Charter Communications Inc (CHTR) — Q4 2015 Earnings Call Transcript

Thanks, operator, and good morning everyone. Welcome to Time Warner Cable's 2015 fourth quarter earnings conference call. This morning, we issued a press release detailing our fourth quarter and full year 2015 results. Before we begin, there are several items that I want to cover. First, we refer to certain non-GAAP measures. Definitions and schedules setting out reconciliations of these historical non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release and trending schedules. Second, today's conference call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management's current expectations and beliefs, and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein, due to various factors which are discussed in detail in our SEC filings. Time Warner Cable is under no obligation to, and in fact, expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Third, the quarterly growth rates disclosed in this conference call are on a year-over-year basis, unless otherwise noted as being sequential. And fourth, today's press release, trending schedules, presentation slides, and related reconciliation schedules are available on our Web site at twc.com/investors. With that covered, I'll thank you and turn the call over to Rob.

Thanks, Tom, and good morning everyone. Some quarters are more fun to report on than others. This one is fun, because it gives me an opportunity to share just how proud I am of what our team has accomplished. We achieved almost everything we set out to do in the fourth quarter and in 2015. We made our network more reliable, our products more compelling, and our customer service better. And significantly, we materially increased our customer base. I am particularly gratified by our full year residential subscriber gains. As we reported earlier this month, we had residential customer relationship net adds of 618,000. That's not just our best ever. It's nearly three times the previous record. And video net adds were 32,000. It's been a long time since we talked about full year video net adds. We also added a million HSD subs, and just over a million phone subs. And we ended 2015 strongly with our best ever Q4 residential customer relationship and PSU net adds. Fourth quarter customer relationships grew in every region, driven by improvements in both connects and disconnects. Connects increased most in LA and Texas, while disconnects came down most in New York City. Importantly, our subscriber improvement over the last eight quarters is beginning to show up in our financial results. Fourth quarter residential revenue growth of 4.6% was the strongest organic growth in more than six years. I think our residential operation is well positioned for 2016 and beyond. And while we continue to turnaround the residential business, business services kept humming along, recording yet another quarter of more than $100 million of year-over-year revenue growth. That makes 18 quarters in a row. While I'm excited about our reported results, I'm equally pleased with the progress we're making in the areas that are under the radar that enhance customer experience and are critical to delivering sustainable growth going forward. We continued our multiyear effort to improve reliability in customer service. Once again in 2015, we invested heavily in our network and equipment. Network investments to drive better reliability and greater capacity included upgrading the power supplies on roughly 10,000 nodes, replacing approximately 19,000 reverse path lasers and splitting almost 13,000 nodes. And in customers' homes we deployed 4.1 million new modems, 2.8 million new set-tops, and 3.5 million digital adaptors, many of which replaced older, less functional CPE. As a result, at year end 65% of our modems were DOCSIS 3.0, up from 47% a year earlier, and approximately two-thirds of our set-top boxes ran our cloud-based guide, up from just over half at the end of 2014. We also made great strides in key residential customer service metrics. Fourth quarter customer care calls per CR were down 13%, and repair-related truck rolls fell 19% from last year. When we had to roll the truck in Q4, we arrived within our industry-leading one-hour appointment window more than 98% of the time. And importantly, we resolved customers' issues on the first visit 15% more often than a year earlier. Over the course of the last year we've introduced a number of tools and apps to empower our customers. I'm particularly excited about TechTracker, which now allows our customers to track the whereabouts of their technician and also sends customers a text or email with the technician's name and photo. This way, customers know who is coming and have a better idea of exactly when they'll arrive. During 2015, we completed our rollout of TWC Maxx in Austin, Kansas City, Dallas, Raleigh, Charlotte, and San Antonio. And we began the process in Hawaii, Wilmington, Greensboro, and San Diego. As a result, a significant portion of our footprint now has all-digital video, and HSD speeds up to 300 megabits per second. Fueled by our Maxx investments, at year end almost 45% of our total HSD customers subscribed to speed tiers of 50 megabits per second or greater, and more than half of our HSD subs enjoyed TWC-provided home Wi-Fi. In addition, Time Warner Cable HSD customers can now enjoy Internet access outside the home through nearly 500,000 Wi-Fi hotspots nationwide. We meaningfully enhanced our video product as well. Video customers across our footprint now have access to 30,000 VOD assets. During the year we augmented our TWC TV app, adding more linear and VOD offerings, and making it available on more platforms. The TWC TV video experience inside the home is fast becoming indistinguishable from our traditional set-top box-based offerings. In fact, foreshadowing the video product of the future, we're trialing an IP video offering that eliminates the need for a leased set-top box. The TWC TV experience outside the home is also becoming more robust, with 100 live channels and 9,000 choices of VOD content from 64 networks. And even phone is more compelling than it's ever been, with unlimited calling to countries comprising half of the world's population, and apps that enable customers to make and receive unlimited calls from anywhere. All this is driving lower churn and better customer satisfaction scores. To be clear, we know we have a long way to go, but I'm encouraged and impressed by the progress we've made. Consistent with our practice last year, during the Comcast deal, we will not provide guidance during the tenure of the merger with Charter. But you shouldn't assume that means we're standing still. Quite the contrary, we have an ambitious 2016 financial and operating plan marked by continued subscriber growth, better financial performance, and continued investment to improve the customer experience. We plan to continue the rollout of TWC Maxx, completing cities begun in 2015, and adding cities primarily in the Northeast and Midwest. We've set new, even more ambitious targets for network reliability, repair call, and truck roll reduction, on-time arrival, and first call resolution. We'll continue to enhance our products, and we'll continue to drive business services hard, because our opportunity there remains enormous. And as you'd expect, we have every intention of capitalizing on the political advertising opportunity from this year's elections. Before I close, let me provide a quick update on the status of our deal with Charter. Both the integration planning and regulatory review processes continue to move forward. Together with Charter, we're working constructively with the FCC and DOJ to ensure that they are in a position to approve the deal expeditiously. As you know, the FCC restarted the 180 days shot clock last week, and we're now at Day 124. New York State approved the transaction two weeks ago. The California PUC held a public hearing on Tuesday evening which went well, and we remain hopeful that the approval process in California can be accelerated. All that said, we're still not in a position to provide you with a specific timetable for closing. 2015 was an incredible year. Despite the many merger-related distractions, our team has delivered with single-minded determination. We're a much stronger company than we were two years ago, and we've got great momentum as we begin the New Year. Going forward, we intend to continue to drive growth, improve the customer experience, and build value for our shareholders. With that, I'll now turn it over to Bill Osbourn, and then Matt Siegel, who will review our Q4 results. After they comment on the quarter, the three of us, along with Dinni will be available for Q&A.

