Charter Puts Mobile in Motion

Plunging deeply into the mobile market, Charter Communications has notched the first 21,000 customers for its new Spectrum Mobile offering and is now integrating the wireless service into a reconfigured triple-play residential bundle.

Speaking on the company's third-quarter earnings call Friday morning, Charter Communications Inc. executives reiterated their high hopes for Spectrum Mobile, which they rolled out across the US early last month after a soft launch at the end of June. In the early going, Charter is selling Spectrum Mobile in two tiers -- Unlimited (at $45 per line, though speeds may be reduced if a customer exceeds 20 gigabytes during a given billing cycle); and By the Gig ($14 per gigabyte). (See Charter's Spectrum Mobile goes full market.)

Charter has also started positioning Spectrum Mobile as the new third service in its triple-play bundle with video and broadband, replacing its legacy wireline voice service. The wireline service is now becoming a low-cost, add-on service to the larger bundle, priced at just $10 a month.

"The whole [mobile] marketplace is available to us," declared Charter Chairman and CEO Tom Rutledge. He predicted that the combination of lower prices for consumers than they pay for competitive wireless services and higher revenues for Charter than it receives for its wireline voice services will prove to be a winning formula for his company.

Besides racking up its first Spectrum Mobile customers, Charter registered other favorable subscriber metrics in the summer quarter as its video sub losses subsided a bit and its broadband sub gains accelerated a bit. Only its wireline voice sub numbers showed significant deterioration on the residential side.

Specifically, Charter cut its video subscriber losses to 66,000 in Q3, a sharp improvement from the 104,000 video customers that it shed in the year-earlier period. The improvement came as the MSO continued to upgrade its entire 51 million-home footprint to all-digital service and extended its new Spectrum pricing and packaging to 67% of its video customers, up from 32% earlier in the year. With most of its legacy Time Warner Cable and Bright House customers now upgraded to all-digital service, the company expects to complete that capital-intensive project by the end of the year.

On the broadband end, Charter added 266,000 customers in the quarter, up from 250,000 a year ago, as it continued to roll out 1 Gig service enabled by DOCSIS 3.1 and boost the speeds of its other data tiers. With about 95% of its footprint upgraded to DOCSIS 3.1, the cableco aims to virtually wrap up that capital-intensive network upgrade by the close of December as well. (See Charter Nears Gigabit Finish Line.)

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"Our integration is coming to a close," Rutledge said, predicting that analysts will see "a meaningful reduction in capital spending" by the company starting next year.

On the down side, Charter saw its wireline voice customer totals plunge in the quarter as it shifted its marketing focus to the new Spectrum Mobile product. The company lost 107,000 legacy voice subscribers, reversing its gain of 26,000 subs a year ago.

Despite the continuing growth of its commercial customer base, Charter also saw its business services revenue gains continue to slow because of its more aggressive pricing. Company officials said they have cut prices in the small-to-mid-sized sector for legacy TWC customers and plan to do the same for legacy TWC enterprise customers as well. After doing that, they expect commercial revenue growth to better match the pace of customer growth.

Charter's share price fell about 5.2% to $298.48 each in morning trading on the NASDAQ exchange.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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