Charter Communications, Inc. (CHTR) Earnings Call Transcript & Summary

Okay. Welcome, everyone. I'm Bryan Kraft. I'm the cable, telecom, media analyst at Deutsche Bank, and I'm thrilled to be hosting a fireside now with Chris Winfrey, Chief Financial Officer of Charter Communications. Chris, welcome. Thanks for joining us today.

Thanks for having Charter back.

Chris, I'd be remiss not to start off with a question reflecting on 2020, given what an historic and remarkable year it was. Looking back, how do you think the pandemic has permanently changed your business, both from a consumer behavior perspective and also in how you're running the company from an operational standpoint?

Well, if you think about our product set, it solidified the need for these products in a ubiquitous way. And it made it very clear that our terminal penetration for these products can be much higher than it was always needed, and that's just highlighted how much it was needed even more in this environment. I guess the other piece that changed quite a bit was the acceleration of the digitization of all of our service -- self-service options, whether that was through self-install or digital self-care. And I don't think that goes backwards similar to the need for our products, but the need for that type of digital self-care. And that has pretty profound implications on our cost structure over time. And in terms of how we operate the business, I think it -- look, it was an unfortunate year for many and not something that any of us ever would wish upon any of us or ourselves. But it demonstrated the strength of our operating model, our ability to go-to-market pricing package the way that we do, to service the way that we do. We had always said that our operating model was positioned to operate well in all kinds of different market climates. I can't say that we have this one in mind when we would say that. But it really validated our operating model in the way that we go to market. And including the way not only do we take care of our customers, but also in terms of the ways that we take care of our employees. I think we're all very proud of the job that we've done over the past year and continue to do. And I think the future for Bright and for Charter as a result of what we're doing is bright.

Looking ahead to '21, as always, there's a lot of focus on the residential Internet subscriber growth outlook. And in the case of this year, there's some concern that demand was pulled forward into 2020. On your earnings call, you talked about your expectations for 2021 net adds exceeding 2019. Can you talk about the many factors coming back to -- coming together to shape that outlook for 2021?

Sure. Well, 2020 was a unique year, and so it's going to provide a difficult comparable for us throughout the course of this year. And we said on our last call that we thought 2019, from a full year perspective, was probably the better comparable. That didn't mean by quarterly, so nobody was suggesting that Q1 versus Q1 2019 or Q2 versus Q2 2019. If anything, we thought that our ability to match or exceed performance from a net addition standpoint of '21 versus 2019, was really going to be more based on the back half of this year. And the reason for that is the expectation that we have is that the market starts to get back to normal transaction volume. What do I mean by that? I mean, people moving, people which creates selling opportunities for us. So Q1 for us right now, because the pandemic is not over and things haven't returned to normal, looks more like Q4 than it does what we think it will look like in the back part of this year. But those -- the transaction volume is what we spent a lot of time on the call talking about is, for us as a share taker, the -- when you have movers in the marketplace, that creates a selling opportunity. In a weird and unique sort of way, the fact that nobody is moving, there's a lot of stimulus out there, so people are paying their debt. They're not being disconnected for non-pay the same way they usually would means that our financial performance is actually very good. But our net addition growth is stunted to what it would normally otherwise be because of the lack of activity in the marketplace. What I would tell you is, temporary issues aside, our confidence in our ability to achieve a higher level of terminal penetration was actually very high because of all the things I talked about before, the need for the product, our ability to compete across all of our different markets with a better product, better price, better service, with a product that's really demonstrated its need in the marketplace now and in the future. I think our optimism around our future here is good as ever.

And maybe you could talk for a minute about the innovation in the product and what you're doing to help drive market share and penetration gains, whether it's speed, features, et cetera?

