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
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
From The Founder
The New IP is actually bigger even than business. Like another hugely important tech that Light Reading is digging into right now, the New IP has the potential to change the world by fundamentally advancing what it is possible for people to achieve with communications.
LRTV Huawei Video Resource Center
Huawei Shares Its Vision of the Future of Mobile Networks Innovations

2|26|15   |   2:30   |   (0) comments


Mobile broadband is changing our lives. It's reshaping the Internet, industry, and society. It allows us to freely connect with one another anytime, anywhere. At this year's Mobile World Congress, Huawei will share its latest insights and newest ideas and technologies that will shape the future of MBB. They will showcase their end-to-end MBB solutions that will ...
LRTV Huawei Video Resource Center
Accelerate Digitizing, Boost Digital Business

2|26|15   |   6:14   |   (0) comments


A new digital revolution is leading us to a better connected world. Together with millions of digital partners, Huawei will help CSPs to build their digital service ecosystem and aggregate a wide variety of digital services. In this video, we find out how Huawei is going to help CSPs implement digital operations.
LRTV Huawei Video Resource Center
The Secret Recipe to Enabling Hyper-Growth Industries

2|26|15   |   3:38   |   (0) comments


With a number of successful cases on network capability exposure, Huawei is going to share the secret recipe to enabling hyper-growth markets with a step-by-step approach.
LRTV Documentaries
BTE 2015 Is Bigger & Even Better

2|25|15   |   03:13   |   (4) comments


This year's Big Telecom Event (BTE) in Chicago is going to provide more opportunities than ever for networking, getting to grips with key industry challenges and opportunities and, equally as important, having some fun.
LRTV Interviews
Light Reading ICT Leaders Roundtable at MWC 2015

2|12|15   |   1:07   |   (2) comments


On Sunday March 1, 2015, Light Reading will host an ICT Leaders Roundtable in partnership with Huawei. At this half-day event, CIOs, analysts and researchers will discuss key industry trends like virtualization in the cloud with a specific focus on new business models. Located at the luxurious Renaissance Hotel near the Fira Barcelona, space is limited so please ...
LRTV Documentaries
Going Green in 2015

2|12|15   |   02:04   |   (0) comments


Energy efficiency is set to be an incredibly hot topic in the telecom industry this year.
LRTV Custom TV
SDN & NFV: Where Are We Going From Here?

2|11|15   |   11:27   |   (0) comments


Vitesse Semiconductor CTO Martin Nuss gives his perspective on why SDN and NFV should be tightly interconnected and how he sees the industry moving forward.
LRTV Documentaries
Time for Gigabit Europe?

2|9|15   |   01:27   |   (4) comments


Gigabit broadband networks are springing up all around the US and they'll soon become more commonplace in Europe.
LRTV Interviews
Brocade Brings New IP Vision to 2020 Vision Executive Summit

2|3|15   |   4:23   |   (0) comments


In December 2014, Light Reading gathered telecom executives in Reykjavik, Iceland to discuss their vision for high-capacity networks through the end of the decade. The intimate, interactive meeting was set against the backdrop of Iceland's spectacular natural beauty. As one of the event's founding sponsors, Brocade's Kelly Herrell shared his company's strategy at ...
LRTV Interviews
Brocade's Kelly Herrell on the New IP

2|2|15   |   12:36   |   (0) comments


In December 2014, Steve Saunders sat down with Brocade VP of Software Networking Kelly Herrell at Light Reading's 2020 Vision executive summit in Reykjavik, Iceland. They spoke about Brocade's approach to the New IP, the future of the telecom industry, and more.
LRTV Huawei Video Resource Center
Dr. Dong Sun Talks About Carriers' Digital Transformation & Huawei’s Telco OS

1|29|15   |   6:28   |   (0) comments


Dr. Dong Sun, Chief Architect of Digital Transformation Solutions at Huawei, discusses how telecom operators can become digital ecosystem enablers and deliver optimal user experiences that are in real-time, on-demand, all-online, DIY and social (ROADS).
LRTV Huawei Video Resource Center
Huawei's Chief Network Architect Talks about Network Experience & Operators’ Strategies

1|29|15   |   3:39   |   (0) comments


In the digital age, network experience has become the primary productivity especially for telecom operators. In this video, Wenshuan Dang, Huawei’s Chief Network Architect, discusses how carriers can tackle the challenge of infrastructure complexity in order to enhance business agility and improve user experience.
Upcoming Live Events
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
All Upcoming Live Events
Infographics
Net neutrality, broadband services and the current outlook on data consumption, as presented by the New Jersey Institute of Technology.
Hot Topics
Cyber Security Expert Warns: You're Doing It Wrong
Sarah Thomas, Editorial Operations Director, 2/23/2015
10 Weirdly Useful IoT Devices
Eryn Leavens, Copy Desk Editor, 2/24/2015
Small Cells Enabling Location Services
Sarah Thomas, Editorial Operations Director, 2/25/2015
FCC Adopts Title II Rules
Alan Breznick, Cable/Video Practice Leader, 2/26/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Check out Light Reading's interview with Jay Samit, the newly appointed CEO of publicly traded SeaChange International Inc. With a resume that includes Sony, EMI, and Universal, Samit brings a reputation as an entrepreneur and a disruptor to his new role at the video solutions company. Hear what he had to say about the opportunities in video, as well as the outlook for cable, telco, OTT and mobile service providers.
G'day! And welcome to an entirely new feature on Light Reading -- our weekly "CEO-to-CEO" interview.