Betting Against the Dinosaur Narrative: Why Charter Communications Continues to Dominate : Analysis of Charter Communications

Betting Against the Dinosaur Narrative: Why Charter Communications Continues to Dominate : Analysis of Charter Communications

With rapid disruption in the communications and technology industry from subscriber erosion in core segments, and competitive pressures from industry disruption like AT&T and Verizon in the internet, to video subscribers falling due to competition with Netflix and direct competition with Starlink, the market has continued to undervalue Charter Communications. However, Charter Communications (NASDAQ: CHRTR) presents the contrarian view. Charter Communications is a leader in global broadband, internet, and cable services. With the ability to scale and generate recurring revenue alongside its merger with Cox, it continues to solidify its position as the dominant force in the U.S. telecommunications industry, leveraging its scale and infrastructure to drive long-term value. 

Charter has delivered steady broadband subscriber growth, resilient cash flows (~10% FCF yield), supported by 90% recurring revenue, and operating leverage. Meanwhile, its valuation at ~9x forward earnings, ~7x EBITDA, ~2.8x revenue, and 70% drop from ATHs, multiple indicates a true mispricing between fundamentals and market sentiment. 

Business Overview 

Headquarters of Charter Communications, (also known as Spectrum), located at 400 Washington Boulevard in Stamford, Connecticut, USA. A bridge carrying the New Haven Line (part of the Northeast Corridor) over the Rippowam River is visible in the foreground. Wikipedia

Significant business segments include Residential Internet, Video (Pay TV), Voice (landline), Mobile, Commercial Services, Advertising, and others. Residential services make up nearly ~80% of the revenue, with residential internet access being the single largest revenue source. Residential Internet access requires monthly broadband fees ($70-$80 for standalone service), with higher tiers for gigabit speeds. Video revenue comes from cable TV packages (basic and premium), whereas voice revenue comes from phone services. Mobile revenue is generated through Charter’s Spectrum Mobile offering. Mobile revenue is generated through Charter’s Spectrum Mobile offering, which Charter sells to its internet customers by the gig. 

Internet (~42%) has hovered consistently at $23,360, up about 1.4% YoY, while Video (27% of revenue) has seen a stagnation down roughly 7.5% YoY. Residential Internet continues to grow with 30 million Internet customers as of Q2 2025. Revenue is driven primarily by the number of subscriber relationships and the average price (ARPU), which has grown 2.2% YoY. In Q2 2025, Charter’s average residential revenue per customer was about $123 per month. Though Charter has seen a 117,000 net decline in broadband customers in Q2 2025, Charter has been leaning on speed advantages and upgrading the cable network to multi-gigabit capacity. 

Charter has about 12.6 million video subscribers (down from ~13.8 million a year prior), demonstrating the secular decline as customers drop traditional TV for streaming, leading to a 10% YoY drop. However, ARPU has continued to rise due to Charter raising prices to compensate for higher programming costs. The company is driving towards simpler, lower-cost video packages and leveraging broadband strength to roll out value-add video packages, including Disney+, ESPN+, HBO, etc. Charter has continued to move towards high-margin, profitable sectors while deflating video revenue, especially as ~64% of video revenues are costs associated with programming, deflating their low-margin business. 

Residential voice is a legacy segment consisting of landline-style services, which has demonstrated an immense decline in revenue generation, primarily as the entire sector sees a decline. In 2004, 99% of adults had a landline, whereas the number has dropped to ~30% today. Charter lost ~220,000 voice lines in Q2 2025, with low ARPU for voice. 

However, mobile continues to grow extremely quickly (+25% YoY), as Spectrum offers attractive, competitive pricing without hidden fees, and promotional value via their Wifi. Spectrum has utilized its broadband network to provide mobile devices, allowing customers $2500 per line (max 5) to switch to Spectrum Mobile. Spectrum Mobile surpassed 10 million mobile lines 6 years after launch, and continued adding 514,000 mobile lines in Q1 2025, demonstrating Charter’s ability to move into high-growth markets. Charter operates mobile as a Mobile Virtual Network Operator (MVNO), under Verizon (not owning the underlying infrastructure or assets), essentially reselling Verizon’s wireless network. The service is available to Charter’s home internet subscribers, creating synergy and driving the average revenue per user. In 2024 alone, Charter added roughly 2 million mobile lines, and mobile service revenue grew ~25% YoY. Churn in the mobile sector is relatively low, as many customers must change their home internet to change their mobile device. 

Regarding mobile technology, Charter has an MVNO agreement with Verizon, which allows for competitive pricing; however, margins are thin due to wholesale data costs. Every gigabyte of data a Spectrum Mobile customer uses is a wholesale fee paid to Verizon, so that larger usage may increase fees. Charter has been trying to offload usage onto Wifi hotspots. Charter has also had aggressive customer acquisition offers, which involve reducing prices, leading to thinner margins. However, Charter has been investing in limited network infrastructure. 

