Charter Communications Q3 2026 Earnings Call Transcript

Charter Communications (NASDAQ:CHTR) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.

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View the webcast at https://charter-comms-q3-investor-call-nov-2026.open-exchange.net/registration

Summary

Charter Communications announced a new operating model to address market competitiveness, focusing on returning to growth and increasing efficiency.

The company plans to capture $1 billion in synergies from the Cox Communications integration and an additional $2 billion in operational cost savings over the next 18 months.

Charter reported a 1.5% year-over-year decline in pro forma revenue and a 3% decline in EBITDA, excluding transition expenses, for the third quarter.

Recent acquisition of Cox Communications has added 11 million passings and over 5 million customers, enhancing market reach and synergy opportunities.

Management is committed to deleveraging, aiming for a net debt to EBITDA ratio of 3.5 times, while balancing debt repayment with share repurchases.

Full Transcript

OPERATOR

Hello and welcome to Charter Communications third quarter 2026 investor conference call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. 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 Aninger.

Stefan Aninger (Investor Relations)

Thanks, operator, and welcome everyone. The presentation that accompanies this call can be found on our website, ir.charter.com, and 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. During the course of today’s call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. These non-GAAP measures, as defined by Charter, may not be comparable to measures with similar titles used by other companies. We will also refer to pro forma results. While our Cox transactions closed on August 19, 2026, these pro forma results present information regarding the combined operations as if our transactions had closed at the beginning of the earliest period presented in our materials.

In order to provide a more useful discussion of our results, please refer to the pro forma disclosures throughout today’s materials. 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, Kevin Howard, our interim CFO, and Jeff Murphy, our Senior Vice President of Corporate Finance and Development, will also join us during Q&A to help us answer finance questions. With that, let’s turn the call over to Chris.

Christopher L Winfrey (President and CEO)

Thanks, Stefan. Before we discuss our results, I want to start with an important update on our business priorities and the significant changes we’re making to how Charter Communications operates and competes. We’re announcing a new path forward for Charter Communications to address a more competitive and complex market. We recognize that we’ve not generated the customer growth and performance we expect, and our customer satisfaction is not where it needs to be.

Returning Charter Communications to growth requires more than incremental improvements to how we operate. So today I’m announcing a new operating model for Charter Communications. We’re fundamentally rethinking how we compete, how we allocate resources and how we run our business. This represents a significant change, and with greater urgency and sharper focus, we will transform our ability to compete in the market with growing customer expectations for service delivery, experience and value.

Going forward, we’ll maintain a relentless focus on two clear priorities: doubling down on returning our company to growth and, secondly, transforming Charter Communications into a simpler, more efficient organization. Let me walk through how we intend to deliver on each of these objectives, which will strengthen our competitive position, unlock efficiency with faster decision-making, and significantly increase cash flow over time. Our top priority is to return to growth in our core business by winning more Internet customers.

We have over 70 million passings, 37 million customer relationships and 34 million Internet customers, leaving significant runway for more penetration of our footprint. We’ll win more Internet customers by reformulating our value proposition and go-to-market approach to significantly accelerate the pace of new connects and grow market share. We’ll make our offer stronger, more simple and more transparent. And we’ll perfect our single-play Internet go-to-market, including the offer proposition, the marketing and distribution, and then layer in our unique convergence capabilities, mobile as well as our market-leading video product.

We also plan to modify our sales channel capabilities to drive better connects and maintain the same or higher rates at connect and over the course of the customer relationship by delivering additional value over time. More details to come when we fully launch, but we will grow our Internet sales rate. But to really accelerate growth, we must also reduce churn. While we have low historical churn, we can be even more competitive through smarter pricing, enhanced customer service and an even better network. Too often our most loyal long-term customers are at risk from aggressive price competition. And we also fully recognize the importance of Internet ARPU. And while our average ARPU is competitive, we’ll reconfigure our offers at promotion and retail by adding value into the relationship and earning ARPU.

