Charter Communications (NASDAQ:CHTR) is overhauling its operations and targeting $2 billion in additional annualized cost savings after losing internet customers in the third quarter, as the company integrates its newly acquired Cox Communications business.
President and CEO Chris Winfrey said Charter will focus on winning and retaining internet customers while simplifying its organization. The savings target, to be achieved over the next 18 months, is separate from more than $1 billion in anticipated annualized transaction synergies from the Cox deal.
“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,” Winfrey said. He did not provide a timeline for returning to subscriber or EBITDA growth.
Internet losses deepen as competition persists
Legacy Charter lost 156,000 internet customers in the quarter, compared with 109,000 a year earlier. Interim CFO Kevin Howard said lower customer connections drove the decline, while the churn rate was essentially flat.
Howard cited expanded fixed wireless competition, lower sales to lower-income consumers, mobile substitution and aggressive promotions by some competitors. He said Charter had not observed meaningful share losses to Starlink, including in its subsidized rural footprint, but was monitoring the service closely.
Legacy Cox lost 77,000 internet customers during the quarter. Winfrey said that since Charter launched Spectrum pricing and products in the Cox footprint on September 16, the run rate of internet losses there had been cut in half, primarily because of stronger sales. He cautioned that Cox’s loss rate remained higher than Legacy Charter’s after adjusting for size.
Legacy Charter added 440,000 mobile lines in the quarter and lost 38,000 video customers, an improvement from a loss of 70,000 video customers a year earlier. Legacy Cox added 70,000 mobile lines and lost 39,000 video customers.
Cost cuts and Cox integration
Winfrey said Charter plans to simplify its internet offers, improve customer service and change its sales and marketing approach while maintaining average revenue per user. He said the company would provide more details when the strategy is fully launched.
Chief Operating Officer Nick Jeffery, who joined September 1, is helping implement the new operating model. Winfrey said prior changes to promotional offers had not reversed the company’s trajectory and that the new approach would encompass products, distribution, service and organizational structure.
The $2 billion savings plan includes eliminating projects that do not contribute to internet growth, reducing management layers and narrowing the company’s set of vendors. Winfrey said the cuts are not targeted at frontline service and sales employees. Charter expects the savings to flow to EBITDA, though he said they would also give the company greater competitive flexibility.
Charter closed its Cox acquisition on August 19, adding 11 million homes and businesses passed by its network and more than 5 million customers. Howard said the company expects nearly half of the more than $1 billion in annualized transaction synergies to be achieved in the first half of 2027 and 90% within 24 months.
Revenue and earnings decline
Third-quarter pro forma revenue fell 1.5% year over year, while adjusted EBITDA declined 4%, or 3% excluding Cox transition expenses. The pro forma results present the combined businesses as if the Cox transactions had closed at the beginning of the earliest period presented.
Pro forma net income moved from a $1 billion profit a year earlier to a $2.1 billion loss. Howard said the decline was driven in part by an approximately $6.3 billion noncash franchise impairment charge at Legacy Charter, partly offset by a $1.4 billion gain from an August debt exchange and a noncash tax benefit.
Pro forma capital expenditures totaled $3.2 billion in the quarter, including $33 million in transition spending. Charter expects approximately $13 billion in pro forma capital expenditures for 2026, excluding transition costs, and $11 billion or less in 2027 on the same basis.
Debt reduction remains a priority
Charter generated $674 million in free cash flow during the quarter and ended September with $109 billion in debt principal. Its net debt-to-adjusted EBITDA ratio, excluding transition expenses, was 3.93 times.
The company expects to finish 2026 below 3.9 times leverage and reach its 3.5-times target within three years of the Cox and Liberty Broadband transaction closings. Howard said most fourth-quarter free cash flow is expected to go toward debt reduction, although Charter also expects to repurchase some shares.
Jeff Murphy, senior vice president of corporate finance and development, said Charter sees advantages in addressing both debt and equity. The company’s approach, he said, will continue to evolve as it works toward its leverage target.
About Charter Communications (NASDAQ:CHTR)
Charter Communications, Inc is a telecommunications and broadband services company that operates under the Spectrum brand. The company provides internet access, video entertainment, mobile communications and voice services to residential customers, as well as connectivity, data networking, cloud, security and other communications solutions to businesses and government organizations.
Charter operates one of the largest broadband networks in the United States, serving customers across dozens of states.
