Charter Communications reported a net loss of 100,000 video customers in the first quarter, with legacy Time Warner Cable customers leaving in hordes as Charter attempts to convert these acquired subscribers to its Spectrum brand.
Legacy Charter lost only 13,000 pay-TV users in the quarter. But the company lost 108,000 TV customers in the TWC footprint amid what Charter CFO Christopher Winfrey called “churn from the low-value legacy TWC value set.” The Bright House Networks footprint—closed on by Charter along with TWC on May 18 of last year—saw a gain of 21,000 video users during the first quarter.
Charter reported gains in Q1 of 428,000 high-speed internet users, with legacy TWC systems picking up 235,000 customers.
Charter reported a 4.3% gain in first-quarter revenue to $10.2 billion, adding the metric on a pro forma basis that combines the year-ago comparisons of legacy Charter, TWC and Bright
Charter said it has now launched Spectrum pricing and packaging in most of the legacy TWC footprint, with only Hawaii pending (that’s coming in the second quarter). Charter launched into the Bright House footprint in the fourth quarter. Charter also said it would restart digital conversions in 40% of the legacy TWC footprint and 60% of the legacy Bright House zones.
“We expected a rough set of results from Charter this morning, marked by decent trends in the legacy Charter markets and high churn and ARPU pressure in the TWC markets,” New Street Research analyst Jonathan Chaplin said in a note to investors. “For the most part we got what we expected. One surprise: broadband adds were a bit stronger than we expected.”
Notably, Comcast continues to add video customers—42,000 in Q1 alone—on the strength of its advanced X1 video platform. Charter Chairman and CEO Tom Rutledge said that Charter’s two-way interactive Spectrum Guide interface is also capable of growing marketshare, but the effect is being dampened by the TWC conversion.
“Given all the integration activity, Charter legacy would have been positive if we hadn’t been doing that,” Rutledge said. “The [video customer loss at legacy Charter] is an effect of our integration process more than anything else.
“None of [the OTT competitors] have a product that’s bette than ours in the marketplace,” he added.
Rutledge also noted that Charter’s long-awaited integration of Netflix into its video platform is finally happening.
“We’ll provide a common user interface that allows [Netflix] to work on all devices in the house,” Rutledge said. “Our fundamental obligation to our customer is to make using video easy.”