Thanks, Rob, and good morning everyone. As Rob said, we capped a very good year, with outstanding operating results in Q4. Since we announced subscriber metrics for the year earlier this month, I won't dwell on the full-year accomplishments although there were quite a few. Instead I'll highlight some of the trends underlying the fourth quarter results. The 200,000 residential customer relationships added in the fourth quarter were driven by very strong connects. In fact, Q4 connects were 14% higher than the year ago. Connect improvement was broad-based, but California and Texas delivered the biggest year-over-year increases. The three key sales channels, inbound sales, online sales, and direct sales, continued to perform significantly better than the year ago, with strong double-digit growth in each channel. But it was not just a connect story in Q4. Residential customer relationship churn declined by 5% despite the year-over-year increase in new subs who tend to churn more. Fourth quarter churn improvement was driven by a significant improvement in voluntary churn, in addition to lower non-paid disconnects. It's noteworthy that we now have more than 15 million residential customer relationships. Residential PSU net adds of 562,000 were 137,000 better than last year's Q4. The PSU growth was again driven by strong triple-play net adds of 205,000. Triple-play sell-in at 38% of customer relationship connects remained very strong. Each of the primary residential products did well in the fourth quarter, with 54,000 video net adds, and 281,000 and 227,000 net adds for broadband and voice respectively. On a full-year basis, residential video net adds of 32,000 and broadband net adds of 1 million were the best since 2006. And voice net adds of more than a million were our best ever. The quality of the residential subscriber base continues to be very solid, as the early life churn continues to be significantly lower than a year earlier. With that said, let's move on to our financial results. Fourth quarter revenue at $6.1 billion was up 4.9% year-over-year. And full year revenue of $23.7 increased 3.9% over 2014. We grew fourth quarter Residential Services revenue by $210 million or 4.6%; the best organic year-over-year Residential revenue growth since the second quarter of 2009. We are very encouraged by the revenue acceleration in the second half of 2015. This demonstrates that the plan we set in motion two years ago to drive subscriber growth and in turn drive revenue growth is working. Residential revenue per customer relationship of $106.77 in Q4 was up slightly from last year. As we've explained in prior quarters, our strategy of driving very strong volumes of customer connects at promotional rates that are lower than the average of our existing customer base increases aggregate connect revenue but naturally tempers ARPU growth. Business Services posted another very good quarter. Revenue increased $109 million or 14.4% year-over-year in Q4. This was the 18th consecutive quarter of year-over-year growth above $100 million. HSD led the way, up 19.1% and contributing significantly more than half the Business Services revenue growth. The balance of the revenue increase came roughly equally from voice which grew 13.8%, and wholesale transport which was up 14.3%. It's noteworthy that Business Services surpassed 1 million voice lines in service in Q4. Other Operations revenue declined 6.8% in Q4. Media sales revenue was down $48 million from last year due to lower political advertising revenue, which was $8 million in the fourth quarter compared to $61 million a year earlier. Fourth quarter other revenue increased primarily due to RSN affiliate fees from our Residential Services segment as well as other distributors of the Los Angeles RSN. Note that affiliate fees from our Residential Services segment are eliminated in consolidation. Next, Matt will cover expenses, cash flow, and the balance sheet.

Thanks, Bill, and good morning. As noted, total company adjusted OIBDA declined $8 million or 0.4% in Q4. Excluding the pension expense increases of $27 million, adjusted OIBDA was up $90 million or 0.9%. On a full year basis, adjusted OIBDA declined $90 million or 1.1%. And excluding the pension expense increase of $108 million, adjusted OIBDA increased $18 million or 0.2%, somewhat better than we projected on last quarter's call. In Q4, as in recent quarters, we continued to invest aggressively to drive subscriber growth, take care of our expanded customer base, and improve the customer experience. The biggest increase was in sales and marketing where we increased spending by $79 million or 14.7% in support of higher volumes of connects. Sales and marketing in the Residential Services segment grew $48 million or 13.4% while the increase in Business Services was $29 million or 22.7%. Technical operations was up $40 million or 10.3% related in large part to our success in adding customer relationships and PSUs. Customer care, which had been growing at higher rates earlier in the year, grew by just $9 million or 4.1% year-over-year, benefiting from lower call volumes. Programming and content costs, which increased $128 million or 9.7% year-over-year, continued to be the biggest drag on adjusted OIBDA. Contractual affiliate fee increases were the primary driver of higher programming and content costs. In the Residential segment, average programming cost per video sub in the fourth quarter was $42.89, up 386 or 9.9% from last year. Shared functions costs increased 4.3% to $774 million in the fourth quarter, as a result of higher compensation cost per employee including pension expense and higher insurance expense. Moving down the income statement, fourth quarter adjusted diluted EPS was $1.80, down $0.23 from a year ago. Higher depreciation expense resulting from large capital investment we made over the last several years continued to be a driver of low EPS. Full year capital spending of $4.45 billion including $946 million in Q4, was up 8.5% from 2014 due to customer relationship growth as well as investments to improve network reliability, upgrade older customer premise equipment, and expand our network to additional residences, commercial buildings, and cell towers. In 2015, we added 66,000 commercial buildings to our network, representing an estimated $975 million in serviceable annual opportunity. Full year free cash flow of $2.2 billion was 7.5% lower than in the prior year mainly due to an increase in capital expenditures partially offset by an increase in cash provided by operating activities. Free cash flow was $883 million in the fourth quarter, down less than 1% year-over-year due to higher capital spending and cash taxes partially offset by a change in working capital. Note that we had already made our December tax payment when the extension of bonus depreciation was enacted. Our overpayment of roughly $120 million could be applied to reduce this year's taxes. At the end of 2015, net debt stood at $21.3 billion, down $1.6 billion from year end 2014. Our adjusted net leverage ratio was 2.77 times at year end 2015. So to summarize, the very strong operating momentum is beginning to transfer into stronger financial performance. We're very pleased with the trajectory of the business, and we believe that we're very well positioned to deliver strong financial performance in 2016. With that, let me turn it back over to Tom for the Q&A portion of the call.

