Good day, and thank you for standing by. Welcome to the Altice USA Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. Operator instructions: Thank you. I would now like to hand the conference over to your first speaker today, Mr. Nick Brown. Sir, please go ahead.

Hello, everyone. Thank you for joining. In a moment, I'll hand over to Altice USA's CEO, Dexter Goei; and CFO, Mike Grau, who will take you through the presentation, and then we'll have time at the end for Q&A. As today's presentation may contain forward-looking statements, please read the disclaimer on Page 2. Dexter, please go ahead.

Hello, everyone. I'm going to start today by summarizing the full year and Q4 results. And then I'll provide a recap on our strategy to accelerate investment plans. Starting on Slide 3. Revenue growth for the full year in 2021 was 2% year-over-year with a strong recovery in News and Advertising and Business Services. Organic broadband customer net losses were 3,000 for the full year. This is a bit better than I previewed in December as we finished the quarter better than expected. We just launched more competitive Internet + Mobile converged offerings in January as planned and have begun expanding our sales distribution channels to support additional growth. Full year adjusted EBITDA grew 0.3% year-over-year with a margin of 43.9%. We delivered another strong year of free cash flow at $1.6 billion, in line with our target. This supported share repurchases of $805 million for the year, although in Q4 we shifted capital deployment to heavier investment in the business to drive future growth. Lastly, I want to highlight that we announced today a new plan to bring 100% fiber broadband, delivering multi-gig speeds, to more than 2/3 of our entire footprint over the next 4 years, reaching a total of 6.5 million FTTH passings by the end of 2025. This will include about 4 million fiber passings at Optimum, covering all the areas where we overlap with Fios and Frontier, and 2.5 million fiber passings at Suddenlink. Fiber is the future and given the progress we have made at Optimum with our fiber build, we're excited to build on that success and break ground later this year at Suddenlink to bring our state-of-the-art network to more customers and communities. We strongly believe this is the right approach to improve customer experience and enhance the value of the business. Turning to Slide 4, looking at the revenue growth in more details, you can see the reported full year revenue growth of 2%. Reported Q4 revenue declined slightly by 0.6% year-over-year due to the absence of political advertising revenue and recent pressure on the Residential business. We also show here a couple of adjustments worth mentioning to see our underlying trends. Adjusting for RSN credits, which impacted revenue in 2020, total revenue growth was 0.8% for the full year and declined 1.2% in Q4 of 2021. Further adjusted for an incremental $100 million of AirStrand revenue, which we recognized in the second half of the year for the early termination of a backhaul contract, revenue growth would have been closer to flat for the full year at minus 0.2% and down 2.4% in Q4. Residential revenue grew 0.3% for the full year but declined 1% adjusting for RSN credits. Business Services grew 9% for the full year on a reported basis. However, excluding the RSN credits and $100 million of AirStrand revenue, Business Services revenue was up 2%. News and Advertising grew 6.1% for the full year supported by strong recovery across local, regional and national advertising. Turning to Slide 5 to look at Q4 customer trends in our Residential business. We reported a net loss of 13,000 residential customers in Q4 and broadband net loss of 2,000. This is an improvement from Q4 last year, where remember, we saw some pressure from storms across Louisiana as well as volatility from pandemic-related regulatory program. It's also an improvement from the prior quarter as we aligned our acquisition offers more closely with Fios and pushed harder on marketing in Q4. On Slide 6, we show the annual customer trends in our Residential business. We reported an organic net loss of 51,000 residential customer relationships in 2021. Although if you include the Morris Broadband acquisition, which we completed last year, our unique customer base reduced by 16,000. The organic broadband customer net loss was 3,000 in 2021, although increased by 27,000 if you include the Morris Broadband acquisition. Clearly, the pandemic has meant we've been operating in an unusual environment for the past couple of years, seeing exceptional customer gains in 2020, which in hindsight was partially a pull-forward of demand, which depressed growth in 2021. This has also reduced visibility into our business trends, which have not yet fully normalized, including lower gross add activity for the past 2 to 3 quarters and higher move-churn than normal across the New York tri-state area. However, we remain confident that we will see more benefit from our accelerated pace of footprint expansion, fiber rollout, other investments in customer experience and expanding our sales distribution. These growth and investment initiatives are likely to build cumulative through the year, so we expect to see a greater impact in the second half. I want to highlight again that we continue to see growth at Optimum in non-Fios areas and across Suddenlink in 2021, which was close to 2018 and 2019 levels. We only saw customer losses in Optimum areas where we overlap with Fios, and that's the main area where we started to see improvements already in Q4. Now on Slide 7 on Business Services. Revenue growth continues to trend towards pre-pandemic levels as markets reopen and customer growth has been much better than in 2020. Reported revenue growth for Business Services was up 2.2% for the full year, excluding AirStrand revenue, and up 3.6% in Q4 on the same basis. We also saw an improvement in revenue growth at Lightpath, up 2% for the year and 3.2% in Q4. On our News and Advertising business on Slide 8, revenue grew 6.1% for the year or 15% excluding political advertising, with an easy comparison given the peak COVID impact on the sector was in the middle of 2020. In Q4, revenue was down 11.7%, although grew 4.2% ex political, which was better than expected. We will hopefully see more normalized advertising trends going forward now with more of a political benefit this year in the second half. Local, regional and national advertising markets have been all recovering with the notable exception of the auto segment which remains weak. Excluding autos, our News and Advertising revenue was actually up about 26% versus Q4 2019 levels. This recovery has continued at the beginning of the year with the gaming sector providing a boost at the moment. Slide 9 is a recap of strategic measures we announced at the end of last year to enhance the company's network, product portfolios and customer experience on an accelerated basis. First, we are significantly accelerating our fiber network rollout and expanding the availability of multi-gig services. With a more differentiated broadband service, we expect to drive higher gross additions and help reduce churn given the reliability of fiber network service, reducing our long-term network maintenance and technical service costs as well. Just as a side note, technical calls are down 30% on a like-for-like basis versus HFC. NPS scores are up 44% versus HFC. Gross add ARPUs are increasing 6% to 8% on our fiber gross adds and early churn is 1.5% to 2% better after 3 to 4 months, which on an annualized basis gets us closer to 5% to 6%. We are also accelerating our new build activity edging out to the Suddenlink footprint to drive customer growth with a shift to more fiber new build construction where practical. I mentioned already we have accelerated investments in mobile and converged offerings, which became available last month, and we expect this will help improve broadband customer churn as well. On the customer experience side, we have begun expanding our sales and distribution channels to pre-pandemic levels to support additional customer growth. Finally, as our operational performance improves, we will rebrand Suddenlink to Optimum to drive a consistent marketing message and customer experience across the entire footprint. This should start in April of this year. Slide 10 is a good illustration of how we are in the early innings of the growth we expect from selling high-quality, high-speed broadband services that we can support very high levels of data usage. Our 1-gig customer penetration increased to 15% in Q4, almost doubling from a year ago, with close to 50% of new customers now taking 1-gig speed. The average download speed customers take now increased to 352 megabits, which continues to accelerate as customers are increasingly taking the 1-gig service. Still, about 50% of our customer base take speeds of 200 megabits per second or lower. So we still see a lot of growth to come here. Average monthly data usage for broadband-only customers was 556 gigabytes in Q4, with video streaming remaining the biggest driver. At the high end, 14% of our broadband-only customers are actually using more than 1 terabyte of data per month. All of this gives us confidence we're making the right decision focusing on fiber to future proof our network given it's the best technology that exists to support high levels of throughput and data usage with very low latency and very high reliability of service. You can see in the lower left of this slide our fiber penetration of total fiber passings was about 6% at the end of 2021 with around 70,000 customers. Our focus has been on selling fiber to new customers, but we will start to do more migrations later this year to accelerate penetration and bring the benefits of this new network to a wider part of our customer base. Slide 11 summarizes our updated fiber road map as we announced today a new multiyear plan to bring 100% fiber broadband to more than 6.5 million passings across the Optimum and Suddenlink footprint. As a starting point, we reached 1.2 million total fiber passings at the end of 2021 which were available for sale to customers across the Optimum footprint, adding just under 300,000 passings for the year. This differs slightly from our previously reported fiber homes passed metric, which showed the fiber passings ready for service or in other words constructed but not necessarily yet available for marketing to customers. The difference relates to issues such as power connectivity, which can delay lighting up the network by a couple of months. We believe this ready for sales number is a better reference to measure our success in customer penetration, so we intend to report this figure going forward. This means that we actually now expect to reach an additional 1.3 million homes passed ready for sales in 2022 as we close the gap to what we already constructed last year. So we are on track to reach our prior target of 2.5 million total fiber passings by the end of 2022 which will be ready for sales. We expect the total peak in incremental fiber passings and related CapEx in 2023 and 2024 at around 1.6 million new passings in both years, especially as we expand across the Suddenlink footprint at an accelerated pace. However, please note this includes reallocating some new build CapEx towards new build FTTH passings as well as fiber homes we may build with government broadband subsidies, so we'll have some items offsetting our total CapEx spend. Specifically, we now expect to build out fiber to about 2.5 million homes at Suddenlink over the next 4 years with approximately 200,000 passings focused initially this year in Texas, growing to 600,000 additional passings in 2023, 900,000 in 2024 and 800,000 in 2025. By the end of this period, we will have covered about 1 million homes in Texas with fiber and another 1.5 million homes across the southern states as listed on the right of the slide. At the same time, we will continue to roll fiber across the Optimum footprint, targeting an incremental 1.7 million passings from 2023 to 2024 primarily to reach a total of 4 million fiber passings in the New York tri-state area by the end of the period. Moving to Slide 12. You can see we added 141,000 new homes built last year, mostly edging out around the Suddenlink footprint, with Morris Broadband inorganically adding another 89,000 passings. We are still achieving about 40% penetration after the first year of expanding our network into new areas, so it remains a great driver of new customer growth. We're still targeting additional 175,000-plus passings in 2022 of new homes built. Separately, in 2021, we completed the upgrade of over 300,000 Suddenlink HFC homes in areas where customers previously only received a maximum download speed of about 150 megabits per second, taking this up to either 400 megabits or 1-gig. We're planning on a similar HFC upgrade of more than 100,000 additional homes during 2022. But beyond this, we'll be focused on moving straight to fiber wherever possible. Lastly, so far, we've applied for broadband subsidies totaling for over 150,000 homes where we could get support for new FTTH build. We are close to completing our first win here on about 30,000 homes passed, which we hopefully will shortly announce. We should be able to apply for additional subsidies for close to 500,000 and potentially up to 1 million unserved or underserved homes by the end of this year and believe we're in a strong position to win a good proportion of these funds. These will all be built out in FTTH. Slide 13 summarizes our new mobile converged offerings with up to $30 monthly savings if you take both a broadband and mobile service from us. This positions us much better versus our competition and should support improved customer growth this year. But as I alluded to earlier, we think we'll be able to be even more aggressive here in the coming months. Optimum Mobile had approximately 186,000 lines at the end of December, reaching 4% penetration of Altice USA's residential customer base. On Slide 14, I want to remind you how we pulled back on sales distribution channels during the pandemic necessitated by stay-at-home orders and social distancing protocols, but we're now extremely focused on getting back to pre-pandemic levels here. On the left, you can see we're targeting approximately double the number of door-to-door sales representatives we have in 2022, up to 400 to 500. And on the right, you can see we've been targeting an additional 50 to 75 new retail stores in 2022. Most of these new stores should open in the second half this year as it takes time to secure the locations and get the stores up and running, but we feel confident about hitting these targets in 2022. And now I'll hand this over to Mike for the financials in more detail.