Sure. You would have noticed in the past, even the past few weeks, that we have continued to announce speed upgrades. The majority of our footprint already was minimum speed of 200 megabits per second, the remainder of which would have been at a minimum speed of 100 megabits per second. So we've really started to accelerate that now that the vast majority of our footprint is at minimum speeds of 200 megabits per second. It's not just speed. Cable benefits from having a comparable advantage as it relates to low latency. So when you think about gaming or more interactive type of applications, our network is better situated for that. We've also been rolling out our advanced in-home WiFi product now across the majority of our footprint, which enables customers on the Internet to have the best router available to them and to have additional technologies that -- in the home that allow them to control the WiFi plan or the Internet network inside their home, control access to certain devices at certain times and to provide more ubiquitous coverage throughout the household. And so that product is being more widely launched. And I think that will ultimately turn into a competitive advantage. And finally, when you think about what Internet was maybe 15 years ago, there was an Ethernet cable into the back of the computer; 10 years ago, maybe to the family room or to the kitchen through WiFi. Now if you think about all of our expectations that it's going to work out on the terrace or out in the yard the same way, and you combine that with our MVNO as well as the CBRS spectrum licensing, the license that we have access to, and the convergence of these products is really the area where I think we'll continue to create competitive advantage in the future. At the end of the day, all of that really is just an extension of the Internet product that you and I are enjoying today.

And staying on the top of broadband before we get into some of those other things that you mentioned, can you talk a little bit about the recent RDOF auction? What's the opportunity you see here? What kinds of returns do you expect on the project? And how does it fit into your broader agile strategy that you've been following?

So you just mentioned it. It's not something entirely new for us. This is a continuation of the strategy that we've always had, which is to extend our network. The economics are very good, and the return profile is very clear cut, and we think the risk attached to that investment is pretty low. The way I would describe the payback relative to other things that we look at inside the company is that the edge-out rural, whether that's in the context of RDOF or just the normal rural build out that we do, is they're much longer paybacks than your typical capital expenditure product and -- or project. But the IRR, the internal rate of return on it is high, double-digit percentage IRR. And because of the nature of these rural communities where we're building, the likelihood that we can achieve a very, very high terminal penetration is very high. And so we think the returns are attractive. We think that the more of it you do, the more opportunity you have to build or acquire additional footprint. And particularly right now, in the absence of any mid- or larger-scale M&A from the cable footprint, the economics are not that different from cable M&A. This is just creating your own and building out your network with a proven model. So I don't think it's fundamentally going to change the growth curve of Charter, and it will drive some incremental capital expenditure, but they're very good returns. And it will open up the opportunity for more of that along the way. And I think it's good for cable to be part of the solution in terms of bringing more broadband out to the rural communities, an opportunity for us to look good that way. They don't always come around. And so we're excited to be part of it.

And can you remind us when you start to actually break ground on some of those build-outs?

I think you'll see some preliminary building beginning at later -- late this year. One of the things that we promised to do is to provide some transparency about the amount of rural capital expenditure -- rural build capital expenditure and then to tie that to the amount of passings growth and ultimately to the subscribers that we get and the revenue that we get for these new build areas. So we'll do that over time. The actual planning work and the permitting and the make-ready and all the activity that we have to do in advance means that in a particular area, the capital expenditure will be slightly front-loaded before we ever have a passing that's actually passed and available to be marketed. And so we'll communicate that over time, make sure people understand, but we'll provide transparency so that people can see it. It's not going to be material at the end of this year, and there won't be material inside 2021, but the engine will be up and running, and we'll be moving along. And I think 2022 will start to be your first decent size build year, yes. Now that's just for the RDOF piece. We are doing a significant amount of new build every single year, and that's continuing today. And a good portion of that has been and remains rural, outside of the RDOF footprint.

Okay. So everyone is trying to track and stay in front of is competition, new competition. What are you seeing as far as fixed wireless and new competitive fiber-to-the-home build-outs within your footprint? And if you could talk about how you're thinking these... [Technical Difficulty] about fixed wireless as a potential long-term competitive threat in broadband?

Sure. All of what...

Did you get all that?

I did. It was a little choppy, but I got where you were going. And all of that...

Sorry about that.

No problem. All of that really is just another question of overbuild. And overbuild isn't something new. It's been something that we've been doing with for years and years. And so while there may be more names or logos, if you will, that are attached to that potential overbuild, real or perceived or advertised, and I think the level of overbuild is still going to be a lot less than what we've already been going through the past 10 years or so. And so we take it seriously. We always have, but it's not anything new, and we've been able to compete, and we've been able to grow at a really fast rate despite that historical level of overbuild. As it relates to fixed wireless, and if you go far enough, it's just a fiber overbuild. And I think in order to be able to handle the throughput that's going through our network today and to be really competitive, and somebody would have to do that. And to be able to do that at the price point that we have with a brand-new investment on top of another network, it's difficult. Those economics have historically not played out at all. We are today, for a non-video customer, averaging around 700 gigs per month. And if you think about the average wireless throughput as more akin to 10 gigs per month. So the difference between utilization rate of our network versus the wireless networks that exist today is significant. And I don't think the current wireless networks are designed to be able to handle that traffic. Now there are efforts by T-Mobile, by Verizon to go further into the network. And so we'll compete. We always have. It's another version of an overbuild. But I think if we continue to invest in our network, we'll continue to operate in a very competitive environment and do well as what we've always done.

Okay. Why don't we shift gears to video for a minute. From a video subscriber and revenue perspective, Charter significantly outperformed the industry last year. Can you talk about what led to that outperformance? And how sustainable you think it might be looking ahead?

Well, I don't think it's sustainable to continue to add video subscribers absent unique conditions, which we saw last year. That being said, the product is very important to us. It's very important to our connectivity products that we sell, including broadband. And I think we can do better than the rest of the marketplace for a period of time. The real reason, one of the biggest reasons that we did so much better or differently than others last year was because of how much broadband we sold. We sold more broadband on a gross or a relative basis than anybody in the marketplace. That meant there were more selling opportunities. And we haven't given up on video because we believe in its importance to broadband and our connectivity products. And so that meant that we sold a lot of video. And because churn was also down, particularly at the latter half of last year, we didn't see as much churn going out as you had in previous periods. So I think the market will start to return back to normal, as I mentioned before, and the normal activity will start to take place, which will be good for broadband. At the end of the day, whether we add some video or we lose some video, it doesn't make any real difference in our free cash flow profile. But I think we'll stay committed to the video product because of what it can do for our broadband business and it does for our business today. And -- but I think the reason that we grew when nobody else did was because we sold so much broadband and because we stayed committed to the way that we sell video as part of the overall bundle of services that we provide to consumers.

And how should investors think about the longer-term impact on Charter's financial performance as the video product continues to shift away from larger packages towards slimmer ones? Is there a point at which the video subscriber losses become a headwind for EBITDA? Or are the margins low enough at this point that it doesn't really matter?

I don't see a major impact to our financial profile, one way or another as it relates to the video business and its performance, unless we were to not have a competitive video product for the reasons I mentioned. If we didn't have a competitive video product, I think that could have an impact on both sale and retention of Internet customers and that extended connectivity that I talked about through our mobile offering. The financial impact of having skin in your packages will mean lower revenue per video customer. I mean, lower programming cost per video customer relative to what it would have otherwise been. But if you think about our suite of video products today, we have something, I think, for everybody. We have the traditional expanded video with regular set-top boxes or without a set-top box. We're available on all devices inside the home, outside the home with all of the content. And we have streaming packages that are available, essentials, stream, choice. We have skinny version of our traditional expanded offerings that are available for Latino views and other type of products that are out there available as well for all kinds of different audiences. So we're really tailoring to the marketplace and finding those niche spot to attach broadband together with a video product that meets the customer's interest and their wallet at the same time and hopefully providing overall stickiness to the suite of products that we provide.

And as we think about where video is going from here, how do you think about the opportunity for Charter to play a role as a platform distributing video apps? And will we hear more from Charter in the near future on this front? Do you see it as a potential new profit pool? Or is it more a feature to bundle with broadband?