Hey, thanks. Rob, it looks like the FCC is moving forward again to try to sort of unbundle the set-top box from the cable service, and maybe circulated NPRM. I know I've asked you about this before, but what's your view on that process, and where it leads, and what does it mean for Time Warner Cable and the cable industry? Thanks.

Thanks, John. The fact sheet that the FCC circulated yesterday is a little hard to decipher. So I'm not sure we really understand exactly what's being proposed yet, and as you say, it's an NPRM process, and my expectation is that sometime after the meeting in mid-February we'll get a clearer view of exactly what is being proposed. But from what I can glean from the materials that have been shared, it appears to me that this is an attempt to create regulation that is really unnecessary given the advances that have been made driven by marketplace forces. And in particular what I mean is that almost every MVPD, if not every MVPD, has over the last several years made great strides to make their video products available through multiple different devices to give customers a lot more choice than they ever had, and that's happening without any imposition of regulation, which as we all know can have unintended consequences that it can actually stymie or thwart innovation as opposed to advance it. So I'm highly skeptical, but I really do want to reserve judgment until we see the specifics of what's being proposed. We in particular have been at the forefront of some of the developments in the delivery of IPTV, not only through our TWC TV app, which serves as a complement to our traditional video service. It enables customers to consume our video product in all sorts of IP-enabled devices, but more recently, through the trial that we're doing in New York City which represents kind of the first stage of a potential substitutional service which would enable customers to enjoy our video service without leasing a set-top box, so again, hard to really see the need for regulation in an environment that's as dynamic and as vibrant as this one.

Thank you, good morning everyone. Your programming costs are still growing at roughly double-digit rates. Can you talk about the outlook for 2016, and beyond if you can? And as part of that, can you comment on how you see the bundle evolving?

Jessica, we're not going to give specific guidance on 2016 programming expense, just as we're not really going to give any other guidance. I would tell you, I don't expect any near-term fundamental change in the trajectory of programming cost growth. In the fullness of time, do we see the growth rate we've seen for the last, I don't know how many number of years moderating? I think it's certainly a very interesting time. And there are some reasons to believe that in fact long-term programming cost growth might moderate. One of the points of leverage historically that programmers have had is that if we cease to carry a particular network due to an inability to reach an agreement, customers who wanted that network would have no other choice but to switch to an alternative MVPD, and that certainly put pressure on us at the negotiating table. I think as you see more and more programmers making their networks or their content available on an a la carte basis direct to consumers I think that dynamic changes, and it does potentially shift leverage in a manner that could allow us to moderate programming cost growth. But again, very early days in those kinds of trends, and there's a lot of things that go into programming cost growth, so I'm hesitant to make any firm prediction at this point.

I just wanted to drill down on your Maxx market performance. Obviously we see total company performance, and it's all improving, but can you sort of compare and contrast in the Maxx markets what customer behavior is on take rates on advanced services and churn characteristics so we can understand when we do the full transition what the company could look like? Thanks.