Thank you, Dexter. Good afternoon, everybody. Turning to Slide 15. You can see our adjusted EBITDA margin was 43.9% in 2021 or 44.8% ex mobile, which is slightly ahead of 2019 levels. Remember that we had some temporary savings in 2020 at the peak of the pandemic, making 2019 a better comparison. Full year adjusted EBITDA grew 0.3% year-over-year, although Q4 EBITDA declined 5.9% year-over-year with the revenue decline and higher marketing spend. Our EBITDA less CapEx or operating free cash flow margin of 31.7% in 2021 was also ahead of 2019 levels, although a bit below last year driven by increased network investments. I do want to remind you that some of the areas where we are increasing investment will include higher operating costs as well as higher CapEx, which will likely negatively impact margins in 2022 to drive better customer growth and higher medium to long-term revenue and cash flow growth. Specifically, we're looking at over $100 million of additional OpEx, including rebrand costs, which are more of a one-off, expanded door-to-door sales and retail store distribution and higher marketing spend around our revamped mobile and converged offerings. On Slide 16, you can see our capital intensity was 12.2% in 2021, up from 10.9% in the prior year. Without fiber and new home build growth investment, this would have been closer to 9% in 2021. Our CapEx target in 2022 remains between $1.7 billion and $1.8 billion on a cash basis, including $300 million to $400 million of additional FTTH CapEx and $100 million to $200 million of additional new build CapEx. Note, this excludes any CapEx associated with potential subsidized rural broadband construction as this is more uncertain right now. However, as Dexter said, we are pursuing this opportunity aggressively as we are experienced in fiber construction and well positioned with the cost advantage to help cover the unserved and underserved areas around our footprint. We still see the same opportunity to reduce CapEx after 2024 once our fiber build starts to scale back. We are just accelerating spend here to bring forward the benefits. Slide 17 highlights the annual free cash flow trend. We had another strong year of free cash flow generation at over $1.6 billion, in line with our target. Recall, we exhausted our tax NOL, so cash taxes have been higher this year and our CapEx increased year-over-year given the construction restrictions that we had in 2020. We do expect free cash flow to be lower in 2022 with the accelerated investments we're planning to drive growth. But also note that we should see improved EBITDA growth from 2023 and reduced CapEx after 2024 as we scale back the fiber build, supporting medium-term free cash flow. Lastly, Slide 18 shows our CSC Holdings leverage trend since the acquisition of Cablevision completed in mid-2016 when net debt to EBITDA was closer to 7x. We've been trending to our leverage target of 4.5 to 5x in the last 2 years, with a couple of exceptions being the $1.5 billion dividend we paid in mid-2018 in conjunction with the spin-off of Altice USA and the $2.3 billion tender offer at the end of 2020 following the Lightpath minority stake sale. We remain committed to reduce leverage to this target range, even as we are accelerating investments to support all of our key strategic initiatives. We did not do any share repurchases in Q4, instead opting to pay down debt and invest more heavily in our business. And I do want to highlight that our balance sheet remains very strong and in very good shape right now. At the end of Q4, we had liquidity of over $1.7 billion on top of a very healthy level of free cash flow generation. The weighted average life of our debt is currently 6.2 years and our weighted average cost of debt was 4.6% at the end of 2021. We have no annual bond maturities greater than $1 billion before 2025, all of which can be covered by free cash flow generation and/or capacity from our revolver. We will continue to proactively and opportunistically manage our liabilities, although we really don't need to go to the market for anything right now. As a final comment, before we proceed to Q&A, I would note that we will not be giving any additional financial guidance for 2022 today as we want to maintain maximum flexibility to invest more in our various growth initiatives. And with that, we will now take any questions.

Operator instructions: Your first question comes from the line of Philip Cusick with JPMorgan.

A couple. First, the faster fiber build in '23 and beyond, do you think that leads to higher CapEx in those years as well or is the $1.7 billion to $1.8 billion a good range? And then you said you ended December better than expected. Can you talk about what you're seeing in the market? Just expound on that a little bit, whether it's moves or new interest. What do you see out there?

