Optimum Communications, Inc. (OPTU) Earnings Call Transcript & Summary

All right. Welcome everyone to our next session this morning. It is a pleasure for me to welcome to our Communacopia plus Technology conference Dexter Goei, the CEO of Altice USA. Dexter, thanks so much for being with us.

Nice to see you, Brett.

And thanks for coming to the West Coast for us, we appreciate it.

Unfortunately, not a great trip.

Is Dexter’s microphone working okay? I just want to make sure on the webcast, they can hear him.

Testing, testing, it's not working.

Just give them one second. They're going to run that one up here. New conference -- it's working -- you know what? We're on now. All right. Same conference, same tech difficulties. So well, we have something new to talk about. Last week, the company announced on October 3, you were going to become Executive Chairman of Altice USA. And then Dennis Mathew is going to join the company from Comcast as CEO.

So the first question is, why are you transitioning into the new role now? What's your involvement going to be as the Executive Chairman? And ultimately, why did you and the Board decide that Dennis was the right person to take over your old job?

Helpful. There's -- I think that...

Works better. There we go. Does that work? Okay.

I think as was announced last week, the biggest reason for this is for personal reasons. My family and I would like to go back to Europe. I've spent my whole childhood and much of my professional career there. And so it's really just a personal decision. We made the decision to do a search probably about 6 months ago. I made the announcement to the Board about a year ago, that I was planning, it's really based on my second child, not that you guys care, but he's graduating in the summer of '24, and that's the time frame that I'd like to go back. And so we never knew how long it would take to find someone. So we started 6 months ago. It could have taken us a year, but we really want to give ourselves at least a year for a transition period. So maybe we're 4 or 5 months early, but that's really the only thing. Dennis -- I interviewed many, many people during the process and Dennis fits the bill across the board. Point #1, he's a great operator, a proven track record, been at Comcast for over 17 years. Has run regions, has run recently one of the most high-profile regions the Freedom region, which is Philadelphia and the Greater Philadelphia. So that's point #1. So he's got a proven track record. Number two, and even more important from my standpoint, he's just a great guy, great guy, team player, focused on the prize and someone that I think will do very well with the executive team at Altice USA. And so really looking forward to working with him. I've been spending a lot of time with him recently, Will really be involved in transitioning him actively over the next kind of 6 months, let's call it. From my job standpoint, I'm going to be very focused on the external stuff. So a lot of the strategic stuff. There's the discussions around us being strategic activity. So I'm going to be very focused on that. There's lots of other things that we're working on as well, small and big. I'll be doing still a lot of the external stuff, government affairs, investor relations, that type of stuff. Let really Dennis focus on the operations, strengthen the bench. And at some point in the future, we'll transition those over to him. But I'm around for 1.5 years. My relationship with everyone in this room is not going to change for quite some time.

Okay. Great. So over the last year, and really, I think it is here at our conference last year, you started talking about some of the significant repositioning steps you want to take for Altice, including a fairly significant fiber project. Now that you're a year into it, how is it unfolding relative to what your expectations were? And do you still feel confident that the plan you essentially outlined for investors a year ago is still the right strategic plan for the company?

Yes. I mean, we realized a year ago and actually really 4 years ago, when we decided to start fiber, it's just been in fits and starts, given COVID, given permitting issues, given just pure talent-related issues and training. But the right thing to do was the future-proof the network, both at Cablevision as well as at Suddenlink. And we've made the announcement exactly a year ago that we were going to embark on a 7 million-plus upgrade of our homes. And it's absolutely the right strategy. Everything that we thought about in terms of the drivers of that strategy, customer experience, incidence rates falling, churn rates coming down, ARPU levels enhancing, all of those issues we're seeing in small fits and starts right now. We've got about -- we're at 120,000, 130,000 subscribers right now. We'll probably end the year close to a couple of hundred thousand, something like that. But our cost to serve numbers for fiber subscribers relative to coax are down dramatically. ARPU levels are up 7%, 8% on gross adds who take fiber versus coax. Our churn rates are 6% to 8% lower on cohort to cohort. Our NPS scores are positive in fiber, relative to negative in coax, right? So every single metric that you can imagine that you would anticipate are better. The install process still is not as good as I'd like it to be, particularly on the triple play. But the single-play install is as good, if not better, in terms of our repeat rates relative to coax. So all the customer metrices that you can imagine are pointing in the right direction. And we're starting to see, obviously, the rhetoric in the sector has been increased competition. Whether it be fiber overbuilders or other technologies like fixed wireless. And so future-proofing our network is the thesis, reducing our cost to serve, ultimately reducing our CapEx numbers dramatically. Those are all still front and center and I think are going to be proven out correct in the next couple of years.

Let's dig into some of that, and we'll start with the pacing of the upgrade. As you pointed out, you're targeting something like 7 million homes passed. I think it'll roughly be a 4x increase from about where you are right now in terms of the fiberization of your footprint. And so you're going to need to see an acceleration in the pace. Has that unfolded throughout the quarter? Are you seeing that acceleration? Is there anything in the macro environment, supply chain that is causing you to rethink that?

Yes. I mean listen, we're always going to run into challenges like supply chain issues. We've been very good at anticipating ahead of time with our subcontractors, with supply of materials, that we've had no pressure on supply chain really this year. We don't anticipate that going into next year. But we ended the year at about 1.2 million homes passed last year. In the second quarter, we did 260,000, 270,000 new homes. That was a record quarter. We're going to beat that record again in the third quarter and anticipate probably beating that even in the fourth quarter, hopefully as well, even though we may run into weather issues. We're going to end the year at 2.2 million, 2.3 million homes passed, the anticipation for next year. So this year, we will have done 1 million. Maybe we do a little bit more 1 million to 1.2 million is the stretch target. But next year, we're in budget process right now, but the anticipation is to do 1.6 million to 1.8 million next year, right? So we're materially moving that, let's call it, 1 million on the Cablevision footprint and 600,000 to 800,000 on the Suddenlink footprint. So we're materially moving that. And that cadence is going to go into 2024, maybe slightly higher and then start falling off in 2025 as we would have completed the Cablevision footprint. And thus, we'll have some Suddenlink footprint still in 2025.

And what gives you confidence in the acceleration? Is it just you keep getting better at it? Or is it there's certain stress you take upfront that creates a degree of leverage as you go to deeper...

It's the stress upfront. A lot had to do with regulatory clearance. A lot had to do with getting effectively subcontractors in place. And so both of those are working very well right now. We don't anticipate any changes going to next year, where we have lined up both for the Suddenlink footprint. The Optimum footprint is, it's a pretty straight arrow to 2024. We feel very comfortable being able to do the extra 2 million to 2.5 million homes we're going to do in 2023 and 2024. It's really doing it and scaling it in the Suddenlink footprint in small pockets since we're going to smaller communities. And we're ready, right? A lot has to do with the fact that, obviously, we've been spending quite a bit of time in ramping up our edge-out strategy as well. We also have quite a bit of subsidy money coming in that we've been winning regularly subsidies. So all of that's driving our comfort in being able to line up the subcontractors, making sure that we have all the materials in place. And we've had the better part of 2022 getting ready for 2023.

All right. I know you alluded to it earlier, but obviously, this is a very capital-intensive project. You're looking to spend somewhere between $1.7 billion to $1.8 billion in aggregate cash CapEx this year. And you said it's going to remain elevated as you go through the project. And as you get to '25 and '26 is when you would expect it, it would tail off. So the question is, you had outlined some assumptions around what the costs were going to be. I think you said $500 to $550 per passing in the Optimum region, and something closer to $1,000 per passing in the Suddenlink region as you're building up, are you finding that you're staying on budget?

Yes. I think the numbers this year are more like $560, $570 on the Optimum. Obviously, we're seeing some pressure on some inflationary things, whether it would be power or gas for trucks, some labor pressures on that, but the numbers are materially not very large. And we're embarking on our Suddenlink upgrade early next year, and we don't anticipate that changing relative to what we're targeting.

