Charter Ekes Out a Profit
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