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Thomas Rutledge, CEO of Charter Communication (CHTR), on the results for the fourth quarter of 2017 - EPS Call Transcript Welcome to the investors' meeting of Charter's forth quarterly 2017. You will find the accompanying slides on our website in the financial information section. However, we will not verify these risks and other warnings related to this call.

A number of comments we make in response to this request regarding our expectation, forecasts, projections and future outlook are forward-looking statements.

All forward-looking information reflects management's current views only and Charter assumes no responsibility to publicly rework or modify any forward-looking information or to make any forward-looking statement in the future. However, Charter does not undertake any responsibility to publicly release any forward-looking information. In today's conference call, we will refer to non-GAAP financial performance indicators as identified and coordinated in our results brief. Those non-GAAP financial performance indicators as described in the Articles of Incorporation may not be similar to those used by other entities for similar instruments.

Whilst the Time Warner Cable and Bright House deals were completed on May 18, 2016, these pre-formal results present information about the activities as if the deals had been completed on January 1, 2015, to allow for a more useful debate on our results. Except as otherwise noted, client and finance information to which we may relate in this request for amounts prior to the third quarter of 2016 is provided on a transactional basis as if it had been entered into at the beginning of the first such statement date.

Also, please be aware that all annual rate increases noted in this conference call and presentations are annual unless otherwise stated. In addition, all customer and transfer information you see in today's material continues to be built on old enterprise definition. I am joined by Tom Rutledge, Chairman and CEO, and Chris Winfrey, our CFO.

I' ll use it to forward the call to Tom. The year 2017 was the defining year for the new charter. Integrating three old businesses into a single enterprise with a single services and operations plan, our businesses are rapidly expanding and the most demanding aspects of our integrations are behind us.

In 2017, our client results went according to plan. Despite all the major changes in our businesses, we were able to increase our overall client base by almost 4% for the year as a whole. Our premium sells have risen and the biggest part of the previous Time Warner Cable Challenge is behind us. We were able to report a further increase in the number of new customers in our new stores in the last three months compared with the previous year.

Spectrum, our premium quality productset, is the bulk of our service today, with more than 50% of former Time Warner Cable and Bright House private clients now signing up for Spectrum prices and package. Our extended base is being purchased by all of our videoconnections and our overall extended videoconnections have grown again this month.

For the full year, we increased sales by 3.9% or 4. 5 percent without advertisement and EBITDA increased by almost 6 percent. As well as introducing our Spectrum prices and packages, we also made significant headway in 2017 in the consolidation of our customer-focused solutions and platform offerings. We' ve streamlined and standardized our various types of streaming content so that today almost all of our clients, regardless of floor space or bundle, use a Spectrum TV application to connect to our IT-based streaming content.

Continuing to build our three existing network sites within the facility, we will streamline our IT assets and our products and deployment platform. In the last 18 month, we have recruited tens of thousands of new people to good workplaces in the municipalities where we support the creation of more in-sourced services and supply personnel as a result of our locally based approach to improving the craftmanship, improving our products supply and improving the consumer experiences, while streamlining our managerial structures to significantly reduce our indirect costs.

For example, in the 4th fiscal year, the number of storm-related phone call and bill-related call from old Time Warner subscribers decreased by 15% year-on-year, and call turnaround rates were shortened as our own staff provided better and more effective call handling as well. Nevertheless, 2018 will be another bustling year of Charter-integrated work.

Our focus continues to be on a number of important customer-focused programs that will help us establish client relationships more quickly and achieve long-term revenue generation over time. Spectrum will further advance the pervasiveness of our Spectrum prices and packages in our new emerging market by reselling Spectrum proprietary brand products to new subscribers and moving existing subscribers to Spectrum, as well as small businesses.

It has been running for over a year, driving one-time investment and putting short-term pressures on sales to prolong customers' life and increase revenues over the years. In the operational area, we will purchase more in 2018 from our sales representatives and our employees in the CRM area.

By 2019, we will streamline our accounting architectures and infrastructures, all our account managers will work from a common front-end front-end point for all our distribution, accounting, delivery, services and storage operations across the country, so that each of our account managers in each call centre can process client phone enquiries from anywhere in our domestic presence.