That role of aggregators and distributor is something that we've always done. It's what all we've always -- the role we've always played. And you could argue that, in many ways, we still have the best set of assets to continue to do that, whether that's programming relationships, whether it's the 2-way interactive network, whether it's simply the amount of connectivity sales that we have every year to be in front of consumers. We are what you referred to doing today. We have Netflix available on Spectrum Guide, and you will see, either relatively shortly market by market, a bunch of other app-based video content being made available to consumers over our platform, which will enable us to be the aggregator of content, again, in a slightly different way. And so you'll see that on Spectrum Guide. So I do see that as our role. I don't -- who's going to win in the space? Will there be a single winner? I don't think so. For us, it really is just about making sure that we provide a valuable overall connectivity product and using video as an application to go do that.

Got it. Okay. Advertising. I know it's not a huge part of the business, but a profitable one and not unimportant. You had cyclical challenges last year, political strength, of course. But can you talk about how much the business has recovered on a nonpolitical basis at this point?

Yes. What a year in advertising last year. We had, first, the impact of the pandemic. I think in the second quarter, we lost half of our revenue temporarily. And then you started to recover on our core advertising and then had a very significant political year. So that's going to create some weird dynamics on our financial quarterly comparisons this year, year-over-year. But leaving that aside, the actual advertising business, I'm thrilled. It has largely recovered. It's about 95% of our core, where we think it would have been otherwise. And given the overall state of the marketplace in small and medium businesses in general, we're thrilled with that kind of result. Some of that comes about because of market recovery. Some of it comes about because of the products that we've launched, our ability to have monetization of the long-tail inventory through what we call audience app and the ability to increasingly take not only the IP-based impressions that we have through Spectrum TV app and throughout the different devices that we have, but also to convert our QAM or set-top box inventory into impressions-based viewing as well, which is essentially the same, and to be able to monetize that in a different way and add into that addressability. So what you're seeing in the advertising space is the local spot business is really changing. And so you can be in an environment where the overall viewership and the overall video subscribership is declining slightly, and you can still have an environment where you're advertising, with or without political, is still increasing. And I think that's the future for our advertising business. We offer a unique suite of products that virtually nobody can replicate, both in IP as well as in the traditional video sense as well as combining that with digital, which we do today, and have very local targeted coverage and national coverage through Ampersand nationwide. So it's attractive, despite [indiscernible] in advertising.

Interesting. Let's move over to business services. Can you talk about what you're seeing in the small and medium business part of the business from a cyclical recovery standpoint?

The small- and medium-sized business environment was impacted, obviously, very hard from COVID. And we saw a lot of that inside of Q2 of last year. We continue to see small- and medium-sized businesses struggle, and we're doing what we can to help them stay open and help them stay connected through our services. I would say the recovery that we saw was significant already in Q3. And then Q4, if you take a look at our relationship growth rate, we've been -- the past 2 quarters, we've had more net additions than we did the prior year despite the pandemic. That doesn't mean that we don't have businesses who are going out of business at a higher rate. But because of our products being priced and serviced the way that they are, as new businesses were opening or new businesses were looking for more attractive alternatives, some of that transactional volume in the marketplace that I talked about on the residential side actually caused in the small and medium business space for the transaction activity to pick up. And we ended up having higher sales in that environment because it's our higher speeds, our higher-quality products and the pricing, which we were able to deliver to package that all together. So while you may not see it in our revenue just yet, the net additions for small and medium business have been pretty healthy and completely different than what any of us really thought would have been the case during the midst of pandemic. That has impacted small and medium businesses this way.

And how about on the enterprise side, can you give us a sense as to what you're seeing there?

Yes. Enterprise is a little different because -- for a few reasons. One, on the SMB space, it's very similar to the residential side where you have a sale and you have an immediate connect, and the revenue flows through. Enterprise has a long sales cycle, and it has oftentimes construction attached to it. And so what we did inside of Q2 or Q3, or what we didn't do in terms of selling, really only manifest itself in the latter part of last year and heading into this year. Our sales had picked up, which means that the revenue outlook for the back half of this year starts to get quite a bit better on the retail side. But we're still in an environment where I think the number is around 30% of our sales activity is on site relative to what we would normally expect. And so if you think about in an environment like this year, you and I having a conversation or if I were to try to sell you a residential product or an SMB product, that may be pretty easy over video or over phone. But if you're looking to sell complex fiber products inside of a building, where those corporations aren't actually going on-site to be right now, it's difficult. So the fact that we're recovering to historical sales level now despite being in that environment, I think we're pleased with where we are. So we'll start to see the turnaround on revenue later this year on the retail side. And I'm hopeful that when the economy starts to get back to normal, we can go back to our way of accelerating our selling and our revenue growth rate back to where we expected for retail.

