if having a product that is, you liked it.

Phenomenal. Yes. I would love it on all sports.

You would pay for a ticket, you would love to have that service. But that service has 150 megabits to 200 megabits per second of consistent bandwidth consumption at all times for each particular device. And that's where our network excels and others would struggle to be able to support that. And so whether it's holographic images, whether it's that type of immersive content for education, health care or entertainment, sports is a great example. And I'd like to see a lot of the sports providers really jump into that space. together with big tech, Silicon Valley to know that these networks are there and they're there for people to use, and we're encouraging it.

I mean it seems like the fastest way to sort of get over this wireless hump is to drive the broadband product as aggressively drive that -- and you guys give the traffic numbers Comcast because the traffic numbers. But to do what you can to drive that is aggressive.

Sallow capacity today that's sitting there for somebody to use it. And so we're begging developers and investors to promote that type of capabilities because it's there for you today.

One question on the rural stuff before we move to sort of use of cash. You've expanded your network by almost 1.5 million passings in the last 12 months. Sort of what's the plan going forward both in the sort of existing footprint and sort of expansion? And then how is the economics spend?

So we've forecast where we're going to be on capital. When we put out a guidance or an outlook like that, we have every intention to meeting it. And so the network expansion, as you can see, it's on the back end now. That was the most attractive stuff that we built. You could see in BEAD, we'd really built most of the stuff that was around us already. So we weren't a large participant in BEAD because what we intended to do had already been done through RDOF, State grants ARPA.

So I think that will come back to a normalized level, which is dramatically. We'll continue to build greenfield market fill-in, but the rural expansion that we've had, which is the higher cost per passing and that kind of volume is baked into the outlook that we've provided. And just to be clear, when we say that, we're going to deliver it. We understand how important that is. And so people can really -- I think I said it on the earnings call, bank on or taken to the bank, the free cash flow take off that we're going to have.

The returns have been fantastic, mid- to high teens. And so no -- certain variables have moved around all over the place. But in the end, the business plan proved to be solid. So it's great.

And one of the questions I get, first, when we talk about rural is the impact that these LEO projects are going to have, whether it's StarLink, which always seems to have a -- you're talking about more capabilities or sort of next-gen satellites and now I think it's called Amazon LEO. Just what your thoughts -- especially in that part of the market, do you think these services or these new offerings really make a dent in the broadband market?

I think it's a great product for a low-density or mobile environment. And I think there are ways that we really should be thinking about how to cooperate, whether it's Amazon or StarLink whether it's D2D or whether it's backup services or B2B applications, I think they're complementary. We're obviously keeping a very close eye on it. But by all accounts, it's limited based on density. And so we do well in those more dense environments. And it's a great product for the right use case..

Got it. So wrapping up on the sort of CapEx side. how do you see longer-term capital intensity trending post the subsize rural and the network evolution.

I think we said that it's coming down below $8 billion, which means using today's revenue, it means less than -- or around 14% as a percentage of revenue, capital intensity. And the thing I would leave you with is when we say less than $8 billion, that essentially means less than 14% capital intensity. And I don't see anything in front of us from a network investment that's going to knock us off that path. The numbers that I just mentioned incorporate new products, new business development, continued CBRS and ROI-based fiber-powered DAS deployment, all of which will provide new legs of growth.

Great. So wrapping up, what you've laid out, EBITDA growth in the plan for '26 CapEx maybe coming down a bit in '26, but much more meaningfully '27...

A real takeoff...

Is a real big year. So you've laid out sort of dramatic growth in free cash flow and the operating cost improvement. So putting that all together in terms of the use of that cash, historically and even now, you've been spending -- you've been taking a lot of lot of cash and buying back stock. John Malone in a recent interview, suggested maybe pivoting from buybacks to a dividend, which is a complete departure from not just Charter, but Malone Liberty companies in the past in general. Just what's your thoughts on sort of use of cash going forward? And whether or not there's sort of any reason to change at this point.

It's -- for me, it's -- to say it's a privilege is an understatement, a privilege to really be able to have conversations with John on a somewhat regular basis. It's fascinating, it's fluid. It can very much change from one week to the next because he's trying different things. I think John is by background, he would say a scientist. And so he's trying on new hypotheses and sometimes he's doing that very openly in a public space. And they're really challenging thoughts and thought provoking. And so it's good and it's healthy and I've enjoyed all that.

We sit down on a regular basis with our Board and review capital allocation strategies. And we do that based on long-term shareholder value. the reality of what you're doing in terms of accretion, but also perception based on what your investor base feedback is and what the demand is from there. And so we take all that on board and taking a look at the cap end model and where do you want to be on the WAC curve? And we do that together with our Board on at least an annual if not semiannual basis. And when conditions dictate, we do it even more frequently.

To come at the right solution for shareholders in terms of value creation. So you can rest assured that we're going to do that. Fundamental to all that is making sure that rock-solid staying committed to the investment grade that we have across our debt structure. I think the hub upgrade right now is what do you do with this really significant takeoff in free cash flow. It will be an explosion of free cash flow. And if that's what we're debating, that's a first-class problem to have.

I would argue that there are things that you can do from a capital allocation, particularly if you're putting an organic investment, but from a capital allocation, that will have a marginal impact on the return to shareholders. So I'm not going to knock that, but the biggest issue we have right now isn't the allocation of the free cash flow or even I gather, convincing people that free cash flow is going to be there. Our biggest issue is people don't believe that we're going to have a terminal growth.

And so when I think about capital allocation, I say, well, that's great, we'll do that as well. But the biggest thing that we're focused on, the biggest thing I'm focused on is making sure that we can convince investors appropriately and do the right things to make sure that we have terminal growth. And if you have that and you have this free cash flow explosion, then the decision around how you allocate capital in terms of a capital return to your shareholders really is just the icing on the cake.