Last June, we relaunched our purely digitized service, and by the end of 2017, 30% of the previous Time Warner Cable and 50% of the old Bright House Networks will still be offering full analogue videos. There will be improvements in our videoproducts in these countries. During 2016 and 2017, we postponed a number of introductions due to the merger, particularly with the LEGACY CHARTER, as part of our fundamentally restructured operational framework and the current set of policies, we will introduce new and more aggressive offerings across Germany.

We will be using our Worldbox, our fastest, most affordable and most efficient set-top speaker, which we have used around two million times to date. Later this year, we will be expanding our streamed videos and on-demand libraries to around 50,000 high-definition tracks in a number of different media types.

Until the end of 2018, we anticipate that the Spectrum Guide will be available substantially to all new videocustomers, so that we can take full advantage of the breadth of this large contents repository. These include legacies charter stores that are continuously linked to existing TWC or bright house stores from so-called hybrid stores such as Los Angeles, where we have been waiting to introduce the Spectrum Guide to full DMA at the same inception.

Current clients in these stores will be able to upgrade from their remotes to Spectrum Guide over the years. We will also begin to offer beloved third-party apps such as Netflix and others on Spectrum Guide, making our set-top boxes a gateway for access to our own material or that comes from somewhere else.

They will appear first on our Worldbox and then over the course of our lives on older boxes. Our Q4 results show that we are successful with our new videoproducts and we are piloting and starting new and existing videostream videoproducts with our devices to better meet consumers' demands for more choice and economic clout.

We will be offering giga-bit service in practically all regions where we operate all 50 million passes by the end of the year, and in December we increased Spectrum's minimal web speed to 200 mbps in New York, Hawaii, Austin and Charlotte without adding consumer costs. We also started using our Wave 2 Wi-Fi Routers in the 4th fiscal year, which provide higher speed, distribution and greater overall home security.

Mr Chris will talk about the impact of this introduction, but the aim is to attract and bind more cablebers. 5G testing is also going well, as are our 6G testing, which is our pre-specification for integrating small-celled architectures with nonlicensed and licenced spectrum that work intermittently with our DOCSIS progressive roadmap to deliver high-capacity, low-latency products.

By 2017, we were announcing a collaboration with Viacom and AMC, who will be producing genuine Spectrum footage prior to finalization. From our experiences with our Spectrum broadcast distribution network in New York One and Bay Noves 9 in Tampa, our strong brands and high value programs can have differentiated value and value to our customers.

We have another bustling year of implementation ahead of us, some sensible improvements are in the pipeline and we stay optimistic about our plans and our upside. But before we forward the call to Chris, just a few remarks about the fiscal reforms and the abolition of Title II. The Charter is dedicated to net neutrality.

We significantly expanded our headcount in the United States in 2017 and raised our investments by 15% to $8.7 billion. During 2017, these figures rose as we gained more trust in the implementation of the fiscal reforms and FCC measures to foster net impartiality for all participants in the economy. At the end of the 4th trimester, we speeded up the introduction of our Spectrum Giga offers for 2018.

Throughout a number of our market segments, we have duplicated our minimal web speed from 100 Megabit to 200 Megabit at no extra charge to our clients and speeded up tests of our new embedded wired and wireless offerings. As a result of these changes, we announce today that we are committing ourselves to pay each Spectrum associate at least $15 per hour this year.

Now I' m gonna forward the call to Chris. Prior to commenting on our results, I would first like to recall that when I refer to the client results for the forth Quarter of 2017, I will compare them with the results for the forth quarter of 2016, which have been restated for our programme client seasonality at Legacy Bright House in the forth Q4 of 2016.

Therefore, as of the first three months of 2018, we will no longer report transitional costs in our income statement or transitional investments, although these costs will be incurred for some years. Those who want to adapt the model in the run-up to the first trimester can do so now. This trend plan also shows a line break that we will make in the first trimester, all costs for lower selling and storage costs will move from costs for services clients to costs for direct mail where these call centre operations are now manage.

