Charter Rural Strategy Extends Beyond Government Funded Areas to “Perpetuity Growth”

The government funding that Charter has received for rural broadband deployments generates revenue opportunities for the company beyond the funded areas, said Charter CEO Chris Winfrey. He noted that while the company has cited rural internal rates of return (IRR) in the mid- to high teens, “what’s not included in that return is a bunch of other opportunities.” He added that “Now you have the option to extend your footprint even further with new passings” and referred to this phenomenon as “a machine of continuous return.” He noted, for example, that Charter made service available to 145,000 locations in New York state through a funded program, but eventually brought service to close to 180,000 locations, including neighboring areas. Of rural builds in general, he said, “These are [faster-growing] systems by definition with lower operating costs and higher penetration.” From a company perspective, he said, “you now have a higher perpetuity growth rate,” adding that “I don’t think anybody has thought about the fact that you have a higher perpetuity growth rate and what that means from an overall valuation perspective.” Winfrey also noted that rural buildouts offer “a rare opportunity for cable to look good.”