Okay. And you alluded to any visibility into any further grants coming through right now?

Yes. We're currently -- I think we've got about 40,000, 45,000 homes that we've won to the tune of about $50 million of grants. Every week and every month, we're applying for additional grants. I wouldn't -- I don't want to predict, but I anticipate we should be getting couple of hundred thousand more over the next, call it, 12 months, 24 months.

Okay. So there are a number of benefits to deploying fiber, faster speeds is an obvious one. But as you complete the fiberization of your network, I would assume that there's going to be lower OpEx. There's probably you need lower maintenance CapEx as all your customers adopt this. As of the second quarter, you only had about 6%, 7% penetration of the fiber that you've deployed so far. It's a relatively new product for you. So what are you thinking and what is the right penetration curve relatively beyond?

Yes. I mean listen, the numbers, I don't think we're going to hit 200,000, but we're going to be pretty close to 200,000 by year-end on 2.2 million homes, 2.3 million homes. So we're kind of in that 8% level. Next year, we're in the budget process right now, but we're targeting at least to get close to around 600,000, let's call it. We'll end the year at, really on the East, I'm talking really about Cablevision, we'll probably end up at 3.3 million to 3.5 million homes. So it will be in the high teens there, and excluding Suddenlink which will kind of go through the same curve as we had at Optimum. And then the year after that, we're over 4 million homes, probably 4.2 million to 4.5 million, which is our last year 2024, you anticipate being nicely over 1 million, right? And our cost to serve numbers, we've been saying it pretty regularly. We think it's at least 30% to 40% lower. We're seeing that in terms of the incidence rates. All of the math is working in that direction in small scale. And we think it's going to be even better on a larger scale, right? So as the processes get better, as the experience on the installs get better, as the repeat rates come down, we think that, that experience is going to get better and better, right? If you really think about problem solving and troubleshooting in the fiber network, when you're calling, you have a problem, you only have 2 problems. One is your CPE, something is wrong with your CPE, or something is wrong with power in the network, right? So you're not getting enough light. Where as in the coax network, you've got so many different failure points in there, whether it's amplifiers, whether it's in-house wiring, whether it's your CPE, whether it's lots of other different active components that are in your network, all the way from the head end into the home. So that's when you have a problem in terms of trying to troubleshoot where the problem is, it could be an amplifier 3 miles away, right? That's not a problem in your fiber network. And this is why incidence rates are coming down so dramatically because, fundamentally, you troubleshooting it can be remote and could be very, very quickly identified as to what the problem is.

How deep into the fiber deployment do you have to be before you really start to realize those benefits at scale?

The math would suggest that we've got some good data to show to you some time next year, right, where you're starting to sit there. You're kind of about that 400,000 or 500,000 subscribers. You can sit there and those 500,000 subscribers are costing you X. And you can start multiplying that as you start working through your model and pushing things forward. Today, we're still running into teething pains on installs, particularly on triple play because the WiFi distribution is not as stable. And we're moving people to an Apple TV box and to an Android box to really to get that TV more stable. But on the 1P side, you're starting to see the incidence rates dramatically improve.

And what's the process that's going to drive the penetration? Meaning, to what extent it is mostly going to be reflective of all your gross adds in places where you have fiber or fiber gross adds versus pivoting to focused on getting existing HFC customers.