You sold NaviSite about 1.5 years ago, and that had been a drag on revenue growth. The other drag has been wholesale, as I understand it. I'm curious as to whether you think the wholesale business has the potential to begin growing again at some point, just given the investment outlook for wireless infrastructure, small cell deployment and now DISH constructing a network?

Yes. We had been a victim of our own success with cell tower backhaul and becoming as large as we had and for many years have provided a very healthy growth rate underpinning the overall enterprise growth. Once that started to slow down, its revenue mix impact had a dilutive impact to our overall enterprise growth. And we've actually been going negative on the cell tower backhaul and other wholesale revenue to do the overall marketplace and sites being put out to bid with lower rates or the need for others to have request products like dark fiber that we don't generally provide, it's not part of our product set. And so that revenue base has declined, and it continues to decline. The good news is it's becoming a less and less portion of our overall revenue. And so its dilutive impact on the overall enterprise revenue will decline every quarter. Could we stabilize it? I think there are ways to do that. But either way, it's becoming a lesser and lesser percentage of the overall mix, and its impact will start to become more muted.

Okay. And can you just talk from a product development perspective on the business side? What -- just what's happening there? And what role does that play in future growth versus just purely kind of taking market share?

Yes. On the enterprise space, our bread and butter really has been on fiber Internet access. And so we have sophisticated products around voice, unified communications, SIP, PRI, unified communications. We have, obviously, Ethernet, which is a big product for us as well. We're entering into the SD-WAN space, both customized as well as the Meraki platform that we recently announced to be able to go more widely to the marketplace with these managed services. But it's an underpenetrated opportunity for us for sure. Our history has been providing excellent fiber Internet access. The way I talk about it internally is that has 90%-plus of the capital attached to it to provide that fiber Internet access. And we haven't always done our best, I think, in selling these additional products, which would generate even higher ARPU and therefore, enhance the ROI. So the ROI is fantastic on fiber Internet access. But if you're able to sell multiple products into that customer, it does a couple of things. One, it clearly increases your revenue and it improves your ROI even further with a lot less capital, but it also entrenches you with that customer in a way that makes it more difficult to lose to competitors in the future. And so that's a big focus area. Our products are there, they're sophisticated and our reputation in the marketplace has been improving significantly in terms of our capability to provide those services. So I'm optimistic that we can do more with the same type of investment that we're doing today and go back and harvest the relationships that we have and make enterprise grow even faster.

Okay. Why don't we spend a few minutes on mobile. Charter saw a nice acceleration in mobile net adds last year, even though industry churn was down and your mobile net adds are predominantly gross-add driven. Why do you think you were so successful in 2020? And as we think about the mobile net add outlook in 2021, what are the factors that we should consider in building a net add bridge, if you will, from '20 to '21?

There's -- it's -- I can tell you the positive and I can tell you the one that's going to work against us slightly. The positive is that we use every opportunity to every sales opportunity that we have with the customer and all of our cable products to also sell mobile. And our compliance, for lack of a better word, of having that pitch rate and our yield on selling those customers continues to increase, which bodes well from the mobile business. The other big driver for mobile net adds being so high last year was that we were selling a lot of cable, for all the reasons that we talked about before. And so we have a lot more sales opportunities because of Internet. And we were using that as an opportunity not only to provide people unlimited broadband Internet with faster speeds and more unlimited capacity than they'd have elsewhere at a great price, but also to save the money where I can -- while combining that with mobile. And so the first area, we're going to continue to get better and better. And the second area, hard to imagine that we're going to have the same amount of Internet sales opportunities this year as we had last year. But we think we'll continue to get better and better over time in mobile. And it's a great product for us, and it's a great extension of the Internet connectivity that I talked about before.