We’ll also significantly enhance our service with an even more disciplined focus on what drives customer calls and dissatisfaction. And we’ll continue investment in AI technology to give our teams the tools to provide the best service and to reduce unnecessary service events. Our second major priority is becoming a simpler, more agile and efficient organization. We’re undertaking a fundamental redesign of how we operate at every level. We’ll reduce complexity, accelerate decision-making and focus our resources on the activities that contribute most directly to growth and stronger performance. We’ve already begun putting these changes into motion, starting with our leadership. On September 1, Nick Jeffery, the former CEO of Frontier and Vodafone UK, joined Charter Communications as our new Chief Operating Officer.

Nick is already acting as an important change agent at Charter Communications, bringing a fresh perspective and challenging us to fundamentally rethink how we operate, compete and deliver for our customers. And he’s helping me put this new model in place, which we introduced earlier this week to our 100,000-plus teammates nationwide. That comes down to the two priorities of growth and efficiency that I mentioned, and we’re bringing that to life across the entire company through four strategic imperatives: winning more Internet customers, improving customer service, upgrading our networks and becoming more efficient.

We’ll find an appropriate venue, whether at a conference or an earnings call, for you to hear from Nick and me directly on the operating strategy and transformation. Alongside Nick’s appointment, we’ve announced other changes to our leadership team and operating structure to address the evolving needs of our business as we build an organization to win in the future. We’ve also established dedicated leadership for Spectrum Consumer, Spectrum Business and Spectrum Wholesale. Another critical component here is our ongoing investment to ensure we retain the best network for our customers across our footprint.

As we complete our network evolution, we’ll deliver even better reliability and faster upstream and downstream speeds, and our network investments are set to decline after next year, consistent with our previous outlooks. A critical part of our transformation is capturing the full value of our combination with Cox Communications while driving meaningful cost reductions. That means realizing the benefits of our expanded scale, simplifying our combined operations and eliminating duplicative activities. In addition to the more than $1 billion in transaction synergies that we anticipate from the Cox Communications transaction, we’re now targeting an incremental $2 billion in annualized run-rate operating expense savings over the next 18 months.

Much of that will come from simply eliminating projects that don’t contribute to Internet growth, and we’ll also be organizing our leadership and teams for maximum effectiveness, increasing spans of control and reducing layers. We’ll drive even more meaningful partnerships from a more focused and narrowed set of vendors, requiring better speed, quality and pricing. I want to be very clear: these savings are not targeted at frontline service and sales employees, and we’ll continue to invest in employee progression and market-leading benefits like education.

Our frontline employees will benefit from simpler offerings, faster responsiveness to the market, and continued technology deployment, where we already use AI. Allowing our team members to serve happier customers more effectively and reducing unnecessary service transactions will continue to drive higher quality and lower service transactions, higher job satisfaction and will reduce hiring needs as a result, all while moving Cox Communications service calls from offshore to our 100% U.S. employee base without increasing headcount.

We’re building a winning culture, raising our competitive metabolism with faster execution and a stronger sense of urgency across the company. This transformation represents an opportunity for us to take an uncompromising approach to strengthening our culture and ignite stronger performance across the business. By simplifying how we operate, we’ll be able to make decisions faster, execute more effectively, and create greater capacity to focus on our Internet business and return to growth.

We recognize that ultimately our progress will be measured by results, and we intend to provide you with greater visibility into our performance as we execute against these two main priorities. Right now we’re focused on a variety of measures of success to drive the right outcomes, but the most obvious ones are increasing the rate of customer connects, reducing churn, increasing customer lifetime while maintaining ARPU, increasing convergence across our existing and new footprint, and bringing planned cost efficiencies online.

And we look forward to updating you on our progress on these as we go forward. The ultimate success of these initiatives will be reflected in stronger revenue, EBITDA and significantly higher free cash flow generation over time, supported by declining capital expenditures, all of which also ties into prudent capital allocation, including debt reduction, which has already started. Next, let’s quickly review our newest high-value asset, Cox Communications, and our third quarter performance. On August 19, we closed our acquisition of Cox Communications, adding 11 million passings and over 5 million customers, making Spectrum the leading Internet and video provider in the United States. We now pass over 70 million homes and businesses with a 50% customer penetration rate. More importantly, a great opportunity to grow our base.