So we're doing both. Today, we're about 80% of all gross adds in places where we have fiber are taking fiber. The 20% are really technical issues. One is a client doesn't want to move over to fiber because they're really used to their existing setup. They know how the TV works. They like the experience. Two, your renter and your owner won't let you drill a hole through a wall to drop your fiber into your house. Three, because we only do 3, 500, 1, 2 and 5 gig. Today in fiber, you have guys that are at 100-meg product because they can only afford a 100-meg product and they're on a low-cost plan. And so we don't do fiber. Those rules are changing where, on ACP and in low-income broadband, we're going to put people on the 300-meg products so that they can get fiber even for the $30 or the $15.99, depending on which bracket you're in. We're trying to basically say that the only way that you can't take fiber is if the landlord won't let you do anything into the home. And so we're trying to make sure that, that gross add number instead of 80% gets closer to the 90% where you can have probably 10% fallout. And then on the migration side, all retention people go to free migration to fiber, and people are proactively pushing and asking us for migrations, and we're doing that. So that's where the incremental volume is going to get to, obviously, more and more footprint going to drive more and more gross adds. And more efficiency and trying to make sure that the business rules are working properly. And on top of that, we're starting to push people more aggressively on migration or getting pulled that way.

I want to spend a little bit of time talking about the competitive backdrop, and all this has been talked about quite a bit. But we're clearly seeing the fixed wireless products have maybe more traction at the outset. And I think a lot of people, including me, thought they would have -- the telcos you compete against are undergoing their own fiber upgrades. So the first question here would be, what's your view on the long-term competitive impact of fixed wireless? I think I know what it is, but I'm going to ask you anyhow. And then the other side of that question is, what are you doing in the short term, why there is a degree of momentum in these products, to make sure that you are remaining competitive as they're finding niches that are attractive to it?

Well, listen, on the first point, I don't think the rhetorics even come for me. I think some of the fixed wireless players are saying the same thing, which is at some point, you're running into network quality issues. The product is an entry-level product. And given the usage patterns on broadband, which are whatever, 60x more than what's on a wireless subscriber at price points that are half of what unlimited subscribers are paying for in wireless, the math doesn't work, right? So you're going to have network-related issues. I think people are calling for network-related issues probably 2 years from now or maybe 3 years from now, where you'd expect the fixed wireless product to plateau on performance and penetration. And so I think that's not necessarily coming from me. We agree with that assessment. I think we're hearing it from even some of the fixed wireless players out there, that they believe that to be the case as well. I think from our standpoint, the entry-level product, that $25, $30 entry-level point is out there, both for fixed line guys and fixed wireless guys. I think the industry continues to evolve, which is we're being competitive, obviously, in our bundling other customer acquisition costs they're willing to give away. But ultimately, we're pushing people to higher speeds, right? So today, we still have about 50% of our subscribers are 200 megs or less. That used to be 2/3 about 1.5 years ago. So that number continues to rise while people are continuing to push our average speeds at the high 300s, our downloads are about 600 gigabytes per month. So that -- those numbers continue to evolve, we're be pushing the 300-meg product, which is the entry-level FWA product, we're the only FWA product. That 300-meg products is going to go away. That's what's been happening in cable over time, is fixed broadband providers, given the capacity issues and given what clients are looking for, continue to eliminate lower tiers and pushing things up, that's going to happen again, right? So at some point, you're going to have a, whatever, $25 FWA product competing with a $35 500-meg product. I'm making things up. But you will start seeing us naturally start getting rid of some tiers and pushing people up to higher speeds, where you're not competing anymore on an apples-to-apples basis, at least from a headline marketing standpoint.

Right. And it turns out that fixed wireless isn't durable, which I'm not going to push back on. As I said before, you are seeing the telcos you compete with deploy more fiber as well. That is obviously a very durable technology.

One telco.

Yes. But it is more overbuilding.

It is more of a building of themselves, right? So they're replacing their DSL platform with fiber. There's more, let's call it, competitive broadband pressure in markets where there used to be only a DSL against broadband, to your point. And I think that is something that there should be an expectation that, over time, and I can't call it whether it's 5 or 10 years, but in that time frame, you're going to go from what's probably an overbuild market where you have 25% of the country's overbuilt with 2 players, you're probably going to make that 2/3 of the market, right? 50% to 2/3 of the market, maybe 75% of the market, where you're going to have 2 players over time. It may take us 10, 15 years to get there, but it's going to happen in my mind, which is why from our standpoint, if we believe that time to accelerate to get up the fiber as quickly as possible across our entire footprint, every new investment that we do in edge-outs is in fiber. Every subsidy bid that we're doing, we're doing it in fiber. And so we're just continuously to expand on our fiber footprint and we continue to do so, and we'll be able to compete at the highest level. The highest customer experience. We'll be able to be more nimble on price levels. But ultimately, people care about the customer experience and the throughput.

