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CHARTER COMMUNICATIONS, INC. /MO/ filed this Form 425 on 02/05/2016
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FEBRUARY 04, 2016 / 03:00PM GMT, CHTR - Q4 2015 Charter Communications Inc Earnings Call

Chris Winfrey - Charter Communications Inc - CFO

And Craig, on capital intensity, you're right. A lot of people focus on CPE as being one of the big drivers, and it is primarily because it's the easiest to model. So the drivers around that are -- once you've gone all digital, you need less CPE per transaction. So just by going all-digital, on a go-forward basis, you require less CPE for every gross add. The second element is that we're buying boxes at dramatically lower prices, well over a 50% reduction from where we were buying that. And that's being driven by the introduction of WorldBox, but even the path to getting to WorldBox produced those type of prices for us.

And by extending the life of CPE through Spectrum Guide, that obviously has a big impact on capital intensity. The pieces that are, in some respects, even more material but harder to model, include that the business is increasingly becoming more cloud-based. And by developing and putting platforms in the cloud, as opposed to at the local level -- you can think of video on demand as just one type of example -- you can get a better scale on any cable system by doing that, and become more efficient from a capital perspective.

Another area that's also harder to model is that today, when you take a look at TWC, Charter and Bright House, three companies doing their own development and building and standing up of platforms, whether that's data centers or product development or IT platforms. And that gets to be done in a single instance, as opposed to three different times, so that there's a benefit to the transaction, of putting these three companies together, and being able to develop faster, and at a cheaper cost per passing or per dollar of revenue.

And the final one -- I think this is the one that's probably the most misunderstood -- I think you're referencing the proxy statement that we had, that had CapEx forecast as, simply when you have higher revenue growth -- and you can take a look at our results today. When you have higher revenue growth, you have a higher dollar value of revenue per passing. In an environment where a good portion of your capital expenditure is fixed capital spend. And so simply by growing revenue faster, you can drop your capital intensity by having a better utilization of a fixed set of assets, and a fixed capital cost.

And so that's the piece that I think that's the most misunderstood is, in this proxy statements, which I'm not sitting here and reiterating today, although we were intelligent when we put them together, the reality is, those CapEx dollars weren't decreasing. The capital intensity was declining significantly, for all the reasons I mentioned. But a big driver of that is simply being able to drive higher revenue growth on a fixed set of passings.

Tom Rutledge - Charter Communications Inc - President and CEO

And one more item is that if you reduce operating expenses by reducing transactions, the capital infrastructure that supports the operating expenses is also reduced.

Craig Moffett - MoffettNathanson LLC - Analyst

(multiple speakers) Thanks, that's helpful.

Chris Winfrey - Charter Communications Inc - CFO

Same applies to EBITDA, as well, and why you can grow your EBITDA at even faster rate than revenue, from the same principles.

Stefan Anninger - Charter Communications Inc - VP of IR

Kim, we'll take our next question please.


Your next question comes from the line of Vijay Jayant with Evercore.


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