However, we did not take this into account in the financial figures for the final three months, but wanted to emphasize the changes before the first one. Lastly, our results for the final three months of 2017 were slightly affected by the third quarters windstorms in Texas and Florida. Neither the Company's customer results nor revenues were negatively affected in the final quarters and quarters, and total gale related operational costs and investments were below $10 million.

Over the course of the 4th fiscal year, 206,000 or 1 million client accounts were added last year, with 3.4% increase in TWC, 3.9% in Legal Charter and 5th fiscalarter. Four percent at Bright House. Housing and SMEs included, 15,000 more videos, 300,000 more websites and 53,000 more languages. At year-end, 49% of TWC and Bright House clients were active in Spectrum price setting and packing.

The number of subscribers in our new stores and, as shown in chart 6, exceeded the previous year; we were able to increase the number of power supplies for private subscribers by 287,000 compared to 213,000 in the previous year. Last year, TWC retail clients fell by 2.5%, Pre-Deal Charter fell by 1% and Legacy Bright House increased its total client basis for videos by about 0.5%.

Net additions to consumer TWC videos remained unchanged during the period, with continuing expansion of traditionally extended clients compensated by continuing exodus from the lower baseline of finite subscribers. In addition, we have been able to expand our streaming offering, which is a less expensive videoproduct that requires no devices and is aimed at those clients who do not currently purchase a videoproduct from us.

Over the course of the year, we launched this innovative drug more proactively and broadly across our entire presence. We lost 10,000 private clients in the segment of videos in the third quarter, compared to an increase of 20,000 in the previous year due to our concentration on integrating the major purchased prints. Like Tom said, achieving a domestic level of products and services also prompted us to adapt the date for upgrading products in the existing charter for more than two years.

Also, we are merging some old charter stores with the existing TWC services structure while creating new business areas in the region. This puts certain old charter areas in a previously revalued state with regard to the services. The Bright House won 13,000 television clients compared to a 6,000 lost the previous year. Altogether, we acquired 2,000 private consumers for videos in the 4th fiscal year, in parallel with the increase in SMEs.

We gained a whopping 263,000 private Internet subscribers, compared with 303,000 in the previous year. In the last 12-month period, we have expanded our entire private client online business by 1.2 million or 5.4%. TWC's 5.1% increase is 5.6% increase from the US Charter and 6th place. Nine percent to Bright House.

Our volume in the speech segment increased by 22,000 private subscribers in the final three months, compared with 1,000 in the previous year. Higher revenues from trial plays were compensated by a higher migration of TWC legacies. Further achievements are expected with a higher proportion of the Spectrum platform and the introduction of new product launches.

Last year, we were able to increase the number of private clients by 828,000 or 3.3%. Moderate inflation, continuing stand-alone online sales, higher sales and promotion volumes, migrating activities of the Legacy TWC and Bright House with Spectrum prices and packages all dampened ARPU sales development. There' also a mechanic ARPU-hit of the modifications to the old Bright House season itinerary.

Chart 7 shows that our client sales in combination with our ARPU sales led to a 4.0% year-on-year increase in revenues. Overall trade revenues, i.e. SMEs and enterprises together, rose by 6%, with SMEs growing by 4.5% and enterprises by 8.3%. Without Zell-Backhaul and NaviSite, Enterprises increased by over 12%.

Revenues for both the midmarket and the company increased, with 32% higher net additions to TWC and Bright House in the final three months compared with the previous year. In the TWC and Bright House market, our turnover has not yet followed our volume expansion and will not do so until we make the move to more competitively priced both our SME and our corporate product.

Whilst we anticipate that ARPU printing will remain in place until 2018, sales will grow in line with units. Revenues from advertisements fell by 17% in the final three months of the year compared to the previous year, due to government policy in the previous year. Without taking politics into account, revenues from advertisements increased by almost 3% compared to the previous year, as revenues from sales at home, abroad and digitally were higher than in the previous year.

Overall, the company's sales in the final three months rose by 3.2% year-on-year and by 4.2% without advertisement. Considering the overall sales increase without advertisement at each of our existing businesses, TWC sales increased by 3.9%, Pre-Deal Charter by 5.1%, due to client expansion. Bright House's revenues increased by 4.2%.