I'll begin by addressing that, and if Dinni has additional insights, he'll contribute. The main takeaway from our efforts in the Maxx markets is that we are receiving very positive feedback regarding improvements in our product lineup, product reliability, and overall customer satisfaction. This positive response is starting to reflect in our numbers. We have seen an improvement in churn across our areas, with even more notable reductions in our earliest Maxx markets, New York and LA. Everything is looking favorable at this stage. So far, we haven't observed any significant changes in take rates regarding what you might refer to as end services. The only thing that comes to mind is possibly transactional VOD; otherwise, nothing stands out as directly related to the features and benefits we are introducing in the Maxx markets. Overall, we are very satisfied with the investments we are making, which is why we have a robust lineup of markets set to transition to Maxx in 2016.

Hi, it's actually Brandon Ross. A couple of questions, one, with Google Fiber talking about a large scale build-out in LA, why should investors not be concerned about that?

So Brandon, we've talked about Google before as a competitor. As you probably know, our experience with Google is still pretty much limited to the Kansas City market, where Google is available in roughly, let's say, 350,000 to 400-and-some-odd thousand homes in the region is the range they're at that's sort of the state of their development. In some places it's theoretically available but it's not yet really being offered. In any event, they're a real competitor. We've certainly experienced some element of sub losses in Kansas City. But as they move into other markets, and the most near-term market is Austin, where they're just getting started. We think as a result of the experience we've had in KC, that we're much better positioned to compete with Google in future markets than we've ever been. And in part that relates to the rollout of TWC Maxx, where we think our products are not just more capable with HSD speeds up to 300 megabits a second, and all digital video, but also much more reliable. And add to that the fact that we've deployed increased Wi-Fi hotspots in those markets. We think we're very well-equipped to compete with Google wherever they end up going. And as we know from experience, these – the time between announcements about considering a particular market and actually being in markets are multi-year endeavors. So to the extent that anything happens in LA, I think we're a number of years out.

Thanks. I’m going to see if I can squeeze in two questions. First, Dinni, considering the turnaround that has occurred, you've achieved the first milestone of subscriber growth and now the second milestone of revenue growth. While I understand you can't provide guidance, could you share some insight on when we might expect the last phase of that, which is EBITDA and profitability growth? And Rob, I’d like to hear your thoughts on wireless. You’re in a bit of a difficult position since the wireless auction will start before your merger is finalized according to the California timeline. How do you plan to approach wireless given these limitations?

Craig, I can't provide specific guidance as you mentioned, but I can say that after we see subscriber growth, we usually observe revenue growth about a year later. The lag in EBITDA growth is often due to the scaling effects in the business. We've made certain decisions to enhance our customer service in the call centers and with technology. However, as we reach a normalized operating run rate, our year-over-year investments in those areas will not keep increasing. In fact, as we reduce error rates over time, those investments will begin to decline, which we've discussed in this call. We're on track with our plans, maintaining a consistent level of Maxx each year, so we're not forced to scale up for Maxx annually. If things continue as they did last year, we should see these developments unfold according to our overall plan.

So Craig, I'll give you a little bit more without any specific numbers. In our prepared remarks, we did say that our 2016 plan contemplated continued subscriber growth and better financial results. And when we say better financial results, we mean not just revenue but also OIBDA. So, put that in. You can factor that comment in. In terms of wireless, I am not really sure I have much to add to things like previously said in this area. Obviously, we're not going to be participating in the spectrum auction. And our focus in the mobility space has been on the continued deployment of our Wi-Fi access points. We think that adds value to our HSD customers. And we're going to continue to spend to expand that network. And at this point, that's the extent of our wireless game plan.

I would love to ask you for more color on consumer demand metrics. So with all this fabulous products you now have, could you talk about consumer usage? Are you seeing more consumption of the video product? I would love to learn if you have any insights in terms out of home versus in home. In home, how much shifting to on-demand versus stay-at-home linear feeds? Thank you.