So it makes a lot of sense. Chris, thanks for being here.

Thank you very much.

Take care.

Hello, and welcome to Charter Communications Third Quarter 2025 Investor Conference Call. [Operator Instructions]. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

I will now turn the call over to Stefan Anninger.

Thanks, Leila, and welcome, everyone. The presentation that accompanies this call can be found on our website, ir.charter.com. I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, and we encourage you to read them carefully.

Various remarks that we make on this call concerning expectations, predictions, plans and prospects constitute forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements reflect management's current view only and Charter undertakes no obligation to revise or update such statements.

As a reminder, all growth rates noted on this call and in the presentation are calculated on a year-over-year basis, unless otherwise specified. On today's call, we have Chris Winfrey, our President and CEO; and Jessica Fischer, our CFO. With that, let's turn the call over to Chris.

Thanks, Stefan. During the third quarter, we remained the fastest-growing mobile provider in the United States. We added nearly 500,000 spectrum mobile lines in the quarter and 2 million lines over the last 12 months, over 20% growth.

Our video customer losses continued to improve to 70,000 less than 1/4 of last year's third quarter losses. That was driven by significant product improvements over the past 2 years. And Internet competition for new customers remains high, and our third quarter Internet customer losses were in line with last year.

Revenue was down about 1% year-over-year, driven by customer losses and a challenging political advertising comparison. Third quarter EBITDA declined by 1.5% year-over-year, essentially flat when excluding advertising. The operating environment for new sales, in particular Internet continues to reflect low move rates and higher mobile substitution, along with both expanded cell phone Internet competition and fiber overlap growth similar to earlier in the year.

Collectively, that drove third quarter Internet gross adds lower year-over-year. Churn improved year-over-year as to be expected given last year's ACP-related impacts and Internet churn, including nonpaid churn, remains at historically low levels. From a medium- and long-term growth perspective, we know we have the best network, fully capable over where we operate with increasing demand for bandwidth and we have great products to help us win and the ability to save customers hundreds or even thousands of dollars a year.

In the short term, with lower selling opportunities and new forms of competition, small changes in sales or churn have an outsized impact on Internet net gains. We're leaving no stone unturned to drive customer and financial growth, including improved customer perception of our branded products, growing mobile profitability, and driving streaming video growth, all with the focus to drive connectivity revenue growth.

We're also improving our long-term cost profile through our service and technology investments, including AI. Beginning with go-to-market, we remain focused on better ways to message our products and value savings, including our marketing and channel mix and testing new offers with international pricing and packaging structure. The new pricing and packaging we launched in September of last year produces a higher number of total products sold per Connect, a gig attach rate that has nearly doubled, more mobile lines per customer connect and a video sell-in rate that has improved substantially with lower customer churn from bundling.

Despite lower selling opportunities given the macro backdrop, our yield on sales opportunities has steadily increased. And various new offer expressions in our marketing mix are designed to find audience and drive more traffic to digital and traditional sales channels, saving customers money without sacrificing our revenue or cash flow potential at the household level.

Our marketing efforts, combined with our improving products, promotional and retail pricing and customer service have resulted in significant improvement in consumer perception scores over the past year. Our service is backed by the investment in our 100% U.S.-based sales and service workforce, increasing tenure of those employees in quality from better pay, benefits and technology investment coupled with our market-leading and industry-first customer commitment across our wireline and wireless services, which we back with service credits, including their outages, or if we can't be at your home or business, the same day for service or at least next day for installation.

For service visits, we're moving our internal standard to arrive at your doorstep within 2 hours of the service call, and we're now achieving that a large percentage of the time, all of which is helping to drive improved brand perception. In mobile, our broadband growth continues. And for the last 6 quarters, the majority of our line net adds have come from unlimited plus lines, which offer higher customer value and drives lower churn.

We've also been selling more mobile lines for Connect and additional lines to existing mobile households. Convergence reduces Internet churn and higher mobile lines per customer benefits turn further. Increasingly, the line between mobile and wireline connectivity is being blurred as our customers connect seamlessly between the 2 networks.

Over the last 12 months, our total connectivity revenue grew by about 4%. And 21% of our Internet customers are now converged, meaning they buy both our mobile and Internet products. The profitability of our converged customers continues to grow. And we don't treat mobile as a separate product, but if we did, Slide 7 shows our fully loaded mobile service margin, excluding acquisition, and that's without the significant churn benefit to Internet.

Mobile's financial contribution continues to grow with our scale and a 20% reduction in our reliance on macro cell towers over the past 3 years. We are growing offload to faster networks, driven by the development of our Spectrum Mobile network with seamless authentication to nearly 50 million small cell towers through our advanced WiFi, CBRS deployment and partner cable networks.

With 88% of spectrum mobile device traffic now on our own network, the cable operators deliver more facilities-based traffic than the traditional mobile carriers. WiFi is essentially the backbone for all cellular traffic. And 5G macro cell towers are really our backup radios with lower speed and higher latency.

We continue to evolve our fiber-powered wireline network to deliver Internet service that offers more throughput, even less latency and greater reliability, all at a great value. Our network evolution initiative remains on track to deliver symmetrical and multi-gig speeds across our entire footprint with convergence everywhere we operate.

In early 2026, we'll launch our advanced WiFi complete product, a tri-band advanced WiFi 7 router that integrates 5G cellular and battery backup to keep customers seamlessly and fully connected during the service disruption or a power outage.

We've also announced new B2B partnerships that allow secure auto connection to the Spectrum Mobile network, starting with Amazon and Nexar, and we're exploring a wide range of B2B applications using the network assets highlighted on Slide 4 including lower cost and higher performance data transport, authentication services and other consumer-friendly uses of our capabilities. Our video product also continues to evolve and improve.

