October 26, 2017
It hasn't been a pretty quarter for anyone in the pay-TV industry, and Charter is no exception. Following on the heels of Comcast's quarterly report, Charter limited its video subscriber losses to 104,000 compared to Comcast's 134,000, but the company's Q3 decline follows a negative trend in previous quarters as well, whereas Comcast has bucked the industry with video sub gains in the past.
Worse, from a Charter Communications Inc. point of view, net income was only $48 million compared $189 million a year ago, with diluted earnings per share pegged at $0.19 compared to $0.69 in the third quarter of 2016. Total revenue rose 4.2% on the year to $10.5 billion, but that didn't stop the markets from punishing Charter with the stock price falling as much as 8% following the earnings report.
Despite the rough financials for the quarter, Charter Chairman and CEO Tom Rutledge continued to hammer on the company's strategy of unifying pricing and packaging across its entire footprint, as well as on the improvements the company has made with its broadband offerings. Charter's total number of Internet subscribers was up for the quarter, with a net addition of 249,000 new data customers.
Rutledge also used the earnings call to slide in several product launch announcements, noting first and foremost that, "In a couple of months we'll also launch gigabit speeds in several key markets using DOCSIS 3.1." Charter has fallen behind many of its peers in the gigabit race, but that appears set to change as Rutledge added that in 2018, "We'll begin to buy exclusively 3.1 modems."
Other products on the way include a new higher-powered WiFi router, and the rollout of Charter's cloud-based Spectrum guide to new customers beginning after the turn of the year. As far as set-tops go, Rutledge noted that Charter has now deployed more than 1 million boxes on the WorldBox platform, and that going forward, the company will purchase these set-tops exclusively. The advantage of the platform is that WorldBox set-tops can be used across Charter's entire footprint including all of the territories acquired in the Time Warner Cable and Bright House acquisitions.
In a boost to Charter's commercial services business, which brought in $1.48 billion in revenue for the quarter, Rutledge also announced that Charter will launch an SD-WAN solution in the coming months. That would align the company with Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s progress. Comcast introduced its SD-WAN product just 5 months ago. (See Comcast Woos the Enterprise With SD-WAN.)
For more cable market coverage and insights, check out our dedicated cable content channel here on Light Reading. Perhaps most exciting in the Charter earnings call was Rutledge's optimism for the wireless sector. With plans to launch its own mobile service in the second quarter of 2018, Charter has had an opportunity to learn from Comcast's earlier entry into the business. Rutledge said his company has made good use of a cooperative deal with Comcast to explore wireless opportunities together and that there is continued research being done into how cable wireless services can best be managed from a back office perspective. Charter and Comcast don't partner on wireless service delivery in any operational sense today, but Rutledge confirmed there is the potential for such an arrangement in the future. (See Comcast & Charter Seal Wireless Pact.) Rutledge also emphasized the work Charter is doing in wireless that is unrelated to the mobile service it plans to launch. These efforts include 5G field tests and technology development around small cells. (See Charter Launches 5G Field Trials and Ericsson Is Building a DOCSIS Small Cell.) For the future, Rutledge, like his counterparts elsewhere in the cable industry, is a big believer in building Charter's success on a foundation of connectivity. Closing out the earnings call he stated, "We're going down the path investing in our networks for a future that we see as very bright, which is high capacity wireless attached to high capacity wireline." — Mari Silbey, Senior Editor, Cable/Video, Light Reading
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