Charter Communications racked up its strongest growth yet in VOIP subscribers during Q4

Alan Breznick, Cable/Video Practice Leader, Light Reading

February 9, 2007

2 Min Read
Charter Boasts of Big VOIP Gains

Charter Communications Inc. racked up its strongest growth yet in VOIP subscribers during the fourth quarter, even though its IP phone focus has increased its operating and capital expenses.

Like Comcast Corp. (Nasdaq: CMCSA, CMCSK), Charter expects to run up even higher capital expenditures this year as it continues its nationwide VOIP rollout.

Charter said today it signed up 106,200 VOIP subscribers in the last three months, as opposed to 31,300 customers in the year-earlier period. With the increase, the MSO closed out 2006 with nearly 446,000 IP phone customers.

Thanks entirely to this VOIP surge, Charter added more revenue generating units (RGUs) in the fourth quarter than it did at the end of 2005. The St. Louis-based cabler netted 162,400 new RGUs during the quarter, up from 138,200 a year earlier.

Charter also reported progress on the bundling front, due to the stronger VOIP gains. The company said about 38 percent of its cable subscribers now take at least two products, up from 32 percent at the end of 2005. Plus, 94 percent of all Charter phone subscribers now take two services, and 73 percent of phone customers take all three.

Unlike Comcast, Time Warner Cable Inc. (NYSE: TWC), Cablevision Systems Corp. (NYSE: CVC), and others, Charter is not seeing consistently stronger subscriber gains for its other cable TV products.

In the fourth quarter, Charter signed up 59,000 high-speed data customers, down from 73,800 in the year-ago period. It added 40,500 digital video subscribers, down from 49,800 in the year before.

But Charter lost 43,300 analog video customers during the quarter, more than double its pro forma loss of 16,700 basic customers in the year-earlier period.

Charter said it expects that revenues climbed to $1.41 billion in the fourth quarter, up 12 percent on a pro forma basis. Similarly, the company expects that adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $503 million, up 10 percent on a pro forma basis.

On the flip side, Charter said operating expenses rose by $89 million, or 11 percent, in the quarter, due to higher programming costs, greater installations of advanced equipment and services, and its stepped-up VOIP deployment. The company's capital expenditures increased as well, climbing 13 percent to $308 million.

The good news there, according to Charter, is that about 75 percent of its annual capital costs were "success-based," meaning the costs were directly associated with adding new customers.

Charter said it expects capex to go up again this year, rising about $100 million to $1.2 billion.

Charter did not disclose specific earnings information, but it will do so on Feb. 28.

— Alan Breznick, Site Editor, Cable Digital News

About the Author(s)

Alan Breznick

Cable/Video Practice Leader, Light Reading

Alan Breznick is a business editor and research analyst who has tracked the cable, broadband and video markets like an over-bred bloodhound for more than 20 years.

As a senior analyst at Light Reading's research arm, Heavy Reading, for six years, Alan authored numerous reports, columns, white papers and case studies, moderated dozens of webinars, and organized and hosted more than 15 -- count 'em --regional conferences on cable, broadband and IPTV technology topics. And all this while maintaining a summer job as an ostrich wrangler.

Before that, he was the founding editor of Light Reading Cable, transforming a monthly newsletter into a daily website. Prior to joining Light Reading, Alan was a broadband analyst for Kinetic Strategies and a contributing analyst for One Touch Intelligence.

He is based in the Toronto area, though is New York born and bred. Just ask, and he will take you on a power-walking tour of Manhattan, pointing out the tourist hotspots and the places that make up his personal timeline: The bench where he smoked his first pipe; the alley where he won his first fist fight. That kind of thing.

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