Light Reading

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        ADD A COMMENT
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   >   >>
From The Founder
Against the odds, Huawei is growing its telecoms networking equipment business in the US -- that should be ringing some alarm bells for domestic vendors.
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
Between the CEOs
Metaswitch's New CEO Martin Lund Discusses His Role

9|2|15   |   11:27   |   (3) comments


Technology industry veteran Martin Lund joins Metaswitch Networks this week as the company's new CEO. In this interview, Lund discusses his new role and the industry's progress with Light Reading CEO Steve Saunders. Lund believes that the industry disruption caused by SDN and NFV is creating opportunities for companies like Metaswitch – network software providers ...
Telecom Innovators Video Showcase
Nominum on Leveraging the Power of DNS to Deliver Superior Subscriber Experiences

9|2|15   |   07:13   |   (0) comments


Nominum CEO Gary Messiana talks about the challenges service providers face in competing for a much more sophisticated customer, a customer that has heightened expectations for more personalized and compelling digital experiences. Providers are focusing their efforts on delivering higher value subscriber services, retaining their existing customers and increasing ...
Between the CEOs
CEO Chat With Jeff Miller, ActiveVideo

8|28|15   |   19:05   |   (0) comments


Jeff Miller, President and CEO of ActiveVideo, talks to Light Reading founder and CEO Steve Saunders about the impact of virtualization on the TV and video distribution market.
LRTV Huawei Video Resource Center
Vodafone: Mobile Money Is About Customer Trust

8|27|15   |   06.36   |   (0) comments


Light Reading spoke with Vodafone's Ian Ravenscroft about the unique responsibilities and opportunities facing operators handling customers' financial transactions over the network.
Telecom Innovators Video Showcase
Palo Alto Networks on Expanding in the Carrier/Service Provider Market

8|26|15   |   07:54   |   (0) comments


Alfred Lee from Palo Alto Networks tells Steve Saunders about their new chassis-based system, the PA-7080, and how it can benefit service providers compared to legacy firewalls.
LRTV Custom TV
Global Services Forum Preview

8|25|15   |   02:36   |   (0) comments


Light Reading's CEO and Founder Steve Saunders talks about Huawei's upcoming Global Services Forum with the help of Heavy Reading's Patrick Donegan and Teresa Mastrangelo.
Telecom Innovators Video Showcase
Infoblox on DNS Threat Index

8|19|15   |   04:39   |   (0) comments


Dilip Pillaipakam from Infoblox talks to Steve Saunders about his company's core network services.
Between the CEOs
CEO Chat With Ihab Tarazi, Equinix

8|14|15   |   20:18   |   (1) comment


Equinix CTO Ihab Tarazi talks to Light Reading founder and CEO Steve Saunders about the dramatic changes in the data center, cloud and interconnect markets and discusses the impact of SDN and NFV in the coming years.
Telecom Innovators Video Showcase
The Netformx Ecosystem

8|14|15   |   09:39   |   (1) comment


Ittai Bareket, CEO of Netformx, talks with Steve Saunders about the Netformx Ecosystem, which employs cutting-edge prescriptive analytics to help solution providers maximize profits.
Telecom Innovators Video Showcase
Versa Networks on Leveraging VNFs

8|12|15   |   07:37   |   (0) comments


Kumar Mehta, founder and CEO of stealth mode startup Versa Networks, talks with Steve Saunders about how providers can best leverage virtualized network functions (VNFs).
LRTV Custom TV
Transforming the Network Through OPNFV

8|5|15   |   7:09   |   (0) comments


Sandra Rivera, VP Data Center Group; GM Network Platforms Group, Intel Corporation, on OPNFV Arno and how the industry is coming together to accelerate the deployment of NFV and transform the network.
LRTV Huawei Video Resource Center
Huawei ONS Product Demo

8|3|15   |   6:01   |   (0) comments


Huawei shows at Open Networking Summit 2015 in Santa Clara how its SDN and NFV solutions embrace openness.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
November 17, 2015, Santa Clara, California
December 1, 2015, The Westin Times Square, New York City
December 2, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Infographics
Cisco's cloud and virtualization portfolio can increase business agility and innovation by building a more flexible network architecture.
Hot Topics
T-Mobile CEO Plays Data Traffic Cop
Sarah Thomas, Editorial Operations Director, 8/31/2015
CEO Chat With Bill Gates
Steve Saunders, CEO and founder, Light Reading, 8/31/2015
Time to Monetize Cable WiFi
Alan Breznick, Cable/Video Practice Leader, 8/31/2015
Carolina Town Becomes First US 10-Gig City
Mari Silbey, Senior Editor, Cable/Video, 9/3/2015
Eurobites: Anite in OSS Tie-Up With Nokia
Paul Rainford, Assistant Editor, Europe, 9/4/2015
Like Us on Facebook
Twitter Feed
September 22, 2015
Media Begins With “Me”
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Technology industry veteran Martin Lund joins Metaswitch Networks this week as the company's new CEO. In this interview, Lund discusses his new role and the industry's progress with Light Reading CEO Steve Saunders. Lund believes that the industry disruption caused by SDN and NFV is creating opportunities for companies like Metaswitch – network software providers with the agility to embrace new technologies quickly and the ability to deliver on substantial projects for global network operators.
The scene: Last Saturday, lunchtime, the interior of a shi-shi-foo-foo eatery in Manhattan's SoHo district.
Cats with Phones
It's a New Age... Click Here
When smartphones replace stuffed animals.