With the addition of Cox Communications, our footprint now includes key attractive and growing markets like Phoenix and Las Vegas, large adjacent markets like Virginia, Kansas, Oklahoma and Rhode Island, and better in-market sales and service coverage in places like Los Angeles, San Diego, New Orleans and North Florida. And we’ve been busy welcoming Cox Communications’ former customers and our new team members to Spectrum. The Cox Communications transaction offers us significant transaction synergies, but also significant operating synergies, like the growth opportunity offered by Cox Communications’ lower penetration across all of its residential products, and the combination of Cox Communications’ well-known B2B capabilities for legacy Charter Communications gives us the ability to offer highly competitive business services on a much more national basis. There are many other opportunities, like a recent porting over of Cox Communications’ successful AI network reliability team, and local advertising upside.

During the third quarter, Legacy Charter Communications added 440,000 mobile lines and over 1.6 million lines over the last 12 months for growth of nearly 15%. In video, our 38,000 loss at Legacy Charter Communications was half the size of last year’s third quarter loss, driven by significant video product improvement over the past couple years. In Internet, where competition remains intense, Legacy Charter Communications lost 156,000 customers, more than last year’s loss of 109,000.

We’re not satisfied with that result, and we’re taking active steps to shift momentum and gain share. Legacy Cox Communications lost 77,000 Internet customers in the quarter, and it’s fair to think of Cox Communications as about one-fifth the size of Legacy Charter Communications. We knew Cox Communications’ subscriber results and underlying financials were more challenged when we agreed to acquire the asset, which is partly what creates the opportunity in front of us.

Importantly, since the launch of Spectrum Day on September 16, Internet sales are up significantly already, cutting the run-rate Internet losses at Cox Communications by half—still a higher loss than Spectrum when size-adjusted, but it’s getting better quickly, and the lower starting penetration is a big opportunity. The monthly net add rate of mobile lines for Legacy Cox Communications is now increasing and it’s up three times, and video customers grew slightly in October.

At Legacy Cox Communications, we see opportunity for that trend to continue. Those trends will certainly vary after the initial launch period, but building the Spectrum brand through improved product and service offerings and an improved go-to-market for Spectrum at large means we’ll do well with the former Cox Communications assets. Pro forma Charter Communications revenue was down 1.5% year over year, driven by lower residential revenue, and third quarter EBITDA, excluding Cox Communications transition expenses, declined 3%. Kevin will cover more, but run-rate transaction synergies are expected to be over a billion dollars, with little of that realized in the third quarter stub period but beginning to ramp in the fourth quarter, with the separate cost transformation benefits I talked about beginning next year.

Beyond the immediate benefits of the Cox Communications integration and our transformation program, I want to take a moment to remind you of our key assets and the competitive advantages those assets provide and why we win long term. We are America’s Internet company, with the capability no other company has to deliver Internet to more Americans, a purpose that we call Connecting Gigabit America. Our fully deployed fiber-powered gigabit network is 100% converged and will be multi-gig capable everywhere, unlike our competition.

Demand for data and overall data usage continues to grow, particularly in the upstream. Given massive secular trends, electric vehicles uploading data at night, AI applications and other new low-latency demands like physical AI in the future will ultimately separate our network from those with slower speeds and more latency. We also have unique mobile and video products that support Internet customer growth, and today we’re the fastest-growing mobile provider in our footprint.

In an increasingly converged world, we have an economically advantaged, capital-light mobile business with the fastest mobile speeds, driven in part by our near-nationwide automatic Wi-Fi connection, including our Speed Boost feature with partners like Comcast. It isn’t just better speed and seamless connectivity nationwide; we also have the best value proposition in the market, and our video product is arguably the best video product in the country, with extraordinary utility and value driven in part by our seamless entertainment offering providing over $130 per month in included programmer app value.