In terms of operational costs, Chart 8, overall operational expenses increased $199 million, or 3 percent, in the final three months of the year. 8 percent year-over-year, powered by contractually agreed payment and renewal rates as well as a higher client franchise and client portfolio, which contributed approximately 3 percent to program costs increase. In 2018 as a whole, we anticipate that program costs per videocustomer will increase more slowly in 2017.

And that' s reflected in a considerable amount of programs that have been updated in the last 15 to 18 month and that the anticipated slowdown in the pace of increase holds, whether or not you take into account the small investments we want to make in Tom's proprietary footage. The costs for supporting our clients fell by 0. 4 percent compared to prior year, due to the advantages of the merger of three businesses, increased efficiency from our operational business models, partially compensated by higher expenses for receivables losses due to higher client acquisitions and revenues.

The fourth period underlying Adjusted EBITDA increased by 3.3% inclusive of transitional expenses - sorry without the transitional expenses in both period - and underlying Extra EBITDA increased by 1.8%. While there are still many movable parts and we will not miss out on our opportunity for further expansion, the 4th quarterly period is likely to reflect the lows in our Cable Division GDP which should also profit from some policy initiatives during the rest of the year.

In terms of net profit after Chart 9, in the 4thquarter we generated $9.6 billion in net profit due to charterholders. Our net profit in the prior year was $454 million in the final quarter of 2004, reflecting a revaluation gains on our defined contribution obligations. Apart from last year's net accumulated postretirement benefits, this year' effective revenue was higher, underlying EBITDA was higher, compensation expense was lower and we recorded a $101 million charge in this Q4 from a revaluation of our prepayment/Neuhaus deferred income credit also due to the German Federal German Corporate Federal Government taxation treaty.

On Slide 10, total investments in the 4th fiscal quarter were $2.6 billion, of which $202 million was for transitional investments. Without the changeover, CapeEx grew $682 million year-over-year in the final three months of the year, primarily due to higher expenses for CPE, scaleable infrastructures and technical assistance. In our Q4 2008 period, our CapeEx comprised acquisitions for the 2018 level of business, with significant CPE asset sales from the much greater all-digital business this year and for DOCSIS 3.1 and scaleable infrastructures.

1, there was a significant operational and sourcing advantage in 2017, step inventories and market introduction kit in 2018. Without the effects of the switch in pull-forward spending, our 4th quarterly CapeEx was higher than last year with a higher level of CPEs and higher line volume, a higher set-top boxes per line positioning ratio, and the migrating of old to spectrum subscribers for commonly deployed new devices.

There were also purely digitized expenses, which without the above inventories amounted to approximately $70 million in the final three months of the year. Looking ahead to 2018, our cable investments are expected to be supported by many of the same drivers as last year, among them subscriber expansion, frequency migrations, fully digitized systems, insourcing and onboarding.

Overall, we assume that cable investments or the share of investments in sales will be somewhat lower than in 2017. Continuous sales incremental improvement will remain the best way to achieve efficiencies that will be fully digitally completed, we will be at the back of our integrations, and the majority of Spectrum packages and DOCSIS 3 will have been upgraded by 2017 and 2018, respectively. 1 upgrades expenditure will have been made by 2017 and 2018.

Even with the growing demand for growing units of videos, the dollar for CPE videos should fall drastically, as there is a fully-fledged basis of advanced two-way set-top speakers with the DOCSIS modems inside. Chart 11 shows that we achieved free cash flow of approximately $1.2 billion in the final three months, compared to $1.9 billion in the prior year final quarters, mainly due to higher levels of CapeEx.

Our quarterly closing balance was $69 billion in bonds and notes and our $3.7 billion dollar interest per annum on our December 31, 2009 interest rates on our daily cash balances, while our quarterly income statement interest rates suggest an interest of $3.4 billion per annum. At the end of the 4th fiscal year, our net indebtedness was 4.47x our targeted corridor compared to the last 12 months' underlying 12-month EBITDA, 4 to 4.5x.

For us, 2017 was a bustling year of financing. Throughout 2017, we purchased back $13.2 billion, also at an annual weighted average of $347 per stock.