Earlier this month, we announced the launch of our Spectrum app store, a digital marketplace where spectrum customers can discover, activate, manage and upgrade the apps included with respect from TV video plans. And non-video customers can purchase DTC video apps, a la carte. The store is accessible on my Spectrum app and on our website, spectrum.net. It's an important additional step in our effort to bring back utility and value to customers in the video ecosystem, really for the benefit of our connectivity services.

With the combination of over $125 of included video app value in our video product, unified search and discovery in Xumo and our digital marketplace, we're now more fully marketing our seamless entertainment packaging. Slide 9 shows our video customers are increasingly streaming customers through the award-winning Spectrum TV app and now included programmer streaming apps. Also, earlier this month, we announced that we are partnering with Apple to record and distribute a selection of immersive live Laker games starting in January.

Now d don't go to Spectrum Internet and video customers in L.A., Nevada and Hawaii using the Spectrum SportsNet immersive app on the Apple VisionPro. The same will be distributed nationally the next day throughout our footprint and on the NBA immersive app. Experience is amazing, and you can see how immersive content will apply across next-generation devices in the future.

And keep in mind that these immersive video streams filmed in 16k require consistent throughput of 150 megabits per second to the home even when distributed in 8-K for the AppliVisionPro. Our fiber-powered bandwidth-rich network is ideally suited to deliver these kinds of immersive experiences which requires significant throughput and benefit from lower latency. So we continue to believe the high-quality video product with value and utility customers and the development of these bandwidth-rich products can be yet another competitive advantage for our seamless connectivity products.

Video also remains a significant driver of lower customer churn, and it can help drive acquisition. And the partnerships we're recreating with programmers and the leagues, great benefits for all of us as we, for example, address the problem of where is my game. Most of what I've discussed this morning really relates to our products and how they'll -- help drive customer demand and revenue growth. But we're also deploying new technologies, which will transform the quality and economics of our $8 billion annual cost to serve.

For years, we've meaningfully improved the quality of our service while reducing service calls and truck rolls often at a double-digit rate annually. We've reinvested those savings into frontline employee wages and benefits as well as technology and tools to enhance the quality of our service interactions with customers, both of which have meaningfully improved service employee tenure and career progression.

Just a few of the currently deployed tools that we have include machine learning and AI for our network and in-home telemetry to identify and address service issues before they ever occur. Even more so with the deployment of signal in power transponders, which will occur as part of our network evolution initiative. Another example is our unified front end for agents with real-time call transcription, beating our AI models for what we call next Best Action presentment to the agent based on hundreds of real-time and historical metrics.

That front end also integrates our spectrum GPT capabilities for the agent, which will move from current text to conversational prompting. Our AI-based customer sentiment measurement includes supervisor tools to flag real-time agent support and subsequent agent-specific training modules. Our service calls also now have AI call summarization presented on call transfers or subsequent calls and for field techs on job arrival. We're also integrating network telemetry and AI will prompt next Best Action and coaching for the field of maintenance techs as well.

And you can imagine the upcoming positive effects of AI in areas like network monitoring, dispatch in workforce planning. These are just a few isolated examples often seamless to our employees as it simply improves their job and it improves the service experience. And Charter, these tools are all supported by the same unified data set and tools development within our centralized operating model.

All of that reflects where we are today and in the coming months. But just over the past few months, -- we've seen rapid investments in Agentic AI technology, such that we're focusing our efforts with a few key partners going into 2026 to integrate our existing capabilities into a more agentic service. The recent advancements most relevant to us include short- and long-term memory, handling multiple customer issues and prioritization. Multimodal and multichannel service, including our internal service channels, and over time, the customer has chosen to interface.

And the goal is, first, to have a better customer experience at every implementation and then to significantly lower operating costs with even higher tenured service employees because the quality of the job is enhanced, all a virtuous cycle to lower service transactions and cost and improve customer satisfaction, churn and customer growth. The prospect for Agentic AI tools for our back-office employees and software developers has also rapidly increased, and those will be separate work streams within the company.

The benefit is still probably 12 to 18 months away but we believe the impact can be real and material and we'll plan on updating progress on future calls. So the current operating environment is driving us every day to perform better than we are, whether it's continued improvement in our network and product capabilities, adapting our marketing strategy to find audience and drive traffic in a temporarily challenging macro and competitive environment, we're improving execution of our customer service commitments through all the efforts I mentioned.

We're becoming a better operator every day. Consumers are noticing as evidenced by our improving brand perception. All of that effort is in support of our core strategy of offering the best products, including seamless connectivity and seamless entertainment, the most value with unmatched service. And ultimately, those efforts in our differentiated network will drive perpetuity free cash flow growth, which remains our focus for shareholder value creation. Now I'll pass it over to Jessica.

Thanks, Chris. Let's please turn to our customer results on Slide 11. Including residential and small business, we lost 109,000 Internet customers in the third quarter in line with last year's results, but lower when adjusted to remove last year's impact from ACP-related disconnects.

In mobile, we added 493,000 lines with higher gross additions year-over-year, offset by disconnects on a larger base. Video customers declined by 70,000 versus a loss of $294,000 in 3Q of '24 with the improvement primarily driven by better connects year-over-year, resulting from the new pricing and packaging we launched last fall and the various product improvements that Chris covered and lower churn year-over-year, driven in part by our programmer app inclusion packaging.

Wireline voice customers declined by $200,000. In rural, we continue to see accelerating customer relationship growth. We generated 52,000 net customer additions in our subsidized rural footprint in the quarter. And in the third quarter, we grew our subsidized rural passings by 124,000 and by over 453,000 over the last 12 months.