Okay. Want to talk about just the network side of it a little bit. You recently discussed -- or Tom discussed on your earnings call the possibility of eventually offloading up to 1/3 of Charter's mobile traffic onto your CBRS-based infrastructure. Can you just talk a little bit more about that opportunity and how impactful it could be to the long-term profitability and margins for the product?

Look, it's what you mentioned, it's an opportunity. It's not something that we have to do. We're going to be ROI-based around the deployment of CBRS. We have a very good MVNO with Verizon, and they've been a good partner to us. And so we expect that to be our predominant way of providing non-WiFi data services. But we do have ways and more traffic areas of the network to be able to offload, not only with WiFi, which continues to get better and better, but with the CBRS license and unlicensed spectrum that's available to us. And so there's no rush to go deploy a network just to deploy a network. Our product can be very good, in fact, better than anybody else, irrespective of how fast we go with CBRS because of the way it works together with WiFi. But I think you'll see us be very disciplined on the rollout of that network. And the offloading of traffic will simply be dictated based on the economics of the spend relative to the savings that we can achieve on the lease network.

Okay. And can you talk at all about the predominant profile of your mobile customers as it relates to demographics? Unlimited versus by the gig? Family versus individual plans? Just any kind of color that you could give to kind of give us some insights as to who's taking the product?

Sure. And the by the gig versus unlimited, it's a healthy balance of both. It's not weighted particularly one way or the other. And so you see that those product offerings appeal to different parts of the marketplace. And we're selling both at point of acquisition for mobile, which hopefully is starting to bring in incremental Internet customers, but also for existing Internet customers and upgrading them to mobile. So the truth is the demographics of our customer base look like the demographics of our cable customer base, which is everything. And so all pieces of demographics. It's not one particular segment that we're attracting. We're attracting all of it. And part of that because -- it comes about because of the pricing, which allows customers to save a significant amount of money. Some of it comes about by the fact that I think the combined Internet product, when you think about our Internet with unlimited usage together with WiFi that's expanding inside and outside the home, combined with the MVNO and the ability for us to manage that traffic in a way that provides an overall faster speed than any of the MNOs can provide means that not only is it a more attractively priced product, it actually works better than anything else out there today. We're the fastest mobile operator as a result of our WiFi network. And that's only going to improve as we start to deploy CBRS as well.

And talk about margins a bit. Excluding mobile, margins have increased 600 basis points over the past 5 years. That's since 2015, pro forma, when you announced the merger with Time Warner Cable and Bright House. And how would you characterize the capable margin outlook over the next 5 years? And what are the key factors driving that outlook?

I mean, you I and have talked about it before, the margin is an output. And it's interesting, but it's not something that we actually look at all in terms of a success factor or driver for the business. What it really says is that you're getting more revenue per customer relationship and/or you're getting more efficient per customer relationship and that you're getting higher penetration on the fixed network. And all 3 of those things are how we really think about the financial profile of the business. But you're right, if you do all those things well, you get deeper penetration across a fixed number of passings, which means your fixed cost per customer goes down. And you have more revenue per passing and you have more revenue per customer relationship, and your OpEx per customer comes down because your service is good and they call you less and they churn less. And therefore, your customer life is longer and your ROI is better. All those things are true. It means that your margin will continue to improve, but as an output. So all those things that existed for the past 5 years continue to exist today in terms of a trend, and our momentum is good. And so leaving aside the mobile revenue mix question that you rightfully mentioned and we should look at separately, thinking aside at how mobile revenue mix plays into that, I do think the output that you described, which is margin, is going to continue to do well as a result of our operating strategy. It's not a 1-quarter or 2-quarter or 1-year or 2-year strategy or objective. Really, what we're after is to have sustainability in growth and sustainability in cash flow per passing over time. And so a lot of times, that means not taking the shortcuts, making the upfront investment, being willing to invest in service, which could actually depress some of those financial metrics in the short-term to be able to have that sustainable growth over a longer period of time. And so that's really been the operating strategy at Charter, and it continues to be the case.