Last year's roughly half rise in our debt ratio to the upper end of our targeted corridor reflected the trust we have in our business models and what we knew would add to the complexities of our operational reporting over the course of 2017. From a mathematical point of view, the fact that we are currently at the upper end of this lever zone, compared to a half-turn rise in 2017, means that our 2018 buy-backs will be lower than 2017.

A number of other issues also matter, such as the introduction of our working capital-effective domestic product in our FMCG businesses, and I do not anticipate that we will be able to reach the same working cash levels in 2018, given the effect of CapEx-Pullforts 2017 on working cash in 2018 and our expectations of lower investments at the end of 2018 with the conclusion of all-digital and other large scale integrations that do not affect working cash in 2018.

So, no buyback guidelines except, we like what we did when we did it in 2017, 2018, we will be less, and we will stay opportunistic to maintain the agility to generate shareholders value without getting caught up in artifical goals. In Charter, we anticipate considerable reductions in taxes on hard currency in the long run as a result of the German Federal German Corporate Income tax reforms.

Those fiscal cuts and the FCC measures to cancel the Title II umbrella will underpin the significant White House obligations Tom entered into on Charter's behalf last year and the renewal of those obligations today. Significant adoption of fiscal laws in December was already a contributing force to the aforementioned increase in investments in the 4th fiscal year, in particular the advantages of writing off bonuses in the 4th fiscal year 2017.

The expectation of greater regulation security was a major driver in speeding up our DOCSIS 3.1 implementation, which includes Spectrum GIG, and improving minimal web speed in a number of Spectrum customer segments. Prior to joining Q&A, I wanted to create a funding structure for the introduction of our Spectrum Wireless Services later this year.

We believe, as Tom said earlier, that our move into cordless communications can further speed up subscriber acquisition and enhance market penetration. And the more customers we grow, the more revenues we earn from our customers in cable and wire. A large portion of these revenues will initially consist of equipment sales that are fully recognised on the date of the agreement and, like customers' original long-term revenues, will be recognised as manufacturing costs under EIP accountings.

And the more early wins we generated from our customers, the more we saw in the first few days our company grew in terms of our segment revenue, our operating result and our operating margin. Looking ahead, we anticipate that our Wi-Fi facility will deliver strong individual revenue generation with wider incremental advantages for our key cable businesses. At some point our mobile phone operations will be fully embedded; it's just another cable package in terms of merchandising, invoicing and servicing.

However, during the introductory period, we will be able to insulate certain core components to provide visibility into cable performances. Among these headings, which are not necessarily linked to line by line disclosures, are revenues from services, which may be incompatible with the bundling effect of price setting and any subsidy. Equipment revenues and related product sales expenses, MNO or distribution expenses, and all directly attributable expenses of Capital Ex.

Your issue is therefore, at the time when the Charter becomes a taxpayer and the current advantages of our NPLs are ignored, the actual taxation should be in the range of 24% to 25%, including state personal taxes. We do not offer continuous disclosures of synergy, including the differentiation between the synergy of our business models and the synergy of transactions; it is not a light line.

However, I think if you look at our results that are valid for the full year 2017 and the 4th fiscal year, you can see that even in the income from service costs and other charges, and even in our selling and distribution activities, where we have much higher selling and distribution activities and we have synergy effects there that offset some of those ups.

Firstly, Chris, there is a beautiful comment on cable segment earnings before interest, taxes, depreciation and amortization (EBITDA) about the low point of cable segment earnings before interest, taxes, depreciation and amortization (EBITDA) increase. What if you could give us more colour to drive accelerated GDP increase? Reinvesting in cable is with on in its low point because of the particular to cable and I am not saying that now, just everyone is looking, but if we are far successful with radio and there are up front costs in selling and marketing as that is installed to the cordless affiliate.

So, we think that Q4 was probably the low point for cables in the chart and that's our intent, to say the least. Regarding the source of this increase, and as subscription numbers have increased and we anticipate that they will increase further, as many of them are unsure of you on the way, but for the mid- and long-term subscription results it has increased.

This has a significant influence on the sales stream. All of this means that sales should contribute to this EBITDA increase. In the preparatory comments, we also stated that we anticipate a lower level of program costs, which will also affect the EBITDA increase as well.