We continue to expect subsidized rural passings growth of approximately $450,000 in 2025, in addition to continued nonrural construction and fill-in activity. The bad bidding process is largely complete. We bid in 20 different states and were awarded subsidies associated with approximately 84,000 passings. In total, we expect to spend approximately $230 million of our own capital, net of subsidies to build out those passings over the next several years.

Moving to third quarter revenue results on Slide 12. Over the last year, residential customers declined by 2.1%. And while residential revenue per customer relationship grew by 1% year-over-year, given promotional rate step-ups, rate adjustments and the growth of Spectrum Mobile lines.

Those factors were partly offset by a higher mix of non-video customers, growth of low-priced video packages within our base and $106 million of costs allocated to programmer streaming apps and netted within video revenue versus $25 million in the prior year period. That allocation should grow over time as more customers authenticate into our streaming application offers that is neutral to EBITDA.

As Slide 12 shows, in total, residential revenue declined by 1.1% and by 0.4% when excluding costs allocated to streaming apps and netted within video revenue in both periods. Turning to commercial revenue. Total commercial grew by 0.9% year-over-year with mid-market and large business revenue growth of 3.6%. And when excluding all wholesale revenue, mid-market and large business revenue grew by 4%.

Small business revenue declined by 0.9% and reflecting a decline in small business customers with revenue per customer remaining essentially flat year-over-year. Third quarter advertising revenue declined by 21%, including the impact of less political. Excluding political, advertising revenue decreased by 0.5% with national and local advertising market challenges, partly offset by our higher advanced advertising and better inventory selling capabilities.

Other revenue grew by 10.7%, primarily driven by higher mobile device sales. In total, consolidated third quarter revenue was down 0.9% year-over-year. and grew 0.4% when excluding advertising revenue and costs allocated to streaming apps and netted within video revenue in both periods.

Moving to operating expenses and adjusted EBITDA on Slide 13. In the third quarter, total operating expenses decreased by 0.5% year-over-year. Programming costs declined by 6.5% due to a 3.5% decline in video customers year-over-year, a higher mix of lighter video packages, and $106 million of costs allocated to programmer streaming apps and netted within video revenue, partly offset by higher programming rates.

Other cost of revenue increased by 4.6% and primarily driven by higher mobile service direct costs and mobile device sales, partly offset by lower franchise and regulatory fees and lower advertising sales costs given lower political activity. Cost to service customers, which combines field and technology operations and customer operations decreased 0.7% year-over-year, primarily due to lower bad debt expense and labor costs partly offset by higher network utility costs.

Excluding bad debt cost to service customers was essentially flat year-over-year. Marketing and residential sales expense grew by 5.4% due to some higher marketing spend with dramatically higher impressions at lower cost and continued channel mix shift from lower cost channels like in-house call centers to digital and affiliates.

Finally, other expense increased by 0.7%. Adjusted EBITDA declined by 1.5% year-over-year in the quarter and was essentially flat when excluding advertising. We expect 2025 full year EBITDA growth to be flat or marginally positive year-over-year, with higher underlying growth absent the impact of political advertising. And EBITDA growth in the fourth quarter will be pressured by at least as much as it was in the third quarter, given last year's political advertising strength and the same macro pressures we saw in the third quarter.

Turning to net income. We generated $1.1 billion of net income attributable to Charter shareholders in the third quarter compared to $1.3 billion last year. Given this quarter's lower adjusted EBITDA and higher other operating expenses driven by merger and acquisition costs related to the pending Cox transaction and severance costs.

Turning to Slide 14. Capital expenditures totaled a bit less than $3.1 billion in the third quarter, nearly $500 million higher than last year's third quarter due to CPE spend timing and higher network evolution spend. We continue to expect total 2025 capital expenditures to reach approximately $11.5 billion, lower than our original outlook of $12 billion, primarily as the result of some network evolution capital pushed into 2026.

Despite that push, our goal is to ensure that 2025 is the peak capital year even if by a small margin. And aside from the network evolution timing variance, our previous commentary on capital outlook on a stand-alone basis remains the same. Further, even including the impact of the Cox transaction and associated integration capital we expect total combined company capital expenditures to decline in the first full calendar year post close.

All of those statements are inclusive of the bead spending I mentioned earlier. Turning to free cash flow on Slide 15. Third quarter free cash flow totaled $1.6 billion, in line with prior year, given higher CapEx offset by lower cash taxes and a more favorable change in cable working capital tied to CPE spend, some of which will reverse in 4Q. And we expect full year change in cable working capital to be modestly positive.

Turning to quarterly and full year 2025 cash taxes. Third quarter cash taxes totaled $53 million, and we expect full year cash tax payments to total approximately $1 billion. We finished the third quarter with $95 billion in debt principal. Our weighted average cost of debt remains at an attractive 5.2% and our current run rate annualized cash interest is $4.9 billion.

During the quarter, we repurchased 7.6 million Charter shares and Charter Holdings common units totaling $2.2 billion at an average price of $292 per share. As of the end of the third quarter, our ratio of net debt to last 12-month adjusted EBITDA increased sequentially to 4.15x and stood at 4.23x pro forma for the pending Liberty Broadband transaction.

As I've noted before, during the pendency of the Cox deal, we plan to be at or slightly under 4.25x leverage pro forma for the Liberty transaction. Post close, however, we will move our long-term target leverage to 3.5x to 4x, and we would expect to delever to the middle of that range within 2 to 3 years following close.

Before moving to Q&A, I wanted to remind everyone that as our capital spending peak this year and as we begin to benefit from President Trump's new tax legislation, we are poised for rapid free cash flow and free cash flow per share growth over the next several years.