Yes, I am not sure how granular we can get on the call, Laura although we can certainly follow up on. Let me give you a couple of highlevel numbers. Our usage of the TWC TV app has grown materially over the last year. I think in December, we had something like 20 million sessions. And I think somewhere approaching 10% of our customers actually use the app. So, it's starting to get good traction and certainly adds to the value proposition. Most of that use is in home. And frankly, most of that use is on a couple of platforms iOS and android with growing use on local devices as well as some of the other platforms. In terms of linear versus on-demand, I don't have the stats at my fingertips and we can probably follow-up with that.

Good morning. Thanks for taking the question. Just two quick ones, if I could. First of all, following up on John's question around set-top boxes, I mean the last time we tried third party set-top boxes, it seemed like most people didn't actually want to buy box. Has anything changed since then? Particularly, what's your experience of people buying the modems? What share of the customer base purchased the modem? That seems much more straightforward cost-benefit analysis than a set-top with every user interface et cetera? And secondly, could you just update us what percentage of the footprint actually has Maxx at this point? And what the increase was in '15? Thanks.

Roughly 14.5% of high-speed data customers are using their own modems. It's an intriguing question whether there's a genuine reluctance to lease a set-top box and how much interest there is in alternatives. We believe that providing customers with options is the best approach. Customers who wish to continue leasing a set-top box from us will be accommodated through a program. For those who don't, we want to offer the chance to access our video service in a different manner, using a device they may already own or might decide to purchase. Customer choice is key here, and we'll need to assess the demand. In our current trial, which does involve a fair amount of self-selection, the feedback has been very positive. We're conducting the trial to gain more insight into how appealing this is to customers. Regarding Maxx, it's a bit challenging to provide a clear picture since we've fully implemented it in some areas while still working on others. From a completed standpoint, based on customer relationships or homes passed, we are likely in the low 40% range. In partially completed areas, we're somewhat higher, with about half of that occurring in 2014 and the other half in 2015.

Good morning. It's Stephan on for Marci. I think you guys have done various trials on usage-based pricing. Do you have any thoughts on implementing it more broadly throughout the footprint?

Yes, Stephan. We actually are beyond and have been for many years beyond the trial phase. We've offered across our footprint for several years; two different usage-based offerings, one, which enables customers to use five gigabytes a month and another, which enables customers to use 30 gigabytes a month. And the way we think about those are that they are complements to our unlimited offering, and again are consistent with this theme that I have talked about several times of giving customers choice. The uptake, candidly, has not been significant. We probably got somewhere in the tens of thousands of customers that subscribe to those two tiers combined. That said, we think the choice is nice for customers to have and we're not intending to discontinue them.

Great. Thanks a lot. Following up on a previous question, regarding your earliest customers from the new triple play promo last year, what impact does the price increase of about 20 dollars have on those subscribers? Thanks.

We are seeing an improved retention rate, with both overall customer retention and ARPU being higher than before we launched this offer.

Hi, guys. Thanks. So we are seeing ARPU picking up nicely. Can you talk about the balance of new subs coming in and price increases as we think about ARPU and revenue growth this year, obviously with forecasting? And then, customer reaction to the recent price increase, how do you think that influences the ramp and as well as disconnect and cord cutting issues? Thanks.

There are several factors to discuss regarding ARPU. When we increase the number of new customers, they typically come in at lower promotional rates compared to our existing customers. This can have a dilutive effect on ARPU, even as we see an increase in overall connect revenue. Disconnects also affect ARPU; interestingly, the revenue from customers who disconnect is lower than that of our existing base. This means that while a reduction in disconnects may help retain customers, it could negatively impact ARPU. Additionally, the changes in the existing customer base contribute to ARPU. As we transition customers from promotional rates to higher rates, and generally increase rates, we expect to see improvements in ARPU. However, bringing on new customers will inherently have a dilutive effect on ARPU. Regarding customer reactions to rate and fee increases, I want to note that the increases this year are similar to what we implemented last year. We maintained a unified strategy for rate and fee increases, ensuring customers only experience one increase per year and applying these increases broadly to minimize individual impacts. This approach was effective last year, as reflected in our churn numbers, and we anticipate similar success in managing churn this year as well.