Charter’s commercial segment also drives about 13% of total revenue growth, offering services from broadband/ethernet/voice lines, and in the SMB segment, they serve 2-3 million customers. However, this sub-sector has been declining, suggesting possible saturation. However, Charter’s enterprise growth is growing 4% YoY. Enterprise seems to be the major supporter of growth as SMB growth begins to mature or stagnate. 

Cost Structure and Operating Leverage 

Programming & Content Costs were the fees paid to content providers for carrying channels. In 2024, programming costs were about ~9.7 billion, or 30% of total operating costs. These costs are highly variable and inflated depending on the number of video subscribers and their contracts with the providers. On a per-sub basis, they increase due to higher costs passed down to the consumer. However, Charter has generated savings from not paying fees for certain subscribers. 

Network operations and maintenance require operating expenditures for maintaining the utilities and telecoms. However, there are significant economies of scale here as their scale and ability to add customers on existing infrastructure allow for increased operating leverage. This reliance on broadband and operating leverage can be seen by the improvement of gross margins (~44%)and adjusted EBITDA margin of ~41%. To help realize these revenue synergies, Charter has increased marketing spend by about 9%. 

Currently, the most relevant costs would be the mobile direct costs, specifically MVNO wholesale costs to Verizon, where every GB of Spectrum Mobile consumed on Verizon’s cellular is a cost to Charter (numbers not provided). Charter has costs for SIM cards, which rose about 7.3% in Q2 2025 due to higher mobile data usage. However, this is highly unpredictable in itself, as Charter often tries to offload this data onto their Wifi, so if a user is using 90% Wifi, 10% mobile, they will incur relatively low charges. There are also operating expenses associated with selling new devices (mobile device procurement, like $0 phone); however, the long-term return from the device revenue will far exceed the cost. Historically, Charter’s mobile business ran negative EBITDA; however, it is in a growth phase, and as it gains more users and a growing market share, there will be pricing power with Verizon and stabilizing margins as they continue to offload the data onto their broadband networks. 

Thesis 1: Connectivity Convergence Flywheel 

Charter Communications has nearly a million miles of broadband infrastructure and a large consumer base, allowing for cross-selling opportunities via mobile lines, increasing lifetime value, and margin expansion by reducing MVNO wholesale costs. 

Thesis 1a: Under-Penetrated Mobile Platform 

Charter dominates as the largest internet service provider (and possibly with Cox, which is growing its share in a competitive market), serving nearly 30 million internet customers (at home) and 10.9 million phone line customers. That puts mobile penetration only at ~20% of internet accounts, assuming each household has 2-3 lines. This demonstrates a huge runway for significant cross-selling opportunities and allows the wholesale costs of MVNO to be offloaded onto their broadband networks, thereby leading to recurring mobile revenue, with expanding margins across the board. Spectrum Mobile is also only sold to Charter Internet subscribers (to reduce MVNO wholesale costs), allowing for a large consumer base to capture. From a numbers perspective, 117,000 internet subscribers dropped quarter over quarter, mobile still added over 500,000 lines, with ARPU per customer going up to 122.86. 

Thesis 1b: Bundling Internet and Mobile Lowers Churn 

Adding mobile lines to current internet users will reduce overall churn as customers will be less likely to switch off mobile and internet services. Charter explicitly states, “convergence reduces churn and higher mobile lines per customer benefits churn further”. Increased bundling has improved overall stickiness with video pricing and streaming apps coming together, reducing video net losses from -400k to -80k. 

Thesis 1c: Expansionary Growth and Convergence will Improve Economics 

Charter is continuing to grow their wired business, especially in rural areas. Charter is carrying out three major upgrades, with 15% of their network getting basic upgrades (1.2GHz and multi-gigabit download speeds), 50% of the network getting mid-level upgrades, with the network being more efficient and scalable, and a complete next-gen upgrade

with 1.8GHz using DOCSIS 4.0, the latest cable standard to compete with fiber directly. Charter (as of Q4 2024) had a rural penetration rate of 34%, up 27.2% from the year prior, demonstrating the massive expansionary growth in the countryside to capture new growth. 

Charter is now utilizing this growing broadband base to shift MVNO costs down, with Wifi offload (87% of Spectrum data is run on Wifi rather than Verizon’s cell towers), and they’ve built out CBRS small-cell deployments. This includes CBRS radios on utility poles, rooftops, and buildings, allowing users to connect directly to CBRS, rather than to Verizon, to save on MVNO. 

Thus, Charter can utilize their expansion, large customer base, and small radios to grow in mobile. IMPORTANT: Verizon cannot just pull the plug on Charter as well, as they gain billions of FCF from this deal, which is a binding contract. 

