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|CHARTER COMMUNICATIONS, INC. /MO/ filed this Form 425 on 03/08/2016|
And one of the things that your team has talked about is in-sourcing a lot of the functions that are currently outsourced to Time Warner Cable, whether its field operations or call centers. As you bring those costs in-house, how should we expect those costs to be absorbed and I guess what's the margin trajectory as those costs come on board and you've got a kind of transition.
Chris Winfrey - Charter Communications, Inc. - EVP & CFO
Well, it's a similar path to what we've experienced already at Charter. Since Tom joined the Company in 2012, we've added about 7,000 net FTEs. So we've grown from about 17,000, 18,000 to 24,000, 25,000 employees. We are going to need to do the same thing in the new company. So if you just take that pro rata, need at least 20,000 net FTE hires, which is a lot of hires into call centers, into field operations. When we did it at Charter, there was an initial lag effect in the time that it takes to get new hires up and productive, there is fairly high turnover positions in some cases. So you could get to a steady state where you had productive employees that could actually turn it into a net productivity as opposed to a net cost.
In the meantime, while you are unproductive, your hiring internal resources may continue to rely on outsource labor until you can turn that off and have productive in-house people. When you do get to that point, what ends up happening is because the quality of the transactions is so much higher, there is a first call resolution or the lack of a repeat trouble call and what ends up happening is you lower the amount of transactions that are service transactions, that are occurring inside your business and so you see just the opposite impact take place which is even though you're spending more on a per transaction basis because you have your own in-house labor that you've trained and equipped. Your cost per transaction is higher, but the number of transactions goes down dramatically and as a result end up saving on service cost, end up having lower churn, and you get a higher ROI on the investment that we make every day when we acquire a customer. The one key difference here with Time Warner Cable and Bright House, is what we did at Charter, they're both transaction synergies, to help (inaudible) along the way from a margin perspective. And in this case, there will be significant transaction synergies, which in essence allows us to reinvest this transaction benefit into the company to make us more competitive and to provide a superior service faster.
You mentioned before implementing Charter's pricing and packaging into the acquired assets, question on that as you do that, how should we think about the residential ARPU and revenue trends at the acquired assets during that phasing in of those of the new packaging?
Chris Winfrey - Charter Communications, Inc. - EVP & CFO
I think if you low back to the trajectory that occurred when we deployed the same strategy at Charter, what you would find is very early on, you saw an acceleration of the units' growth, so PSUs, and acceleration of the customer relationship growth. The ARPU growth took a little bit of time because there is a selling of highly promotional products at a very attractive price and so going with new pricing and packaging means lowering your pricing on every single one of your products, removing cable modem rental fees on the increment and to lower the set-top box pricing on new sales relative to what's been done today. And often I tell people it's not usual that you'll see a CFO smile when he's talking about all of that, but it's because you know when you have faith that by doing so, you're actually going to sell more products in the household than you would have otherwise and as a result by having a consumer-friendly pricing and packaging strategy, you actually increase the revenue in the household, because you've provided more utility to the household. And as a result, your revenue goes up faster, and as a result, you sell more products faster. It does take several quarters to see that roll through.
And so what you first see is the units as I described before, a few quarters later, you'll start to see ARPU, so residential revenue per household start to rise. And as the benefits of our operating strategies take hold, which in Charter's case took a good 12 to 18 months. You start to see EBITDA flow in a more accelerated way, in a way that mirrors the residential revenue growth. I mean if you look back to last year in our fourth quarter, our residential revenue growth for the entire year was at or above 7%. And, our fourth quarter EBITDA growth, it excludes some of the transition OpEx was about 8.5%. So our EBITDA is now in a position where it's growing faster than our revenue -- that takes time. In the context of the TWC and Bright House transactions, the one difference relative to what I just described is you will have these transaction synergies, which actually allows us to perhaps go faster even in making those investments to improve the product and service.
On the legacy Charter operation side, your unit growth revenue, EBITDA growth is leading the industry. How long do you think that runway is for growth for Charter across your products and customer segments?
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