Thank you very much. Rob, I was trying to understand the updated timeframe for the closing you mentioned earlier in the call. It seems there might be some uncertainty regarding the timing. In the last call, you indicated an early 2016 closing, and it appeared the timeline was on track based on what we have heard. With the clock restarting, do you anticipate any additional factors that could potentially delay the closing beyond the first quarter of this year?

So Tuna, let me start with what you said I said, which I don't think is accurate. I think last quarter what I said was that closing in 2015 looked ambitious without any specificity around when in 2016 we might close. The current short clock, if there are no further delays, will expire towards the end of March. As we know, California has published a timeline that takes us into June although we remain hopeful that we can accelerate that. At this point, it's impossible for me to predict whether or not the FCC would stop the clock. Again, I have no indication that they would. But again, this is an informal short clock and they have a lot of latitude in how they proceed. So I wouldn't describe there will be more uncertainty at all. We are further along than we were when we were last on the phone with you, especially given the approval in New York and continued progress elsewhere, but that's about all about I can say. But I certainly wouldn't characterize it as more uncertainty.

Thanks. I understand that you are moving away from guidance, but can you comment on the trajectory of CapEx spending for '16 and beyond? What are the larger categories? Maxx going all digital, and can you identify what might be considered one-time expenses? Thanks.

Let me provide a high-level overview, and Matt can add to it. As mentioned, we are not providing specific CapEx guidance. However, the factors that influenced our capital spending in 2015 remain our top priorities. Specifically, we will continue investing to drive growth, which includes expanding our network with new buildings for both residential and commercial use. We will also maintain spending on cell tower backhaul in that region. Additionally, we will invest to support the growth in units, which involves purchasing customer premise equipment and increasing network capacity, as customer usage of our services continues to rise. Lastly, we are focused on enhancing customer service and experience, particularly through the Maxx initiative. We have an ambitious plan for Maxx deployments in 2016. Furthermore, as part of our customer experience enhancement efforts, we will continue to upgrade older, less functional set-top boxes, which we believe will significantly improve the customer experience. Matt, do you have anything to add?

Thank you, Dinni and Rob. I would like to hear your insights on the factors contributing to the increase in broadband subscriber growth that you have experienced in your business and that we have observed across the industry. To what extent are these improvements attributed to specific initiatives you have implemented, such as the rollout of Maxx and pricing adjustments, compared to the overall rise in demand for broadband and customers' growing reliance on speed and their willingness to pay for it? Ultimately, I am curious about whether we are in the early stages of a sustained trend of accelerated growth, with the potential for even higher growth next year, or if this year's performance is mainly driven by one-time enhancements you have made.

Jonathan, I don't believe that what we experienced in 2015 was solely due to a one-time benefit. As we have mentioned during this call, it is the result of enhanced operational focus. This includes initiatives to reduce disconnects and optimize our connect machines through various channels we discussed. We are also improving our customer value proposition in the HSD space with efforts like Maxx. I think this is a combination of these factors. Additionally, as Rob mentioned earlier, we see significant growth opportunities ahead in the HSD space. Therefore, we believe that the growth we observed in 2015 is sustainable.

And then only thing I would add to it, Jonathan, is it's not just going happen. There is an awful lot of work on our side that needs to continue to occur in order for us to remain competitive in the broadband space. It's already a competitive market, but it's a dynamic market where new competitors are entering all the time and augmenting their capabilities. So we have to continue to improve our product, improve our customer service, make sure that it's incredibly reliable in order to continue grow at the kind of pace that we've been able to achieve.

Thanks, Jonathan. Operator, I think that's probably all we have time for this morning. Thanks to everyone for joining us. Have a great day.