Charter Communications (NASDAQ:CHTR) and AT&T (NYSE:T), two telecom giants, have carved up the Time Warner empire. Charter bought Time Warner Cable, which was spun off from Time Warner in 2009, along with its sister company Bright House Networks in 2016. AT&T bought the rest of Time Warner in 2018.

Charter and AT&T made those acquisitions to counter cord cutters. Charter's takeover of TWC made it the second-largest cable provider in the U.S. AT&T's takeover of Time Warner's media assets formed the foundation of its new streaming ecosystem.

A network of internet connections across the US.

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But over the past five years, Charter's stock has soared 240% as AT&T's stock declined about 14%. Charter doesn't pay any dividends, but AT&T's stock only delivered a dismal total return of 15% during that period even reinvesting its hefty dividends.

Charter might seem like a better investment than AT&T. But past performance never guarantees future gains, so we should take a fresh look at both companies to see which is the better buy now.

How fast is Charter growing?

Charter generated 79% of its revenue from wireline video, internet, and voice services for residential customers last year. Its residential customer base expanded 4% to 27.3 million in 2019 as its growth in internet subscribers offset its declines in video and voice subscribers. Despite that shift, Charter's average monthly residential revenue per customer still rose 1% as it used fewer promotions.

Another 14% of Charter's revenue came from its SMB (small and medium-sized businesses) wireline segment, which served nearly two million customers last year, while the rest came from its smaller businesses.

Charter's revenue rose 5% to $45.8 billion last year, its net income surged 141% to $714 million, and its adjusted EBITDA rose 5% to $16.9 billion. Its free cash flow more than doubled to $4.6 billion, and it spent over 100% of that total ($7.6 billion) on buybacks.

Charter's growth continued in the first nine months of 2020, and its residential customers rose to 28.9 million by the end of the third quarter. Its growth in broadband internet customers, along with a stabilization of its video business, offset the ongoing decline of its voice business. Its number of SMB customers also grew to 2.02 million as businesses remained connected throughout the pandemic.

Charter's revenue per customer dipped slightly this year, but its rising residential internet revenue offset its other weaknesses. Its revenue rose 5% year-over-year to $35.5 billion in the first nine months, its net income more than doubled to $1.98 billion, and its adjusted EBITDA grew 10% to $13.5 billion. Its FCF jumped 38% year-over-year to $1.8 billion, and it spent $10 billion on buybacks.

Analysts expect Charter's revenue and earnings to rise 5% and 90%, respectively, for the full year, as buybacks boost its EPS. Next year, its revenue and earnings are expected to rise 6% and 48%, respectively.

How fast is AT&T growing?

Last year AT&T generated 68% of its revenue from its communications segment, which houses its wireless, pay TV, and business wireline units. Subscriptions at WarnerMedia generated 8% of its revenue. The rest of its revenue came from its Latin America division and other businesses.

A young woman uses a smartphone.

Image source: Getty Images.

AT&T ended 2019 with 165.9 million wireless subscribers, up 9% from a year ago. However, its number of pay TV connections (DirecTV, U-Verse, and AT&T TV) fell 15% to 19.5 million as it continued losing viewers to streaming platforms.

AT&T's revenue rose 6% in 2019, thanks to its acquisition of Time Warner, and its adjusted EPS grew 1%. Its FCF rose 30% to $29 billion, and it spent about $15 billion on dividends and $2 billion on buybacks.

But in the first nine months of 2020, AT&T's revenue and adjusted EPS declined 6% and 10%, respectively. Its wireless unit struggled as retailers shut down during the pandemic, theater closures hurt  WarnerMedia, and its pay TV subscribers fell to 17.1 million by the end of the third quarter.

On the bright side, AT&T's domestic wireless business rebounded in the third quarter with 5.5 million new subscribers, while HBO and HBO Max's combined domestic subscriber base grew sequentially to 38 million.

But those improvements couldn't offset AT&T's other weaknesses, and it's still pouring cash into its money-losing streaming services to chase Netflix, Disney, and other streaming leaders.

Analysts expect AT&T's revenue and earnings to dip 6% and 11%, respectively, this year. It expects its FCF to decline 10% to $26 billion for the year, but it should still easy cover its dividends. Next year, analysts expect its revenue and earnings to rise 2% as the pandemic ends and new 5G handsets hit the market.

The winner: Charter

Charter's future looked murky a few years ago, but its focus on scale, FCF growth, and buybacks now makes it a stronger investment than AT&T. Charter's forward P/E ratio of 31 is much higher than AT&T's forward P/E ratio of 9, but its impressive growth rates justify that higher valuation.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.