Charter Communications posted big subscriber numbers across broadband, mobile and (gasp!) video in the second quarter amid a pandemic period in which about 90% of new service connections were done via the operator's self-install program.

A sizable portion of those subscription gains came from free broadband-focused programs during the pandemic in which new high-speed Internet customers ended up taking additional services from Charter.

Meanwhile, Charter's business services unit has struggled a bit, particularly in the enterprise segment.

Figure 1: Charter's sales channels have been hindered by store closings, but the operator still managed to add 325,000 mobile lines in Q2.
(Source: Charter)

Broadband
Charter added a whopping 842,000 residential broadband customers in Q2, up from 221,000 a year earlier, extending that total to 26.31 million.

Tom Rutledge, Charter's CEO, attributed that to general high demand for broadband services aided in part by automated and online/digital backoffice systems and the aforementioned high level of customer self-installs.

Charter has wrapped up its DOCSIS 3.1 network deployment and doesn't see a reason, at this point, to accelerate into any additional, major upgrade efforts.

"At the moment, we have a lot of capacity," Rutledge said on today's call, noting that, in June, residential data usage for Internet-only customers was about 600GB per month, down 10% from the April peak, but up nearly 20% from Q4 2019.

Video
Charter bucked the industry trend of widening pay-TV losses by adding 102,000 residential video subs in the period, versus a loss of 150,000 in the year-ago period. Charter ended Q2 with 15.65 million residential video subs.

Some of that growth was driven by a COVID-19 program that provided 60 days of free broadband service to households with students and educators that ultimately bundled in additional services, including pay-TV.

Rutledge tempered those results by stressing that the "secular trends of video hasn't changed," noting that Charter also saw less video downgrading as customers stayed home during the pandemic.

"We grew faster than the rate of video decline … it's that simple," Rutledge said when asked to explain Charter's sudden surge in pay-TV subscriptions.

Still, those pay-TV adds were "something so utterly unexpected that it makes one feel the need to check and recheck the number to make sure it isn't being printed incorrectly," Craig Moffett, analyst with MoffettNathanson, joked in a research note issued following Charter's results.

Charter's pay-TV results also benefited from its rural expansion initiative. "Still, it is a bolt out of the blue to see a major MSO reporting video net additions," Moffett noted.

Mobile
Charter also saw accelerated growth for Spectrum Mobile, a service that relies on an MVNO with Verizon alongside the cable operator's own Wi-Fi network, despite some pandemic-driven disruption to sales channels during the quarter.

Charter added 325,000 mobile lines in Q2 2020, up from 208,000 a year ago, extending its grand total to 1.69 million lines. Mobile revenues grew 96.1%, to $310 million, year-over-year. Mobile-related expenses totaled $413 million, comprising mobile device, customer acquisition and MVNO costs, as well as operating expenses.

Business services
Like its peers, Charter's business services unit has struggled during the pandemic. Total revenues in the category dropped 1.7%, to $1.58 billion. The enterprise end of the business was down 7.1%, driven in part by Charter's sale of its Navisite cloud services division, and by limited access to buildings. The SMB part of the business has "held up better than expected," Rutledge said.

Focus on COVID-19
Charter also provided some additional detail on how its COVID-19 programs, including the free broadband offer for homes with educators and students and the FCC's Keep Americans Connected Pledge, have affected its overall business.

Some 90% of new customers from the educator/student program are on Charter's flagship broadband tier, with nearly 50% subscribing to and paying for additional products.

After adding 119,000 customers through that program in Q1, Charter tacked on another 329,000 in Q2. By July 27, 90% of the cumulative connects on that program from Q1 remained as paying customers or were still on the original 60-day free offer.

Regarding the FCC pledge, Charter said it has "protected" 750,000 residential and SMB customers from collections and disconnect activities through June 30. About 60% of those customers were continuing to pay at least part of their bills, of which half were paid in full.

To help with overdue balances, Charter has waived about $85 million of receivables, recorded as a reduction of revenues in Q2.

"We believe we'll retain most as long-term customers," Rutledge said.

In Q2, Charter estimated a total revenue impact of $282 million from COVID-19.

Late in the call, Rutledge was also asked to expand on Charter's motivation to seek an an early end to provisions linked to its Time Warner Cable and Bright House acquisitions that prevent the MSO from striking paid peering deals and instituting data usage/cap policies.

"I would just describe our goal there as housekeeping, because the market didn't require those conditions and, in my view, never did," he said. "We wanted to put ourselves from an opportunity perspective on the same even playing field as all of our competitors."

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— Jeff Baumgartner, Senior Editor, Light Reading