Right. Bringing you a little near term because I have to. You acknowledged on the last conference call that there's a possibility you could get back to broadband growth in the second half of the year, I guess. We're obviously deeper into the second half of the year. Can you give us sort of a lay of land? What is the market like? How is your business performing?

Yes. I think, listen, I mentioned it on the last earnings call, that we've got 2 different geographies here that our historical Cablevision footprint is gross adds are slower, that's probably because there are a lot less move activity in the footprint. Churn levels are low as well. But net-net, we're probably still losing subscribers in the Cablevision footprint. And we think that will turn around next year as we got a significant footprint in fiber. And then on the Suddenlink footprint, you are seeing gross activity being high but probably on a net-net, relative to 2019, which is the cleanest number for us to look at, given what's happening from a competitive standpoint, particularly in the FWA market, probably taking gross adds out of the market. And churn is running hot in certain markets where we're being overbuilt, right? So that's just par for the course, that when you have a new fiber guy going up against the DOCSIS 3.1 cable person, which fundamentally that customer is probably not that happy with their overall experience. And they've got a new guy coming in with fiber and bright lights and shiny new car, people are going to there. And so we're still losing subscribers in both markets, but for different reasons. But I think we feel good about the fourth quarter, that turning around and going into next year, specifically.

So to interpret that, it seems like you see a path to getting back to fiber growth next year.

Next year definitely. That's kind of -- that's what we're hoping for and predicting.

Right. Any anomalies this quarter? I mean, there's been floods. There's been some natural disasters. Anything outside...

We haven't had those natural disasters for once. We typically have had big natural disasters in our footprint. But knock on something, not this year so far.

Subscribers is obviously an important part of the revenue growth algorithm for your broadband business. But actually for the last several years, ARPU growth has been the most important driver. You haven't seen that growth this year. It's been much more stable sort of by design because you've been using promotions in the market as you've been working through the repositioning of the brand and the product. And I guess the question is, based on the impact you've seen, how are you thinking about the applications of those promotional strategies for the balance of the year and as you go into next year?

Yes. I mean you saw us raise prices 2, 3 months ago away from our promos that started really in the fourth quarter of last year going into the first quarter of this year. We've gone back to being somewhat promotional for the back-to-school, but not to levels like we were last year. So we've kept ARPU -- gross add ARPU pretty steady to rising. And the next promo time frame is really Black Friday going into Christmas. And I don't think you're going to see crazy things out there specifically coming from us. But so we're very disciplined, I think, on our broadband ARPU. Our broadband ARPU, as you see, continues to grow. Obviously, it's not growing at a double-digit clip like it used to, it's really in the low single digit. But at the beginning of the year, we kind of sat there and people were thinking that our broadband ARPU may start falling. And I said we think it is going to grow, and I think we've proven that out. And so we continue, and now we've got the multi-gig product. We've been in the soft launch on multi-gig. And that's going to really start pushing and we're going to be a lot more aggressive next year. We're going to have a big footprint to be able to market a full suite of products, from 300 megs all the way to 5 gigs next year. And so you're going to start seeing, after we've gone through the repositioning of the brand and the rebranding of Suddenlink, really spend our marketing dollars at pushing penetration levels.

And so how do you think about the ARPU growth profile for the company as you sort of are more transition?

Yes, I think you have to really focus on what we like to focus on, which is gross margin ARPU, because obviously, there's a lot of noise in ARPU numbers when it comes to the video subscriber, where our attachment rates continue to fall, which is -- we're seeing across the board. But as long, our gross margin ARPU continues to rise, which it is, that's kind of what we're continuing to focus on, is our gross margin ARPU growing.