Thesis 2: Free Cash Flow Acceleration In the Long Run through Margin Shift As Charter’s equity value continues to collapse, they have taken an aggressive approach in the long run, shifting its business into the internet and mobile industries while taking on high-profile mergers. Thesis 2a: Less Video Drag 

Revenue has shifted towards internet and mobile service (up 3% and 25% respectively). In comparison, video has dropped 10%, which has led to the video cost overhang shrinking over time, falling -9% YoY as Charter shifted towards lower cost video packages. With a new redesign in the works for their bundles, video losses have dropped at a lesser rate, leading to simplified pricing and integrated streaming apps. Thesis 2b: Front-loaded Build 

Charter has been rapidly growing their capex, frontloading for the next 2 to 3 years, primarily across network evolution, rural line extensions, wireless, CBRS development, customer equipment, and maintenance capex. Over the next 3 years, Charter plans to spend 32 billion dollars, before reducing capex by 33% in 2028, which will decrease FCF arbitrarily. 

Across the network evolution, Charter is spending on the DOCSIS 4.0 transition, with new amplifiers, node splits, and fiber deepening being the main cost drivers. Across rural line extensions, Charter has been given subsidies to expand broadband into underserved rural areas, where, after 2025, maintenance capex will be much less than the build-out capex. With wireless, Charter is expanding CBRS to help develop mobile margins and reduce MVNO wholesale costs, adding to peak capex. Finally, DOCSIS 4.0 will require new modems and large-scale replacement, causing elevated purchases over time. 

We can see the beginning of this re-investment, with 100k miles of broadband being added with the cutting edge, mobile customers grow exponentially with growing margins, and rural passings growing by 123,000 in Q2 2025. Even with heavy spending, FCF in Q2 2025 was $1 billion, demonstrating that Charter remains fundamentally sound. Thesis 2c: Scale and Synergies Amplify Per Share Earnings 

The Cox merger will target ~ $500 million in annualized cost synergies in the first 3 years and add scale, growing margin, cash, and the ability to cross-sell their mobile platforms. Charter has purchased nearly $60 billion in shares, with $2 billion in Q2 2025, increasing per-share returns and demonstrating confidence in the overall business. Finally, convergence and mobile scaling will allow unit costs to improve and consolidate margins. Thesis 3: Competitive Moat, High Barriers to Entry, and Mispriced Durability 

The fiber network allows a quasi-monopoly condition and complete control in most neighborhoods. Demand is recurring and barriers are high for complete disruption across the market; however, equity has overpriced competition and balance sheet risks. 

Thesis 3a: Recurring Non-Cyclical Revenues 

Since many households consider the internet a utility cost, steady rate increases, and upselling higher speeds will grow ARPU even when it is difficult to find new customers, thereby being defensive for cash flows over time. Charter passes through almost 58 million homes, and the company plans to drive value through speed upsells and recurring revenues across all its vital product types. 

Thesis 3b: Physical and Structural Moat 

Poles and permits are generally slow and expensive, requiring permission, or they must go under streets, involving digging these streets. Other franchises that want to rewire some arbitrary city that has already served (for long

periods) would include hundreds of millions upfront. This density type is extremely unprofitable as the new entrant could only capture 10-20 % of the market share. A common downside of FWA is that it also cannot cover everything since they have a limited amount of airwaves, and in dense neighborhoods like New York City, capacity will suffer. 

Thus, since Charter has been a longstanding industry leader, it would be tough for one company to erode its market share in locations they have continued to dominate. Plus, with such predictable FCF and recurring revenue, Charter maintains the potential and capacity to expand into competitive locations to compete with their competitors directly. 

Thesis 3c: Strong Operators and Managed Leverage 

Leverage is intentional and managed, with Charter historically maintaining an overlevered profile, and the market has continued to price the worst-case scenario of the business. After Q2 2025, valuations have dropped 20%, even with ARPU growing, and the durability of FCF (EBITDA margins were still near 40% (EBIT constant at about 18%). Moreover, there have been large overreactions about broadband subscribers falling and headwinds that have affected the entire sector, while not pricing in the growth initiatives of Charter. 

Catalysts and Growth Drivers 

Catalyst 1: Wireless Margin Inflection 

Charter continues to grow its infrastructure and MVNO operations, utilizing its most extensive customer base and satellite infrastructure. Charter is looking forward to expanding its MVNO operations with T-Mobile as well. As scale and CBRS continue to grow, operational inefficiency will be reduced, as operating leverage continues to grow and margins expand. 

Catalyst 2: FCF Snapback After Peak Capex 

Charter has led major capex around 2025 and stepping down after this, leading for increased discretionary UFCF that will fuel management’s target of deleveraging and buybacks, as Charter builds out its cross-selling platforms across sticky customers. These capital expenditures will moreover, compete directly with FWA and fiber, building the next-gen platform for ISPs and build-outs in rural areas to capture underserved consumer bases. 

