Light Reading
After losing TW Cable to Comcast, Charter shifts its main focus back to its own operations while retaining interest in "wisely acquiring subs" from other cable operators.

After TWC Miss, Charter Looks Inward

Alan Breznick
2/21/2014
50%
50%

Forget about Time Warner Cable. Who needs it, anyway?

Charter Communications Inc. executives drilled home that message Friday morning as they unveiled the company's fourth-quarter financial results. A week after losing out to Comcast Corp. (Nasdaq: CMCSA, CMCSK) in the contest for Time Warner Cable Inc. (NYSE: TWC), Charter shifted the focus back to its own operations as it highlighted 2013 accomplishments and outlined its 2014 strategy. (See Comcast Strikes $45B Deal for TWC.)

During its earnings call, Charter president and CEO Tom Rutledge disputed the notion that the MSO had pursued TW Cable so avidly for the past eight months at least partly because it wanted to cut its programming expenses by tripling its size. That was not the "main motivation" in courting TWC, he said, and merging the second- and fourth-biggest US MSOs would not have "meaningfully changed" Charter's programming costs.

Rutledge said he hasn't taken a position on Comcast's proposed $45.2 billion acquisition of TWC, but he indicated that his MSO remains interested in "wisely acquiring subs" from other cable operators if the right opportunity emerges. But he downplayed the likelihood of Charter pursuing other big takeover candidates; he said the cable competitive landscape will probably not produce any good possibilities in the near term. (See What's Next for Charter?)

Instead, Rutledge and Chris Winfrey, Charter's executive vice president and chief financial officer, emphasized the growth opportunities offered by the company's own sprawling footprint. Though that footprint contains 12.8 million homes, Charter has slightly fewer than 4.2 million video subscribers. Its 33.9% penetration rate is one of the lowest in the cable industry. At the end of last year, it had nearly 1.4 million nonvideo customers -- one of the highest numbers in the industry.

"The biggest opportunity for us is to grow penetration against the 7 million passings with no subscriber relationship," Rutledge said. "That's where the biggest ROI is."

With that operational focus in mind, Charter plans to boost its capital spending by about $400 million to $2.2 billion this year. Having spent up to $100 million last year to upgrade 15% of its cable systems to all-digital service, the company intends to spend another $400 million to upgrade the rest of its systems to all-digital this year. Among other things, those upgrades will enable the MSO to offer more than 200 HD channels in each market and hike maximum broadband speeds to at least 60 Mbit/s with improved WiFi service.

Charter also plans to spend $100 million on "insourcing" -- rebuilding its fleet of trucks, equipment, technicians, and customer call centers to handle service requests. For the past few years, the company has largely outsourced these functions to contractors. This kept operating expenses down but led to more complaints about poor customer service and high churn rates.

Under questioning from analysts, Rutledge and Winfrey defended these planned onetime capex items as smart business moves to lure more customers, keep them happier, and retain them longer. The executives also said most of the $400 million in all-digital upgrades will be spent on putting advanced digital set-top boxes in subscriber homes, generating more revenue and cutting outlay per box.

"We do think we can grow faster than the rest of the industry," Rutledge said. "Growth capital will be a function of how fast we grow."

Charter's fourth quarter wrapped up a year in which it cut its basic video subscriber losses, boosted its digital video take rate, increased its broadband and voice subscriber gains, and hiked its overall residential customer count. The fourth-largest US MSO also made strong gains on the business services front, boosting its commercial revenue by nearly 20% for both the quarter and the year.

Specifically, it shed 2,000 basic video subscribers in the fourth quarter while adding 93,000 broadband and 56,000 voice customers -- all improvements over a year earlier. For the year, the MSO added 172,000 residential customers, up from 120,000 in 2012.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

(11)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Page 1 / 2   >   >>
DOShea
50%
50%
DOShea,
User Rank: Blogger
3/2/2014 | 12:57:53 PM
Consolation prize
There seems to be growing talk that Comcast might have to divest some markets and customers to get the TWC deal done, so maybe Charter can still buy up the table scraps.
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
2/28/2014 | 8:56:51 PM
Re: Malone
That's a good question. With the fact that there's so much consolidation in the industry already, there might not be that many "good" suitors. They tried for the big splash & that failed. Maybe a RCN-type provider (I'm familiar with them in NYC). They're not too small but also not so big.
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/28/2014 | 4:58:17 PM
Re: Malone
Could be. So where do you think they will turn? What sloppy seconds are most available?
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
2/27/2014 | 10:53:52 PM
Re: Malone
I think Charter is just going to hunt for another acqusition. It'll sort of be like sloppy seconds but a rebound nonetheless.
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/26/2014 | 9:37:51 PM
Re: Malone
So now that Brian Roberts has thwarted his old mentor, what do you think Malone does next? And where does Charter turn for fast growth now? Anybody wantto place some bets? 
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
2/24/2014 | 8:06:33 PM
Re: Malone
I agree with you. In many cases, when CEOs take over public companies & they're outsiders, their main objective is probably to sell as quickly as possible. This way, they get their bonus & get to move onto the next thing.
kq4ym
50%
50%
kq4ym,
User Rank: Light Sabre
2/23/2014 | 2:21:42 PM
Re: Malone
The earnings call of course was meant to provide a very cheery outlook for Charter followers. Seemingly, it would make sense they have a great opportunity to add more customers in it's wide infrastructure area. But, keeping up with the latest technology to keep and attract customers if still going to be an uphill battle for Charter and others, not to mention trying to keep subscription levels profitable but still attractive to customers.
danielcawrey
50%
50%
danielcawrey,
User Rank: Light Sabre
2/22/2014 | 9:36:30 PM
Re: Malone
The biggest problem that MSOs face is antiquated technology, even that which hasn't made it to customers' homes yet. Take this $400 million in all-digital upgrades Charter is planning, for example.

