Video services

Retrans Fees Fuel Charter Losses

Charter Communications Inc. reported a net loss of US$96 million in the second quarter despite both residential and commercial revenue gains.

Total revenues were up 4.7 percent to $1.97 billion compared to the year-ago quarter. Unfortunately, operating costs and expenses also increased 7.5 percent to $1.28 billion, largely due to customer service costs (labor and plant maintenance) and higher programming fees. Charter also suffered financially due to "a greater loss on extinguishment of debt and higher depreciation and amortization."

On the customer front, Charter increased its overall number of residential subscribers by 5,000 in the second quarter to reach a total just shy of 5.1 million subs. The company also gained 6,000 commercial customers to reach a total of 329,000 subscribers.

Video subscriber losses continued across the board, however, much as they have for cable companies throughout the quarterly earnings season. Charter lost 48,000 residential video subscribers in the quarter, and 3,000 commercial video customers.

Between customer losses and increased licensing fees, the video business is a serious drag on Charter's earnings sheet. Negative video trends are a large part of the reason John Malone is pushing Charter to grow either through merger or acquisition. The bigger the company, the more weight it can bring to retransmission negotiations, which get nastier every day. (See Time Warner Cable Sacks CBS.)

Malone is reportedly hoping to take over Time Warner Cable Inc. or perhaps merge with Cox Communications Inc., according to Bloomberg. So far, Time Warner at least has not looked favorably on the idea. (See Behind Cable's Urge to Merge.)

— Mari Silbey, special to Light Reading Cable

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