Slide 16 lays that phenomenon out very clearly. And with the additional upside potential from future EBITDA growth, a declining stand-alone share count and the powerful economic and strategic benefits of our Cox transaction. The pro forma entity will generate higher free cash flow per share in spite of delevering, which will reduce our cost of capital. And as Chris mentioned, sustainable free cash flow is our key focus metric for delivering shareholder value. With that, I'll turn it over to the operator for Q&A.

[Operator Instructions]

Our first question will come from Craig Moffett with Moffett Nathanson. .

Sorry about that. Chris, I wonder if you could just sort of help us think about where broadband is getting better so that we can sort of get our minds around your arguments that things are going to improve on the broadband side. Is it in areas where you've completed your high splits?

Can you share some data that suggests that your market share or market retention is improving, you talked about voluntary versus involuntary churn last quarter and your voluntary churn metrics being best ever. I wonder if you could just sort of help us sort of frame why we should be optimistic about improving results.

Sure. Look, just to tackle both of those quickly, and then I think it's probably best to give a more global look. the high split is going well, but we're not actively marketing the capabilities until we get further down the road from a national perspective just to make sure that we're on track there. So there's really nothing to report there.

Return is definitely better as to the extent that we have a mobile relationship. And to the extent we have more lines for mobile relationship, the impact is significant on the churn impact. And then in addition to that, which has always been the case in cable to the extent you have a video relationship attached to that. But now what we're seeing is the additional activation of these direct-to-consumer apps, which are included as part of the offer.

To the extent when that occurs and it's meaningful, the churn benefit is pretty significant. So no big secret that bundling different products together, saving customers money, having them have a unified service with seamless connectivity and seamless entertainment really does that from a churn perspective.

The challenge that we're facing right now isn't so much on the turnoff side, although I think there's real opportunity where that will just continue to get better. The challenge we have is the operating environment remains competitive with new competitors and a macro environment that hasn't gotten better.

And I'll start from the top of the funnel. So we have a really muted housing environment, there's slow household formation and low move rates. We have continued mobile substitution growth. And then you layer on top of that. So you have these kind of macro trends you layer on top of that. Competitively, there's more footprint expansion from cellphone Internet particularly from AT&T. There's no secret.

Some others have varying results on the residential fixed wireless access or cell phone Internet but AT&T's new to the space with expanding coverage. And then you take a look at our overlap with 1 gigabit or higher competition, it's grown. The pace of that growth hasn't changed in our fiber overlap areas. And our penetration in the true fiber overlap areas remains well above the competition.

But it's new competition in multiple fronts. And in any market when you have new competition, whether it's fiber or cell phone Internet, there's going to be a short-term impact on us. And that's where we're seeing it right now at the gross add level. We are seeing -- in Q1 and Q2, our gross adds were actually higher year-over-year. Q3 it was lower year-over-year. The impact there was most pronounced in the low income segment. That's not an excuse. I'm not sure if somebody is targeting it or not, but it was pretty notable for us, and it's -- that's still very much an important segment for us as well. And so we're trying to pay attention to that.

So it's really coming down to, at this stage, competition for new -- a limited number of gross adds that exist in the marketplace because some of the macro trends. But having said all that, if you think about -- Craig, you and I have spoken about it before, if you take -- if you look at a bucket of gross adds and a bucket of disconnects, the difference between net loss and net adds is a sliver of verse ads or it's a sliver of disconnects.

And in this case, I think over time, when you think about the forward outlook, whether it's household formation, whether it's mobile substitution steadying out, whether it's low move rates, whether it's a cell phone Internet getting to its final state footprint, which is coming or the slowdown or a cessation of new fiber overbuild, all those things, I think, will happen. I just unclear, it's very difficult to predict, frankly, the timing of each one of those. But I don't think it takes all of them.

So it takes a couple of those, one or a couple of those and need to have an outsized impact on our ability to grow. In the meantime, we're not standing, still can hear it. There's a determination on our side and marketing offer expressions, better use of mobile and video. But I think through our own efforts, both short term and long term as well as a couple of those external and macro variables changing, it would make all the difference, and we'll work Internet customers again.

I think in the meantime, when we take a look, is there a silver lining. The silver lining is this environment is -- it is pushing us to be a better operator. And I think when we come out the back end with macro or competitive slowdown, which will occur, we'll end up getting a better operator with a better brand perception and probably a better cost structure along the way as well.

Your next question will come from Ben Swinburne with Morgan Stanley.

Can you hear me okay? .

Yes.

Great. Great. Two questions. Jessica, I think back in September, you had suggested that the fourth quarter EBITDA decline would be maybe less significant than the third quarter. You can correct me if I got that wrong. It sounds like you're signaling that it will be bigger in Q4 than Q3. I'm just wondering if you could talk a little bit what's changed in the business?

And if the layoffs are having a positive or negative, maybe there's a charge in their impact in the fourth quarter? And then Chris, I hesitate to ask you about your competition since it's not you, it's them, but this has been an interesting week. Comcast announced that they're not planning a rate increase, normal course on broadband. Verizon talked about the fact that they had leaned too much on price increases.

I know Charter has always been going back to Tom's leadership, more cautious, I guess, for lack of a better term on pricing. But I'm just wondering when you hear that, do you think does it change your outlook? And do you have to think differently about your ability to grow broadband revenues, convergence revenues, just given what you're hearing from 2, 2 of the companies, one of which is a major competitor in the marketplace.

Got it. So then on the EBITDA side, as we often do, we explored some new offers inside of the third quarter. And a few of those offers impacted ARPU a bit more than we had anticipated without driving the additional sales that we expected. We're pulling them from the market as of the beginning of November, but they're putting a bit of pressure on our ARPU growth in 4Q, which combined with some sales channel mix pressure and marketing and resi sales, we'll will put us in that place where you did hear it correctly that I think that we're a little more pressured in Q4 than we had anticipated that we would be when I spoke about it a few months ago.

And then, Ben, on rate increase. Look, I'd take a step back. Clearly, we've seen, to your point, everything that's been said in the past week or so. But our ARPU today and our promotional pricing and retail pricing, when you take a look at the spectrum pricing and packaging that we rolled out last year, our ARPU and our pricing is low today versus our peers and competitors.

And we're -- because of that, we've always had, as you pointed out, probably a little more headroom than others. And given this macro environment, we're not in a position to not pass through cost increases as they occur. That's particularly the case with video. And I wish that were different, but that's the economic reality, and I think you should expect us to do that. And because of discipline in the past, we're probably in a different spot.

I would also say, remember that based on -- because of the spectrum pricing packaging that we rolled out last year and other migration stuff we've done before, because of the transaction activity over the past year, we've successfully migrated much of our base to Spectrum pricing and packaging. And you haven't seen in our results other than the this separate offer that Jessica mentioned, you haven't seen a big ARPU impact of that migration to lower promotional and lower retail pricing over the past year because we've managed it through putting more value into the package. And that's the case.

And so that migration at a product level and ARPU has been invisible externally. That migration has occurred not just through acquisition, but as customers see these offers in the marketplace, there's a proactive migration that they initiate that also occurs through retention and through loyalty offers that we've migrated, a big portion of our existing base over as well as reactive migration, as I mentioned inside of retention.

And so we've been able to manage ARPU in a way that continues to create value for customers. So lowering their overall product price but keeping the household contribution, the same, particularly at a margin level. So to wrap it up, but I think we're in a slightly different situation. And I don't think that that's where we're at today because of what we've done over the past couple of years.

Your next question will come from Vikash Harlalka with New Street Research. .

Can you hear me okay?

Yes. .

So Chris, it seems like there's a PMS play here where you split the split on how you marketed your products historically. So at your video event earlier this month, you talked about potentially marketing video to customers where they pay for streaming services and get a linear video for free.

Similarly, there was a promotion recently where customers receive broadband for nearly free when they buy 4 lines of mobile. Is this the next sort of step in the evolution in the marketing chain?

Yes. I think these are just different marketing offer expressions to get to higher ARPU and higher margin per household at the same time, saving customers lots of money. So trying to create win-win scenarios our national pricing and packaging hasn't changed, and I think that's the vast majority of how we go to market.

The video expression really is just the way we talk about it. So if you think about it for -- I'm going to make this up, but an audience over 35 years old, or an audience over 35 years old, it may resonate that here's your video package. It's around $100 and you get over $125 of apps included for free. But for an audience that's younger that may not be that interested at all in linear video, the expression -- how about I give you $125-plus of app value for $100.

And oh, by the way, your linear video is included. Well, that's the exact same product. So there's no change in economics there for us. But depending on the audience either way, we're saving them lots of money, and it's valuable to them. It's just expressed in a different way. And then you overlay Xumo and the ability to have to find surgeon discovery. And it's an interesting and compelling way to use video to drive our connectivity services. The feline offer, one, I would start by saying it's a relatively small audience that's willing to convert over 4 lines in 1 single fell swoop.

But it is a good way to express value to consumers by saying, if you take 4 lines, we'll give you Internet for free. And when you do the math and think about the economics here, I'm sure Jessica can chime in. But the vast majority of these customers take speed upgrades. They're taking a limited plus our ARPU at sell-in and over time in our margin over time is higher than any other traditional sale.

And so you can move dollars around, that's the benefit of having multiple products to sell in creating offer expressions that create a really winning situation for different pockets of audience in the marketplace, and you don't have to sacrifice revenue or margin from a company perspective in order to achieve that. Again, that's a twist in offer expression for a relatively small audience.

So you're not going to see a lot of volume there, but to the extent it exists, it's incremental to what you would have gotten otherwise. And it's accretive relative to the average acquisition. .

Particularly, too, because those customers with 4 lines of mobile and Internet line -- their churn rates are very low. And so you can end up with very high customer lifetime values, particularly given the combination of the 4 lines and the upgraded services that people take.

Yes. Even with -- you're totally right. But even without that, it's a land dump but that makes it -- what Jessica said is true. If we get 4 lines in a free Internet with an upgraded for an extra $10 or $20 to 500 megs or to a gig plus an unlimited plus lines to value in that package. It's high for both -- it's higher than the customer can get anywhere else in the marketplace.

And it's higher for us than...

High value asset.

Yes. And because of that, the relationship sticks has low churn and has high customer lifetime value for both.

Your next question will come from Jessica Reif Ehrlich with Bank of America.

I guess 3 different things. One, can you just give us an update on more color on Cox acquisition, how you're preparing for it? And any -- just timing as well. And then on the video product, you've had such dramatic improvement pretty quickly since you started marketing it in October. Can you give us any detail or color on that in terms of conversion of broker bids only subs, what you're seeing in terms of retention? How many subs are really engaging with us? I mean, obviously, it's working.

Yes. So on Cox, there's no real new news there. The -- from a time line perspective, everything we've said in the past is the same. I don't want to step on my foot -- my own feet here and say it differently, but I think it was mid next year is what we have said. And so that's still the case.

Our focus right now from a COGS perspective is a few fold. But first and foremost is to work with the regulators at the federal and state level make sure that we're in a position to answer all their questions properly, make sure they understand the value that exists here for our customers, in particular because we have lower pricing and the ability to bring these type of mobile offers and video at scale and to save money across really the entire suite of products as well as for employees and the communities we serve, including adopting some of the great things that Cox does inside of their local communities and create a benefit for not just the Cox footprint but also inside our existing footprint as well.