It consists of set top boxes that are not competitive with what Netflix and Amazon are able to provide with their own content services. 
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
2/22/2014 | 10:47:47 AM
Re: Malone
Investors own the company and want a return on their investment. They will have different time horizons for their ROI but are not investing because they want fuzzy bears. High quality (Apple) and low quality (Walmart) can work. But as an employee (and the CEO is an employee) your ONLY job is to make money for the shareholders. Seven
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
2/21/2014 | 9:46:11 PM
Re: Malone
"But in investor land, mindless growth is rewarded."


It's all about the dollars & cents. The more you get, the more you can brag. It's all about ego in the end.
Page 1 / 2   >   >>
Flash Poll
LRTV Huawei Video Resource Center
Network Solutions Help the Philippines Jump Ahead

9|17|14   |   2:59   |   (0) comments


In the past, the Philippines has under-invested in technology. Now, the CEO of Softshell talks about how Huawei products help the Philippines jump ahead as the economy improves.
LRTV Huawei Video Resource Center
VCS Observation for Safer Cities in the Netherlands

9|17|14   |   5:20   |   (0) comments


Holland's VCS Observation has been operating for 22 years. Its main goal is to get cities safer. CEO Wim van Deijzen tells us some of the challenges his company faces and how Huawei is helping to overcome these challenges.
LRTV Huawei Video Resource Center
A Conversation With Serbia's Ministry of Interior

9|17|14   |   4:38   |   (0) comments


At HCC 2014, the Assistant Minister of the Ministry of Interior of the Republic of Serbia talks to us about his projects and corporation with Huawei. Solutions like Safe City and E-Government and services like cloud computing are just some of the areas his department is interested in.
LRTV Huawei Video Resource Center
IHS Analyst Discusses eLTE at CCW 2014

9|10|14   |   7:09   |   (0) comments


Thomas Lynch, associate director of critical communications at IHS Technology, talks about broadband in critical communications.
LRTV Huawei Video Resource Center
TCAA on Huawei eLTE: A Broadband Solution for Mission-Critical Communications

9|10|14   |   2:29   |   (0) comments


At CCW2014 in Singapore, the TCCA's Phil Kidner talks about the importance of broadband data for critical communications.
LRTV Custom TV
Spotlight on Cisco: SDN for Optical Networks

9|8|14   |   9:27   |   (0) comments


Cisco's Greg Nehib talks OpenFlow and more on the 'Software-Defined Networking for Optical Networks' panel at the Big Telecom Event in June 2014.
LRTV Custom TV
Cisco's Evolved Programmable Network (EPN)

9|8|14   |   4:05   |   (0) comments


A look at the various demos Cisco showed at Light Reading's Big Telecom Event highlighting Cisco's EPN innovation and how SDN and NFV technologies are enabling a variety of new services.
LRTV Huawei Video Resource Center
The Future of Ultra-Broadband, With Kevin Kelly (UBBF2014)

9|5|14   |   1:13   |   (0) comments


If you think the technological changes we've seen up to now are astounding, just wait until you see what the future has in store. Discuss upcoming breakthroughs with Kevin Kelly, Founding Executive Editor of Wired Magazine, at the Huawei Ultra-Broadband Forum on September 24.
LRTV Huawei Video Resource Center
The Inaugural Optical Innovation Forum in Nice

9|2|14   |     |   (0) comments


More than 170 attendees from network operators, service providers, analyst firms, and component companies from around the world convened in Nice in June for the inaugural Optical Innovation Forum, co-produced by Huawei and Light Reading.
Wagner’s Ring
Data Centers Drive Telcos Into the Future

8|28|14   |   2:20   |   (2) comments


Data centers are at the heart of key trends driving telecom -- network virtualization, the drive for increased agility, and the need to compete with OTT providers.
LRTV Custom TV
Why SPs Should Consider Cisco's EPN

8|27|14   |   5:40   |   (0) comments


Sultan Dawood from Cisco discusses Cisco's EPN, which enables SPs to build agile and programmable networks delivering new network virtualized services using Cisco's Evolved Services Platform (ESP).
LRTV Huawei Video Resource Center
Huawei’s Showcase @ Big Telecom Event 2014

8|26|14   |   2.56   |   (0) comments


SoftCOM is Huawei's framework for telecom business and network transformation. Haofei Liu, Solution Marketing Manager, Carrier Business Group, Huawei, showcases Huawei's SoftCOM architecture in this video.
Upcoming Live Events!!
September 23, 2014, Denver, CO
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
A survey conducted by Vasona Networks suggests that 72% of mobile users expect good performance all the time, and they'll blame the network operator when it's not up to par.
Today's Cartoon
Vacation Special Caption Competition Click Here
Latest Comment
Hot Topics
Introducing 'The New IP'
Steve Saunders, CEO and founder, Light Reading, 9/11/2014
Glimpsing the Self-Driving Car
Dan Jones, Mobile Editor, 9/12/2014
AT&T to Launch WiFi Calling in 2015
Sarah Reedy, Senior Editor, 9/12/2014
AT&T: We'll Bundle Fixed Wireless & DirecTV
Mari Silbey, Independent Technology Editor, 9/15/2014
New NFV Forum Focused on Interoperability
Carol Wilson, Editor-at-large, 9/16/2014
Like Us on Facebook
Twitter Feed