All right? So you recently put your foot back on the gas with the wireless business. You've introduced new bundles and price promotions. And we've already seen it to show up in higher net adds last quarter, I think you had 33,000 mobile net adds. How are you approaching the wireless business going forward? And how are you thinking about the net add a component of it, the EBITDA component of it and the broader affect that the product has on the overall bundle and the broadband customer relationship?

So I mean, it's a good question because you raised 2 things, which is EBITDA versus penetration and potential benefits on the bundle. We agree that there are bundle benefits. We also agree that EBITDA is challenged in many respects, given that it's a gross margin product that's got thin margins in general. ARPUs are falling in mobile. Promos are rising in mobile, and usage is rising also. And so that doesn't bode well for just gross margins in general when usage is rising and ARPUs are falling. And so we're being diligent about the EBITDA side to it, not just getting penetration for the sake of penetration. It's a good product. It's a very good retention product. We're going to spend a lot more time in 2023 with fiber because we're going to start being very active on the marketing of fiber next year given our big footprint. But for the balance of this year, I don't think you should expect real big waves in the mobile product.

And it also makes it seem that you're very confident that the fiber product on its own is resonating, You don't necessarily need the benefit of an attractive replaced wireless product to sell it.

I think you could see that as to what [ overbuilders ] are doing today, right? They're taking market share from inferior product with no bells and whistles on video and no bells and whistles on mobile, right?

Your video subscriber base continues to decline. It's in line with what we're seeing across the industry, driven by cord cutting. What's your framework for thinking about the trajectory of the video business going forward? And your confidence that you can get the company back to EBITDA growth trajectory if cord cutting does indeed intensify?

Yes. I mean listen, I think depending on which cohort we're talking about, some of the people that are churning off is good churn because those are negative gross margin video subscribers. And some of them are profitable guys because they've been around with us for 5 years plus, right? So -- but by and large, we expect that to continue. We expect our gross margin profile to continue to improve as we lose attachment on gross adds of video because that's not a very good, attractive gross add to us. And if we can get the benefits of churn coming from fiber or from mobile and not from the video bundle, that's probably a good trade, right, from an economic standpoint. So we're going to continue to provide a video. We're going to continue to provide the whole supermarket suite of channels. But the emphasis really is going to be, on a quarter-by-quarter basis, looking at things like promos to try and enhance gross adds, but not really trying to make money off the video product.

Your business services segment, which is about 15%, I think, of our total revenue has shown some deceleration this year, and that's even if you adjust for some of the AirStrand stuff, which makes it a little bit noisy. And obviously, it is a somewhat cyclical business, meaning that the economy does matter to your Business Services segment. Can you just give us an update on what you're seeing in light of the moving target we have of the economy right now?

Yes. I mean, again, we've got a tale of two cities in the Optimum footprint -- the Cablevision footprint. We've got 70% penetration of SMBs. Difficult to see you getting a lot more market share, so you're really pushing ARPU growth there and defending against Fios' product out there. But we're doing a really good job. We continue to stay flat to gain slight market share there. The Suddenlink footprint tends to be a lot higher growth. Historically, it's been double-digit growth in there, and that's really kind of like more like mid-single digits growth. Now because there is more competition coming into the market. AT&T has got broadband solutions which are more aggressive as well. But by and large, it's still a great kind of 3% to 4% growth business overall ex AirStrand. We expect that to continue. We continue to push good product. We've got the fiber product now that's coming on board where typically T1 lines for small businesses were costing multiple thousands of dollars per month, now you're starting to get multi-gig for $120, $180, if not a couple of hundred dollars for SMBs. That's a good business. We've got a nice product road map given that what we're doing on multi-gig. And then on the enterprise side, we don't talk about Lightpath so well, but the business is doing very well. We're very happy with the management team. Strategically, they've expanded their footprint. Their sales numbers are the record highs for the last 2 quarters. That's going to translate into some nice financial gains in the next kind of 12 to 24 months as installs come in and people get onboarded. And so we think that asset has actually grown in value relative to what we sold it for, at a very nice multiple, if you remember, like 15x 1.5 years, 2 years ago. And so that's a business that we're going to -- we're happy to be owners of. Unless someone comes by and flashes something very attractive, we're going to continue to want to own that.