Phil, the math isn't perfect here given that there's going to be some HFC-related maintenance and growth CapEx that's going to be coming down. But I think it's probably fair to say that we probably will be a couple hundred million dollars at the most higher in CapEx for a couple of years like in 2023 and 2024, and then it starts coming down in 2025. And obviously, 2026, it's a massive reduction in CapEx. Well, I think it depends in our markets. But broadly speaking, even coming into January and February, gross activity is lower but it's relatively stable relative to last year, so not at all back to 2018 or 2019 levels. And depending where we are in our footprint, from a competitive standpoint, churn rates are in line to slightly higher depending on if we're seeing increased competitive intensity or not. But what we're seeing is that where we are providing 1-gig service, where we are providing now good distribution on the mobile side and where we're starting to start delivering better distribution channel productivity, we're seeing better performance there on the sales side of our equation. So the reason why Mike and the team have agreed to not drive too much financial forecasting at this point is because we are starting to see some nice returns on investment. And we'd like to just maintain some flexibility here if we need to for the next couple of quarters, but I think it depends. Fios is not being hypercompetitive as much as it was in the better part of 2021. They've raised their prices on data. Where you have seen some aggressive marketing and pricing is on the AT&T side, but AT&T Fiber only overlaps with about 400,000 of our homes passed on about 12% in our Suddenlink footprint today. That will increase obviously as AT&T increases its fiber footprint. So we're not seeing any massive competitive pressures here, but it is a month-to-month kind of change of pace depending on if something new comes up.

Your next question comes from the line of Jonathan Chaplin with New Street Research.

Two for you, Dexter, if I may. So first, on ARPU, it looks like it was down a little bit year-over-year. Wondering if you can talk through just the dynamics of where your new offer pricing is relative to ARPU. And as you sort of rectify the business over the course of the next few quarters, where you think ARPU washes out? And then my second question is, it's been a long time since you've given us a thought of where CapEx and margins would be once you get through the fiber upgrade. I recognize a lot has changed since you last gave that guidance. Where now do you think in 2026 once the upgrade is done sort of business as usual CapEx and margins would land?

So on the ARPU side, even though our overall residential ARPU from a fourth quarter standpoint year-over-year or from an annual standpoint is slightly down, obviously, that's driven primarily by the impact of what's happening on our video side of our business. And also what we're doing in terms from a promotional standpoint in the third and fourth quarter where the gift with purchases, which is whether it's either gift cards or OTT, is contra revenue. And so that impacts obviously our ARPU numbers, but it's nonrecurring in many respects. So we still feel good about our broadband ARPU. I think what I had mentioned on third quarter earnings is that even if we stayed as promotional as we were in the third and fourth quarter of last year throughout this year we'd be flattish on broadband ARPU. And so we feel good about those levels. And then I can't call where video ARPU is going to go, but we continue to see some decent attrition and low levels of attachment on gross adds there. With regards to CapEx, if you look at our non-fiber CapEx today, we're probably close to about $1.1 billion, $1.150 billion type number. But if you were to extrapolate to a pretty much a full fiber network by 2025 of 6.5 million homes, our non-fiber CapEx related to HFC is going to come down materially from there. So I think it's fair to say that we're looking at a sub-$1 billion type of CapEx number from 2026 onwards and probably already in 2025 we'll start seeing numbers in the mid to lower teens of the $1 billion. And from a margin standpoint, that's a little bit difficult one for us to call, Jonathan, given that video plays havoc with margins here. But clearly, the gross margins on data are very strong. And given that we continue to migrate more and more to a heavier weighting on data, you'd expect to be able to get to significantly high margins to where we are today.

Dexter, if I could just follow up on the ARPU comment. When we look at where the new offer pricing is, I forget the numbers, I think it's $40, $50, $60 or $45, $55, $65 on broadband, which is all below where average ARPU is for broadband. With bringing customers on at these rates on what looks like flat pricing plans, how do you maintain ARPU in that sort of $74, $75 range?

Well, I think our gross add ARPUs today on data, given that we are seeing 50%-plus of our gross add subscribers taking 1-gig, we're seeing those numbers in the kind of mid-$60s in terms of the gross add ARPUs on data. And so we're not too far off from where our average is. And then obviously, rate action and the fact that 50% of our subscriber base continues to be at 200 megabits or less continues to drive some nice upsell. And you have to remember, we're in a heavier promotional time period right now. I don't expect our pricing relative to Fios, which is about $20 to $25 cheaper today on 1-gig, for us to maintain those levels. So we'd expect to continue to be able to drive ARPU growth here on data for the near term. And as we go into multi-gig, which we'll start announcing in the middle of this year, we will have that product road map to go up to higher speeds and higher ARPUs.

The next question comes from the line of Craig Moffett with MoffettNathanson.

Two questions, if I could, Dexter. First, the wireless strategy, your peer cable operators have obviously made it a very large part of the business, and you've had a lot of fits and starts. I wonder if you could just put a little more meat on the bones of why we should be confident that now is the time we can start to see some acceleration in the wireless strategy and what you can accomplish with wireless. And then second, there is, I think, a concern that so much of your share count is held privately that there may not be a near-term incentive for you to get your stock price up. I wonder if you could speak to that and maybe provide some reassurance about your own ambition in the stock price and Patrick's as well perhaps.

