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Charter Gains on Digital, Broadband Upgrades

Alan Breznick

Determined to join Comcast at the top of the US cable heap, Charter Communications racked up another strong quarter of revenue growth, thanks to its better-late-than-never investments in digital video and broadband upgrades.

Charter Communications Inc. , the fourth-largest US MSO with nearly 4.2 million video subscribers, reported much narrower video subscriber losses Wednesday in the traditionally weak third quarter, as it continued its aggressive strategy of upgrading all of its cable systems to all-digital transmission. The company lost a mere 9,000 basic video customers in the summer quarter, a solid improvement over the 27,000 video subs that it shed a year earlier. (See Charter Revenues Up, Video Subs Down.)

Still playing catch-up with most other major US MSOs, Charter said it has now completed more than 80% of its all-digital initiative, having deployed over 2 million digital set-top boxes in customers' homes since the drive began last year. Plans call for wrapping up the initiative by the end of the year with all of its markets systems converted over to all-digital.

Want to know more about pay-TV subscriber trends? Check out our dedicated video services content channel here on Light Reading.

As part of its "Charter Spectrum" rebranding effort, Charter is also focused on hiking data speeds and boosting broadband service. Those efforts paid off again in the third quarter as the cable company netted 94,000 broadband customers, up from 86,000 a year earlier. With the gain, Charter closed out September with nearly 4.7 million high-speed data subs, or more than 500,000 more broadband subs than video subs.

Even with such improvements, Charter still suffers from relatively weak penetration rates, at least compared to its fellow major MSOs. Only about 40% of its homes passed now subscribe to its Internet service and substantially fewer, or almost 34% of homes passed, subscribe to its pay-TV offerings. Even fewer still, or just over 21% of homes passed, subscribe to its VoIP service.

Yet Charter's revenue figures and corresponding industry standing are clearly climbing as its upgrade strategy bears fruit. On the commercial services side of the business, for example, the company reported $253 million in revenues, up almost 18% from a year ago. As a result, the company is on track to hit the $1 billion mark for business services revenues next year, which would make it the fourth US cable operator to do so.

Due to such healthy gains, Charter saw its overall revenues rise to $2.3 billion in the quarter, up 8% on a year-over-year basis. Likewise, its cash flow climbed to $783 million, up 7% from a year ago. And the company's net loss narrowed to $53 million, an improvement over $70 million in the year-earlier period.

In an unusual move, Charter will not hold its conference call with financial analysts until tomorrow (Friday) morning. The company, which originally planned to report its earnings results on Friday as well, moved up the release by two days largely because it launched a $1.5 billion debt offering yesterday. That offering is part of Charter's financial preparation for the system purchases and swaps that it plans to make with Comcast Corp. (Nasdaq: CMCSA, CMCSK) once Comcast's proposed purchase of Time Warner Cable Inc. (NYSE: TWC) is complete, assuming that deal goes through as planned in the first half of next year.

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

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10/31/2014 | 12:03:56 AM
ups and downs
Charter eally is a suvior, I remember when their stock dropped so low i was delisted, now tey are once again vieing for position at the top of the heap. 
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