We combine those great products and value with our Internet relationships together with a customer service platform that’s 100% U.S.-based, operating 24 hours a day, seven days a week, all backed by our industry-first and industry-leading customer service commitment. Stepping back, we’re reinvigorated by our new approach, and we’re excited to shift the company into offense, where we can take full advantage of our leading assets and significant advantages, ignite our competitive culture and improve service execution for our customers. Finally, I’d like to address our CFO transition. Kevin Howard, our interim CFO who’s here with us today, has been our Chief Accounting Officer since 2006. He’s highly experienced and knows our business extremely well.

Kevin was our interim CFO in 2010, just before I joined as Charter Communications CFO, and I understand finance operations and know the team well. We have top-notch capabilities across accounting, tax, planning, procurement, capital markets and IR. With the in-house talent that we have in place, and a premier CFO position available at a compelling inflection point for the company, we should be able to move pretty quickly in identifying a new CFO.

Kevin will run through the quarter and also cover more on our balance sheet strategy, but I’d note that we’ve already come down to 3.9 times leverage, and we’re committed to making steady progress using our significant free cash flow towards our 3.5 times target leverage. Now I’ll turn it over to Kevin.

Kevin D. Howard (Chief Financial Officer)

Thanks, Chris. Good morning, everyone. Please refer to Slide 10 for a summary of our reporting approach as it relates to the Cox and Liberty Broadband transactions. Let’s start with our customer results on Slide 11. Legacy Charter, including residential and small business, lost 156,000 Internet customers in the third quarter, driven by lower connects year over year, while the churn rate was essentially flat. As Chris noted, we see opportunities in both, with our plan to return to Internet growth. During the quarter, we continue to see expanded fixed wireless competition versus a year ago, including lower sales from lower income consumers, ongoing mobile substitution, and fiber overlap at a rate similar to prior quarters, and with continued aggressive promotions by certain competitors.

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, Legacy Charter added 440,000 lines with higher gross additions year over year, more than offset by higher disconnects even with a lower churn rate given our larger mobile line base. Video customers declined 38,000 versus a loss of 70,000 in 3Q25, with the improvement primarily driven by lower video downgrades, lower customer churn, and higher upgrades year over year resulting from continued seamless entertainment product improvements, including our programmer app inclusion packaging.

In rural, we continue to see strong customer relationship growth, generating 48,000 net customer additions in our subsidized rural footprint in the quarter. Subsidized rural passings grew by 116,000 in the third quarter and by 479,000 over the last 12 months. Turning to Slide 12, Legacy Cox lost 77,000 Internet customers and 39,000 video customers during the quarter, but gained 70,000 mobile lines. Legacy Cox remains an underpenetrated asset across virtually all of its products. As Chris mentioned, we’ve seen significant sales improvements across Internet, mobile, and video since our Spectrum Day launch in the Legacy Cox footprint on September 16th, and we expect it to continue to get better.

Moving to third quarter pro forma revenue results on Slide 14, over the last year pro forma total Charter residential revenue declined 2.7%. Residential revenue per customer relationship declined 1.6% year over year, but was essentially flat when excluding GAAP allocation of the programming costs related to the streaming apps netted in video revenue, which was a headwind of $286 million this quarter, almost entirely at Legacy Charter, versus $106 million in the prior-year period.

There were other puts and takes, including rate adjustments at Legacy Charter in the third quarter of this year and last, the growth of Spectrum Mobile lines, pricing and packaging mix within our customer base, and decline in video customers during the last year. As Slide 14 shows, in total pro forma residential revenue declined 4.1% and was down 2.6% when excluding GAAP allocation of programming costs related to the streaming apps in both periods.

Turning to commercial, we’ve not yet harmonized Legacy Charter’s and Legacy Cox’s commercial business reporting practices, so I’ll discuss those businesses separately today. Legacy Charter’s mid-market and large business revenue grew 2.1% year over year, and when excluding all wholesale revenue, grew by 3%. Legacy Charter’s small business revenue grew by 0.1%. Legacy Cox’s commercial business declined 1.1% year over year, and I would note that given the sizable business that Legacy Cox has with hyperscalers and the unique timing of revenue recognition associated with the hyperscaler business, we anticipate some lumpiness as it relates to Legacy Cox commercial revenue. In total, pro forma commercial revenue grew by 0.3% year over year.

Third quarter pro forma advertising revenue grew by 21% given higher political revenue year over year. Excluding political, advertising revenue declined 5.2% year over year. Other revenue grew by 18.1% driven by higher mobile device sales. In total, pro forma consolidated third quarter revenue was down 1.5% year over year, or 1% when excluding both advertising revenue and programmer app GAAP allocation. Looking at revenue by legal entity, Legacy Charter revenue declined 0.9% year over year in the third quarter, while Legacy Cox revenue declined 4.5%, primarily driven by a decline in residential customers.

But as Chris mentioned, the Legacy Cox customer trajectory is already looking more similar to Legacy Charter. Moving to pro forma operating expense and adjusted EBITDA on Slide 15, on a pro forma basis, third quarter total operating expenses were relatively flat year over year, growing 0.2%, with very little Cox transaction synergy realization in the quarter. Programming costs declined 10.3% due to the growth in cost allocated to the programming streaming apps netted within video revenue previously discussed, a 1.8% decline in video customers year over year, and a higher mix of lighter video packages, partly offset by higher programming rates.

Other costs of revenue increased 15%, primarily driven by higher mobile device sales, mobile service direct costs, and higher advertising sales costs given the higher political revenue. Cost of service customers, which combines field and technology operations and customer operations, grew 1.8% year over year driven by higher fuel and vehicle maintenance expense and higher pole rent driven by our rural construction initiative, partly offset by lower labor expense.

Marketing and residential sales expense declined 1.8% year over year due to lower marketing expense from procurement initiatives late last year, but our volume of impressions and our marketing activity generally was much higher year over year. Transition expense related to the Cox transaction totaled $76 million in the quarter, driven by system disentanglement from Cox Enterprise, system integration with Cox Communication, and branding and marketing expense related to Spectrum Day in the Legacy Cox footprint.

Finally, other expense declined 6.3%, primarily driven by lower labor expense. Adjusted EBITDA declined 4% year over year in the quarter and declined 3% when excluding transition expenses. Due to the mid-quarter closing of the Cox transaction, we only saw a small benefit from the operating cost synergies in our third quarter results. Synergies will materialize in the fourth quarter, and we will highlight estimates of how much is captured within each quarter going forward. We’ve already identified run-rate annualized operating expense transaction synergies over $1 billion, with nearly half that run rate expected to be achieved in the first half of 2027, and 90% of that expected to be captured over the next 24 months.

As a reminder, we define transaction synergies as those which result purely from the combination of the companies. They do not reflect operating synergies that come from operating decisions and investments that increase revenue and lower service transaction costs. Chris also mentioned our additional $2 billion run-rate cost savings plan to be achieved over the next 18 months. We will report progress on that initiative as well. Turning to third quarter net income, pro forma net income declined year over year by $1 billion in third quarter 2025 to a net loss of $2.1 billion in the third quarter of 2026.

The decline was driven by a one-time non-cash franchise impairment charge at Legacy Charter of approximately $6.3 billion, which was less than 10% of Charter’s overall franchise valuation on the balance sheet, one-time M&A expenses related to the transactions booked in other operating expense, and lower EBITDA year over year, partly offset by a $1.4 billion gain related to the debt exchange that we completed in August and the non-cash tax benefit associated with the franchise impairment charge.

Our total share count on an as-converted, as-exchange basis grew by a little over 40 million shares this quarter given the closing of the Cox and Liberty Broadband transactions. Slide 18 in our presentation shows a buildup of our total share count. Turning to Slide 16, pro forma capital expenditures totaled $3.2 billion, including $33 million of transition capital expenditures. Excluding transition CapEx, our third quarter pro forma CapEx declined $440 million, driven primarily by lower spend on line extensions given the declining spend on our subsidized Rural Construction Initiative. For full year 2026, we expect total pro forma capital expenditures, excluding transition CapEx, to total approximately $13 billion, well below the sum of our 2026 CapEx guidance for Legacy Charter of $11.4 billion and the $2.5 billion of 2026 CapEx that were originally expected for Legacy Cox.

We’re building the combined operating plan for 2027. We’ll have more to say on that on our fourth quarter investor call, but for the moment, when excluding transition capital, we expect 2027 capital expenditures to land at or below $11 billion, which is the sum of our previous Legacy Charter guidance of approximately $9.5 billion and $1.5 billion capital expenditures at Legacy Cox. Turning to cash taxes, third quarter cash taxes totaled $431 million. We continue to expect our actual calendar-year 2026 cash tax payments will total between $500 and $800 million, even when including Cox. Slide 17 shows actual free cash flow of $674 million we generated in the third quarter. The year-over-year decline in free cash flow was mostly driven by one-time or temporary impacts, including working capital timing with supply chain financing benefits in the prior year, higher cash taxes this quarter, and third quarter cash costs related to the closing of the Cox transactions.

As we said before, we expect significant free cash flow growth over the next several years, driven in part by declining capital expenditures as we complete our subsidized Rural Construction Initiative and our Network Evolution project, which in addition will be supported by over $1 billion in Cox transaction synergies, do not include CapEx synergies, and the $2 billion cost transformation that we announced today. Further, those savings do not assume any significant efficiencies from Magentic AI.

We finished the third quarter with $109 billion in debt principal, which includes impacts related to the Cox transactions and the Liberty Broadband transaction, our third quarter debt exchange, and some Legacy Cox debt pay-down in September. As of September 30, our weighted average life of debt was 11.1 years, and our weighted average cost of debt remains an attractive 5.3%. Current run-rate annualized cash interest totals $5.8 billion, and as of the end of the third quarter our ratio of net debt to last 12 months adjusted EBITDA, excluding transition expense, was 3.93 times, as expected.

Our leverage target is a net debt to EBITDA ratio of 3.5 times, which we expect to achieve within three years of the close of the Cox and Liberty Broadband transactions while making consistent deleveraging progress along the way. We continue to evaluate the pace of that deleveraging, and as a reminder, we purchased over $1.2 billion of our own debt in the open market for $1 billion in cash in the second quarter, reducing our total leverage by capturing approximately $250 million of discount.

During the third quarter, we executed a debt exchange which further reduced our debt principal by approximately $1.5 billion. As part of normal operations, we expect to use a substantial portion of our free cash flow and liability management to delever in the fourth quarter. We expect that the majority of our free cash flow will go to efficient debt reductions. We expect to exit 2026 below 3.9 times leverage. The combination of proactive balance sheet management and opportunistic repurchases will underpin our deleveraging and maturity management efforts on our way to 3.5 times leverage.

During the quarter, we purchased 140,000 Charter shares totaling $19 million at an average price of $135 per share, driven by repurchase from Liberty in July and August prior to the transaction closing. Since then, we have not purchased any shares or partnership units. We do expect to repurchase some shares this quarter while we simultaneously deleverage. Importantly, we anticipate being in a position to continue to repurchase shares as we progress to our 3.5 times leverage target over the next three years.

Now I’ll pass it back to Chris for a few final remarks.

Christopher L Winfrey (President and CEO)

Thanks, Kevin. Just a few final comments before we turn it over to Q&A. Charter has the assets, the advantages, and the scale to win, and we’re taking decisive action to improve our execution. Our priorities are clear: returning Charter Communications to growth and simplifying our organization to move faster while reducing cost. That’ll drive free cash flow growth which, as Kevin said, is supported by declining capital spend, Cox synergies, and the additional expense transformation announced today, while maintaining a prudent and disciplined approach to capital allocation benefiting both debt and equity holders.

So we’re moving with urgency, and we’re confident that our actions will drive stronger operating and financial performance. We look forward to updating you on the progress there in the quarters ahead. Now we’ll open it up to Q&A, operator.

OPERATOR

Thank you. At this time, if you’d like to ask a question, please click on the Raise Hand button which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you’ll hear your name called. Please accept, unmute your audio, and ask a question. As a reminder, we are allowing analysts to ask one question today. Our first question will come from Sean Diffley with Morgan Stanley. Please unmute to ask your question.