Your ad business obviously is exposed to the economy as well. It was up about 5%, I think, through the first half of the year. Any real-time updates in terms of what you're seeing in the ad market?

Yes. I mean, listen, it's a political year. And so September, October, November are heavily political. So we expect to -- that the budgets, as you may suspect, are very back ended towards the end of the year and given the political season. And so we're ahead of budget this year. The performance of the business is doing great. News 12 is killing it, doing really, really well. And so we continue to look to enhance that product through multiple either through organic investments or acquisitions. We've done some small acquisitions recently in the space that we think are attractive. So that's a business that we'll continue to invest in. And we think it can be a material provider in terms of enhanced financials going forward.

Even in a cord-cutting environment?

Even in a cord-cutting environment. Funnily enough, the logical thing is you're losing inventory, so your revenue should fall, but the CPMs have been rising commensurate with your fall in inventory because that's the most attractive demographic are cable subscribers. The demographic tends to be a certain age group, quite wealthy in many respects. And so those CPMs continue to be very attractive and continue to rise, right? So the inventory fall has not been affecting the financials in news and advertising.

We were talking earlier about many of the steps that you've been taking to reposition the business. That's a very CapEx-intensive initiative, but there's also OpEx that you've been expending. And as a result, you've seen your EBITDA decline about 8% through the first half of the year. How do you think about the key swing factors or milestones you have to achieve to be on a more durable return to EBITDA growth?

Yes. I think it's all about -- at the end of the day, it's all about your gross adds and your net adds, right? So once we get back to net add positive, we're back into an inflection point where we think we're going to be growing our EBITDA going forward, right? So obviously, there are other things we're still upselling people. We're still rate-eventing other forms of financial metrices and engineering and operational know-how. But at the end of the day, once we start getting back to net add positivity, then the numbers will switch to where we want them to be.

So to sort of think about that, it sounds like you're basically saying, yes, you've scaled up the cost structure to some degree this year to make sure the company is positioned to drive that growth?

Yes.

And as you see it, that's where the operating leverage on top of that higher cost structure...

Absolutely.

All right. Net leverage was about 6 turns coming out of the second quarter of the year. It's obviously above the 4.5 to 5 turns that you're targeting. It's a competitive environment. The economic backdrop is still very challenging. What gives you confidence that you can continue on the fiber upgrade process and still ultimately move back towards your leverage targets?

Well, listen, as you mentioned, we're spending $1.7 billion, $1.8 billion on cash CapEx. We're still free cash flow positive. We don't have any refinancing maturities of any size until 2025. We could refinance that today, the markets are open, but we don't want to spend the rates that people are spending today to do something like that. So we will be able to push that. So we don't have a balance sheet issue because we can still spend $1.7 billion, $1.8 billion of CapEx and still generate free cash flow, right? So we're going to spend that money. And then 2025, it won't be $1.7 billion, $1.8 billion, it will be lower than that. And then 2026 will be materially lower than that, right?

So we got time for squeeze in one last question. So next year, whether it's you or maybe it's whether if Dennis is here. What do you hope to be talking about? What successes do you hope Altice will have and the positioning you're going to have as you're looking ahead to '24?

I think it's 2 things. Net add growth, fiber penetration levels that are significant, where we can walk you through all of the significant benefits from a financial and operational standpoint and a customer experience standpoint that we're experiencing. And so that's really -- and then as we continue to scale that, it just becomes mathematical. So we're really excited about what we're doing. We're ahead of plan in terms of deployment. All of, again, to repeat myself, the customer metrices are pointing in the right direction. So it's just math as we start scaling.

All right. Well, I look forward to that conversation and thank you for being here this year.

Great. Thank you. Bye.