So that's the biggest focus, but also clearly, as we try to make sure we're preparing ourselves to as quickly as possible post closing to put ourselves in a position to launched the Spectrum brand in Cox market. It's a long-term pricing and packaging to put Xumo in place for video acquisition and to apply our seamless entertainment and seamless connectivity products. There's a lot of work in preparation for us to do that. We can't do anything in the meantime until we close, but we can do a lot of thinking.

We do a lot of preparation and trying to get ready for that. And so the team is busy on that front as well. On video, it's going to sound like apple pie, but our sales are up, churn is down on video relative to prior periods. And the activation of the apps has really accelerated. It had been growing pretty steadily but that was absent us really doing anything to advertise or drive it because we wanted to make sure that the service experience for activation and it is there in a unified way that upgrades could work the way that it should, with the incremental cost to the customer.

And so it's gotten pretty significant. And then when clearly, we had the launch of the new ESPN app, FOX One as well as Hulu now included for free. And then just in the past few weeks, the launch of the Spectrum app and digital marketplace, there was an accelerated pickup even in the recent weeks. The benefit from that is what we can clearly see now is when you segment customers based on their tenure with the company, the number of activations of these direct-to-consumer apps that they have, whether that customer is 0 to 6 months, 10 years 6 to 12, 12 to 24 or 24 and beyond.

In each of that AB testing of whether they activated the apps or not and how many apps did they activate the churn reduction is significant. There's clearly a lot of self-fulfilling prophecy that's inside there, those that activate tend to like us more argue, but it's pretty compelling. And so we're excited about what we're seeing on that front. It's been a lot of work. It's not perfect yet.

So when you think about the different ways that customers activate each one of those programmers genuinely has a different activation path and flow that we need to follow. So we still think we can work on that with things like behind the modem automatic authentication and still get password in credentials to the programmers the way that they want. So there's still things that we can do to make it even better. We're not done.

But I'm pretty pleased with where it's at. And I said it in the prepared remarks, I just want to be clear, our goal here, it isn't to have positive video ads, and it's not -- unfortunately, it's not to save the video ecosystem because it's pretty challenged. But our goal is to make sure that we have a unique and differentiated product that we can put in front of our connectivity customers in a way that generates new ways to market and acquire customers and has retended value, and it has value and utility for them.

And to the extent a broadband customer wants that and value that, we're going to attach that to the relationship. And if they don't, we won't. And we'll just rely on the retenant value of Internet and mobile convergence on that floor. So it's going well, but it's still very early days. And the amount of pickup on these inclusion offers is significant that's great for the programmers because once that happens, they will have relative to a stand-alone selling of these retail products, they're going to have much lower churn there's obviously an operating cost and wholesale relationship. It's great economics that exist inside the traditional linear system.

And then they have the upgrade potential of these apps to an ad-free version. And we'll keep innovating in different ways, wherever the customer wants to go. That's where we're going to try to meet them together with, I think it's a very different relationship that we have now with the programmers and even the leagues understanding that the importance of doing from packaging and from utility inside Xumo with the ability to have the info search and discovery across all these apps and really solve what I call where is the gaming problem.

The one thing that I would add to that, while it's not sort of the focus of investing in the video product, there has been significant financial pressure on video margin with the loss of customers that we've seen over the last several years and bringing stability to that space even if it's not that you fully stop it for shrinking, if we can bring the pace of that down, that really allows us to be in a better place to highlight the growth that we see across other areas of the business and to drive financial growth of the company as a whole by having more stability in video.

Yes. So it's actually an important derivative growth lever.

Your next question will come from Michael Rollins with Citi.

Two topics, if I could. So first, through all the recent efforts to improve efficiency at a lower cost, can you size the future opportunity for savings, including if you have any step function opportunities to take cost out, whether it's migrating customers to IP video off the linear infrastructure or the automation tools that you're bringing to your customers and employees.

And then secondly, and I guess, forgive the expression, but are there any nonlinear ways to expand Charter's addressable market for revenue to introduce new ways to monetize the customer relationship for both the consumer and business segments.

Look, great questions actually and something both of which we're thinking a lot about. The size of the cost opportunity, I mentioned it in the remarks today. We've been getting -- depending on the year. But if you look at a multiyear period, a reduction in cost to serve or customer relationship through quality transactions, which actually came about by investing more. So we invested more in our employees and our systems and tools in order to drive down service transactions and have lower churn.

And all of that ultimately reduced our cost to serve over time per customer despite the higher investments. And more recently in the past, I'd say, 2 years, making those tools better, the investments that we've had there has been driven by machine learning and which has migrated into AI type investments.

The backbone of all of that is a unified data and software development structure that we have here at Charter, which may or may not be unique, but it allows us to put these separate AI tools because they're really functioning off the same data spine and development infrastructure. It actually sets us up very well for Agentic AI.

And I'll be honest, just a few months ago, I kind of wrote my eyes. But when you take a look at the things that I mentioned that have really changed, at least from our perspective, what we've been able to see, whether it's short and long-term memory, multimodal the ability for our agent to potentially meaning in AgenticAI, agent able to interact with the customers agent over time.

There's a real opportunity here for doing, first and foremost, the improvement of quality of customer service. based on the knowledge of the significant number of transactions we do every year, there's not new millions of different ways to do that transaction in the best ways. There's usually one. And so the opportunity to meet the customer where they want to be in a digital transaction is big. I mentioned inside the prepared remarks just to size that the cost of service for us is $8 billion. A lot of that is physical, but a lot of it's different areas of the business. And what that will do if we make those investments, it actually first -- first is can you improve the customer service quality?

