Charter Earnings: We Still Aren’t Fond of Buying Wireless Growth With Promotions

One of the primary debates coming out of Charter’s first-quarter earnings release concerns its wireless business. The firm added a record 686,000 net new wireless customers during the quarter, equal to more than 35% of the industry total. Spectrum One, which offers broadband and wireless at $50 per month for a year—essentially free wireless service with inexpensive broadband—is driving wireless growth, though management claims most new customers are taking other rate plans. The question is whether Spectrum One customers will keep wireless service once the promotion expires. Charter expects they will, on balance, but we remain skeptical. Regardless, we expect broadband will remain at the center of Charter’s customer relationships and drive the vast majority of profit over the long term. Our fair value estimate remains $580.