That' s, there are some trimmings up there and we have a lots of insourcing investment that is continuous, but to reply to your query, I think it comes from both sales and parts of the expense curve that also continue the efficiencies up there. However, we have it - it is really a logistic issue, part of it is that we also offer it to our current clients and in some cases we have to handle modems.

Of course we like M&A in the sector, as you speak of cable M&A as distinct from programing M&A, from our point of views the cable sector. We have two agreements, one with AMC and one with Viacom, which differ slightly in scale, but they basically provide a windows of opportunity for us to use our contents in a way that suits our clients, and yet to monetise those contents together over a larger sales area that means the globe.

Chris said in his commentaries that we even increased our publicity last year by 3% by turning off politics. Firstly, Chris, can you give us some clarification on the interest rises that have been heralded so far, both in the old Charter and in the purchased schemes? So Phil, we didn't make any significant rates upgrades in 2018, which is really in line with our operational philosophies to gain additional markets.

This has led to a slight rise in some cases, but as you know from the move to Spectrum prices and packages, in many cases this is a drastic cut in the set-top boxes charges charged by the consumer. We' ve had some other minor changes to the margins, but those are two that make up the bulk, but in general our policy is to grow sales through piece growing instead of just taking installments, which hasn't really happened.

Thus, in a unique client relation, the client receives a series of high-quality characteristics which, separately and in their entirety, are more valuable to the client than they would be as stand-alone items. As regards the possibilities of Wi-Fi and deferred frequencies, small radio sets, if you refer to them, I have spoken in the past of an inside-out strategic capability for low-capacity and low-latency service delivery to consumers and enterprises.

So our idea is that we may want to take extra leased bandwidth and mix it with Wi-Fi bandwidth to make an even wider in-home, enterprise and mobility platforms. However, we are working on integrating our licenced and nonlicensed radio spectrums into the same radio equipment so that we can enhance the already good radio cover we offer at home.

The most interesting fact to consider, I think, is that it is the MAIN we are going to join that accounts for 80% of the GPS that wireless operators users sealing on their equipment come to via our Wi-Fi network. Chris, you certainly repurchased more shares than I expected in the 4th trimester and the second half of 2017.

Then for Tom, did I want to nationalise your thoughts about the possibility for the federal administration to nationalise part of the mid-band radio universe to compete in 5G? This was because we knew that any changes we made within the company would lead to the Charter being questioned in statistical terms for a brief while.

Since the higher volume of revenue and higher value selling was obscured by the emigration and migrations of end-of-life products and it was very hard, although we talked about it, it was very hard for humans to see, we have faith in where it was going, and we thought that this was the right place to unfold our leveraging effect than buying shares at these rates, both throughout the year and during the fourth quarter, $347 per share.

Our company has achieved positive earnings before interest, taxes, depreciation and amortization (EBITDA) as well as positive earnings before interest, taxes, depreciation and amortization (EBITDA). As we become more and more busier about our capability to grow wirelessly, you should make sure you have enough installed capability in your solid leverage to still be within your reach, that is our aim.

Now, and let's make sure and I describe what's going on in the videogame and it' complex. Still think we can make videos wax. There is a big pressure in the videogame with the prices and packing, the prices of the items and the fact that in order to transport the entire item, again buy the entire item, as a distributors, and this makes the selling prices generally high for a fully equipped services.

For all these things, the overall class is contracting from a wage point of view, and then you have our capacity to resell, which I still think is good and significant, and I think we have the opportunity to put better videos in front of the consumers and pack them.

As if we had the ability to keep having a full-featured videoproduct that met customers' needs and what everyone else could do. I think because we have a better operating mode and better infrastucture that we can gain against satellites and other wired competition in the market and expand our own videos now.

This concludes our call. In the comments I made earlier I mentioned that 32% year on year increases at TWC and Bright House, at SMEs from a business units point of view, that is really significant and 32% rise in net new customers. I am not giving you a sales forecast except to say how we will have units growing positively, we will have units growing positively, but it will be pushed to 2018 in relation to units growing until we can get a little further in that migratory trajectory and exceed the 50% point, similar to what we have been discussing about housing.

Pardon us and thank you all for taking part in the conversation. Today's telephone call is over, and you can now cut the line.

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