Charter’s Network Upgrade Plans Fit Our Expectations, but Highlight Past Buyback Missteps

Charter spooked the stock market with plans to increase capital spending over the next three years to upgrade its core cable network while also expanding into new, primarily rural markets. New CEO Chris Winfrey is putting his stamp on the company, pulling spending forward on the belief that upgrades will eventually be required anyway, and faster deployment will yield strategic benefits. The firm’s outlook doesn’t differ materially from our forecast in aggregate. We’ve long expected cable companies will need to increase spending over time to compete against fiber-based networks like Verizon FiOS, and this assumption is already baked into our fair value estimates. Our Charter estimate remains $580 per share.