Charter sees broadband sub lift during pandemic

Charter Communications disclosed that its broadband business got a jolt in March due in part to a 60-day free Internet offer during the early days of the COVID-19 pandemic alongside a general increase in new service signups.

In an 8-K filed Tuesday, Charter said it generated 119,000 new Internet accounts in March in response to its 60-day free Internet offer for new customers with students or educators in the household.

Excluding customers coming in via the 60-day offer, Charter's new connects for residential broadband were also up compared to March 2019, the cable operator said. Charter noted that it is also seeing "accelerated adoption by customers of our self-installation and digital self-service capabilities" during the pandemic.

At the same time, Charter said it's too early to predict the total impact of COVID-19 on its overall business. The nation's second largest MSO noted that it's still not known how many will take the company up on the 60-day broadband offer or will convert to paying customers when that period concludes.

Also unknown is the financial impact of Charter's decision to join a "Keep Americans Connected Pledge" sparked by FCC Chairman Ajit Pai that includes an initial commitment to suspend disconnects for a couple of months. Questions also remain about how changes in the company's local and national ad sales business and the ability to support on-site service repairs and installations will affect Charter.

Still, some analysts believe Charter, as a "pure play" cable operator without a major media division or a theme parks unit like Comcast, is well positioned to weather the COVID-19 storm.

"Charter won't keep all of the free subscribers they have added once the 60-day offer expires, but they may well convert some to paying customers," analysts with New Street Research explained in a note in reaction to this week's 8-K filing. "The increase in paying customers speaks to the value of broadband in the current environment and Cable’s product advantage. Cable has been taking share in residential broadband for a decade. We aren't at all surprised to see the pace of gains accelerate in an environment where the utility of the service is highlighted. We don’t expect this to reverse."

And while pay-TV cord-cutting will help boost cable broadband ARPU as customers upgrade to pricier unbundled high-speed Internet services, pay-TV subscriber losses are expected to accelerate as the pandemic continues.

Citing a report issued earlier this month by Bernstein analyst Peter Supino, The Hollywood Reporter noted last week that Supino now estimates 1.5 million incremental video sub losses in Q2 2019 due to COVID-19 than he did in his previous forecast.

Among individual operators, the analyst also increased his estimates for total 2020 pay-TV sub losses at Comcast to 1.67 million (versus 733,000 in 2019), Charter to 1.08 million (compared to 462,000 last year) and Altice USA to 230,000 (versus 107,000 in 2019).

AT&T, he predicts, will still lose about 2.2 million pay-TV subs this year, which ironically would be an improvement from a 4 million lost subscribers in 2019.

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— Jeff Baumgartner, Senior Editor, Light Reading

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