And how about on the CapEx side? How are you thinking about capital investment going forward in terms of areas of increased or decreased investment as well as overall capital intensity for the company?

Well, I know it's not -- maybe it's not as fashionable to foresee, if I would say. But if we see opportunities to go spend capital to grow faster for a longer period of time, we're going to go do it. As long as we can spend that CapEx efficiently, we're not going to be tethered by the optics of how capital expenditure of 1 period over another appears. If you can -- if we can spend it, and we can spend it efficiently and it's going to drive growth, then we should go do that. You see that already in the way that we've approached the rural build. RDOF, CBRS, you'll see the same thing. And we'll make it transparent so people can see what we're doing. All of that being said, I think our core cable capital intensity is declining, and it's going to continue to decline. But I don't want to be shackled by providing some sort of definitive guidance that removes the ability for management to execute on opportunities as they present themselves. We've been good stewards of capital. I think we've been good spenders of capital. And whether that's for additional organic investments that drive growth or whether it's for M&A, or in the absence of those, or in excess cash flow above and beyond those, we'll continue to do share buybacks. But I think this business is becoming more efficient, similar to what I described on the P&L side. And we'll continue to see that, but for some of the nonrecurring investment opportunities that we're going to highlight to investors.

Are there any interesting inorganic or organic opportunities that you're evaluating now?

Well, I think the rural build, well, it's like cable M&A. And so the more that you do, the more opportunity to be. So I think the jury is out on how much of that will still be attractive once we get going. I think our construction and field ops team is -- their heads will probably explode if they heard me saying that right now because we have a lot to do. It's a significant amount of passings that we have to go build, and you're essentially building a cable company here for several years from scratch. So -- but I do think, longer term, that will open up some opportunities. As it relates to inorganic, it's not in our hands. And so you have family-owned business or family-controlled businesses, and they'll decide the timing of what they want to do. And if it's available, we're interested as long as it's at the right price and it creates value for us and for them. But that hasn't been the case over the past few years, and I don't think we can hang our head on that either.

Broad -- I mean just to follow-up on that for a second. And broadly speaking, is there like a minimum threshold in terms of size of the cable business that -- for you, where if it's a certain -- if it's below a certain threshold, it's just not worth the management time and resources to integrate? Or are you pretty much open to anything?

We're open to anything. We've done small systems that are 1,000 passings. We'll do -- it's -- look, if you believe that it makes sense to go build, plant and edge out in rural areas, then every opportunity that's adjacent to us makes sense from a small or medium or large-sized cable M&A perspective as well.

Makes sense. Okay. So assuming there are no M&A opportunities or other organic free cash flow investment opportunities, should we expect to see Charter continue to use all the excess free cash flow and leverage capacity for share repurchases? Is that the kind of the result of all that?

I honestly hope that's not the outcome, but it would be. I hope that we have organic investment opportunities that allow us to compound the return that we have inside of the business that similarly, we have opportunities to deploy capital in M&A in a way that allows us to apply our operating model to drive faster growth on assets than they would have had otherwise. Because I think by doing those 2 things well, you actually enhance the buybacks that you do, do. It actually juices the returns on the buybacks that you do. And I don't think that planning to have a permanent buyback strategy without any of those other alternatives is really a great idea. I think having good organic growth, investing in additional organic investment opportunities that drive more growth, making attractive M&A when it's available to you at the right price enhances the quality and the returns on your buyback when you're able to do them. So it's worked very well for us. But I don't think it's -- I don't think that should be an exclusive strategy for us, and it's not.

Okay. Well, why don't we wrap it up there? Chris, I want to thank you for joining us today and participating in the conference again this year. Look forward to being back to a physical conference in Florida next year, and hope you'll be able to join us again.

Not that there's anything wrong with Connecticut in early March. So thank you very much.

All right. Thanks, Chris. Bye.

Bye.