Well, I'll take the first question first, then I'll take the loaded question second after. On the first one, wireless, I think we've been clear that wireless is very important to our strategy, Craig. Yes, you're exactly right. I think you used the right terminology, fits and starts. It's been a year now that we've been re-homed on the T-Mo network. And we've seen our churn rates come down from mid-60s to 70% down to mid-30s today, continue to improve month-over-month. And so we are at that stage where, one, we weren't going to talk about publicly, but we are on the 1-yard line, even though football season is over, to talk about announcing a new agreement with T-Mo. And so we're very pleased. I think our partners are very pleased with our commitment as well and our financial commitment. And we'll be able to talk about that a little bit more once we announce it. But it will allow us more flexibility and will provide our partners as well as T-Mo with some good financial incentives as well. And we think that we can mimic and do better than our peers over at Comcast and Charter who are starting to grow their mobile subscriber bases nicely. So we don't see there's any reason why we can't achieve as good of results, if not better, than our peers there. And you'll start seeing some of those strategies unfold over the next couple of months as we start being more promotional and obviously as we lead into a rebranding of Suddenlink in April throughout the rest of the year and a real reinvestment in the Optimum brand throughout the year. So those strategies you'll start seeing unfolding in the second quarter all the way through the end of the year, and you'll understand where we are there. In terms of the second question, I can't really speak for Patrick, but as you may know, I'm heavily incentivized. I've got a very large shareholding, at least I believe it's a very large shareholding in Altice USA. That's a big part of my personal net worth. And I'm very focused on making sure that the stock price goes up. I don't think it has been announced. Actually, I'm looking at my lawyer in my room, but I don't think we've announced the new incentive program for the management team. It has been. And so you'll see that we've got a heavily RSU and option-weighted incentive plan for the next 3 years for the top 200 employees at Altice USA very focused on the stock price, right? So I couldn't emphasize how much the management team is focused on making sure that the share price reacts the right way, which is why we're doing the things we're doing today because it is clear in our minds that investing in the infrastructure and upgrading it significantly is going to drive a tremendous amount of value and growth for this business given all the early statistics we've had that are meaningfully better than HFC across all the operational KPIs. And so we just have to continue to execute here and this is a big year of execution. We feel good about our initiatives that we started in the second half of last year. And we feel good about 2022 in terms of executing our operational goals.

Your next question comes from the line of Brett Feldman with Goldman Sachs.

Thanks for the update on your plans for the fiber deployment. You obviously have very specific targets for where you expect to get from a fiber passings standpoint. I was wondering if you'd be willing to share any ambitions or targets that you have for fiber penetration. And what is the penetration strategy? Is it primarily about making sure that you can get as many of the gross adds as possible connected or do you have an intent to go out there and try to proactively move existing customers over? And then just as a component of that, you've articulated CapEx is likely to remain elevated by a certain degree as a result of the passings. Are you also budgeting a certain degree of, I guess, fiber connect CapEx in there if there's a lot of demand for the product or would you think of that as all success-based?

Yes. I mean, Brett, the goal here is better experience for our customers leading to significantly reduced churn and reduced OpEx cost on customer touch points, right? And then ultimately, obviously, a significant reduction in our CapEx going forward. And so today, where we had been focused on gross add fiber clients and not so much focused in terms of migration. Because of the stability of some of our CPEs and our installation processes, those have materially improved over the last 3 months, which is why we're about to launch in March. And we're going to start aggressively migrating 1P customers from HFC on to fiber, and then we will move into the 3P world over the course of the year. And that will be capitalized CapEx from a new install standpoint. But from our perspective, if we are seeing already on 70,000 customers and even smaller cohorts of that an annualized improvement in churn of 5 to 6 percentage points after 3 months, that is boding well for all of the things that we have put into our financial model, 45% better NPS scores, 30% less calls into the technical call center, ARPU rates of 6% to 8% higher in terms of gross add ARPUs, right? So if you throw all that math into the cookie box, it looks pretty good as we start to continue to grab volume even though from a customer connection standpoint, it may be expensive to move people who are producing very good cash flows just on HFC. But the goal here is to move as many people over to fiber as possible over the next couple of years and go after all customers, existing and new customers, and try and put them on fiber.

Our next question comes from the line of Ben Swinburne with Morgan Stanley.

Just following up on fiber and I had a wireless question as well, but first on the fiber side. Dexter, you guys have been at this for some time on the fiber front, but you're obviously scaling up significantly. Can you talk a little bit about sort of the operational areas that you're focused on or any uncertainty around scaling the build level this quick, this substantially. I'm thinking about just like red tape and labor supply and supply chain. A lot of companies in the U.S. are ramping fiber builds and these are not insignificant work projects, as I'm sure you know way better than I do. So I guess if you could talk a little bit about that and sort of how much confidence you have in your ability to hit these passing numbers. And then just on the OpEx savings, can you talk a little bit about the timeline to pick those up? In other words, are you sort of running 2 networks for a period of time, DOCSIS and fiber? And so do you sort of cut it over node by node and that leads to the drop in maintenance costs, et cetera? Just help us think about that too as well.

