Charter Communications reported the loss of 112,000 pay TV customers in the first quarter, exceeding analyst forecasts of around 20,000 subscriber drops.
Charter lost 89,000 video customers in the first quarter of 2017.
The No. 2 U.S. cable company also added 362,000 high-speed internet users in the quarter, matching forecasts. This compared to an addition of 458,000 users in the 2017 period. Going back to 2015 and beyond, and examining the combined broadband additions of Charter, Time Warner Cable and Bright House Networks, the 362,000 adds represent somewhat of a low-water mark, perhaps contributing to the notion that Charter—and all North American cable companies—are facing a saturated market for broadband services.
Going into today’s earnings report, some analysts were highlighting the importance of the first-quarter earnings call by Charter and No. 1 U.S. cable company Comcast, which are being harmed by pressure from OTT competitors on the video side, and fears of market saturation and competition from 5G wireless competitors on the wireline broadband side.
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Charter actually grew total revenue by 4.9% to $10.7 billion in the first quarter. And adjusted EBITDA grew by 6.5% to $3.9 billion.
Still, Charter’s first-quarter report sent its stock cratering, down around 13% as of midday Friday.
As MoffettNathanson analyst Craig Moffett wrote in a note to investors this morning, Charter was viewed as a pure play cable company, even before Comcast’s diversifying $31 billion bid for UK’s Sky.
“That was a clear benefit when cable was in favor (until September of last year). But it became less so when cable gradually came to viewed as, well, if not the worst business in the world, then just a run-of-the-mill bad one.”
The Charter narrative: MoffettNathanson asked Charter executives today, has the Charter narrative turned sour?
For his part, Charter Chairman and CEO Tom Rutledge noted that Charter is just coming out of the ambitiously “complex” integrations of three companies, which is “going quite well,” he said.
“It’s going as planned,” Rutledge added. “There have been lumpy aspects to it, but we’re creating the value we planned to create.”
Rutledge noted that the addition of Charter’s soon-to-launch mobile business will add value and diversification to the Charter portfolio. And he noted that Charter is girded for a 5G future with. “We think we are the natural small cell provider,” he said.
Rutledge also noted that the company is still in the process of returning call centers from overseas. He cited the migration of a call center from the Philippines, which must be kept running until employees at a new call center in St. Louis are hired and trained.
This is generating a drag on P&L in the short term, Rutledge noted. But having better trained U.S. customer reps will result in what he said are “happier customers” who will stick with the cable company longer and spend more money with it.
“We think the Charter story is fully intact,” Rutledge declared, “and getting better because of mobility.”
This and that: Charter said it will have its entire footprint converted to digital two-way set-tops, mostly the World Box variety, by the end of this year.
Earlier this week, the company announced 14 million additional passings for its DOCSIS 3.1 network upgrade.
“Where we have upgraded to DOCSIS 3.1, not only have sales gone up, but disconnects are down in those markets, as well,” Charter CFO Christopher Winfrey said.