Second is can you improve the quality of the job for an agent. And when you do those things, you make it better for the customer, but the agents more satisfied, too, which means that you have a happier employee who delouse more tenure with the company, which is actually better for the customer, you get this virtuous cycle, agenda the back end, you can dramatically lower your cost in environments that have naturally higher attrition to begin with.

And so I think that the size of that -- the total of it today, you can see it in our P&L is $8 billion. And so I think there's -- without it, we don't know yet the exact size, but I think it could be significant, and we're leaning into that pretty heavily. The nonlinear ways, we've been of growing revenue, developing new products. For the past few quarters, we've included a slide, I don't know if it's Slide 4. We can take a look, but whether that's right or not, there's a slide in there that shows the extent of our assets.

And part of that slide is to demonstrate that we have facilities and we have connectivity capabilities that I think are genuinely of interest to a much broader array of B2B partners and could also create additional even residential products for us over time. But I mentioned, we have recently signed up with Amazon to do data offloading, saves the money, has better connectivity.

And we've done the same thing with Nexar, which you'll find a different car rideshare services as video cameras, so for offload. But you can think about what could we bring to the EV community in terms of offloading the amount of bandwidth that comes into a garage every single night and save those providers' money, which actually ends up saving customers' money.

You could think about our location-based services behind the modem or with our seamless connectivity abroad in terms of financial transactions and managing cybersecurity risk in a low latency environment in ways that you could monetize that facilitates transactions for a B2B provider, but also makes the network safe for financial fraud for our end user customers in a way that could be relatively unique.

So -- and then move on, you'll see on that page, there's 1,000 hubs and localized data centers. These are not hyperscaler data centers. They're generally much smaller. They have a little bit less, a lot less power. And we're exploring different use cases for what you could do there with respect to edge CDN could AI inferencing be there.

I think there's a huge set of assets that exist in our footprint that are untapped as it relates to new B2B and B2C products. There's nothing here that I can say here tell you is material today. but we're pretty active in talking to different people across the country. And in fact, globally, about different ways that we can make better use of these assets to revalue consumers and to bring new revenue streams to us. So that's in some sense, that's the history of cable.

If you step back, broadband was never a product, [indiscernible] was never a product, mobile is number product, and it all came on the backbone of these assets that we have in providing connectivity services. And while I still firmly believe we're going to grow Internet again for all the reasons that I talked to Craig about earlier. It doesn't mean that this isn't a good opportunity to go take a look and say, what's the next wave. It's always happened

Thanks, Michael. Leila, we'll take our last question, please.

Your last question will come from Peter Supino with Wolfe Research.

A financial question. I think we -- you all have done a great job of covering a lot of the operational topics today. Historically, Charter has structured its debt really intelligently so that the maturities are fairly evenly laddered, and the rates are fairly fixed.

With rates hired today and with growth coming in below where I'm sure all of us expected a few years ago, I wonder what it would take to make it interesting for Charter to start paying down debt maturities over the next few years. Understanding that it is your conviction that cable broadband will grow again. I think we're all wondering what we do if it doesn't?

Yes. So Peter, we reevaluate our target leverage ratio all the time in spite of the fact that we don't change it very often. And we do that in the context of all of the things you're talking about, whether that's interest rates or growth prospects for the business, sort of how we see the long-term trajectory of the business.

And right now, I would say how we see the long-term trajectory of cash flow. And given what we see across the business today and what we think that we will be able to do as we bring together our business in the Cox business and reap substantial benefits out of that transaction. I think we're comfortable with the stand-alone business where it is today at 4 -- just under $4.5 when you pro forma in the Liberty debt.

And then over time, when we bring in the Cox assets, assuming that the transaction closes that, on its own, sort of moving the leverage ratio down a bit and then targeting at the midpoint of a 3.5 to 4x range over time. What that means is that we will do sort of somewhat less borrowing. I mean I'm sure that you can see we have pretty limited towers over the next couple of years. And on top of that to be in a place where we would be planning to reduce the leverage ratio.

The total amount of borrowing that we do does sort of naturally self-limit in that period. But I think it strikes a nice balance between being able to continue to return capital to shareholders, which I think is an important part of our business. keeping leverage on the business at a time when there is dramatic free cash flow growth that's coming in a way that I think will provide significant value to shareholders and managing risk in a way that's appropriate.

I mean we still in the stand-alone business and then even more so in the combined business, generate a substantial amount of cash flow so that if we did need to delever at some point in the future, from a risk perspective, I think we're more than capable of doing so. So I continue to be happy with where we sit in the guidance that we've given today. But it doesn't mean that we won't continue to evaluate. We will we always have. And if it's prudent for us to make a move, we will.

I think just to -- I'm just going to add to that, it's probably a great way to end the call today that the free cash flow that we've talked about is mechanical. It's because of the massive step down in capital expenditure is mechanical and it happens whether or not there's some were high EBITDA growth rate. So it's happening either way.

And I think everybody knows we typically because we want to make sure that we can make the right capital allocation decisions dynamically to create value for shareholders. We typically don't give a lot of financial outlook. But to the extent we do, we understand the importance of hitting it. and that includes CapEx that includes a commitment to EBITDA growth and free cash flow and particularly free cash flow. And so that means that you can delever fast if you need a Tier 1 and 2 at any time. So it's very repetitive to what Jessica just said, but I felt like I wanted to add that in.

Yes. But it's probably important to say, look, we continue to have confidence in the business and our ability to create the free cash flow growth that we've talked about for shareholders. And the ability in the medium and long term, the broadband asset to deliver the kind of connectivity that people will need to run the products that will come to the marketplace. And so with that confidence, I think we continue to be in a place where we believe that we can continue to create good value for shareholders going forward.

Leila, that ends our call. I'll turn it back to you.

Thank you, everyone, for joining today. The call has concluded, and you may now disconnect.