Sure. On the first point, you're spot on, Ben. We've gone through fits and starts here. And obviously, COVID was probably the worst thing that could have happened to us in terms of trying to accelerate on the CapEx side. But the big red tape stuff for us has been the state of New York. We have about 700,000, 750,000 homes that we're waiting on effectively the governor's office to approve. We feel very comfortable that half of those we will get very shortly. And the other half we'll get also this year. So that has been one of the biggest red tape initiatives to overcome over the last, really, 1.5 years was some of the oversight from the state of New York, which has changed the dynamic in terms of permits. But we feel good about getting those requirements. Connecticut does not have those types of permit approvals from the governor's office. And so we've got 300,000 to 400,000 in the Connecticut area coming out this year, which is the balance of our Optimum footprint this year. And so we feel good about the pipeline going into 2024, which we're going to get closer to completing the entire Optimum footprint in 2024. On the labor side and the raw material side, on the raw material side, we have currently 9 to 12 months of enough inventory. So we've got enough inventory for this year. As you do know, the larger group of Patrick and its sister companies are big acquirers of raw materials and inventory. And so we feel good about our ability to fulfill our 2023 and onwards capacity there. So we're not worried about that. That's obviously a focus. It's been a focus of ours for many, many quarters to make sure that we're maintaining at least 12 months of inventory on that. The labor shortage is something a little bit less predictable. But we've got our own workforce where on the field ops side about 20% of our workforce is fiber-related. And then we work in the New York tri-state area about 3 or 4 contracted, incentivized and onboarded subcontractors. And in the Suddenlink footprint, the ones that we're going to do for this year, the 200,000, that is already done, in the bag in terms of contracted. And we're getting ready to accelerate the Suddenlink side, as you could see from our chart. I don't know what page it was on. But for 2023, that's in the pipeline today right now to make sure we fulfill that. So the fits and starts has always been about whether or not we believe in the return and getting the machine up and running with all the permits. We've gone through all the hard slog here on both of those. We truly believe that this is the right thing to do in our business to drive a tremendous amount of value and we see it in all of our KPIs. We've gotten through the red tape issues. We are properly prepared on the inventory side and on the labor side for the next 12 to 24 months. So we feel good about our ability to execute. Now it's really just following this on a daily basis and making sure that we're executing properly. And hopefully, we won't have too many natural disasters out there that will slow us down. But we're in a good pace right now. January and February have been above budget in terms of our deliveries. We're trying to get ahead of the curve. And then we start accelerating as the weather gets better in the spring and the summer.

And anything on the savings? Do you run 2 networks, et cetera?

Yes. I think the savings is, there are obviously savings from shutting down one network, which relate to power and to maintenance. But the biggest savings are related to customer touch points. We've seen our sister companies deliver 40% to 50% less customer touch points on fiber versus cable. And if you look at the OpEx that's related to customer servicing, it's about $1 billion. And so if we can start reducing that over time by 40% to 50% because it's just mathematical in terms of the amount of calls and truck rolls that you do, that's a massive number. I mean, obviously, the things that you can quantify are NPS, customer satisfaction and churn rates that go along with that, right? So we know that we've seen cable versus fiber in a European context be 7 to 8 percentage points better on churn. And so our early read of an annualized number of 5% to 6% is not off the mark. And we're already seeing 30% less calls versus the 40% to 50% numbers that we've seen from other companies who've run dual network. And so we're on track. We're on track to delivering what we think is going to be pretty standard in the industry in terms of the customer experience, and that's going to translate in some very, very large OpEx savings, CapEx after we finish the rollout. And then on the revenue side, I think it will be very interesting to see how much translate into increased revenue by better NPS scores and reduced churn, right?

If I can sneak one in on wireless just going back to Craig's question. As we watch you relaunch this product and accelerate the customer growth in '22 and beyond, any help thinking about wireless service ARPUs that you guys expect? Because I know you're selling a lot of by-the-gig plans and you've got some promotions out there. It's hard for us to see that in the historical financials. So I don't know if you had any thoughts that would help us think about that business as it scales here on the ARPU side.

Yes. I mean, we're kind of in the low to mid-$20s in terms of ARPU. And that has been tailing lower during 2021 because by-the-gig plans were more popular than the unlimited plan. But with our new agreements, which pricing will be active as of Jan 1 this year, we're going to be driving much more on the unlimited packages. And so we suspect that the ARPU levels will be firmly ensconced in that mid-$20s and hopefully higher as we continue to grow.

Our next question comes from the line of John Hodulik with UBS.

Great. Just a quick clarification to start off with, Dexter. On the 6.5 million, and I know you guys talked about it a little bit, does that include any subsidies you expect to get from the government? And if things go well, I mean, could that number creep higher? And if you could sort of size that first, that would be great. And then sort of related to that, can you quantify the extent to which you guys think you can do edge outs and increase the footprint. That's sort of all one question. And then just really an unrelated question, and I think you've answered this basically as part of every other question. But I mean, did you look at DOCSIS 4.0 deployment, especially in the new Suddenlink territories where you're sort of within a greenfield? And I guess, obviously, you decided against it. But I guess is your view that eventually the rest of the cable industry will head in the same direction as you guys and just go for fiber?

