Charter Ekes Out a Profit

Is there life left in Charter Communications (Nasdaq: CHTR)? The last few years have been pretty rocky, with an accounting scandal, a frequently changing executive lineup, and a debt that ballooned to $19 billion.

But things may be looking up, as the company has shown it can actually make money this quarter.

The company today announced profitable third-quarter earnings figures that matched analysts’ consensus expectations for revenue while exceding earnings expectations, due in large part, company officials said, to customer additions in high speed Internet (HSI), digital video, and telephone services.

“The value of bundling is clear,” said COO Michael J. Lovett during an earnings conference call. “And we believe our product combination of voice, video, and data provides for an obvious competitive advantage.”

Charter added 98,400 high-speed Internet subscribers this quarter, bringing its total to 2.1 million customers -- and recorded a $41 million, or 22 percent, increase in Internet revenue due in part to higher subscription rates. Since September 2004, the company says it has added more than 300,000 new HSI customers.

These gains, company officials said, were the primary stimulus for overall revenue figures this quarter, which increased $70 million to $1.32 billion, up 5.6 percent from $1.25 billion in the year-ago quarter.

Earnings results were even rosier, especially in light of gloomy analysts’ expectations, which had forecasted losses of 99 cents a share. Instead, Charter recorded third-quarter earnings of $75 million, or 9 cents a share, after preferred dividends, compared with last year’s losses of $3.3 billion, or $10.89 a share.

HSI additions, however, were only part of the picture. Charter announced 75,800 net digital cable additions, bringing its total subscriber number to 2.7 million. This increased video revenue to $9 million, a 1.1 percent increase over the year-ago quarter. The voice side of the business added 22,100 new subscribers this quarter, for a total of 90,000.

These additions are good news for Charter’s bundling strategy, which company officials believe give it a competitive edge in the market. To hasten its ascendance as a leading provider of VOIP, officials said they have a target of passing 6 million to 8 million homes by the end of 2006.

“We will continue to play the bundling game across all our product lines,” said CEO Neil Smit during the call. "We won’t compete on price alone, and I don’t think we have to," he said in regards to increasing competition from Verizon Communications Inc. (NYSE: VZ) in the video market. (See Verizon Sets TV Precedent.) Still, some analysts remain wary of Charter’s progress, and with the stock trading at a buck and change, it's clear the market remains nervous that Charter's huge debt load could eventually force it to reorganize.

Capex figures continued to rise this quarter. Charter said it spent $273 million, a 10 percent increase from the year-ago quarter, and year-to-date capex increased to $815 million, up 28 percent from $639 million in the same period last year. Interim CFO, Paul Martin said in the earnings call that this was primarily related to telephone, video-on-demand, and digital simulcast deployments.

“We expect capital expenditures to be approximately $1 billion to $1.1 billion for 2005,” Martin said. “Slightly up from our original estimate of $1 billion.”

The stock traded up a few pennies in today’s trading, closing at $1.27, up from yesterday’s $1.20 close.

— Joe Tuzzo, special to Light Reading

Balet 12/5/2012 | 2:55:30 AM
re: Charter Ekes Out a Profit that Charter can post any profit.
Let me share my experience with their local center in Alhambra.

When I bought an HDTV, I decided to try Charter. They are the only cable co available at where we are.

I scheduled an appointment with a tech to hook up the service. He came in 3.5 hrs late, said that it was too dark for him to use a flashlight and left.
Another one came a few days later and said that it was too big of a job for him to do (by the way, I used to have Charter in my house before that). He wanted to go see his grandma instead, since it was Friday.
Another one came on Sunday and did some work, but said that he needed another type of techs to complete the work.
Another two came a few days later and could not find a cable box to connect to, etc. etc.

I became the best friend of Charter's customer service meantime. I tried to reach Mr. Eric Brown, the Western Ops VP, no luck. There is no way to get to a GM of the Alhambra center either.

To make the long story short, I ended up finding the box, hooking the cable myself and turning on the HD box.

Now I am enjoying the HD service. Football games are awesome!

Long live Charter!
tobeit 12/5/2012 | 2:55:28 AM
re: Charter Ekes Out a Profit Nice story - happy ending?

Well, if you paid for the HD service the day you bought the TV - Charter made his cut.
Did you get charged for the extended service calls as well? If not, maybe, Charter contracted that out and such bad service will never trigger any change.
Hope some better cable "service" company steps up in Alhambra soon - anybody interested?
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