Sean Diffley (Analyst)

Great. Thanks very much. Team, and helpful on the new operating model. I was hoping you could dig in on how you’re balancing volume and pricing going forward. It sounds like the new goal is to win more customers. Maybe just talk about the go-to-market, and in the past you’ve talked about more of a perception than a product problem in the marketplace. What’s the new strategy for winning these new customers while also maintaining ARPU? Thank you very much.

Christopher L Winfrey (President and CEO)

Sure. So look, you kind of hinted at it: our competitive advantages remain. We’ve got a fully deployed network with gigabit capability; we’re increasing the multi-gig convergence. But really the change here is how we bring them to market and how we operate. It’s a fundamental rethinking of how we compete. It’s not just an offer strategy difference; it’s the way that we’re going about allocating the resources, putting priority squarely on Internet growth and how we run our business.

So they’re not small changes, and it’s not tied to one particular activity. But if you think about it, the first priority of growth—which is Internet growth—we are transforming the go-to-market. That includes the customer proposition. It includes the propositions we have for existing customers over time, to marketing, and the full distribution across sales channels. So I think we have significant upside not only in our sales but also in our service execution, and to drive churn a lot lower. I won’t go back through all the efficiency side again, but the $2 billion of savings—it’s all coming from a bottoms-up plan.

It’s designed to create additional flexibility and flow to the EBITDA line, but really to make us faster, more decisive, and have more efficient execution, and kind of reinvigorate the culture towards competition. You know, the ARPU side—you know, we understand the importance, and we take a look at it really from a connectivity ARPU and from a customer relationship ARPU. It’s not lost on us the importance of Internet ARPU, particularly towards investors. And so the goal here is to grow volume, to your point—have higher sales. More importantly, the best sale you can make is by not losing the customer that you already have—but also by maintaining ARPU at the point of connect and doing that by adding value into the relationship, both at the point of connect as well as over time into the existing relationship.

We’re not at a point, for competitive reasons and where we’re at on the rollout, to really get into a whole lot more detail. The only thing I can tell you is that I’m very excited about where Nick and our team is going and taking this, and confident that we can drive both sales as well as maintain ARPU along the way as key objectives here.

Sean Diffley (Analyst)

Thank you very much.

Christopher L Winfrey (President and CEO)

Thanks, Sean.

Stefan Aninger (Investor Relations)

Thanks, Sean. Operator, we’ll take our next question.

OPERATOR

Our next question comes from Craig Moffitt with MoffettNathanson. Your line is now open.

Craig Moffitt (Analyst)

Hi. Thank you. I’m going to see if I can squeeze in two questions, if I could. First, maybe Kevin and/or Chris, could you talk a little bit more about how you think about the trade-off between buying back debt in the open market versus buying back equity in the open market? And is there a scenario where you would delever faster because of the dislocations in the credit market? We certainly heard from equity investors that they would love to see lower leverage sooner.

And then I don’t know if Nick is there in the room, but I’d love to hear from Nick about what his own insights have been since he started and where his priorities are for the next year.

Christopher L Winfrey (President and CEO)

So let me start there, Craig. And I’m actually going to hand over to Jeff Murphy, who runs all of our corporate finance and development, all of our financing and M&A. So Nick’s not in the room. You know, he’s squarely focused on getting us back to Internet growth. And our view has always been the best investor relations is to deliver great results, and then you don’t have to say a whole lot. And so that’s where we’re squarely focused. I mentioned in the prepared remarks that I do understand the importance of hearing more details, both from me as the operating strategist deployed but also together with Nick, and so we’ll find the right venue to go do that periodically to make sure that we’re helpful to investors without providing a lot of distraction to the operating team, because we have a clear focus. It’s on Internet growth, and it’s about becoming more efficient. And it’s hard to be in two places at the same time.

As it relates to the balance sheet strategy, before Jeff chimes in, look, we’re highly aware of the different feedback that we’re getting—pretty universal from debt investors recognize this has got a boatload of free cash flow attached to it, but we’d still like to see a decline in leverage—and a mixed view from equity investors, many of which would like to have both the cake and eat it too, and some that would like us to focus squarely on buybacks exclusively.