So on the first one, John, listen, we've identified 2.5 million homes in the Suddenlink footprint which we'd like to fiberize. And that's really based on scale mainly and some competitive nature in some areas which we think we argue can drive penetration even higher by putting in fiber. Whether that 2.5 million is all going to be funded by us or some portion of it will be funded with some subsidy money, I couldn't tell you. We're in the early innings of the subsidies game. We've done 150,000 applications for homes passed. We think we've won 30,000 here. And so if we use that same ratio, let's call it, and we're applying for about 1 million, maybe we can end up getting 200,000 homes there, which will be part of that 6.5 million, but it may take you to 6.7 million because there's 200,000 homes who are never going to upgrade given that they're in much more unserved, underserved or non-served areas out there. But what we do know is that we are definitely going to hit 2.5 million homes in Suddenlink and around the edges of 100,000 here or there, plus or minus. I couldn't tell you where we end up landing, but I suspect it will be higher than 6.5 million by maybe a couple of hundred thousand homes. On the edge outs, we continue to see abilities for us to edge out. We're going to do 175,000-plus of edge outs this year. I hope that we'll be hitting a run rate of closer to 200,000 a year by 2023. And we'll be fiberizing as much of that as we can. Some of it is going to be plant extensions on HFC. It's going to be difficult to do fiber in isolation. But we also have intermediate steps where we do RFoG technology, which allows us to quickly pivot to fiber at a much lower cost when we do decide to put in a fiber headend and overlay fiber across the entire HFC network. We looked at DOCSIS 4.0, but as you can tell, we looked at it briefly because of 2 things. Number one is, we continue to be driven by the herd mentality that fiber is the technology of choice for anyone investing significant amounts of capital into the ground to upgrade their networks or to deploy new network. And we just don't believe that the isolated U.S. market can continue to drive a very U.S.-centric technology. Even the DOCSIS networks in a European context or around the world are all driving themselves to fiber as well, right? So we think that the OEM support is going to be a lot lower. The R&D is going to be a lot lower. We think that the cost, as we looked at it, are quite expensive to drive up to DOCSIS because it's not just a line extension on fiber. There is a lot more fiber to drive into the entire network than just line extensions. And so we think the cost could be even higher than really building, as we're doing over building our own network with fiber. And by definition, if there's any active components into the network, it's going to be more susceptible to latency issues and worse customer experience than having an end-to-end glass network. So we don't want to be the smartest guy in the street, but we think that following the tried and tested technology which is available everywhere and which everyone is pushing towards and which I think consumers, by definition, are gravitating towards even if they don't even know the difference between HFC and fiber is going to be meaningful in terms of the success of our business. So we're committed here. We know the numbers. We have the cash to do it. It's not going to be prohibitively expensive. It's just we need to be able to execute here over the next couple of years, and we feel really good about the performance of the business.

Your next question comes from the line of James Ratcliffe with Evercore ISI.

Two, if I could. Michael, just give us an idea or ballpark how much that one-off component of the extra $100 million in OpEx is for '22 and how much is really run rate? And just secondly, Dexter, sort of conceptually, last year, the company was buying back stock in the mid-$30s. Where the stock is now, the accretive impact on free cash flow per share is more than twice what it was a year ago. So is it your view on the returns on fiber have gotten dramatically better in the last year or is there something else that's saying, even at half the price, fiber is the better play than the stock now?

So James, in answer to your first question, the one-off element, which is the rebranding of our incremental OpEx, a placeholder in the neighborhood of $30 million would probably work fine.

Listen, I think on the return side, there is a financial engineering element which any Excel spreadsheet would suggest that buying back our stock today at $15 relative to mid-$30s is not a bad bet. But in order to continue to aspire to mid-$30s and higher values, you've got to understand that the underlying operations need to be dynamic and you need to be able to react appropriately on the capital allocation decision. And the capital allocation decision for us is very clear, even if maybe the year-over-year returns are maybe not as good as buying back our shares, the longer-term returns or even the medium-term returns are exponentially higher by investing in our network today as quickly as possible, one, for organic growth and the customer experience issues of our existing customers, but also from a competitive dynamic standpoint where markets are getting more competitive. Not all markets, but some markets are. And getting ahead of that curve and being proactive here is going to drive our views of the asset value and terminal value exponentially higher than just buying back our shares, right? So if we get back down to a sub-$1 billion CapEx number in 2026, we're really looking at if we get back to EBITDA numbers that are similar to last year or the years before, we're looking at $1.7 billion to $2 billion of free cash flow. And on 450 million shares, it's not a bad kind of $4 per share of free cash flow and growing if we've invested correctly in our network and growing nicely. That seems like a pretty nice return for us and for all shareholders going forward. So we feel good about the investment profile today. And as I just mentioned to John in the last question he asked, the fiber performance is showing everything that we thought it was going to show. And as we continue to drive bigger volume numbers, we're confident in being able to drive some very good operational KPIs here.

Your next question comes from the line of Michael Rollins with Citigroup.

Just a follow-up and then a question on the competitive landscape. So for the follow-up, with the guidance for higher cost of $100 million during 2022, should that be taken on the fourth quarter run rate or on the full year 2021 cost base? And then just curious if you're seeing any early impacts from fixed wireless access products. And when you look at the combination of expanding fiber competition over time and the possibilities of fixed wireless, when you're underwriting the business case to upgrade to fiber, are you incorporating any significant market share increases for the broadband business?

Michael, in answer to your first question, the incremental OpEx that we're approximating would be versus a full year '21.

And I think on market dynamics, what we had first envisioned was no revenue enhancement on FTTH versus HFC and really just a free cash flow return because the OpEx numbers and ultimately the CapEx number is going to come down significantly. But we're starting to see the early signs, both through gross add ARPUs and reduced churn numbers, that we'll see a nice revenue impact. Taking market share is probably the wrong way to think about it, but reduced churn by definition, we should be able to take market share. And so if we're seeing annualized reduced churn numbers already at 5% to 6%, we should be able to take that incremental market share over time in the areas where we have fiber. And if not better because we're seeing more like 7% to 8% in other markets around the world in terms of the head-to-head competition. So that is where we think that we'll be able to drive incremental market penetration and not by being aggressive from a promotional ARPU gross add standpoint. In our areas, no. Where we are seeing potential threats on fixed wireless is in MDU contracts where some of the fixed wireless providers are aggressively going after MDU contracts across, I think, fixed land country where they can deploy their capital aggressively and be aggressively promotional on ARPUs. I think we feel very good about our ability to defend our MDUs, particularly since we're upgrading most of them up to fiber quickly, and we've got strategies on loyalty from that standpoint. But that's where we see, let's call it, competitive pressure, but not from a gross add activity standpoint today.