Catalyst 3: Subsidized Rural Expansion (BEAD) 

Charter has faced many positive windfalls from the BEAD program, or “Broadband Equity, Access, and Development” Program, a federal and state program to help expand broadband access nationwide, especially in rural areas. This allows for increased passings and mobile penetration in rural areas. 

Written by Armaan Patel

Financial Metrics

Risks and Mitigants: 

Risk 1: High Debt and Interest Burden 

The industry average of Debt/EBITDA multiple is roughly 1x, and Charter has a much higher obligation (especially when including EBIT). However, Charter has spread their debt obligations across decades through the 2030s, 20240s, and 2050s, and much of the debt was fixed at low rates. Charter can pay off much of this debt, as they have done $60 billion in buybacks, and 86% of its revenue comes from direct monthly subscriptions. However, interest expense is the downside, with Charter reaching up to $5 billion in interest rate expenses. In 2021, their Debt/EBITDA ratio was about 11x in 2022 and by 2024 the ratio reached 7x as the business begins to delever. Their pro 

Risk 2: Broadband Subscriber Losses 

The entire broadband industry has seen subscriber losses over time, losing 117,000 subscribers in Q2 2025 as the sector saw a decline. Half of Charter’s footprint now faces fiber rivals, leading to an overall loss of pricing power and threatening the monopolistic status of Charter in this reliable sector.

The mitigant is Charter, using its predictable revenue and strength to invest a record $12 billion in DOCSIS 4.0 upgrades to offer multi-gig speeds, and adding new passings in rural expansion (450,000 in one year). Charter’s broadband infrastructure currently allows for 50 million passthroughs (essentially, how many homes they could easily provide broadband to if they switch). They plan to add 100,000 miles of fiber optic network infrastructure and build symmetrical, multi-gigabit speed across 1.7 million new locations. Risk 3: FWA and Fiber Taking Share 

FWA, or fixed wireless access, is a technology that uses radio waves to deliver high-speed internet to homes and businesses instead of traditional cables (4G/5G). This has grown rapidly in the U.S. and is a critical reason Charter’s internet pricing power has lost control, as Verizon and AT&T continue growing, leading to compressed margins. Moreover, the end of the Affordable Connectivity Program has led to an elevated churn rate as low-income households have opted out of programs. This has prevented price hikes across the board, and now the company must fight to retain customers. 

Analysts at TD Cowen don’t foresee a reduction in the FWA market until 2026, when they see these businesses hit maturity and exit the growth phase. However, Spectrum has continued to bundle millions of lines with continual growth, and by utilizing its own Wifi to lower MVNO costs and Charter’s significant expansions across fiber optic, Charter is pushing aggressively against market competition. 

Risk 4: Customer Dissatisfaction 

Due to increasing competition, Charter has seen a growing dissatisfaction, with the 2023 American Customer Satisfaction Index giving Spectrum an internet service score of 64, whereas the ISP average was ~68-70. Oftentimes, Spectrum has been hit with issues due to hidden fees, frequent rate increases, equipment problems, and even a public carriage fee dispute with Disney, affecting 15 million customers unable to watch the first two weeks of the college football season and the U.S. Open tennis. Charter and AT&T/Comcast have faced increased churn rates, with Charter hitting a churn rate of 31% in 2025. 

Charter has tried to gain customer retention by guaranteeing pricing for up to three years with bundled services, free speed upgrades for existing customers, and maintaining retention post-ACP (Affordable Connectivity Program), Charter reporting it was able to retain ~90% of former ACP customers. Risk 5: Cutting the Cord 

Even as the second-largest cable TV provider, the rise of wireless and streaming platforms has reduced the number of TV customers, losing about 1.23 million video subscribers and dropping to 13 million at the end of FY2024. The industry is in decline as TV subscriptions have fallen 30%, and management has indicated that it is no longer a key driver of financial performance. Moreover, there have been historical conflicts with Disney in 2023, where Charter lost access to Disney’s channels for 10 days. 

Management has begun to add video as an add-on rather than a profit driver, bundling different streamers like Disney, Hulu, and ESPN. 

Risk 6: Litigation 

Risks associated with Charter could be antitrust issues, including the 34.5 billion merger with Cox Communications (thanks, Topper). The deal would create the nation’s largest internet provider, consolidating the largest internet service providers, leading to potential dominance in the broadband market, especially in rural areas (Reddit thinks this merger will go through, though, if that matters).

Table 1 (Revenue Breakdown) 

Betting Against the Dinosaur Narrative: Why Charter Communications Continues to Dominate : Analysis of Charter Communications