And so what we’re trying to do is find a really balanced approach here, given the confidence that we have in the business plan, the significant free cash flow that we have today, the explosion of free cash flow that’s about to take place as capital expenditure steps down and the savings programs layer in, and really trying to find the right balance here of using free cash flow for both debt reduction and for equity. And I may have just stolen everything that Jeff was about to say, but I’m going to pass it over to Jeff in case he’s got other thoughts around the topic.

Jeff Murphy (Head of Corporate Finance and Development)

That was a great answer, Chris. Look, in addition, we see where our debt securities are trading. We see an equity security that trades at a level that I think is really difficult to justify given the cash flow that Chris has outlined. We think that there’s advantages to going after both sides of the balance sheet, Craig, and we’ll continue to pursue a balanced strategy. I think we’ve said that at least in the short term we’re going to deploy a majority of free cash flow against debt reduction, and we plan to do that in the most efficient manner we can.

But it will continue to evolve with time. We’re not dogmatic. We’ve already shown an ability to change. The leverage targets have moved over just a short 18-month period from four and a half to three and a half. We make strong progress against that every quarter. So I think we’ll continue to do those types of activities and be good stewards of capital.

Christopher L Winfrey (President and CEO)

And honor what we say along the way, and make sure that as the Internet growth picks up and company performance gets in place, that we’re not pivoting back and forth as it relates to the capital allocation and market strategy as well, which is important. I’d just highlight what Jeff said: the opportunity for providing liquidity into the debt markets and doing debt repurchases, taking down the principal of debt and creating equity value along the way at the same time through the debt discount, is hard to ignore.

And it’s something that we clearly understand and are focused on, and in some sense that’s a win-win. Not in some sense—it is a win.

Stefan Aninger (Investor Relations)

Thanks, Craig. Operator, we’ll take our next question, please.

OPERATOR

Thank you. Your next question comes from Vikash Harlalka with New Street Research. Please go ahead with your question.

Vikash Harlalka (Analyst)

Hi, thanks so much for taking my question too, if I could. Chris, the word growth has been used several times in the press release today and on the conference call. Is there a timeline you can share with us when you expect to return to growth on the major metrics like broadband subscribers and EBITDA? Is this like a long-term growth, or are we talking about the next couple of years? And just a clarification, how much of the $2 billion of cost reduction do you expect to reinvest in the business versus falling to the EBITDA line?

Thank you.

Christopher L Winfrey (President and CEO)

Yeah. So, you know, we’re not providing any guidance or outlook for exactly when we return to growth, but I want to be very clear that’s the objective—that’s the determination of success—and we’re going to be providing regular updates in terms of the steady progress that we make. So right now the focus is day by day just getting better from where we were, and that’s the type of progress that you’ll be able to see. Look, midterm I think is, you know, people have different definitions of that. Even in the short term, I think we’ll be able to have additional success and we’ll be able to measure that, we’ll be able to show that. And you know, that’s really the outlook from a legacy Cox footprint perspective—that’s already happening.

From a legacy Charter perspective, the goal here is to minimize the year-over-year gap that you saw in Q3 on Internet subs and, you know, start to make immediate headway on that year-over-year gap and then from there to get better and put ourselves in a position to grow at both the legacy Cox and the legacy Charter footprint for Internet, and have the focus squarely on Internet—but not lose sight of the convergence advantage and the mobile economics and the mobile stickiness that we have and its churn reduction capabilities—without overcomplicating the offer set or the understanding of the goal inside the company.

The cost transformation—I almost forgotten you’d asked that. Let me take a step back on that. You know, the first goal isn’t really just taking out cost. It’s putting ourselves in every way—and I talked with Sean about the different things you’re looking at—but the reduction of cost is really about simplification and increasing our focus and having faster decision-making, making us agile, and getting our entire team, including leadership, closer to the customer.

So I think we’re going to clearly produce big cost savings. This is a bottoms-up plan. This isn’t aspirational—putting that into place in short order. The goal is for that to fall to the EBITDA line and ultimately drive free cash flow. But clearly it also gives us—

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