Your next question comes from the line of Kutgun Maral with RBC Capital Markets.

Two related ones on asset monetization, if I could. First, you have a multiyear plan to accelerate investments across your core cable business. Does that change your appetite to monetize any assets that might be considered noncore? And just on the flip side of that, I realize you're embarking on a more meaningful path to driving long-term value with cable assets. So maybe perhaps this is becoming a less relevant question. But is there an updated view on monetizing some or all of your cable assets?

So I don't think we have anything that we believe is noncore to start off with. You could say maybe the advertising business is maybe noncore, but since a lot of the advertising business is tied to our video inventory, it's very difficult to separate those businesses, but that could be something that we definitely could always look at if we could look at bulking up in size or somebody would like to bulk up in size on the advertising business is probably by working with our fellow MVPDs in one way or the other. We do have 50.1% of our Lightpath business which is less core, let's call it, to our business given that it's a different, it's just a different network in many respects than our residential or SMB business. But again, it's in very strategic location relative to our B2C business. So I wouldn't say it's noncore. We were able to arbitrage obviously valuations nicely by selling 50% of that business. And so I wouldn't ever rule that out on there. And then in terms of the cable network, I'm assuming what you're suggesting is maybe selling the HFC network itself as opposed to the HFC network and its customers. I don't think we're in the business of selling the customers. I think it could be interesting just given that we would have 2 networks in many areas whether we would ever see any value or someone would see some value in buying the HFC network. I'm not so sure we would do that either given that we're just bringing another competitor. But I don't see us ever wanting to arbitrage selling some of our cable subscribers to fund an FTTH rollout. There's always going to be things at the edge that make no sense because they're in small jurisdictions and communities that maybe are very inefficient for us to run from very far away, but that's optimization and not about selling businesses out there. So I think we like the business. And as we grow into a predominantly fiber-to-the-home company, one of the larger ones in the U.S. after AT&T and Verizon, I think we're very well positioned for the next generation of consumer trends and experiences.

Your next question comes from the line of Greg Williams with Cowen.

First one is just on the fiber-to-the-home strategy. Obviously, you're getting more aggressive in the Suddenlink territories. Just wondering if you could provide some color on the cost per home passed in the Suddenlink build. In the past, you said in Optimum territory you can do it rather cheap, $500 to $600 because you have 80-plus percent aerial fiber, dense footprint, et cetera. But how does that translate into the Suddenlink territories in terms of cost per home passed as I think about the outer-year CapEx? Second question is just on margins in 2022. Just help us with the trajectory of the margins through the year as you think of the many moving pieces and the $100 million OpEx increase in terms of the sales reps, retail stores, mobile investment and then the advertising sort of tailwinds in the second half.

So on, I think, Suddenlink footprint, it's difficult for me to give you just an overall number because every community is a little bit different. But we do see the areas, obviously, that we're focused on are the higher density areas and where we do have the bulk of our customers. So there will be areas which are going to be slightly more expensive than Optimum, and there'll be probably areas which are going to be twice as expensive as Optimum, right? So probably anywhere between $500 to $1,000 per home passed on average, let's call it, in terms of what we're going to spend in the Suddenlink footprint. And then on margins standpoint, I think back at the UBS conference in the beginning of December, we talked about 41% to 42% EBITDA margins for 2022. I think those numbers are in the ballpark. Again, we have enough moving pieces in 2022 that we want to reserve the right to be more nimble in terms of how we allocate capital. But directionally, that's probably the right level.

And our last question comes from the line of Frank Louthan with Raymond James.

It's Rob on for Frank. You might have said this earlier, how much CapEx and OpEx do you expect to spend on distribution channels this year? And then separately, on your recent efforts to seek broadband subsidy, how much do you guys think you can get from the government from those subsidies over time?

Yes. I'll take that. On the distribution channels, on the retail stores, it costs about $900,000, so just under $1 million per store to get a store up and running. That would be the CapEx component. And then once the store is up and running, call it, $500,000 to $600,000 annually. And then on the door-to-door salespeople, we're talking about doubling our footprint from 250 to 500, maybe we get to 400 and I think a fully loaded door-to-door salesperson, maybe something in the neighborhood unit cost of $75,000 to $100,000 would be about right.

And I think on the subsidy side, listen, every community is a bit different, but most of these unserved or underserved markets who are looking to upgrade to at a minimum 100 megs of symmetric fiber up and down in terms of speed are spending anywhere between $2,000 to $4,000 per homes passed on average and are typically contributing somewhere between $1,000 to $2,000 into the subsidy kitty. And so we're doing the balance of it. So we're spending anywhere from $1,500 to $3,000 and local communities are spending anywhere from $1,000 to $2,000 type numbers. And so depending on how many homes we end up being able to get, if we would look at the high end of it where we could get probably a couple of hundred thousand, we end up probably getting somewhere between $200 million to $300 million of subsidies.

Thank you. This does conclude our question-and-answer session. Turning the call back to our speakers, sir, please go ahead.

Thank you, everyone, for joining. Do reach out if you've got any follow-up questions. Otherwise, we'll catch up with you in the next few weeks. Thank you.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.