Rutledge Sets Stage for New Charter
New Charter, same as the old Charter. Well, not really, but the name will stay the same.
Explaining that he expects Charter Communications Inc. to close on its acquisitions of Time Warner Cable Inc. (NYSE: TWC) and Bright House Networks within days of regulatory approval, CEO Tom Rutledge also announced that New Charter will keep its historical name. (See Wheeler Recommends Charter Deals.)
"After a lot of creative thought, we've decided to call the new company, Charter," quipped Rutledge on the company's quarterly earnings call.
The decision is appropriate given that Rutledge plans to unroll the same strategic roadmap for the company's new properties that he used in upgrading legacy Charter when he took over as CEO in 2012. Rutledge will start by ramping up the conversion to all-digital video in TWC and Bright House markets and implementing new pricing and packaging to match what Charter offers across its current footprint. The chief executive said he expects to complete those processes by the end of 2018.
Rutledge readily acknowledged that Charter will have to spend money in order to make the most of its new assets.
"Our objective is to actually accelerate the growth rate," he said "and in order to do that we're going to spend more capital... and we're going to package in such a way that we think we get longer-term revenue growth and get that revenue growth over a longer period of time with the quality of the products that we're selling into the market."
While higher capex spending is a given, Charter will also enjoy some immediate benefits from its acquisitions. Programming expenses, for example, will go down in relative terms thanks to rates that Time Warner Cable has already negotiated for content licensing. Increased size will also offer Charter major advantages going forward, as it can use its scale to drive efficiency.
Rutledge stated that Charter plans to centralize marketing, sales and product development departments after the close of the deals, and that it will consolidate the combined field operations group from all three companies into 11 distinct regions. While Rutledge added that the field operations regions would "be managed with largely the same set of field employees that are with the three companies today," there are still cost savings to be gained just from consolidating offices.
As Light Reading reported this week, it appears that Network Operations Centers (NOCs) owned by TWC and Bright House in Charlotte, N.C.; Herndon, Va.; Syracuse, N.Y.; and St. Petersburg, Fla. are slated to close over the next year and a half. (See Charter Jumps Gun on TWC Restructuring.)
Regarding Charter's quarterly financial statements, the company continued a trend today started by Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Time Warner Cable by reporting increases in residential video and broadband subscribers. (See Comcast Can't Be Beat on Broadband and TWC Goes Out With a Bang.)
Charter added 10,000 video customers and 141,000 Internet subs in the first quarter, bringing its total number of residential customer relationships up to 6.4 million. Total first quarter revenue also jumped 7.1% compared to a year ago, landing at $2.5 billion.
Overall earnings were less favorable. Charter lost $188 million in the first quarter thanks to financing arrangements put in place for the upcoming acquisitions. Those losses were higher than analysts expected. The Zack's Consensus Estimate predicted that Charter would lose $0.84 per share, while Charter actually reported a loss of $1.68 per share.
Among other milestones in the earnings report, Charter also announced that its cloud-based Spectrum TV guide is now available in Fort Worth, Texas; Reno, Nev.; and St. Louis, Miss. The company expects to roll the product out to most of the rest of its legacy markets by the end of the year.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading